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“The food supply chain is breaking”

 In Newsletter

Issue No. 127

 

Assets covered: CBOT Corn Futures (C1), CME Class III Milk Futures (DA1), CME Kansas City Wheat Futures (KW1), Soybeans

 

As the global Coronavirus pandemic unfolds, the wide-reaching affects on the food supply chain are hitting with a one, two punch. The shuttering of restaurants and schools coupled with panic buying in grocery stores was an unexpected consequence of the virus, upending the food supply chain as we know it.

 

“The food supply chain is breaking,” said John Tyson, Chairman of Tyson Foods, in a shocking letter to the public last week.

 

While national jobless claims and food insecurity for families grows, farmers have no choice but to pour out their milk and smash their eggs because there is no supply chain to connect producers with end consumers. Commodity markets are stacking up, which is wasteful and deflationary.

 

In response to food supply chain woes, the USDA released the details of the Direct Assistance to Farmers through the Coronavirus Food Assistance Program this week, which is $19 billion in total funding to support farmers and ranchers most affected ($16 billion) and to support the Farmers to Families Food Box program ($3 billion) to help support the food supply chain connecting food to consumers.

 

Over Supply: An Old Problem Made Worse

 

We recently spoke with ag commodities expert Christopher Narayanan with INTL FCStone in our most recent QuickHit video series. Last week the USDA released its supply and demand report for May and Narayanan thought the outlook was optimistic for the new crop year. We have yet to see, but this could mean oversupply in the market, especially for corn crops he said.

 

“I think the big thing is how do we use up the corn that we have? In the last decade, we’ve seen a huge increase in corn supplies. I look at the amount that’s left over at the end of a crop year divided by how much we used in that particular year. That’s been on the rise…” said Narayanan.

 

When reviewing our data, our CBOT Corn Futures projections are showing a 16 percent drop in average end of day closing price for May 2020 when compared to May of 2019. We may see a slight uptick in value at the end of Q2 in June, but those gains will all but taper off going into mid-Q3.

CBOT Corn Futures forecast 2020

CBOT Corn Futures (C1) forecast through August 2020
CI Futures generated this chart. Book a demo to see it in action.

 

 

When looking at other ag commodities in our database, we see a general trend of depressed prices through August of this year. We’ve included our milk, wheat and soybean outlooks below.

Class III Milk Futures CME 2020 Forecast

CME Class III Milk Futures (DA1) forecast through August 2020
CI Futures generated this chart. Book a demo to see it in action.

 

Kansas City Wheat Futures CME 2020 Forecast

CME Kansas City Wheat Futures (KW1) forecast through August 2020
CI Futures generated this chart. Book a demo to see it in action.

 

Soybeans 2020 Forecast

Soybeans forecast through August 2020
CI Futures generated this chart. Book a demo to see it in action.

 

We cover more than 60 different ag commodities on our CI Futures platform. Interested in learning more about 2020 and 2021 outlooks for ag commodities? Contact us to book a free consultation call.

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