Market Update 4/24/2020
Apr 24, 2020
On the week equities have been down slightly with the Standard and Poor’s 500 Index down about 75 points. Overall, there hasn’t been any major news or breakthroughs with regards to the economy or COVID-19 on the week. It seemed like equities wanted to rally today after the House passed another aid package and now needs to go to the President for his signature, although so far the market is fairly flat to up a few points in the S&P 500 as the market is already looking forward to the next major package. (It is pretty amazing that the 484 billion dollar package isn’t even enough for the market to get excited about) Treasury Secretary Mnuchin said he is looking for a reopening of the US in May or June, but the lack of definition seems to give some pause to the equity bulls.
We had it all this week in energy with May West Texas Intermediate Crude Oil Futures trading at a NEGATIVE 40 dollars a barrel as there simply was no space in the inn and there were too many paper longs holding futures on the end of the trading period. Currently, June futures are at 17.18 a barrel, as there seems to be a bit of stability at least for the time being with Crude implied volatility slowly settling down. While the move to –$40 a barrel was certainly a technical move it highlights the need of the industry to continue to shut in wells as fast as it can as space for crude is limited. Bakken crude continues to trade at a large discount –currently, at $9.32 a barrel delivered into Clearbrook, MN as the world simply does not need this oil today.
Corn finished the week lower with spring planting progressing well in most parts of the corn belt. Ethanol plants continue to shut down or slow their grind with the latest announcement from ADM on their Cedar Rapids, IA, and Columbus, NE dry mills being idled (their wet mills continue to run). The market did find optimism on the potential for Chinese purchases of corn and soybeans as they discuss filling their State reserve. Some believe the Chinese will buy US crops in lieu of cheaper South American crops to fill their original trade agreement commitments.
Soybeans are poised to finish the week flat. We confirmed purchases of August/September soybeans destined for China earlier this week. Many believe that we will continue to see a much more normal seasonal buying pattern from the Chinese this year with our opportunity lying in the August-November period. The idea of some acres switching to soybeans and the weak Brazilian Real continue to pressure the market.
Wheat is finishing the week out significantly lower, even though we are still getting drier reports from the European wheat crop, they are to see some scattered rains. Stats Canada planting intentions was supposed to be released today but was delayed due to the pandemic, we will see that May 7th. The spot market in Minneapolis continues to trend lower as the demand for retail flour fades.
Much like a pitcher on a hot streak, we won’t talk too much on the current weather forecast. Although we can say that current weather maps remain very favorable. What a difference year over year. With extremely favorable weather Minnesota, Iowa, and the I-states have been planting hard this week. We are hearing reports of entire corn crops planted, and soybeans going in the ground, guys south of us are hitting it hard. We will see how high corn plantings come in for this week, on USDA data next Monday, the trade is looking for 25% planted on corn. Some wheat has started to go in locally.
The sun is shining, its go time.