Chicago | Reuters — Chicago corn futures slumped on Wednesday, giving up part of the previous session’s gains, as the U.S. government reported the U.S. ethanol industry saw a near-decade low in weekly production amid massive stocks.
Wheat futures followed in mid-day trading, as investors squared up their positions ahead of Thursday’s world agriculture supply and demand estimates (WASDE) report from the U.S. Department of Agriculture.
The most-active corn futures contract on the Chicago Board of Trade settled 1-1/2 cents lower at $3.30 a bushel (all figures US$).
CBOT soybean futures closed 1/4 cent down at $8.54-1/2 a bushel, while wheat futures fell one cent to close at $5.48-1/4 a bushel.
The market mostly factored in strong U.S. wheat production, said traders, after USDA reported better-than-expected crop conditions on Monday, rating 62 per cent of the crop as good-to-excellent. The report beat analyst expectations that only 56 per cent of winter wheat would achieve the rating.
The big mover of the day was corn — with the coronavirus panic causing pain for the ethanol sector, a significant market for U.S. corn.
A slew of U.S. ethanol plants have shut down as fuel demand collapsed due to the coronavirus outbreak, and meatpackers have been hit by a worrying side-effect: less carbon dioxide is now available to chill beef, poultry and pork.
“We’re down 33 per cent for the year in production and record stockpiles of ethanol. And that doesn’t count the plant that closed yesterday, or will close today or next week,” said Karl Setzer, commodity risk analyst for AgriVisor. “It’s definitely a bleak outlook for corn right now.”
Crude oil futures rebounded on Wednesday, lifted by hopes that a meeting between OPEC members and allied producers on Thursday will trigger output cuts to shore up prices amid the coronavirus pandemic.
But that lift could not overcome worries about ethanol’s demand destruction, market analysts said.
“You have to do something for the demand for corn domestically to pick up, or somebody steps in and buys something in a big way on the export business,” said Mark Schultz, chief market analyst at Northstar Commodity. “I just don’t see that happening.”
Some traders are also questioning China’s appetite for U.S. soybeans.
China released 500,000 tons of soybeans from state reserves on Tuesday, as rain delays slowed shipments from Brazil. That is despite a Phase One trade deal between China and the U.S, that promised a slew of U.S. agricultural exports, including soybeans.
— Reporting for Reuters by Christopher Walljasper in Chicago; additional reporting by P.J. Huffstutter, Naveen Thukral and Sybille de La Hamaide.