Consumers seeking comfort a boon for wheat prices

With ethanol plants ratcheting down, corn still struggles; cattle prices remain volatile

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Spring wheat. Mikkel Pates / Agweek file photo

The grains are trying to divorce themselves from the coronavirus, but in reality, wheat and soybeans have benefited from the outbreak, corn has not.

Wheat has gained ground because of strong international demand for good quality milling wheat. Bread is a comfort food and the pandemic has resulted in a majority of the world’s population being isolated, which is leading to more eating at home, hence the increased demand in bread. And the increase in demand is not just in the U.S.; it’s worldwide. The increase in demand has resulted in Russia looking to impose an export quota for the next three months. Russia is looking at only exporting 7 million metric tons more of their grains over the next three months to make sure they have their needs met first.

Corn, on the other, is not seeing benefit from the virus. The stay-at-home decree in many countries, including the U.S., has resulted in a massive decrease in travel. The decrease in travel has reduced the need for crude oil, which has dropped to trade nearly 60% lower. The decrease in crude demand is also causing a sharp drop in ethanol demand. As of April 10, 20% of the nation’s ethanol industry was offline. To date, 36 plants are sitting idle while more than 40 plants have reduced grind.

For the week ending April 3, the ethanol production estimate was nothing short of frightening. Production was put at 672,000 barrels per day, a decline of 20% (168,000 barrels) from the previous week and 33% lower than last year. Stocks were estimated at 27.091 million barrels, an increase of 5% (1.374 million barrels) from the previous week and up 17% from last year. This is the lowest weekly ethanol production estimate since records have been kept and the highest stocks estimate on record.

The slowdown in the ethanol production had been supportive to the soybean complex. The demand for soybean meal is increasing because of the declining supply of dried distillers grains. Also, soybean demand is expected to increase, especially because of recent concerns of production shortfalls in South America. Soybean supplies at crush plants in China are extremely tight at just 50% of normal. Reports of lower-than-expected yields in the early harvested soybeans in Argentina is also supportive.


On a more positive note, there are signs that the virus outbreak in New York is starting to plateau, which has helped to bring a little optimism back into the financial sector. The number of new cases is decreasing which added to the optimism.

There is light at the end of the tunnel as China, five months after the virus outbreak occurred, has its economy back running at 90% to 95% capacity. The U.S. will not get back on its feet that quickly because of the heavy-handed way China stopped the spread of the disease, but it does give hope that by the start of summer the U.S. could be getting back to normal, whatever normal is.

Crop progress

The U.S. Department of Agriculture released its first Crop Progress report for the 2020 crop year last week. The report continues to show an improving winter wheat crop and planting progress moving forward in the South. Winter wheat conditions were estimated at 62% good/excellent versus expectations of 56% and compared to 60% last year. The hard red wheat crop (Southern Plains) is in average condition while the soft red wheat crop (Delta and southern Corn Belt) is showing the best condition rating in four years. The report also showed planting progress in in line with the 5-year average for cotton (2% ahead), sorghum (2% ahead), rice (2% behind), and oats (3% behind).

Moisture conditions continue to show how saturated the ground is across the U.S. Topsoil conditions are 92% surplus to adequate (1% below last year) and subsoil moisture conditions are 91% surplus to adequate (1% below last year).

Harvest progress continues to advance in North Dakota as corn harvest progress is estimated at 81% completed versus 75% last week. Sunflower harvest is 95% completed versus 91% last week.

Last week’s market activity was mainly focused on USDA’s April Crop Production report. This report is expected to bring the numbers from the March Quarterly Grain Stocks estimate into table form. The report was negative to both U.S. and world wheat ending stocks as they were increased more than anticipated. That same sentiment applied to corn as both the U.S. and world numbers were higher than expected. Soybeans were the only bright spot in the report. Although the U.S. numbers were negative, the world numbers were friendly. In the end, the grains seemed to ignore the report and continued to trade current concerns.


The OPEC+ meeting was scheduled to take place at the end of last week. The meeting is an attempt to try and get all the major oil producing countries to cut production by a combined 10 to 15 million barrels per day.

In a surprise move, Russia agreed to cut its production 1.6 million barrels per day on the stipulation that all major producing counties (U.S., Canada, Norway, Brazil, Mexico) cut production as well. The U.S. is saying it has cut production already, but Russia will not accept the shutdown of wells due to low price as a cut. They want assurance that when prices improve, those wells will not come back online. Saudi Arabia has not made public the size of the reduction it plans to make.



Cattle continue to see extremely volatile trading with both the live cattle and feeder cattle contracts seeing trading limits remaining at expanded limit levels for the past few weeks. As of April 8, April live cattle has traded limit in 21 out of last 25 sessions.

Cash traded at $105, $7 off last week’s trade, but still more than $13 above futures. Reports that packers are starting to reduce supply chain speed added pressure as it has traders worried that cattle weights will start to increase.

The positive news in the meats came from strength in the stock market. The stock market rallied higher on news that the virus curve is flattening in New York.

Reports that two cattle plants and one hog plant closed because of a high number of workers testing positive for the coronavirus had traders worried about a backlog of slaughter-ready animals that will result in increasing slaughter weights and more meat to move through fewer channels. On average, 50% of the U.S. beef production moves through food service and 65% of the U.S. pork production moves through food service. With restaurants remaining closed, that adds a lot more product that either has to move through grocery stores or go into freezers. Cattle slaughter weights are at 873 pounds, a 4% increase year-over-year.

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