COVID-19 continues to dominate the U.S. economy, including the corn and soybean markets.
The good news at the moment may simply be that the news can’t get worse, according to Don Roose, president of U.S. Commodities in West Des Moines.
“All these negatives could turn positive,” Roose says. For example, once the virus peaks and the new cases start to decline, the markets may rebound.
In the meantime, though, the best strategy appears to be one of reducing risk and putting some kind of floor under the market, Roose says. Early this week, before the USDA issued its Prospective Plantings report, corn prices were still dropping. But Roose says some farmers could take advantage of loan options or of the fact that insurance levels are now above the crop price.
The goal is to protect the downside and leave some possibility of taking advantage of a market that still could recover, he says.
In recent weeks corn prices have been hit with a double whammy of the COVID-19 situation which has gripped the world and also of nosediving oil prices that have caused serious problems for the ethanol market. Those oil prices have been pushed lower by a fight between Russia and Saudi Arabia about oil supplies and also by reduced fuel usage due to the virus pandemic here and around the world. With more people working at home and few traveling, fuel demand has dropped.
The resulting low fuel prices have been good news for drivers but not so good news for the oil industry or the ethanol industry.
Roose says there are at least some vague possibilities of good news down the road related to the virus. One is that China appears to be making progress against it and may begin increasing soybean purchases. The other is that South America has not yet seen the worst of the virus, and if it does that could give the United States some advantage later in the spring.