Good Morning,


Outside Markets as of 6:00am: Dollar Index up 0.0200 at 79.1200; Euro down 0.00040 at 1.39280; S&P’s up 1.00 at 1865.50; Dow futures are up 9.00 at 16,369.00; 10-yr futures are up 0.08%; The Nikkei closed down 2.93% at 14,033.45; The DAX is down 0.14% at 9,454.44; The IBEX-35 is down 0.58% at 10,420.00; The Russian MICEX is up 1.37% at 1,336.65; Gold is up $3.20 at $1,311.80; Copper is down $1.45 at $304.25; Crude Oil is up $.81 at $100.31; Heating Oil is up $0.0099 at $2.8976; Paris Milling Wheat is down €2.25 at €213.25/MT.

Mixed to weaker equity markets this morning with sharply lower Asian shares after tech starts became the downside leader Tuesday.  During Tuesday’s trade, Twitter fell 18%, adding to heightened tension in Ukraine and the seemingly empty promises made by the West in the face of a defiant Russia.  Adding to the complexities is the Euro trading near the highest levels since 2011, which is combating the easy money measures taken by the European Central Bank to kickstart the EU’s economy.  Money fleeing out of the Black Sea region is finding a home in Europe as a safer destination.  Western companies are finally starting to see negative effects from the slowing Russian economy.  To wit, France’s Societe Generale (SocGen) bank has taken a €525 million write down on Russia, dropping its net profits in Q1 13% y/y.  CRB-Index still trading near the highest levels since mid-2012.

Scattered showers moving into the WCB this morning with fieldwork expected to be impacted in SD/ND/MN/WI, while the storm will move East tomorrow and Friday to shut things down in IA/MO/IL and the rest of the eastern corn belt.  The map below shows the 7-day forecasted precip map and is pretty self-explanatory.  The majority of the Midwest will see soaking rains which will be welcome for some areas wrapping up planting.  For the Northern Plains, this will slow things further and keep acre switching decisions on the front-burner.  Eastern HRW areas will receive decent rains later this week, but dry western and south-west areas look to remain dry.  In the 6-10 and 8-14 day outlook, NOAA keeps the below normal temp bias in place over the Midwest for the duration.  A below normal bias for precip accompanies it, however, so a week out looks more favorable for completing spring work.


Slightly easier tone overnight after the solid gains posted in wheat and corn.  Wheat markets had been rallying on declining crop prospects in the southern plains, but maps like the one below have now thrust Minneapolis wheat to the forefront over planting delays.  Minneapolis led strength yesterday, however, spring wheat acres probably aren’t in jeopardy just yet.  Last year was a record or near record slow seeding pace for North Dakota and the majority of Canada and yet record crops were achieved in Canada and bumper crops in North Dakota.  The real risk is declining corn acres in ND and N-MN.  A strong argument can be made we’ve already lost corn acres in the North, but it’s hard to judge whether the market is picking them up elsewhere?  One must remember there are 2-3 million acres of Prevent Plant in IA/S-MN/SD/ND which weren’t accounted for in the February Outlook Conference.

Lots of wheat data points out yesterday including draws in KCBT delivery stocks of 3.118mbu w/w, which are also down 28.207mbu y/y.  Chicago wheat delivery stocks fell 943,000 bushels w/w, and are down 10.343mbu y/y.  Minneapolis stocks saw a slight build.  KCBT protein scales were also slightly firmer for ord’s (+9c), 13.0’s (up 4c) and 14.0’s (+25c).  Call spring wheat proteins mixed from last week.  A weather special from a private forecaster chronicled the vastly improved wheat growing areas in Australia from just a few weeks ago.  Australian farmers are in planting season right now, but chatter of declining Australian crop prospects due to the expected El Nino weather pattern have been incessant as of late.  KC wheat is now trading a $12.81 premium to Paris Milling Wheat, the largest premium since July 2012.

A lot of discussion over upper-Midwest corn basis and a lack of program off the PNW as of late.  PNW corn shuttle bids continued to sink late Tuesday with bids of +90N and even down into the 80’s common.  Corn bids are following rail freight lower with spot BNSF cars trading at tariff this week for the first time in 9-months.  This has several implications: For one, the lack of strength in premiums and declining rail freight reiterates the lack of a program present as demand pull would be lifting both.  The lack of reliability in rail and the railroads snubbing of grain exporters pushed the majority of business to the Gulf.  In the process, however, PNW corn boats are now enjoying a $6-7/MT discount to Gulf boats destined for Japan.  Whether this will incite any Japanese/SE-Asian business remains to be seen, but the cheapest source of corn for export is back to being the West Coast.

A quick note on soybeans, chatter during the session yesterday said the Chinese government has plans to auction off 3MMT of soybeans from state reserves later this month.  There were rumors this would take place earlier in May, but never did so remains to be seen whether this auction happens or not.  In addition, there was talk there could also be corn and sugar auctioned off, but tonnages were not mentioned.  Lastly, cash traders not distressed Brazilian soybean boats are now trading into southern Ohio crush plants in limited quantities.  March Census soybean import data showed only 1.1mbu of soybean imports during the month, however, bringing MYTD imports to 23mbu with the majority coming from Canada.  Many think soybean imports will be increased Friday on updated WASDE balance sheets.

A more in-depth discussion of Friday’s balance sheet numbers will be in tomorrow’s comments.


Bottom Line:  A little easier markets today even though grains are sitting on weekly gains.  Ethanol production data at 9:30 should underscore the solid margin structure in the industry and leave no doubt about that line-item in the corn balance sheet.  Wheat is in the discovery phase of trying to figure out how small the crop is, how much demand we need to ration and how big world supplies actually are to cover any short fall.  Soybeans are caught between incoming imports, tight balance sheets and uncertain acres.  Clear as mud.


Good Luck Today.


HPC 5-7


Tregg Cronin

Market Analyst




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