Miller Magazine Issue: 123 March 2020

90 MARKET ANALYSIS MILLER / MARCH 2020 The potential recession of the global economy due to the spread of coronavirus increases pressure on stock and com- modity markets. At the same time, the market has already "digested" the epidemic as a threat and is starting to react less and less sharply. Oil is getting cheaper, demand for et- hanol is declining, and as a result, demand for raw materials is also falling. As global trade recovers, the market is wai- ting for a reversal. China declares that most companies will recruit employees on March 10th. Vietnamese companies have signed 18 agreements with US producers to purchase about $ 3 billion of agricultural products over the next 2-3 years. Transactions include the purchase of 100 thousand cows, 3 MMT of wheat and barley, fruit, corn and soybe- an feed for animals. Bullish signals begin to appear on the market. Corn export rates are below expectations, there is sup- port from ethanol. Since the beginning of the season, Uk- raine has sold almost 18 MMT of corn from 30.5 MMT of export potential. The main focus remains on the EU. Spain bought 3MMT, Egypt - 2.4MMT, China - 2.35MMT, Net- herlands - 2.1MMT, South Korea - 1.7MM. In total, the EU imported almost 14.4MMT, which is 2MMT less than the same date last year. Ukraine's presence declines due to more active purchases in Brazil, where a weak local currency has made corn more competitive. Brazil's exports in February amounted to 347 kMT, whi- ch is the smallest volume in February since 2012 and the smallest monthly volume since 2018. The reduction com- pared to February 2019 was 78%. 59% of corn sold to Iran, despite the threats of the local government to refuse to buy Brazilian grain for political reasons. The first boat with Argentinean corn (~ 30kmT) is unloaded in the eas- tern part of Brazil. Local analysts expect an increase in im- ports to Brazil, while domestic consumers are awaiting the supply of safrinha crops later in the spring. Some regions of production suffer from drought. Local prices, depending on the region, are 20-60% higher than last year, which is associated with a drop in currency and demand from the ethanol complex. In the US, corn consumption for ethanol grew by 3% over the week, and by 9% compared to the same week last year, which supports the exchange. At the same time, there were no sales to China (except for the lot of sorghum), and Latin American corn is still cheaper. Ethanol production this week in the US has increased. At the same time, its reserves are also high. At the same time, due to low sales, producti- on will grow, which means the US needs expensive oil and OPEC + meeting to limit oil production at their fingertips. NTL FCStone predicts 1.1% growth in US corn use for et- hanol production in the United States Given potentially high carry-over stocks, even declining production globally does not make wheat more bullish.Tu- nisia is looking for 117 kmT of soft wheat in March-May. On February 25, Tunisia bought ~ 125 kMT of wheat at a price of $ 232.92 + CnF. Prices are in line with the $ 216- $ 217 FOB Novorossiysk indicator. Japanese MAFF purcha- sed 117kMT of wheat. Ethiopia has announced a tender for 400kMT of wheat flour on April 7 to the previously an- nounced 200kMT on April 1. Both tenders are shifted from late January. Jordan was unable to buy 120kMT of wheat at a tender on Tuesday. Turkey is looking for 305kMT of milling wheat, sellers must place a security deposit under the terms of the tender. At MATIF, funds stopped building a net long position. Position decreased to 66 thousand contracts (minus 12.3 thousand contracts per week). The air temperature in the Black Sea region still exceeds the average annual norm, and moisture reserves are below average. Crops of winter whe- at in most regions of Ukraine and Russia are in satisfactory condition, but due to a small reduction in areas in Ukraine and Russia, next year's crop may be lower, although it is actually too early to predict anything.