After bottoming in late March, gasoline futures have exploded higher, nearly tripling since the low.
During the nationwide coronavirus shutdown, Americans slashed their automobile use, cutting mileage, and therefore fuel consumption, by over 60%. The collapse in demand and concerns about long-term economic slowdowns sent prices to 20-year low, sending wholesale futures prices under 40 cents per gallon.
At the same time, nationwide gasoline stockpiles ballooned to an all-time high over 260 million barrels, nearly 20% more than normal.
Since then, U.S. drivers have increased their mileage and slowly cut into the stockpile. More importantly, markets seem to see an end of the coronavirus crisis stage and are projecting better future demand. As of midday Friday, June gasoline futures traded for $1.00 per gallon, a price that does not include taxes, fees, transportation, or retail markup.
Corn prices reached a one-month high on Thursday, topping $3.30 per bushel. Demand for the grain has been increasing as U.S. ethanol producers renewed production.
Nearly all U.S. ethanol is used as a gasoline additive, so the collapse in driving also gutted ethanol demand. Ethanol production ground to a halt amid the crisis, sending corn to a ten-year low in April.
Now, as drivers hit the roads, they’re burning more fuel and helping boost prices for corn. Even as prices are rising, many U.S. farmers are hesitant to sell at the still-low prices, which is forcing end users to bid the price even higher.
Meanwhile, soybean prices have remained lackluster, trading Friday near $8.40 per bushel. President Trump has recently increased threats against China over its treatment of the coronavirus outbreak and political dissidents in Hong Kong. Soybean growers are worried that actions against China could result in retaliatory tariffs against soybeans again, repeating the pain that farmers felt over the last two years.
As the growing season progresses, these markets will be increasingly sensitive to weather, as the crop size and health will be largely determined during the coming months.