4/22/2014 Morning Comments

Good Morning,


Outside Markets as of 5:15am: Dollar Index down 0.0760 at 79.8760; Euro is up 0.00120 at 1.38060; S&P’s are up 1.25 at 1865.75; Dow futures are up 9.00 at 16,380.00; 10-yr is up 0.05%; The Nikkei closed down 0.85% at 14,388.77; The DAX is up 1.17% at 9,519.86; The FTSE-100 is up 0.96% at 6,689.07; The IBEX-35 is up 0.71% at 10,365.90; Gold is down $3.30 at $1290.60; Copper is down $1.90 at $301.50; Crude Oil is down $0.42 at $103.21; Heating Oil is down $0.0082 at $3.0035; Paris Milling Wheat is down €2.75 at €214.75/MT.

World equities are mostly firmer today as Q1 earnings seasons has gotten off to a solid start, although investors remain wary of this evening’s report on Chinese manufacturing as well as the possibility of more sanctions being levied against Russia.  The US has warned it will order new economic sanctions on Russia if it does not comply with the Geneva accord entered last week.  Pro-Moscow gunmen are showing no signs of surrendering government buildings they have seized, and it widely suspected the protesters are backed by the Kremlin who is trying to incite civil war in Ukraine.  Existing home sales data will be released in the US today, and it is expected to show a 1.1% decline to 4.55 million units which would be a 1 ¾ year low.  The 1% rise interest rates combined with lower consumer confidence tied to the Affordable Care act are being cited.


After a band of showers exits the far eastern corn belt this morning, the Midwest should see pretty wide open weather until this evening when another system tracks through the upper-Midwest and far-western corn belt.  This will produce modest precip in SD/ND/MN with heavier totals in IA/NE/KS.  This system will push East and impact MO/IL/WI on Thursday into Friday with heaviest totals in MO/WI up to 1.15”.  Additional moisture will push in this weekend with South Dakota seeing another shot Sunday into Monday with totals between 0.50-1.00” while S-IL/MO/AR see another 0.75-2.00”.  Lots of showers around, but expect planting to surge when and where it can occur.  Extended maps from NOAA show a cooling of temperatures to below normal during the 6-10 and 8-14, but precip will slip from above normal to below normal late in the period as we round out April.

Firmer markets overnight as prices bounce from yesterday’s sharp selloff and react to the mostly friendly crop progress report issued yesterday afternoon.  Yesterday’s loss leader, wheat, succumbed to selling pressure based on better than expected rainfall over the weekend, the forecast for rain this week in the southern plains, temporary optimism surrounding Ukraine/Russia and the trimming of fund length.  The technical picture of wheat is not incredibly encouraging, and if the lows from April 11th are breached, it will look increasingly likely the entire rally from the end of January through March 20th was bear-market corrective, and prices are set to trend towards those January lows.  Lots to happen between now and then, namely growing weather, but funds should be a little anxious about the developing chart picture in wheat.  A close over $7.18 basis July Chicago would be encouraging.

Yesterday’s crop progress report was about as expected to maybe a touch friendly with nation-wide corn planting progress pegged at 6% vs 3% last week and 14% on the 5-yr average.  Progress is slightly ahead of last year’s incredibly slow pace, and should be near 20-25% next Monday.  There are roughly 85 million acres of corn remaining to be planted.  Spring wheat planting progress was estimated at 10% vs 6% last week and 19% average.  North Dakota is 1% planted.  Oats planting progress was listed at 20% complete vs 41% last year and 55% on the 5-yr average.  The national winter wheat condition held steady at 34% G/E vs 35% last year.  Notable changes were witnessed in OK where G/E dropped 3pts to 11% G/E, while poor/very poor increased 7% to 61%.  Freeze damage is still being assessed.  9% of the winter wheat crop is headed vs 17% average with TX at 34% and OK at 38%.

Statistics Canada will be out Thursday with their first estimates of plantings on principle field crops.  Analysts expect the agency to show farmers intending to plant 24.4 million acres of wheat, down 7% from a year ago.  Canola seedings are seen up 6% to 21.1 million acres, the second largest on record after 2012’s 22 million.  Oats acres are seen steady at 3.2 million acres.  Incredibly wide basis levels, -$3.00 under the Minneapolis Board price in some cases, are expected to encourage less wheat plantings in 2014.  Poor rail performance is also thought to be inhibiting additional plantings.

Australia’s Bureau of Meteorology said in a recent statement El Nino was likely this year, and now put chances at 65% for the weather phenomena showing up as early as July.  El Nino is associated with above normal rainfall in the Americas as well as drought in Australia and Southeast Asia.

Yesterday’s export inspections on corn of 63.0 million bushels were tied for the largest single week since 1990.  Still plenty of chatter about Chinese soybean length being sold and looking for a home.  Several more Brazilian soybean cargoes were said to be trading into Mobile, AL with expectations of being railed to a southeast crusher.  Brazilian harvest is thought to be around 90% complete according to SAFRAS.  Delivery certificates continue to be canceled, and funds continue to load up on beans which should keep SN/SX very resilient above $2.50.


Bottom Line: Markets can find a little bit of a bounce today from yesterday’s drubbing, especially with the extended forecast looking a bit wet and cool for ramping up the planting pace.  South American soybeans are still heading to the US, and Chinese soybean inventories remain an issue.  Still, the US has to get to the end of August before new crop beans are harvested, so downside should remain limited as long as Chinese economic data doesn’t suggest a more severe slowdown is waiting in the wings.  Charts on corn and wheat need to turn around or risk further erosion.  Weather maps remain key.


NOAA 4-22


Tregg Cronin

Market Analyst






COMMODITY TRADING INVOLVES RISK AND MAY NOT BE SUITABLE FOR ALL RECEIPIENTS OF THIS POST. Neither the information presented, nor any opinions expressed, constitutes a solicitation for the purchase or sale of any commodities. The thoughts expressed in this email and basic data from which they are derived are believed to be reliable, but cannot be guaranteed due to uncertainty about future events and complexities surrounding commodity markets. Those acting on the information are responsible for their own actions.


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