The Van Trump Report

Coronavirus Continues to Complicate the Big Picture for Corn & Soybeans

CORN bears have taken some massive swings as of late. Not only is flat price down roughly -10% in the past 30-days and down roughly -15% in the past couple of months, but the basis in many locations has gotten completely hammered as ethanol collapses. Several areas have witnessed a very dangerous -$1.00 per bushel tumble, some can argue an even greater reduction in wealth is occurring in their area. Weekly ethanol production numbers fell by -17% and are back at levels not seen since the fall of 2013. At the same time, ethanol stocks pushed to a fresh record of +25.7 million. As I’ve been saying for several weeks, the ethanol industry is going to take a massive hit and some plants simply are not going to recover and will be closed forever. The coronavirus concerns are only complicating the matter as driving hours and overall gasoline demand has fallen off a cliff. In turn, bears have huge concerns about overall demand as the global economies seem to be in some type of economic quicksand. Bulls are pointing to a better than expected March 1 Quarterly Stocks report but it’s still one of the top-5 highest in the past several decades so it’s providing little nearby support. The trade is also worried about the massive estimated jump in U.S. planted corn acres. Obviously, most inside the trade see the USDAs 97 million acre estimate as overly optimistic now considering the current circumstance, but still, most are thinking we could see 92 to 94 million. China and upcoming U.S. weather could be a big “wild-card”, but with this many U.S. acres in play and ethanol hitting a huge stumbling block, I worry that prices nearby could continue to post lower-highs and lower-lows.

SOYBEAN bears are pointing to record high prices being paid to producers in Brazil as the strength of the U.S. dollar and the depreciation of the Brazilian real creating a perfect storm, i.e. good for the Brazilian farmer but extremely difficult for producers here at home. Adding fuel to the fire, data recently released shows Brazilian exports on track to hit a new record. There’s also talk circulating that movement of soybeans in Argentina has slightly improved as government leaders have eased restrictions in a few rural areas, meaning soybeans from the farms might be getting to the crush facilities a bit easier. Stay tuned… Here at home, bulls are pointing to continued strong record soybean crush demand. I suspect this strong demand continues for meal as DDGs production becomes more limited as ethanol plants reduce run rates and some close their doors. Bulls also believe South American exporters could run into more serious logistical hiccups as coronavirus complications spread, ultimately pushing more global demand back towards the U.S. As a producer, I still believe there will be better opportunities to price bushels in the weeks ahead. Staying optimistic longer-term…

Many producers across the country are scrambling to figure out how best to stay afloat and keep the losses to a minimum. Make certain you are fully communicating and talking with your bankers, insurance agents, landlords, equipment dealers, ag retailers, etc… and exhausting all available options. Personally, we have a couple of businesses that are in the process of applying for the government’s new “Pacheeck Protection Program”. Hopefully, some of the new and upcoming bailout packages will move deeper into helping rural America. I think it’s going to take some time…

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