COVID-19 continues to disrupt the grain markets, just as it continues to disrupt just about every other aspect of life.
“The uncertainty in the markets is greater than I’ve ever seen it,” says Karl Setzer, a commodity risk analyst with AgriVisor.
The biggest problem, Setzer says, is that nobody knows when the COVID-19 epidemic will end or what the world will look like when it does. What is normal a year or two from now is likely to be different than was normal a few months ago, he says.
One major aspect of this for farmers is that people are driving less, and because of that oil usage is dropping worldwide. That has hit the ethanol market hard. The latest USDA usage report included a drop of 375 million bushels in usage in the ethanol market.
That was partially offset by a projected increase of 150 million bushels for feed usage.
Still, Setzer says the market is sending a pretty clear message that it doesn’t want grain at the moment. The price of corn is now below the insurance level, which means it makes little sense for most producers to be marketing much new-crop 2020 grain at the moment.
“Old-crop sales are the only ones a guy should be concerned about right now,” Setzer says.
There is still the possibility there could be lower than previously projected bushel totals coming out of South America this spring. And Setzer says the prices today are signaling it may be advantageous to switch some acres from corn to soybeans this spring.
Still, the level of uncertainty remains high, and the market is trying to grapple with that extreme level of uncertainty. Usage levels will be watched closely in the coming weeks and months.
And the mix of corn, soybean and wheat acreage will also be of interest to many traders as the spring planting season unfolds.