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February 13, 2020 | FBN Insights | Kevin McNew

Coronavirus Concerns Weigh On Corn & Soy Futures

Wheat posts strong export sales

Brazil To Process More Ethanol With Corn   

In Brazil, the world's largest sugar based ethanol plant could add corn to boost its ethanol production.   

Brazil is the world’s largest producer and consumer of ethanol. 

In Brazil, sugarcane is the primary input for ethanol.   

Recently several cane-based sugar and ethanol plants in Brazil are adding machinery to produce ethanol using corn.

By adding corn capabilities, plants can expand production period to a full year.  

Traditionally, Brazil produces ethanol from April to December.

Brazil is witnessing a boom in corn based ethanol investment with most projects taking place in the key corn producing states.  

FBN’s Take On What It Means: We believe that Brazil has been progressively shifting toward a corn based ethanol program to compliment it’s sugar based ethanol industry.  This shift is reinforced by Brazil’s sugar production shortfall which has led to increased imports of US based ethanol.       

USDA Waiting to Hear If China Will Reduce US Farm Purchases

China has not informed the US of any delays or reductions of its planned purchases of U.S. agricultural goods under the Phase 1 trade deal due to the outbreak of coronavirus.  

The Phase 1 trade agreement was signed on Jan. 15.

The Phase 1 deal requires China to increase purchases of U.S. agricultural commodities by $40 billion over the next two years.

According to Reuters, the White House has said that if the coronavirus lasts for a “long time” that would raise the chances of China cutting planned purchases. 

Last week Chinese President Xi said that the coronavirus would not interrupt China’s purchases of US agricultural goods. 

FBN’s Take On What It Means: We believe that the latest news about the uncertainty of how coronavirus can impact Chinese imports of US agricultural goods can be interpreted as short term political and economic noise.  We are monitoring the USDA’s weekly export sales of key US agricultural commodities for Chinese purchases.                                                              

                                                                                                                                                                      

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