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GRAINS-Corn recovers from 3-1/2-year low, weakening ethanol demand curbs gains

Chicago corn ticked higher on Thursday after dropping to its lowest since 2016 in the previous session, although gains were limited by a sharp decline in demand for the grain-based fuel ethanol amid the coronavirus outbreak.

Wheat rose for the first time in four sessions, while soybeans also gained ground.

“Ethanol demand has really taken a hit, which will leave a lot of surplus corn,” said Phin Ziebell, agribusiness economist at National Australia Bank. “Going forward, ethanol fundamentals look very poor.”

The most-active corn contract on the Chicago Board of Trade rose 0.3% to $3.27-3/4 a bushel by 0250 GMT, having dropped to its lowest since 2016 in the previous session.

Wheat added 0.1% to $5.40-3/4 a bushel and soybeans were up 0.6% at $8.56-1/2 a bushel.

Demand for corn-based ethanol has suffered as U.S. stay-at-home orders have kept cars off the roads. Weekly ethanol output fell 102,000 barrels per day to 570,000 barrels, while inventories set a record high, according to the U.S. Energy Information Administration.

The ethanol sector’s slowdown comes as the U.S. Department of Agriculture is projecting that farmers will plant a massive corn crop this spring, which could lead to burdensome supplies of the grain, according to analysts. More than a third of the U.S. crop is used to make ethanol biofuel.

The governors of five U.S. states have asked the Trump administration for a nationwide waiver exempting the oil-refining industry from the nation’s biofuel laws to help it survive a demand meltdown, according to letters seen by Reuters.

Disruptions to U.S. meat production from COVID-19 continued to hang over the soybean market amid fears of a knock-on effect on demand for soymeal widely used in feeding livestock.

U.S. soy processors crushed a record-large volume of soybeans in March, topping trade estimates for a fourth straight month, according to National Oilseed Processors Association data released on Wednesday.

Ukraine, one of world’s top grain exporters, is ready to ban wheat exports if sales exceed limits agreed with traders, the deputy economy minister in charge of agriculture told Reuters on Wednesday.

Any further restrictions of Ukraine’s grain exports could speed up trade from Black Sea producers Russia and Kazakhstan, depleting their grain export quotas earlier than anticipated.

Commodity funds were net sellers of CBOT corn, wheat, soybean and soyoil futures contracts on Wednesday and net buyers of soymeal, traders said.
Source: Reuters (Reporting by Naveen Thukral; Editing by Subhranshu Sahu and Uttaresh.V)

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