CBOT weekly outlook: Crude volatility holds down corn, soy

CBOT July 2020 soybeans (candlesticks) with NYMEX July 2020 WTI crude oil (blue line). (Barchart)

MarketsFarm — Hit by an unprecedented crash in North American crude oil prices, particularly this week, corn and soybeans have struggled at the Chicago Board of Trade, according to Terry Reilly of Futures International.

As the May contract for West Texas Intermediate (WTI) wrapped up earlier this week, it crashed so badly its price turned temporarily negative.

“It’s pretty volatile in crude and it’s putting a lot of pressure on prices,” he said, noting corn hit a 10-year low and soyoil has been on a downward trend for more than a week.

Corn and soybeans were on the upswing on Wednesday, due to technical trading plus weather problems in Eastern Europe, the Black Sea region and parts of the U.S., Reilly said.

However, with such volatility in crude oil, he predicted corn will slip to $3 per bushel while soybeans fall to $8 per bushel (all figures US$).

May corn was at $3.10 per bushel on Tuesday and July corn closed at $3.18. Meanwhile, May soybeans closed at $8.31 per bushel and July was at $8.41.

With low crude prices crippling the U.S biofuel industry, especially ethanol, the only solution to this quandary is for oil prices to dramatically improve, which Reilly stressed is very likely not going to happen any time soon.

Ethanol stocks reached record levels, he noted, but production has significantly dropped. A report stated about 40 per cent of U.S. ethanol plants have halted production.

In the meantime, U.S. President Donald Trump “needs to create a stimulus package that favours the biofuel industry,” Reilly said, stressing it would be a terrible move if Trump “cut back on biofuel regulations for big oil.”

Reilly also noted Chicago was being very hard hit by COVID-19, with lockdown and social distancing measures still in place.

The earliest the CBOT trading floor could reopen is May 15, he said, but noted that could be delayed further depending on the severity of pandemic.

— Glen Hallick reports for MarketsFarm from Winnipeg.



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