Outside Markets as of 7:00am: Dollar Index down 0.1360 at 79.6140; Euro is up 0.00250 at 1.38590; S&P’s are up 6.75 at 1866.50; Dow futures are up 66.00 at 16,389.00; 10-yr futures are down 0.06%; The Nikkei closed down 0.98%; The DAX is up 0.77% at 9,473.68; The IBEX-35 is up 0.30% at 10,336.80; The Russian MICEX closed off 0.04% at 1,279.56; Copper is down $0.20 at $309.10; Gold is down $0.50 at $1300.30; Crude Oil is up $0.54 at $101.14; Heating Oil is up $0.0047 at $2.9856; Paris Milling Wheat is down €1.50 at €215.75/MT.
Despite escalating tension over the weekend in the Ukraine/Russia saga, global equities are starting the last week of April on a positive note. Pro-Russian militants turned to kidnapping over the weekend, with Ukraine mobilizing military forces in an attempt to take back the eastern part of its country. The Whitehouse has announced a new round of sanctions targeting Russian companies and individuals for the country’s non-compliance with the Geneva agreement. Unless the course is altered, chances will increase the Russian economy could hit a recession sometime in 2H2014 if capital continues to flee Russian markets. The Federal Reserve’s FOMC will meet later this week where they are expected to taper another $10 billion from their bond-buying program.
The much anticipated rain event for the Midwest finally began last night with lots of 1.0” totals in MO/IL/IA/MN/SD/ND and lesser amounts in areas between. Additional precip is expected the next several days for the Midwest, essentially bringing fieldwork to a stop across the corn belt. Heaviest rain this morning is falling in MO/IL with snow falling in W-ND/E-MT. 6-10 and 8-14 day maps released from NOAA yesterday afternoon suggest a continuation of below normal temps, and in some cases much below normal, for the upper-Midwest. Precip patterns are mixed, but the maps seem fairly consistent with below normal temps which seems more of a concern than the water. Uniform emergence when temps remain stubbornly on or below 50* becomes difficult. As the calendar flips to May, the planting conditions and pace will become more pressing.
Firmer to sharply firmer markets overnight led by old crop soybeans now that first notice day is upon us. Stength is being derived from the Ukraine/Russian tensions, lack of rainfall in the southern plains over the weekend and none in the 7-day forecast and slow planting progress in the Midwest. This afternoon’s crop progress report will be watched closely with most expecting corn planting progress between 18-22%. Chatter suggests the number could be higher than expected, but little to no progress will be made this week. The real concern is the 2-3 million acres analysts are throwing back into the mix from last year’s prevent plant. The later the calendar gets, the less confident one can be about those be available for corn and soybeans. The emergence issue is also one the market may pick up on more as we work our way into May.
The Wheat Quality Council Tour begins their observation of the winter wheat crop in the southern plains today, so expect to see a lot of pictures and articles about conditions there. What will be interesting it their assessment of the freeze event a couple weeks back. Their timing should be perfect to get a solid handle on any losses, which were expected to be worst in N-TX/S-OK. KC continues to lead complex strength on conditions, although the rest of the Northern Hemisphere wheat producers are reportedly receiving good growing conditions. China’s winter wheat crop is said to be in excellent shape. Paris Milling Wheat is soft in this morning’s trade on the solid crop prospects they have coming.
Soybeans are clawing back last week’s losses as traders realize once May goes off the board, delivery warehouse supplies won’t be assessable again until mid-July. The South American soybeans we’re importing aren’t working into the central belt crush locations who are still enjoying solid margins. Cash guys think the US farmer is down to his last 5-10% of the crop in many areas, if not totally sold out already. The SK/SN is up 3.50c this morning to +7.25c, and to be honest, additional strength back into double digits shouldn’t surprise. Basis and spreads have more work to do in rationing remaining soybean supplies. CIF trades Friday also suggest CK/CN shouldn’t see any weakness past -6.00c. Zone 3 cash basis is trading well above delivery equivalence, making bullspreads look cheap at current values.
Export inspections out mid-morning with another big corn week expected. Nothing to date which suggests the US won’t hit export targets, although wheat needs a few solid weeks to close out May to make sure the no export reduction takes place.
Bottom Line: Expect firmer markets for the duration as traders grow concerned about planting progress, lack of rainfall in wheat areas and the constant fear of disruption out of the Black Sea. If tensions continue escalating, one would think world wheat importers will hasten their move in diversifying suppliers. Soybeans supplies remain incredibly tight, and the market doesn’t seem convinced the current amount of South American soybean imports will do the job of alleviating said tightness. Scales are tipped toward the bulls at the moment.
Good Luck Today.
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