Outside Markets as of 6:00am: Dollar Index up 0.2220 at 79.5800; Euro down 0.00550 at 1.37970; S&P’s are down 2.75 at 1869.50; Dow futures are down 19.00 at 16,491.00; 10-yr futures are unchanged at 125’ 03.5; The Nikkei closed up 0.25% at 14,199.59; The DAX is down 0.26% at 9,582.47; The IBEX-35 is down 0.96% at 10,489.20; The Russian MIXEX is up 0.59% at 1,371.52; Gold is up $1.10 at $1288.80; Copper is up $0.85 at $307.10; Crude Oil is up $0.37 at $100.64; Heating Oil is up $0.0153 at $2.9355; Paris Milling Wheat is down €1.50 at €206.50/MT.
Eco data out overnight showed Chinese inflation easing in April to 1.8% in a mixed message for investors The drop in inflation gives the Chinese Central Bank more room to ease monetary policy and stimulate the economy if necessary, but it also underscores the slowdown in domestic demand. An article out yesterday highlighted the President of the European Central Bank’s comments in his presser yesterday. Essentially, Mario Draghi said the capital flight out of Russia and into the European Union has been close to $220 billion, nearly four times the level admitted by the Kremlin, since the insurgency began. This has in effect pushed up the demand for safe haven assets like the Euro and sovereign bonds like those of Spain and Italy, whose yields have hit record lows this week. That one needs a minute to sink in. In recent days, Putin has softened his stance towards Ukraine and the amount of capital fleeing Russia is probably a big part of that. It also means the economic contraction for Russia later this year could be even worse than forecast. This could affect financing for every corner of their economy. Stay tuned.
Wide band of showers stretching from WI/MI to LA this morning bringing soaking regions to almost every inch of the corn belt. Map below shows radar returns for the last 48 hours with pretty much all field work coming to a stop across the western corn belt. A fairly open day today will occur for areas west of the showers this morning, but more rain moves back in Sat-Tue for most of the region before a drier bias is seen late next week. The second map below shows soil moisture percentiles with much of ND/SD/MN sitting in the 90th percentile in case there was any doubt about how full our profile was. The upper-Midwest and Northern Plains could do without additional moisture right now, which NOAA’s extended maps suggest. However, their cooler bias on temperatures remains during the 6-15 day period. By May 15th-20th, the topic of switching corn varieties to shorter-day numbers will be common.
Mixed markets as traders await the 11:00am USDA reports, although the wheat market isn’t wasting time extracting some premium with most contracts down 7-10c. There was some decent rainfall across eastern portions of the HRW growing regions, but the driest parts in the west received next to nothing. What could be impacting wheat futures even more is talk in the market yesterday afternoon of the possibility of European wheat working into the US-East Coast and US-Gulf. As has been mentioned here multiple times, US wheat has priced itself out of all major importing destinations, but it appears now we have almost priced our way into imports which would make it seem the market has gotten ahead of itself in its mission of rationing out demand. We haven’t even harvested a bushel yet, so to push our domestic market to the point of importing wheat from Europe would be a bit too far, too fast. Couple this with the massive put buying in Chicago wheat, the put/call ratio in July options up 10% m/m, the lack of commercial buying and the deliveries at all three wheat exchanges and you’ve definitely put a chink in the wheat armor. Might also be some anxiety about the winter wheat production number from the USDA at 11:00am. It wouldn’t unlike the USDA to take a measured approach in reducing the crop over the next couple of months, so bulls should remain flexible. World numbers will also be a focus and could squash any bullish US inputs.
A quick note on global weather, one private forecaster put out a piece yesterday talking about the growing chances for ridging to take place in the Volga Valley in Russia and parts of eastern Ukraine. Their timing isn’t definite, but they talked about the chances 2-weeks out and into June holding a bias for drier and warmer weather over FSU wheat growing areas. To-date, FSU weather has been pretty favorable, but that period would be key development time leaving wheat vulnerable. A ways out to have a lot of confidence, but just know it’s being discussed.
The other big news yesterday was the continued strength in the CIF corn market which has pushed afloats to +70N, FH-May to +65N and LH-May to +62N. This has put delivery Zones 1-4 at or above delivery equivalence by 1-11c/bu. The demand pull from the river remains strong, and with farmers farming, enough bushels aren’t headed there to satiate demand. This should support the CK/CN at -3.00c, and probably doesn’t make a guy want to get real bearish CN/CU or CN/CZ. There is still very little definition to Black Sea maize, and Argy maize remains rather expensive on a relative basis. PNW basis sank further yesterday, so no overt demand showing up off the left coast just yet.
Plenty of chart indicators out there suggesting topping action in wheat. Hard to want to throw out any specific targets in front of a high volatility report like the one this morning. Charts will be revisited this weekend with further guidance.
There were 131 KC wheat deliveries overnight bringing the month-to-date total to 304. 139 in Chicago wheat, 94 soybean, 7 corn, 378 oil and 19 soymeal.
Bottom Line: Not much else to cover until 11:00am. Planting progress made big jumps before the rains this week and should be close to averages by Monday for most of the corn belt. Acre switching and PP talk will increase if the Northern Plains remains wet until this time next week. Main focus of today’s reports should be old crop corn and soybeans, winter wheat production and new crop demand numbers. Basis remains a mixed bag on corn, and the US is close to pricing itself into imports. Lots of moving parts so review marketing levels early and often.
Good Luck Today.
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