ACI Market Update 5/1/2020
May 1, 2020
It was a mixed performance from the macro environment with equities rallying Monday-Wednesday while taking a breather Thursday and Friday with today’s losses being the most significant. Currently, the Standard and Poor’s 500 Index is at 2822, a touch lower than the close last Friday at 2836. The market continues to fight between the accommodative Federal Reserve and the scary earnings that are starting to be reported and especially the guidance given by these companies for Q2. In a bit of good news, we are slowly starting to see more states begin to gear up to get the economy back to something resembling normalcy, but it is a long process.
Energy finally got some stability with the mania from last week finally subsiding, with the market doing its job to wash out some tourists and shut-in some production. June West Texas Intermediate Crude Oil Futures are currently at $19.71 a barrel, with July at $22.16. Cash crude prices have recovered nicely with Bakken trading up to par the futures, a strong rally in the cash as last week it was trading much as 8 to 9 dollars under the board. It seems that finally, we have gotten into a better situation with regards to inventory management out in the oil patch.
Ethanol production continues to move lower and margins have moved up – for a while I had positive cash flow projected for some plants. Unfortunately, I fear that will be short-lived as it is still so easy for plants to flip the switch back on.
USDA’s Crop Progress report was released on Monday afternoon showing 27% complete for Corn, which was 15% higher than last year and 7 points better than the 5-year average. For Soybeans, the US was 8% planted, higher than last year’s 2%, and the 5-year average of 4%. Spring Wheat was 14% planted nationwide, higher than last year but slightly below the 5-year average.
While prices are slightly lower today, values on the week remained largely the same, with December Corn settling at $3.36, ¾ of a cent under last week’s settle November Beans are trading up about 5 cents on the week and Spring Wheat is trading around 4 cents lower.
It was an interesting week with regards to China, with a handful of both soybean and corn boats trading out of the US this week into China, while at the same time President Trump threatening more tariffs and putting aside the Trade Deal to focus on costs incurred due to Coronavirus. This morning, The President tweeted out his strong support for Farmers and Ranchers which the market is taking as a suggestion that there will be another MFP or other similar payment getting pushed out soon.
Recent weather has helped local areas dry out and inch closer to getting in the field. The 7-10-day forecast looks slightly cooler than normal with only one main precipitation concern next Tuesday. Across the corn belt, favorable weather conditions have allowed farmers to get in a good chunk of corn which will probably lead to us seeing close to 50% planting progress early next week. The Western corn belt is starting to get dry and raise light drought concerns. Weather in South America has allowed them to continue with soybean harvest. In the US, the weather has allowed producers to get more bean acres in the ground than average, continuing ahead of last year along with corn. Regarding wheat, Russia and Europe have seen favorable weather. Locally we have started to get some spring wheat and corn acres in the ground.
Grain Team – Aaron, Connor, Dallas, Hank, Jenna, Joel, and Kevin