As you all well know, the coronavirus has the whole world in a tailspin. While we all try to continue to socially distance ourselves, all of our grain marketers are available by phone to help with any of your questions or marketing needs.
The corn market has been taking the brunt of the beating the last month. OPEC and Russia are in an oil price war and thus have flooded the oil market with supply. In turn, we have seen crude oil drop from over $60 per barrel in January to near $20 per barrel in the last couple weeks. Good news if you are in the market to lock up your fuel needs, but bad news for the ethanol market. With the large drop in crude, ethanol is no longer price competitive and ethanol plants have margins deep in the red. You have probably noticed the significant basis depreciation in the last couple of weeks and is mainly due to the demand destruction we are experiencing. Ethanol plants losing money= throttling back or shutting down plants= less corn usage. As we move forward, there is still going to be a demand for feed corn in our area this summer, however, if the ethanol plants remain out of the market for many months, basis may not have to be a strong as we once thought it could have been this summer.
Beans on the other hand have a bit more of a positive tone to them. As the coronavirus spreads into South America, there is concern that beans will not make it to the ports and/or ports may be closed and beans will not be able to be shipped out to China. In turn, China will likely have to turn to the US for bean purchases. Bean demand will also likely come from the domestic market as well. As ethanol plants throttle back or shut down, there is less DDGs that will be available and feed rations having to turn to more soybean meal rather than DDGs.
As we turn the page towards planting season, we have the Quarterly Stocks and Perspective Plantings report to be released by the USDA on Tuesday, March 31 at 11 AM. This will set the tone for the spring markets and we turn our head to weather and planting pace. Enjoy the warmer weather that is headed our way! As always, please reach out to any of the marketers so we can help you execute your marketing plan.View News