Another grain market domino falls

meat packing plant

Just when you thought the worst was over, continued fallout from the coronavirus outbreak has another market domino falling.

The current pandemic has caused one more negative factor in current grain markets to come to the forefront of pricing on the Chicago Board of Trade. This comes in the form of problems in the livestock markets.

Meat packing closings

Livestock prices are plummeting as major packing houses are closing for indefinite periods because of outbreaks of COVID-19 in their workers. The latest closing comes as Smithfield closed their pork packing house in Sioux Falls, South Dakota. This closing comes as a shock to livestock markets because they represent 4 to 5% of all pork cutout in the country.

The effect of the closing ripples through farm country, as the loss of demand has sellers scrambling to sell hogs that are ready for market and can’t be held back very long. That leads to sharply decreased prices, and that leads to lowered demand for corn and soy products.

An employee problem

Smithfield and government officials emphasize that consumers should not fear the virus can be transmitted through the meat. Rather, this is an employee problem, since workers who have been found to be positive for the virus are feared to be spreading the disease at work.

The plants dealing with this problem are now disinfecting worker areas and trying to see how they can cut meat and meet any kind of social distance standards.

Corn and soybeans

On April 13 as this is written, soybeans lost almost a dime on a knee-jerk fear that lower hog numbers means less demand. I don’t see how this works in reality, as the hogs still exist and must be fed. The lifecycle of hogs and beef animals is long enough that real demand changes come slowly. However, the market is all about perception. What is bad for livestock is bad for grain right now, according to the futures markets.

Corn futures also lost slightly April 13, with the lead month off almost a penny. We see corn mostly even to up a half-cent April 14, but soybeans are a fraction of a cent lower after early losses of a couple of cents. May corn futures are trading a pathetic 3.31-1/4, with May soybeans at 8.52-3/4.

The livestock markets have another problem developing, this time with disease. Unfortunately, I cannot find where I read it or the details. I know that there is an outbreak of porcine epidemic diarrhea virus killing as many of 80% of young pigs in some sow herds, but I thought this was something else. Stay tuned for more information.

Wheat soars — for now

As corn markets are staggering, wheat markets have been soaring. In part, this is because of a fear of a food shortage which pops up with a world event like the virus, whether there is the chance of wheat being short or not.

A real fear of a shorter crop in the Plains had Kansas City hard red winter wheat futures 25 cents, but futures there are off seven and a half cents April 14 after being higher earlier this morning.

After temperatures in the 70s last week, and a crop that has long broken dormancy, the area saw morning low temperatures of 24 degrees two days in a row. It remains to be seen if there is real damage in the hard wheat country, but the fear is putting a double top in their futures prices.

So, there is a plethora of negative news for grain growers, but the fundamentals remain. Yes, the lower ethanol grind of corn caused by lowered demand for gas and cheap prices will cut some consumption out of the corn balance sheet, but the world will still eat.

Eventually, we return to sensibility and the reality that prices are too low. Soon USDA will actually survey farmers in the northern states that had corn out all winter to find what they really harvested, both acres and yield. Some day we will see realistic numbers for the actual production of corn and soybeans in our weather-disaster of a 2019 crop.

Meanwhile, the dominos keep falling and smashing prices when they fall.


Up-to-date agriculture news in your inbox!



We are glad you have chosen to leave a comment. Please keep in mind that comments are moderated according to our comment policy.

Receive emails as this discussion progresses.