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Markets: Ethanol production may lower corn demand 200-300 mb

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Corn closed the week 15 1/2 cents lower. Last week, private exporters announced a sale of 113,000 mts of corn sold to Japan and 567,000 mts of corn sold to China. 

In the weekly export inspections report, U.S. corn exports, for the week ended March 26, of 50.0 million bushels were easily were a marketing year high in surpassing those of two weeks ago at 38.8 million bushels. This is the first week of the 2019-20 marketing year in which exports met/exceeded the average weekly "needed" export pace in order to reach the USDA's 1.725 billion bushel export projection, currently at an estimated 40.5 million bushels/week. Cumulative exports of 711 million bushels still down 39% from last year's 1.168 billion. 

In the USDA acreage and stocks report USDA pegs March 1 corn stocks at 7.953 billion bushels, below trade estimates of 8.125 billion. Feed usage was above trade expectations by 300 mb as producers feed lower quality corn to animals. Exports were poor and with falling ethanol margins, old crop stocks are likely to remain comfortably above 2 bb. 2020 corn plantings were estimated at 96.990 million vs. trade estimates of 94.328 million. If realized, this year’s corn acres would be the second largest ever, only behind 2012. Using that average figure and trendline yields of 176 bpa equals 3.233 bb of ending stocks. I think it’s unlikely this acreage figure would be realized as it assumes South Dakota corn acres at 6 million, the largest since 2013; Iowa corn acreage at 14.1 million, the largest in history; Nebraska acreage at 10.5 million, the largest in history with only key states of North Dakota showing acreage reductions of 300,000 and Kansas down 100,000 from last year. 

U.S. ethanol production, for the week ended March 27, plummeted to 840,000 barrels/day (247 million gallons/week) from 1.005 million barrels/day (295 mil gallons/week) the week prior, the lowest weekly production since September 2013, and was nearly 16% below last year's same-week production of 999k bpd (294 mil gallons/week). The lack of demand for ethanol prompted a huge increase in U.S. ethanol stocks last week to 1.080 billion gallons (25.717 million barrels), an all-time record since EIA begin reporting weekly ethanol data in June 2010.


The loss of ethanol production will hurt U.S. corn demand, possibly 200 mb to 300 mb. Ethanol use accounts for 43% of total demand for corn, which will no doubt increase old crop ending stocks. The increase in stocks will further pressure new crop corn values, making rallies selling opportunities. 



Soybeans closed the week 30 cents lower. Last week, private exporters announced sales of 285,000 mts of soybeans to Mexico. 

In the weekly export inspections report, U.S. soybean exports were a new marketing year low at 15.2 million bushels and below last year's same-week exports of 26.2 mb. This was the fourth consecutive week in which soybean exports fell solidly below the current roughly 26.7 million bushels/week "needed" pace in order to reach the USDA's 1.825 billion bushel export projection. Cumulative exports of 1.161 billion bushels are down to an 8% year-over-year increase after being up more than 20% just seven weeks ago. 

In the USDA acreage and stocks report, soybean stocks were pegged at 2.253 billion bushels, a bit over trade estimates at 2.241 billion bushels. While this stocks figure is down 474 mb from a year ago, it is still the second largest figure on record for March 1. Soybean seedings were lower than trade expectations of 84.865 million at 83.510 million. While the corn acreage figure was the second largest corn planting acreage in history, the soybean figures is the third largest soybean planting acreage in history. Using this acreage figure and trend line yields of 50.9 mb; ending stocks could easily slip to 250 mb to 300. This suggests soybeans will advance vs. corn to buy a few acres this spring to provide more cushion in the balance sheets. 


The soybean may draw a few acres away from corn, especially if the month of April proves to be wet across the Corn Belt. 


For the week, Chicago wheat closed 21 1/4 cents lower; Kansas City wheat closed 15 ¾ cents lower and Minneapolis wheat 12 1/2 cents lower. Last week, exporters did not announce any private sales. 

In the weekly export inspections report, U.S. wheat exports last week of 13.4 million bushels were below last year's same-week exports of 16.7 mil bu. Wheat exports were considerably below the roughly 23.8 million bushel/week average "needed" pace for the fourth consecutive week and will require a strong late push if the USDA's 1.000 billion bushel export projection is to be met. 

In the USDA acreage and stocks report heat stocks were forecast at 1.412 billion bushels, down from trade expectations of 1.432 billion bushels. New crop all-wheat seedings were forecast at 44.7 million acres, a 117-year low and 300,000 below expectations. HRW seedings are pegged at 21.7 million acres vs. 22.5 million a year ago. SRW seedings are pegged at 5.7 million acres vs. 5.2 million a year ago. HRS intentions are forecast at 11.9 million vs. final acres of 12.0 million a year ago. 

Last week, Kansas wheat conditions improved 2% to 50% g/e. Texas jumped to 56% g/e from 49% last week and conditions are the best in the last five years for late March. Oklahoma conditions fell to 70% g/e from 77% but are the second best in the last seven years for this date. Illinois SRW is 61% g/e. Oklahoma wheat is 44% jointed, Texas is 28% headed and Kansas is 3% jointed. 

The Wheat Quality Council canceled the Hard Winter Wheat tour this year.


Any rally needs to be sold as the winter wheat crop is off to a great start and the Russian wheat crop appears to be the second largest on record, which will dominate world exports in the second half of 2020. 


Last week, live cattle closed $7.97 lower while feeder cattle closed $12.42 lower.

Last week, fed cattle cash trade occurred at mostly $112 to $113 live and $175 to $180 dressed — $5 to $15 lower than last week. 

Last week, the Fed Cattle Exchange Auction had 4,696 head listed for sale in 32 lots. Six lots, totaling 832 head sold with two lots in Kansas selling 318 head at $113; Nebraska sold 91 head at $111.25; Texas sold 344 head at $113 and Oklahoma sold 79 head at $113.

The latest USDA steer carcass weights were down 3 pounds compared to the prior week at 898, making them 32 pounds above last year. Last week's net sales of 18,200 MT reported for 2020.


Reaction to the coronavirus and fears of a slowing economy have sent cattle futures into a free fall. Cash trade was sharply lower last week and the futures continue to hold a huge discount to the cash. Producers should be pulling cattle ahead to take advantage of the stronger cash trade than what summer futures are offering. 


Lean hogs closed the week $15.92 lower. 

Iowa/Southern Minnesota weekly hog weights for week ending March 28 at 285.4 pounds vs. 286.2 pounds last week and 286.1 pounds last year. 

This week's net sales of pork of 38,200 MT were reported for 2020 with shipments of 40,200 mts. China was a net buyer of 18,900 MT of U.S. pork, while taking shipment of 16,200 MT.


Strong exports to China should provide support to the lean hog market

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