Market analyst: Pandemic starting to shrink
04/14/20 — We are finally seeing the COVID-19 pandemic starting to shrink, as less new infections are occurring daily than the previous day, meaning in 14 days we will have fewer of the infected people to spread it going forward. Finally, the drastic social distancing programs implemented across the world are starting to show some response. As spring arrives, it likely will diminish even more, so the restart of economic activity shut down by social distancing can begin again. But how quickly the economy recovers is quite important — and for agriculture, how quickly trade resumes is quite important (corn is about 1/6 exported, soybeans and wheat 50%). For corn, how quickly energy consumption resumes near normal activity (if ever) is also important.
The coronavirus now has at least 1,930,780 infections worldwide (up 71,769), with 120,450 deaths (+5,471), so the social distancing strategy is working around the world. That might be the good news, and the bad news as that means social distancing will be a part of many in the world’s lives until a vaccine or better approach is found. For now, the West cannot seem to find any tactic other than a shutdown of 29% of our economy to stop the virus from spreading. For now, the growth rate is not only slowing, but new infections are dropping each day so that means the problem is getting smaller, not larger. That is a huge victory for those in the health industry as now they can probably handle the new cases into the summer (which will likely shrink the infections as well). For this winter/spring season, we’ve likely dodged the bullet so to speak. But next fall, the same issues will emerge with colder weather/flu season, and it’s likely that fall and winter sports/crowd activities will once again be canceled as the virus starts up again in fall (just like the flu season).
The futures market seems to be dismissing the Saudi/Russian crude oil agreement to shrink oil supplies as prices are going back down to near lows, now just a few dollars from it. But with the start up of near-normal life just a month or two away, that might be a short-lived decline.
There is snow in Texas, Oklahoma and Kansas as the cold weather is across the entire U.S. today, with well below normal temps likely to hang around for another week or so. The next 7 days will also be dry, though, with the cold weather. The 8-14 day forecast warms a bit to near normal, and precip amounts increase to above normal for the southern half of the U.S., but remains below normal for the northwest Corn Belt. Could something actually be planted in April this year?
So far planting progress in nearly as pathetic as last year, with only 3% of corn planted (same as last year and 1% behind normal), 9% cotton planted (3% ahead of normal), 18% sorghum planted (1% ahead), and 21% of rice planted (10% behind). Sugarbeets are 10% planted (equal to normal and 3% ahead of last year), with oats 32% planted (4% behind normal but 3% ahead of last year). Winter wheat is 6% headed (1% behind normal and 1% ahead of last year), with conditions 62% G/E (same as last week and 2% above last year). HRS wheat is 5% planted (4% behind normal and 3% ahead of last year), with barley 12% planted (3% behind normal).
Soil moisture is almost as saturated as last year at 92% adequate/surplus (2% behind last year), with subsoil 91% adequate/surplus (also 2% behind last year). It’s unlikely planting will go as horrible as last year, but we still might have significant prevented planting this year. (Maybe the second worst ever?) Last half April and May weather determines most everything about the planting season, but a slow start and saturated soils are not what we wanted to begin the year.
It’s become extremely difficult to do a market assessment for ag products without first assessing the state of the U.S. economy/pandemic situation. For example, the April USDA report made a number of big changes (huge corn demand cuts, big SAM soybean production cuts) and the market couldn’t care less. Prices hardly budged when the USDA report came out last Thursday. Probably because it didn’t matter — the state of the world and U.S. economy/impacts from COVID-19 were far more important than USDA’s report. The problem for U.S. agriculture is that the world is becoming less and less ‘global’ due to COVID-19. With the U.S. exporting 1/6 of our corn, and 50% of our wheat/soybeans less ‘global’ is a bad thing; we need the export markets. So any tendency to import less hurts U.S. agriculture — and the market knows it.
On the other hand, we can’t seem to keep pasta, dry beans, eggs, milk, and bread on U.S. grocery shelves the past few months. That feeling of being unable to buy products you want is something the rest of the world is far more familiar with than the U.S. So the need to import food from the U.S. is indeed a very strong and important need — perhaps more important than anything else. We need to make sure we remember to take care of our customers’ needs the way we would care for our own children. We do not want to give any customer an excuse not to buy from the U.S. — especially in these difficult times.