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Corn: Waterloo on the crude oil market

April 21, 2020 3:16 PM, Der AUDITOR
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PARIS. The Chicago corn market is sliding deeper and deeper into the red. The crude oil market experienced a Waterloo yesterday for the WTI variety. Pressure is coming from the US meat market, and after Smithfield Foods and Cargill, JBS has now announced further closures of production sites. Dark clouds are also gathering on the Western European meat market.

In Chicago, corn was trading at just USD 3.09 per bushel, which is 3.5% lower than yesterday. In Paris, the front end was slightly up by 0.4 % at EUR 164.50 per metric tonne. The sharp drop in the price of corn in Chicago was due to the escalation on the crude oil market, which experienced a Waterloo, with WTI achieving a negative price for the first time in the history of the oil future. Crude oil peaked at the May date at USD 37 per barrel. Overflowing crude oil stocks due to the restrictions imposed by the Covid-19 pandemic make export deliveries worldwide impossible because refineries' warehouses are filled to the brim. We know negative interest rates, now the trade has to deal with negative prices. US President Donald Trump wants to put 75 million barrels of crude oil into the strategic reserve to stabilize the market. Trump is also considering stopping Saudi Arabian crude oil deliveries. There are 20 supertankers, full to the brim with unsold crude oil, floating on the oceans of the world. Pressure was also exerted by favourable weather forecasts for the corn sowing season in the USA, with 7% of stocks sown by 19 April. At 684,000 metric tonnes, the export inspection for US corn was well below trade expectations of 0.85 to 1.3 million metric tonnes.

Corn, daily price development

Parity

EUR/mt

Diff. EUR/mt

Bordeaux, FOB

158.00

0.00

La Pallice, FOB

158.00

0.00

Netherlands, CIF

187.00

4.00

Oldenburg, DDP

192.00

2.00

Brake, FOT

186.00

3.00

Lower Rhine Region, DDP

186.00

4.00

Upper Rhine Region, FOB

183.00

3.00

Ukraine, FOB

-

-

Trade sources

Meat consumption declines worldwide
In the US market, slaughterhouse closures continue unabated. Following Smithfield Foods and Cargill, JBS has now also announced the closure of a plant in Worthington, Minnesota, which employs 2,000 people and processes 20,000 pigs per day. The 30% slump in meat consumption in North America in March, which is expected to continue into April, means less animal installations on US farms, resulting in lower corn and soy consumption. Chinese demand remained lower. According to the National Bureau of Statistics, China's pork production fell by 29% in the first quarter of 2020, after falling to a 16-year low of 42.6 million metric tonnes in 2019. According to official sources, China's pig stocks have fallen by 40% since August 2018, when African swine fever was detected, and by as much as 60% according to unofficial sources. In Western Europe, too, the mood is uncertain; although the supply of pigs ready for slaughter is not too extensive in Germany, demand is quiet. It seems that many consumers are avoiding the fresh meat counter. The retail trade cannot compensate for the sales volumes lost in the catering sector due to the Covid-19 pandemic.

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