Corn Futures Fall on Bleak Ethanol Prospects
28 March 2020 - 7:19AM
Dow Jones News
By Kirk Maltais
--Corn for May delivery fell 0.8% to $3.46 a bushel on the
Chicago Board of Trade on Friday, amid projections that the closure
of ethanol plants will cut into domestic corn demand.
--Wheat for May delivery rose 0.4% to $5.71 1/4 a bushel.
--Soybeans for May delivery rose 0.1% to $8.81 1/2 a bushel.
HIGHLIGHTS
Ethanol Into The Ether: As ethanol demand evaporates, biofuel
makers are likely to need a lot less corn this year. "Right now we
could be looking at 350 million to 400 million bushels of lost
demand for 2019-2020 corn," said Craig Turner of Daniels Trading.
"The big concern is those bushels go right back into the ending
stocks on the balance sheet." Prior to coronavirus hitting the U.S.
market, the USDA projected ending stocks of 2019/20 corn at 1.89
billion bushels, a decline of roughly 400,000 bushels from the
previous year.
Wheat Speculation: Russia is considering limiting wheat and
other grain exports for three months in response to the coronavirus
pandemic, Reuters reported. Traders said the proposed limit of 7
million metric tons for April through June was about what they
expected exports to be before the quota, but they are concerned
that, based on Russia's history, more restrictions could follow,
according to the Reuters report. Traders of U.S. wheat speculated
this could boost demand for American grain.
Harvest Time: Argentine farmers have started harvesting
soybeans, completing work on 4.6% of the area planted, according to
the Buenos Aires Grain Exchange. Rain is slowing some work, and
productivity has been less than expected in some areas, the
Exchange said. If the trend of lower productivity continues, the
Exchange said it might cut its forecast of a harvest of 52 million
metric tons. Argentina is the world's third-biggest soybean
producer, after Brazil and the U.S., and the USDA has forecast an
Argentine harvest of 54 million tons for the current season.
INSIGHT
Corn-ucopia: Independent groups such as Indigo Ag and Allendale
are projecting 1 million more planted corn acres than the USDA.
Indigo cites the futures price ratio between corn and soybeans in
February and March as the main predictor. At a time when ethanol
demand is waning, any increase in corn production would be bearish
for the futures market.
Coronavirus: Quarantine orders in the U.S. to curb the
coronavirus are expected to cut ethanol consumption by more than
50%, said Pacific Ethanol CEO Neil Koehler in an earnings call. As
a result, Pacific Ethanol is cutting production by 60% by the end
of March, Mr. Koehler said.
AHEAD
--The USDA releases its weekly grain export inspections data at
11 a.m. ET Monday.
--Conagra Brands Inc. reports third-quarter earnings before the
market opens Tuesday.
--The USDA releases its prospective plantings report at noon ET
Tuesday.
--The USDA releases its quarterly grains stocks report at noon
ET Tuesday.
(Jeffrey T. Lewis contributed to this article.)
Write to Kirk Maltais at kirk.maltais@wsj.com
(END) Dow Jones Newswires
March 27, 2020 16:04 ET (20:04 GMT)
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