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Midwest Marketing Solutions

By Staff | May 7, 2020

Cow-calf producers expected to see largest impact from COVID-19

Cattle producers will receive $5.1 billion of the $9.6 billion of the USDA direct payments for livestock producers. A study from Oklahoma State University estimates cattle industry losses as a result of the COVID-19 pandemic will reach $13.6 billion, alone. That is $4 billion more than the total allocation of funds set aside by USDA for livestock producers. The remaining $4.5 billion is allocated for $2.9 billion in direct assistance for dairy producers and $1.6 billion for hog producers. According to the National Pork Producers Council, industry economists estimate hog farmers will lose $5 billion collectively for the remainder of the year. With the funds allocated for producers, the compensation will be based on price losses between January 1-April 15 and producers will be compensated for 85 percent of price loss during that period. The second part of the payment will be expected losses from April 15 through the next two quarters, and will cover 30 percent of expected losses.

Corn analysis

Corn closed the week $.07 1/4 lower. Last week, private exporters announced a sale of 589,395 mts of corn to Mexico.

In the weekly export inspections report; U.S. corn exports, for the week ended 4/16/20, were 26.9 million bushels and were the lowest in 11 weeks. Last week’s exports were below the average weekly “needed” pace of roughly 40.3 million bushels needed in the May-August timeframe if the USDA’s 1.725 billion bushel export projection is to be met. Cumulative exports of 835 million bushels are down 36% from last year’s 1.311 billion at this time.

In the weekly crop progress and conditions report for the week April 13-19; U.S. corn planting is 7% complete versus 7% expected, 3% last week, 5% last year and 9% average. Iowa is 2% done, while Illinois is 8%, Indiana is 4%, Missouri is 11% and Texas is 64% complete.

In the weekly EIA report; U.S. ethanol production, for the week ended 4/17/20, declined to 563k barrels/day (166 million gallons/week) from 570k bpd (168 mil gallons/week) the week prior and was 46% below last year’s same-week production of 1.048 mpbd (308 mil gallons/week). U.S. ethanol stocks moved higher again last week, although at a much slower pace as well, now at 1.163 billion gallons (27.689 million barrels) versus 1.154 million gallons (27.469 mil barrels) the week prior with the 9 million gallon increase easily being the smallest in four weeks. Ethanol stocks are now nearly 22% (208 million gallons) larger than last year at this time. -Thanks to Randy Middeltstat

Strategy and outlook

The loss of ethanol production will stymie U.S. corn demand as ethanol usage accounts for 43% of total demand for corn. Until the economy opens back up and energy consumption returns to more normal patterns, corn usage will remain subdued. Any weather related rallies should be used as selling opportunities.

Soybeans analysis

Soybeans closed the week $.04 lower. Last week, private exporters announced sales of 606,000 mts of soybeans to China and 125,000 mts of soybeans to Mexico.

In the weekly export inspections report; U.S. soybean exports last week of 19.8 million bushels were again below the current average “needed” pace of roughly 26.0 million bushels in order to reach the USDA’s 1.775 billion bushel export projection for the 7th consecutive week. Cumulative export inspections of 1.209 billion bushels are up 6.1% from last year’s 1.140 billion.

U.S. soybean planting is 2% complete versus 2% expected, 1% last year and 1% average. Illinois and Indiana are both 2% done.

Strategy and outlook

The soybean may draw a few acres away from corn, especially if the month of April proves to be wet across the cornbelt. The COT report has turned decidedly bearish to the soybean market. The fundamentals suggest to sell this market on weather related rallied.

This material has been prepared by a sales or trading employee or agent of Midwest Market Solutions and is, or is in the nature of, a solicitation. This material is not a research report prepared by Midwest Market Solution’s Research Department. The risk of loss in trading futures and/or options is substantial and each investor and/or trader must consider whether this is a suitable investment. Past performance, whether actual or indicated by simulated historical tests of strategies, is not indicative of future results. Trading advice is based on information taken from trades and statistical services and other sources that Midwest Market Solutions believes are reliable. We do not guarantee that such information is accurate or complete and it should not be relied upon as such.

Brian Hoops can be reached at (605) 660-1155.

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