Monday’s big selloff in the markets was the sudden spread of coronavirus outside of China, particularly in South Korea, Japan, Italy and Iran. There are currently 53 known cases in the US.
Markets are trying to bounce back today but so far it has been a struggle with corn and soybeans only up 1 each while wheat is down 5. Traders and end users are reluctant to start any rally as the tears of the expanding outbreak continue to be a major driver that is linking traders around the world.
According to analysis by research firm Capital Economics, COVID-19 will cost the world economy over $280 billion in the first quarter of this year, meaning that global GDP will not grow from one quarter to the next for the first time since 2009. China’s growth is expected to slow to 4.5% over the same period. The slowdown may also undermine US plans to massively boost exports of ag goods, energy and services to China, hampering any potential recovery in farming communities. World supplies of grain are robust and South American corn and soybeans are now cheaper than those out of the Gulf.
Brazil continues to have great weather with rains continuing to increase the size of their crop. Crop progress remains strong and planting of Safrina corn crop is now close to 80% complete.
There are still some very good basis levels trading for corn delivery into the spring months. There is very little carry in the market which indicates that now is the time to be making cash sales. Commercial elevators are aggressively selling to end users due to the lack of carry which is covering demand and resulting in basis widening. Elevators with ground piles will begin picking them up in the next two months which will lead to a surplus of grain in the pipeline as well. I would advise producers to be locking in sales for any cash that is needed in the next 30 days. Basis for June and July are also advised while looking to lock in the cbot during planting season. New crop sales for this fall should be in place or made to get you to 20% sold.
Have a Safe Day!