Commodity markets have not enjoyed the first half of 2020. In fact, both the grain and livestock markets are likely not looking backward, but instead are eyeballing the second half of the year with more than a little trepidation. What does the second half of the year hold in the markets? Joe Vaclavik of Standard Grains in Nashville, Tennessee, has some interesting thoughts on the impact of 2020 on the agricultural markets.
“The first half of the year was very abnormal,” he said without much hesitation. “If you look at where the markets were early in the year, we entered 2020 on a high note. Front-month corn futures were in the $3.80s and even the $3.90s, as well as better soybean and livestock prices.”
But those prices were short-lived, thanks to the coronavirus and the resulting economic shutdown. He says coronavirus has been THE big story of the year so far in agriculture. It was very much the story when it comes to the corn market, due to radically lower demand for ethanol.
“The virus hit and then the government shut down the economy,” Vaclavik says. “People just stopped driving. The amount of gasoline demand plummeted to levels that we haven’t seen in 30 or 40 years. When gasoline demand drops, ethanol demand goes with it.
“Ethanol typically accounts for as much as 40 of total corn usage in a given year,” he adds. “That means farmers lost hundreds of millions of bushels in corn demand lost because people weren’t driving.”
He says that sharply negative trend in the corn markets likely bled over into other commodities, including soybeans. But the livestock markets weren’t left unscathed during the first six months of this year either. The enormous loss in production capacity brought the entire processing industry to a screeching halt.
“That’s how you’d characterize the first half of the year,” he adds, “as a massive disruption in overall demand for ag products.”
There are some positive markers ahead for the markets. To find out what they are, listen to the complete podcast here: