Free Commentary

As we have all witnessed, when a plant has been suffering through a prolonged dry spell, even a few refreshing drops of water can bring about an amazing recovery.  That would seem to describe the action we have witnessed in crude oil over the past day or so.  Knocked off of its foundation by the one-two punch of a slowdown, or maybe better-stated shutdown in global transportation and a power struggle between Saudi Arabia and Russia, Brent futures have collapsed nearly 70% from the January peak.  But just when you thought the plant was beyond revival, a quick spring shower materialized, some color has returned, we have perked up a bit and have shown there could still be some life left here.  The shower that I am referring to came in the form of a statement by President Trump that he has spoken with the leaders of both Russia and Saudi Arabia and was of the belief that a deal to end the price war should be made in “a few days.” When contacted, a representative from the Kremlin tried to pour cold water, or in this case, I guess, cold crude oil on that notion and said that discussions with the Saudi’s “have not begun” and “are not planned,” but obviously futures markets think otherwise.  It is probably premature to get our hopes up but seeing that crude has been one but one of the leaders in the commodity collapse of 2020, I cannot help but think if it began to turn around, it would be a positive sign for the entire sector.  If nothing else, it would have to provide a psychological boost for the ethanol industry and, by extension, the corn market.  On a related note, bankruptcy lawyer serving in Taunton city has said that Whiting Petroleum Company, who was once the largest shale oil producer in North Dakota, was the first major bankruptcy casualty from the collapse.

Indian agriculture would appear to be the latest casualty from the coronavirus as the 21-day nationwide lockdown is disrupting the winter crop harvest.  The northern states, which are considered the breadbasket of that nation relies on seasonal workers from the east, and most of them cannot leave their villages.

Obviously, the announcement by the Russian government that they would release 1 MMT of grain from state reserves has not calmed markets or citizens, and they now plan to release 83% of the 1.8 MMT on hand or about 1.5 MMT.  Neighboring Ukraine is experiencing a banner year, however.  For the first nine months of the marketing year, they have exported a record 46 MMT of grain, up from 37.6 during the same period last year.

Weekly export sales have been released this morning, and we find that for the week ending March 26th, we sold another 1,075,400 MT or 42.3 million bushels of corn.  This was 41% below last week and 13% under the 4-week average but still within expectations.  Mexico was the top buyer with 314.6k MT, followed by Japan taking 239k and the unknown destinations with 170.8k.  Keep in mind as well that last week, export shipments set a marketing-year high of 49.6 million bushels.  Bean sales were robust at 957,400 MT or 35.2 million bushels.  This was 6% higher than last week and 75% better than the 4-week average.  Mexico was on the top of the list here as well, with 388k MT, followed by China with 131k, and then Bangladesh taking 108.3k.  Take note that bean oil set a marketing-year high with sales of 67k MT.  At first blush, wheat sales look terrible as for the current marketing year; we sold just 72,900 MT or 2.7 million bushels, which was down 90% from last week and set a low for the marketing year.  Mexico bought 84.9k MT, the Philippines 60k, and Malaysia 42.9k, but there were reductions of 125.8k MT from unknown destinations.  Thankfully though, we sold 185,900 MT or 6.8 million bushels for the 2020/21 marketing year.  Here we find both the Philippines and China buying 60k MT each and Panama taking 23.2k.  Other notable purchases by China this week came in Sorghum – 77.7k MT, Cotton – 24.5k RB, Whole cattle hides – 484.6k, wet blues – 25k unsplit, and Pork – 18.9k MT.

Finally, this morning, and filed in under the heading, “And if you thought that one was big,” the weekly unemployment claims report has been issued this morning and crushed last week’s record number.  For the week ending March 28th, 6.6 million people filed new claims, bringing the two-week tally to more than 10 million.  Economists were looking for a number of around 3.7 million.  As you might expect, equity markets turned lower on the news initially but have since reversed higher.  A positive reaction to negative news?