4/16/2018 Morning Comments

Good Morning,


A busy weekend of weather with snow showers still working across the Great Lakes this morning.  The focus was on the blizzard which hit SD/N-NE/S-MN/N-IA, dumping anywhere from 5-20” of heavy wet snow.  Some melting took place yesterday, reducing the area covered by snow to 69.1% across the upper-Midwest, although yesterday morning the total was as high as 80%.  The average snow depth across NE-WY/MT/ND/SD/MN/W-WI is 6.6” as of this morning.  Freezing temps also hit a large swath of W-KS Saturday, one more thing thrown at this HRW crop.  The other big focus will be the forecasted rains for the central and southern plains which begin mid-week.  As of this morning, the 7-day forecasted precip maps are putting 0.75-2.00” across almost the entire state of KS as well as 100% of OK and N-TX.  NE and S-SD will also see moisture prospects.  Afternoon 6-10 and 8-14 day models from NOAA were erratic, and we will prefer to wait until this afternoon’s guidance.


Not difficult to ascertain what markets are paying attention to overnight with Kansas City wheat leading losses as the southern plains looks forward to the best rain chances all season.  As many have pointed out, this crop is running 2-3 weeks behind normal development, allowing more time for moisture to help revive production prospects.  This isn’t to say production won’t still fall meaningfully below last year’s total, but some of the worst-case scenarios could be off the table if the forecasted rains fall later this week.  The other wheat class in focus is hard red spring in the Northern Plains with another weekend blizzard delaying fieldwork.  Crop progress reports this afternoon aren’t likely to show any progress over the previous 7-days, although wheat seeding in North Dakota has stretched into June a couple of time over the last 5-6 years.  We examined prevent plant data dating back to 2011 over the weekend and discuss that below.  Snow storms also hit Iowa this weekend with boots-on-the-ground there suggesting little to no corn will go in the ground during the month of April if forecasts verify.  Iowa can plant corn quickly, but markets will remain concerned until producers can really let loose.

Friday’s Commitments of Traders data showed another week of buying in corn by managed funds, with their net long up 28,511 contracts to +206,946 contracts.  This is about 25,000 contracts above their 6-week average, and a bit larger than most analysts were expecting.  The gross commercial short rose by 32,467 contracts to 1,136,624 contracts, the largest gross commercial short since February 22nd, 2011.  Funds sold 1653 contracts of soybeans to leave their net long at +142,298 contracts.  The gross commercial short did rise by 27,000 contracts to 629,250 contracts, which is a new all-time record for this position.  The gross commercial long is among the largest positions on record as well, so both end users and commercial hedgers are heavy participants in this market.  Prior to the late week selloff, funds in KC bought 7,287 contracts to leave their net long at +23,434 contracts, the largest in 3-weeks and greasing the skids for the current dump.  Funds in Chicago bought 16,333 contracts, cutting their net short to -58,214 contracts, which is the smallest net short since March 20th.  Funds remain net long over 100,000 contracts in soy meal, and are still net short a small position in Minneapolis wheat.

As noted above, snow cover yesterday morning across the Midwest totaled 80.2%, the highest percentage for April 15th since 2013 when 93.50% of the area was covered by snow with an average depth of 12”.  In 2013, snow receding fairly quickly over the next 10-days, with most of the snow gone by the end of the month.  Snow cover this year receded across parts of the Dakotas yesterday, and should do more of the same today.  Still, it is difficult not to look at 2013 as a potential proxy for planting progress and decisions this year.  In 2013, spring wheat planting progress nationally as of May 1 was just 12%, and was only 43% planted as of May 15th.  Spring wheat acreage fell from the March intentions report to the final in January by 1.095 million acres, and fell 653,000 acres from the year before.  Spring wheat acreage this year is forecast to rise 1.319 million from 2017.  2011 and 2013 were also large prevent plant years in the US, which we took a closer look at this weekend.  In 2013, national prevent plant acreage totaled 8.318 million acres, 2.8 million of which were in North Dakota.  1.668 million was filed under spring wheat with the rest split fairly evenly between corn and soybeans.  In 2011, there were 10.3 million prevent plant acres across the US, 5.6 million of which were in North Dakota.  In 2011, spring wheat planting across the US was just 10% complete as of May 1 and 36% complete as of May 15th.  In both years, spring wheat planting was still being reported in North Dakota during the last two weeks of June.  The last two years have featured below average prevent plant acres across the US compared with the prior 5-years.  Much will depend on the next 2-4 weeks of weather, but the financial incentive to plant soybeans could see many of these acres still seeded even if progress lags through April.

NOPA member crush data will be released later this morning with expectations for 168.247mbu to have been crushed during the month of March.  This would be close to 10% above March 2017, and be a new record for the month of March, eclipsing the previous record from March 2015 at 162.822mbu.  Soy oil stocks are seen at 1.962 billion lbs, up 5.7% from the end of February and 8.1% above March 2017.  These would be the largest stocks for any month since June 2016 if they are realized.  Because of this last stat, oilshare remains incredibly weak at 29.0% this morning, just off the lowest levels since July 2016.  Front-month board crush is around 40c off the highs posted in early April, but remains historically strong at $1.33/bu.  The spread is below the 50-day moving average this morning, but above both the 100 and 200-day moving averages.


Bottom Line: The weekend events in Syria don’t seem to have the market rattled on any front, leaving our space to concentrate on weather.  Traders will be looking forward to the crop progress report this afternoon which should show a lack of progress on both corn and spring wheat.  The evolving rain chances for the southern plains will also be a focus as wait to see if models verify.  Still feels as though the market doesn’t know what it has for acreage on any one crop.  The resiliency of soybeans is impressive, but keep in mind the back end is leading which needs to be monitored.


Good Luck Today.


Tregg Cronin

Market Analyst






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