March 24, 2020

According to traders, US wheat futures surged nearly 4% on Monday and hit a one-month high, sustained by strong buying of domestic flour millers as consumers stock on bread, and signs of a pick-up in global export business.

Soybeans rose on expectations of rising demand for soymeal, a feed ingredient. Corn followed the firm trend but rallies were capped by poor margins for producers of corn-based ethanol fuel.

Chicago Board of Trade (CBOT) May wheat settled up 23-1/4 cents at US$5.62-1/2 after reaching US$5.63-1/4, its highest since February 21. CBOT May soybeans ended up 21-1/2 cents at US$8.84 a bushel and May corn finished down 1/4 cent at US$3.43-1/2 a bushel. Wheat led the way up, reflecting milling demand as the spread of the COVID-19 has led to US consumer stockpiling of staples like bread and pasta.

"A lot of it has to do with the virus. Bread is flying off the shelves. There is some concern; Will the flour mills be able to continue, due to virus concerns?" said Tom Fritz, a partner with Chicago-based EFG Group. Fresh export demand lent support. Chinese importers last week signed deals to buy 340,000 tonnes of US hard red winter wheat, their first purchase of the grain since late 2017. Russian wheat export prices stabilised last week after seven weeks of decline.

"Late last week, there was a global push to originate wheat," Fritz said. The plunge in crude oil futures this month has depressed margins for the ethanol sector, which is projected to use nearly 40% of the 2019 US corn crop. That factor has hung over the CBOT corn market, dragging futures to contract lows last week, although values closed little changed on Monday.

Expectations that ethanol plants will scale back production, curbing supplies of distillers' dried grains (DDGs), a by-product used in livestock feed, have lifted prices for soymeal, a competing feed ingredient.

US ethanol producer POET said it suspended corn buying "at a number of locations" due to weak biofuel demand and is evaluating its production levels.

The strength in soymeal futures continued to lift CBOT soybeans on Monday, with CBOT May soybeans reaching US$8.85-1/4 a bushel, the contract's highest since March 6.

"The slowdown in the ethanol grind, there's not as many DDGs being made. That creates a greater demand for soybean meal," Fritz said.

The spread of the coronavirus in South America has also stoked worries about shipments of soy. Argentina is the world's top soymeal supplier and Brazil is the biggest global soybean exporter.