The Coronavirus pandemic continues to dominate global financial markets, including commodities. We are witnessing an unprecedented shut-down of the consumer economy as communities attempt to self-isolate and quarantine to slow the spread of the virus.
Among the casualties of the pandemic is ethanol demand. Energy markets are getting hit with the double-whammy of a contracting economy due to pandemic protocols as well as a price war between two of the largest oil producers, Russia and Saudi Arabia. Corn sunk to new contract lows today as country basis finally gives up the ghost, led by the ethanol sector, and the futures market anticipates reduced forward demand.
Wheat markets, however, are staging a rebound as flour mills and food companies ramp up production to quickly replace grocery inventories, cleaned out from consumer stockpiling. Whether this has created new demand or has simply pulled future demand forward into the here and now remains to be seen. Either way, food commodities like wheat and rice are gaining on fuel commodities like corn and soyoil.
Soybean prices are stable today after the heavy beating of the last few weeks. Largely driving the decline in soybean prices has been the destruction of the value of the Brazilian real, which has led to heavy farmer selling of soybeans in Brazil. Note the two different soybean charts in the image above; soybeans in Brazilian real terms have rallied to new contract highs amid a record crop, while soybean prices denominated in US dollars have slumped.