Weekly market review
Grain markets continued their slide, following the financial markets lower to start the week.
The Dow Jones set the tone for the week posting the largest single day point loss that the index has ever seen, losing more than 2,000 points during Monday’s trade session. The VIX, which measures market volatility, spiked over 80 for the first time since October of 2008. Fear surrounding the spread of Coronavirus spiked higher this week as the government scrambled to adjust policies, and develop bailout packages to try to limit economic damage. Yields on 10-Year Treasuries started to work their way higher to end the week after trading as low as .0318% recently. The market started to feel better toward the end of the week as we prepare for more coronavirus cases here in the U.S. Tensions are still high as there is a long way to go before we see the other side of this, but at the moment markets seem to be taking a breather.
Gasoline futures, which started trading in 2005, hit an all-time low this week. The record low in the gas markets are due to a combination of oil markets in a free fall from the price war between Saudi Arabia and Russia, and demand loss as several countries, including the U.S., are forced to essentially shut down for months at a time to combat the spreading of Coronavirus.
Gasoline futures were trading more than 35 cents below ethanol futures earlier this week diminishing the demand for ethanol blending in the near future. With the Ethanol market being pinched by Oil markets, there has been news of several plants across the country taking bids off the board.
There has not been any news on when those plants plan to start placing bids again. Those unplanned shut downs have started a domino effect in the basis market where ethanol plants are the driving demand force. Basis has fallen more than 25 cents from the previous week in certain areas in Iowa, Minnesota, and South Dakota.
The May soybean contract scored a new contract low this week at $8.21, but has since bounced off of those lows.
May corn contracts put a contract low in this week, trading as low as $3.32 as concerns heightened for how much demand loss ethanol markets will see in the coming months. Global prices are relatively cheap for ag commodities, combined with the fact that freight costs are low as well, the market has provided a good opportunity for China to follow through on their commitments made earlier this year. It was announced Friday morning that China had made purchases of corn, soybeans, and wheat.
Private exporters reported to the USDA that China had purchased 756,000 tons of corn, more than twice the amount that the market was anticipating. It was also reported that 340,000 tons of hard red winter wheat was purchased, along with 110,000 tons of soybeans.
Weather in southern Brazil looks to turn drier next week, where the corn crop is already being stressed due to warmer, drier weather. The trade has not been overly concerned about the dry conditions, but markets are starting to pay attention as the crop continues to develop. Here in the U.S. weather outlooks are continuing to call for warmer, wetter weather patterns through the next couple weeks. Some models are showing a drier patter setting in for the second half of April, but the confidence level on those models are low at this point.
For more information, you may contact Regan Coyle at (515)-200-5123, or e-mail at firstname.lastname@example.org. The opinions and views expressed in this commentary are solely those of Regan Coyle. Data used in writing this commentary obtained from various sources believed to be accurate. This commentary is intended for informational purposes only and is not intended for developing specific commodity trading strategies. Any and all risk involved with commodity trading should be determined before establishing a futures position. Please visit our Risk Disclosure Page for more information on commodity trading.
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