Chicago | Reuters — U.S. corn futures dropped to their lowest level in about 3-1/2 years on Wednesday as weekly ethanol output set a record low, reflecting weak demand for the crop during the coronavirus outbreak.
Soybean and wheat futures also fell at the Chicago Board of Trade.
Demand for corn-based ethanol has suffered as U.S. stay-at-home orders to prevent the spread of the COVID-19 coronavirus have kept cars off the roads. Weekly ethanol output fell 102,000 barrels per day to 570,000 barrels, while inventories set a record high, according to the U.S. Energy Information Administration.
The ethanol sector’s slowdown comes as the U.S. Department of Agriculture is projecting that farmers will plant a massive corn crop this spring, which could lead to burdensome supplies of the grain, according to analysts. More than a third of the U.S. crop is used to make ethanol biofuel.
“With poor prospects for the demand for corn to produce ethanol and the grim global economic situation, it pretty much leaves supply disruptions to give corn much hope for a rally,” said Tomm Pfitzenmaier, analyst for Summit Commodity Brokerage.
The most actively traded corn contract dropped to its lowest price since Sept. 1, 2016 at the CBOT. May corn ended down 2.1 per cent at $3.19-1/4 a bushel and set a contract low (all figures US$). July corn slid 1.7 per cent to $3.26-3/4 a bushel and also set a contract low.
CBOT May wheat ended 1.5 per cent weaker at $5.40-1/4 a bushel on technical selling and improving crop weather in the Black Sea region. The contract extended losses after breaking below key technical points at $5.45-3/4 and $5.40.
CBOT May soybeans settled down 0.7 per cent at $8.42 a bushel, after dropping to their lowest since March 19 earlier in the day.
Disruptions to U.S. meat production from the spread of the coronavirus continued to hang over the market amid fears of a knock-on effect on demand for soymeal widely used in feeding livestock.
Cargill said it temporarily reduced work shifts at a beef plant in Fort Morgan, Colorado, to “minimize the impact of COVID-19,” the disease caused by the virus.
Smithfield Foods said it would shutter two U.S. plants that process bacon and ham, after closing a separate hog slaughterhouse because of a coronavirus outbreak among employees.
“It will be a big issue for soymeal demand as U.S. meat processing plants close down,” said one Singapore-based trader at an international trading company.
— Reporting for Reuters by Tom Polansek in Chicago; additional reporting by Naveen Thukral in Singapore and Sybille de La Hamaide and Gus Trompiz in Paris.