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Weekly Market Review

By Staff | May 7, 2020

Markets across the board started the week off on edge after the energy sector brought some volatility to the market. The big headline that caught a majority of national headlines was the story that crude oil traded into negative values. The unprecedented event was caused by the shortage of oil storage as end user consumption continues to lag due to the travel restrictions in place across much of the country and world. With the lower demand levels, oil supplies continue to back up making storage expensive and hard to find. The multinational agreement earlier this month to reduce oil production by 10 million barrels a day was helpful, but stocks continue to fill up with production still outpacing demand. It is estimated that it will take a reduction of 30 million barrels a day in order to match the reduction in demand and stop the growing oil stocks.

Ethanol producers, much like oil producers, are facing storage issues with the loss of demand. It has been reported that more than 40 percent of all ethanol plants are shut down at the moment. Ethanol stocks increased another 220,000 barrels this week reaching 27.7 million barrels, a record high. Stocks continue to rise even with production dropping again this week to record low levels. The trade was encouraged by the fact that decreases in ethanol production seem to be slowing week to week, signaling that the market is beginning to stabilize.

Chinese buying picked up this week, with sales being reported for both corn and soybeans. It was reported this week that China is looking to buy grain to fill state stockpiles while world prices are relatively low. It was rumored that 30 million tons of grain could be purchased, 10 million of that being soybeans along with 20 million tons of corn. The purchases would be a strong sign that China is committed to holding up its end of the trade agreement that was made earlier this year.

Bunge announced earlier this week that they will be selling 35 interior elevators to Zen-Noh. Bunge’s CEO stated the “transaction will allow Bunge to operate more efficiently and reinvest in higher returning areas of the company while reducing costs and strengthening our balance sheet”.

Several processing plants across the country have been forced to shut down over the past couple weeks due to concerns surrounding the spread of the coronavirus. Tyson Foods announced earlier this week that they would be shutting down their largest pork processing plant, located in Waterloo, The plant is estimated to produce 4 percent of pork products in the country.

The trade has started to take notice of dry conditions in the Southern Brazil area. It is estimated that nearly one third of the crop is under some sort of stress from the unseasonably dry conditions. Extended forecast show little chance for any significant rainfall in the near term. Several analyst have started to decrease their projections for crop production in that area. There has also been some talk about logistical issues arising in Argentina due to major river levels currently at 50 percent of what they would be normally this time of year. This has caused boats to reduce their loads to prevent the risk of running aground.

For more information, you may contact Regan Coyle at (515)-200-5123, or e-mail at rcoyle@maxyieldgrain.com. 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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