Outside Markets as of 5:50am: Dollar Index up 0.1630 at 80.4180; Euro down 0.00310 at 1.36190; S&P’s are up 1.00 at 1891.25; Dow futures are up 6.00 at 16,534.00; 10-yr futures are up 0.05%; The Nikkei closed up 0.87&, The DAX is up 0.23%, the IBEX-35 is down 0.06% and the Russian MICEX is off 0.19%; Gold is down $3.30 at $1291.70; Copper is up $2.45 at $316.65; Crude Oil is up $0.13 at $103.87; Heating Oil is up $0.0043 at $2.9544; Paris Milling Wheat is up €0.75 at €198.00/MT.
Economic data in the US today will include April new home sales which are expected to show an increase of 10.7% to 425,000, reversing much of the 14.5% plunge in March. If confirmed, today’s data would leave the series 11% below the 5 ½ year high of 470,000 units posted in January. Yesterday’s existing home sales were up 1.3% to 4.65 million units for the first increase of 2014. The median home price of a new home in March was up 11.2% to $290,000 while the median price of an existing home price in April was $201,700. Supply of new homes was sitting at a 2 ½ year high in March of 6.0 months. The big weekend news will be Sunday’s presidential election vote in Ukraine. Russia and Russian-backed protestors have been unable to block the vote, but will probably fail to recognize the vote as legitimate.
Rain activity picking up in the southern plains with areas in the south registering solid rain amounts in the last 24 hours, although the heaviest totals should fall today through Sunday. N-TX has so far registered the best totals and is receiving the best rain this morning. Totals over the next 5-7 days are still expected to range from 0.75” in NW-KS to as high as 4.7” in NC-TX. All three major HRW states should see rain, and the moisture will extend north to bring solid precip to MO, who needs it badly, IA/ND/SD/NE. North Dakota’s rain is expected to be drawn out over the next 5-7 days, but as much as 2.0” could fall in total. This won’t be welcome as farmers race to wrap up seeding against PP dates. 6-10 and 8-14 day maps from NOAA continue to paint a nearly ideal forecast for developing crops in the Midwest with above normal temps and precip. The south is also expected to see above normal precip.
A little relief bounce in grains and a continuation of the winning ways in the complex as we head into the long, 3-day Memorial Day weekend. The story continues to be about soybeans while grains find a back seat. Including this morning, July beans are sitting on a 3-day rally of 55c, although yesterday’s highs at $15.36 will offer the first line of defense. Lots of things are contributing to the soybean rally including firming domestic basis levels prior to the rally, firmer CIF NOLA barge bids, chatter of bids rolling to the SQ and net positive export sales. Yesterday’s export sales report showed old crop sales of 6.0mbu which were the largest in 8-weeks, and way over what we need to be doing a weekly basis. A couple crushers in the eastern corn belt have joined the +90SN club, while crushers in the west appear more reluctant to push bids above recent highs. Cash traders noted several crush plants in the west were rolling bids to the August from the July which is usually bullish the spread as commercials decide not to take on any additional short exposure against the July. The Brazilian farmer did sell beans yesterday along with the US farmer, however, with FOB PGA paper trading down to -32N from -27N earlier this week. The one farmer who appears hesitant to engage as of yet would be those in Argentina. Those farmers held beans through the inverse collapse last year, and inflation is worse in 2014 than in 2013, so hard to know what might induce widespread selling from that group.
New crop soybean bids finally cooled off yesterday as the US farmer leaned in with CIF barge bids for OND trading to +88/90X vs +91/92X Wednesday. PNW shuttles also eased slightly to +152/150/148X vs +153/152/150X 2-days ago. Likely to see a slowdown in the new crop soybean purchases from China as has been present every day this week. No material change to US corn basis with US corn still competitive on a FOB basis through September and into October. Somewhat odd to still see US corn competing that closely with ARG/BRAZ paper considering we should see a slowdown in soybean loadings in Brazil and a ramp up in corn exports anytime. US corn remains the cheapest FOB source through July at $212.10/MT vs $216.43/MT in Argentina and $215.24/MT in Brazil.
Modest strength in corn spreads this week with the CN/CU pushing to +3.25c vs +1.00c Tuesday with similar moves in the CN/CZ. The market looks as though it is coming to grips with an improving SRW crop as spreads there continue to trade weak. The WU/WZ traded down to -18.75c yesterday, a new contract low. In addition, US wheat remains uncompetitive on the export front, limiting any sort of underlying cash strength for the spreads or flat price. Minneapolis continues to correct against KC, and this move is probably not over with. Rains in the southern plains will benefit at least some of that crop even if the majority is too far along. In addition, forecasted rain in the Northern Plains will slowdown HRS planting once again, keeping fears of PP acres in the north for a second straight year fresh. Canadian seeding is also behind averages, although they’re wielding the largest old crop stocks in 25 years to help compensate. Nonetheless, as harvest pressure increases in the south, and doubts over acreage of HRS persist, should be a fair amount of upside left in owning Minneapolis vs KC at current levels of -20.00c.
December corn has retraced almost 61.8% of the entire $4.35-$5.17 rally, and should consolidate near current levels. The difficult thing is knowing whether we’ll get a B-wave as part of a larger degree ABC corrective sequence, before another round of fresh lows, or if the A-wave is still in progress. Tonight’s COT data will be very interesting to see if the managed money continue to hold their position or if they’ve begun liquidating. The US farmer isn’t selling a lot of new crop corn, but the funds have a 200,000+ contract net long hanging over the head of the market.
Bottom Line: Would expect a modest bounce in all of our markets today as traders take some risk off the table ahead of the long 3-day weekend. Rainfall totals throughout the session and the weekend will be key for early week direction. Wheat harvest in the south will continue to intensify, weather forecasts for the Midwest look ideal, old crop soybean demand remains untenable and acres in the north remain a large question mark. Still have 2-17 days before all areas hit their Prevent Planting dates. With prices above spring guarantee levels, those acres will have every effort to get planted.
Good Luck Today and have a good Memorial Day Holiday.
COMMODITY TRADING INVOLVES RISK AND MAY NOT BE SUITABLE FOR ALL RECIPIENTS 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.