10/10/2017 Morning Comments

Good Morning,


Rain in IA/NE as well as IL/IN this morning, adding to totals received in those same areas over the last 12-hours.  Rains will finish up later today in E-IA/IL/N-IN with totals expected to be around 0.50-2.15” in N-IL.  Then things dry out until the weekend when rains once again move back into IA/S-WI/N-IL with another 0.75-2.50” with heaviest totals in E-IA.  Most other areas of the Midwest should be quiet during the 7-day, although rain chances increase slightly late in the weekend for SD.  Temperatures in the 6-10 and 8-14 will remain above normal, while precip is a mixed bag with above normal in the ECB, but below normal in the Plains.


Mixed markets this morning as wheat markets are mostly following through to the downside, while soybeans try to claw back some of what they lost yesterday.  On the selloff yesterday, open interest was mostly higher with SRW Wheat up 3,838 contracts, corn up 104 contracts, HRW wheat up 2,792 contracts and soybeans up 5,850 contracts.  The string of steady open interest increases in corn finally came to an end Friday with O/I dropping around 5,000 contracts as price climbed slightly.  Still impressive that over 130,000 contracts of open interest have been added since August 30th between the prices of $3.44-3.62.  Corn option volatility has climbed slightly over last week at 15.95% vs. 15.24%, but remains historically very low.  That amount of fresh interest in our market added between such a tight price range isn’t likely to stay bottled up for long.  Otherwise, soybeans remain inside their rising trend channel, while wheat has found itself back with 10-12c of two month lows.

The weekly crop progress report will be delayed until today given yesterday was a government holiday.  Data Friday included the most recent Commitment of Traders data which showed funds mainly adding to recent positions.  Funds in the corn market sold another 10,772 contracts to put their net short at -170,553 contracts, the largest net short since 5/30, and about 100,000 contracts larger than the 52-week average.  Funds in soybeans bought 1,807 contracts to lighten their net short position slightly to -15,596 contracts.  This is the smallest net short for the group since 8/1/2017.  Commercials have also been buying, however, with the gross commercial long position rising to +315,993 contracts, the largest position in 6-weeks.  Data also indicative of farmer/elevator selling with the gross commercial short rising to 383,690 contracts, the largest position since April 4th.  In KC wheat, funds sold 3,511 contracts, leaving their net long at +2412 contracts, while in Chicago funds bought 7,919 contracts to put their net short at -86,679 contracts.  Small net selling by managed funds in Minneapolis with their net long down to 5,383 contracts, the smallest since May 30th.

Other data released last week included import/export data for the month of August.  Ethanol exports saw a solid month with 103.0 million gallons exported which was down from 116.6 million gallons last month but above the 91.4 million gallons from a year ago.  YTD ethanol exports total 906 million gallons vs. 708 million gallons for this same time a year ago.  Brazil’s imports declined from last month but remain above year ago totals despite the threat of tariffs.  DDGs exports for the month of August totaled 761,467MT, the smallest since May and well below the 1.137MMT from a year ago in August.  DDGs exports YTD total 7.303MMT which are down slightly from the 7.527MMT exported a year ago.  Otherwise, also thought it interesting to point out wheat imports for the month of August which totaled 366,113MT, 99.9% of which obviously came from Canada.  The total is the largest month of wheat imports since July 2014.  While there was some fear of low protein Canadian wheat finding its way across the border, most of the wheat imported was 12.9-13.9%+ according to the US Census Bureau.  Even though they are on a 2-month delay, monitoring imports from Canada will be important to the US-HRS balance sheet as 17/18 unfolds.

Fresh contract lows for many corn and soybean spreads as harvest rolls on and crops appear to be getting larger, not smaller.  CZ/CH hit fresh contract lows of -13.50c yesterday and overnight, accounting for right at 75% of full financial carry.  If farmers or elevators have not yet begun moving hedges to the March, these sort of levels are probably not a bad place to start.  CZ/CK and CZ/CN have also hit fresh contract last in the last 24-hours, while the CH/CK and CK/CN are just off contract lows.  SH/SK hit a fresh contract low overnight of -9.25c.  Barge freight has stabilized and even clawed back a bit after the big sell off last week as the river system received a fresh injection of rainfall.  Still, export premiums are nothing to write home about, despite the steady string of daily export sales announcements.  Producers needing to catch up on marketing should be looking at the available carries on the board, as well as the potential cash carry once the sloppy gutslot harvest levels are past.  The old saying is carries are rarely earned, meaning the 30c the board is currently paying to store corn until July won’t be earned if it isn’t sold.  One has to ask what is more likely, that front-month corn rallies to where the deferreds currently are, or whether the deferred months slowly work themselves to where the spot months are trading?


Bottom Line: Both export inspections and crop progress will be released today, providing some fresh data to chew through.  Otherwise, we are gearing up for the October 12th WASDE report which will not only give us the latest corn and soybean production estimates, but also the latest by-class wheat S&D’s based off the Sept. 29th report data.  While vol is off the lows from last week, still isn’t implying we are going anywhere fast.  Basis levels remain especially weak in the country, encouraging farmers to store as much as possible.  Don’t forget to lock in the carry if the decision makes sense.


Good Luck Today.



Tregg Cronin

Market Analyst






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