Chicago | Reuters — Chicago soybean futures slid lower on Tuesday as fears of demand destruction for livestock feed due the closure of several U.S. meat packing plants hung over the market.
Corn also inched lower, hovering near a 3-1/2-year low as it tracked crude oil markets. More than a third of the U.S. crop goes to ethanol biofuel.
Wheat eased as steady U.S. crop ratings tempered concern about frost damage in parts of the U.S. Plains.
Several U.S. meat processing plants temporarily closed last week after workers contracted the COVID-19 coronavirus, prompting fears of a knock-on effect on demand for soymeal widely used in feeding livestock.
Arlan Suderman, chief commodities economist at INTL FCStone, said there will likely be a short-term boost in feed demand.
“You can’t just slow down production that fast, but that’s the thinking of fund managers – plant closures means less feed usage. Near-term, that’s simply not the case,” he said.
It will be hard for soy supplies to tighten enough to offset that eventual demand destruction.
“I don’t think China can buy enough to get us out of this,” said Jim Gerlach, president of A/C Trading.
Soybean imports by China, the world’s top buyer of the oilseed, fell 13 per cent in March from a year earlier to a more than five-year low, customs data showed on Tuesday, after rains delayed cargoes from Brazil and the coronavirus outbreak dented demand.
“Buyers in China indicate they already have half of their July needs filled from Brazil,” said Suderman. “We anticipate they’ll become aggressive takers of U.S. soybeans this fall, but that wont help the current marketing year.”
The most-active soybean contract on the Chicago Board Of Trade (CBOT) settled down 7-1/4 cents at $8.47 a bushel (all figures US$).
Corn fell 5-1/2 cents to $3.26 a bushel and CBOT wheat slipped 6-1/4 cents to $5.48-3/4 a bushel.
In Monday’s weekly crop progress report, the U.S. Department of Agriculture (USDA) estimated 62% of U.S. winter wheat was in good or excellent condition, stable on the week and slightly above the year-earlier.
The favourable crop ratings distracted from a potentially damaging frost in part of the U.S. Great Plains.
“Freeze damage in wheat is difficult to sustain a rally on. It takes some time to assess the damage and its impact,” said Suderman.
Egypt, the world’s largest wheat buyer, bought 120,000 tonnes of Russian wheat in a tender, which was less than anticipated.
— Reporting for Reuters by Christopher Walljasper in Chicago; additional reporting by Gus Trompiz and Forrest Crellin in Paris and Naveen Thukral in Singapore.