1/30/2019 Morning Comments

Good Morning,

Day two of three for the freezer door being left open across the Midwest.  Current air temperatures across the Midwest range from -19* in Green Bay, WI to -35* in Grand Forks, ND.  Interesting to see air temps in Anchorage, AK at 34* above zero this morning with Greenland at 3* above zero.  Wind chill values are -40 to -60* across the Midwest this morning with another day of severe cold expected tomorrow before a warm up into the weekend.  Next round of precip moves into the Midwest late in the weekend, bringing 0.50-0.75” totals to Iowa, Wisconsin, Illinois, Indiana, Ohio and Michigan.  The Plains have a small chance at snow but mostly dry the next 7-days.  Below normal temps and above normal precip will be the norm during the 6-10 and 8-14 day outlooks.  Despite the severe cold snap, doesn’t seem to be much concern over winterkill in the United States due to adequate snow cover. 

Higher markets across the board this morning as grains continue to mark time until the USDA and CFTC begin piecemealing out their data sets.  As we understand it today, weekly export sales will be released over the next four weeks beginning Thursday with data from December 20th.  Assuming the government doesn’t shutdown again on February 15th, we should be current on export sales by February 22nd.  The CFTC will be releasing data starting with the oldest data set first, releasing a week each Friday and Tuesday as they did during the shutdown in 2013.  It will take until March 8th for the CFTC to get caught up which is particularly frustrating considering they have all of the data and could release it immediately.  What are they guarding against regarding releasing all of the data at once?  The only positions anyone really cares about are the current ones.  Why don’t they just take their time and string the fun out until May? I digress.  Today also markets the start of the latest round of negotiations between the U.S. and China, although Trump Administration officials seem to be setting expectations low for a deal.  Every statement released seems to remind us a deal doesn’t need to get done until March 1st, implying one won’t get done until March 1st.  Call me a cynic, but I still don’t think agriculture is high on the list of priorities for Mr. Trump, Mr. Mnuchin, Mr. Lighthizer and especially Mr. Ross.  Open interest changes yesterday saw corn up 21,928 contracts, soybeans up 1,160, SRW up 8,838 and HRW down 595 contracts.

Yesterday saw weekly deliverable stocks data which continues to see CBOT and KCBT stocks drawn down while MGEX holds steady.  CBOT wheat stocks fell 1.396mbu to 65.830mbu which compares with 82.996mbu a year ago.  OH-River stocks are off more than 10mbu from a year ago.  KCBT stocks were off 917,000 bushels last week to 108.544mbu which compares with 110.387mbu a year ago.  MGEX stocks were down 4,000 bushels last week, the first draw in stocks in six weeks.  Total stocks of 17.059mbu in Minneapolis/Duluth are down from 21.537mbu a year ago and would be the lowest stocks for the last week in January since 2012.  The combination of lower deliverable stocks and the extreme cold of January has helped the MWH/MWK rally to -2.50c yesterday, tying contract highs before backing off to -3.75c this morning.  Minneapolis spot floor trades were up 20-30c for 14.5% yesterday at +120/130H.  15.0% was down 35c to +115/150H.  The cold should help basis hold to firm as movement grinds to a halt.  Cash spring wheat still feels cheap compared to the other classes of wheat although the Northern Plains is always holding more physical than the market thinks.

Egypt’s GASC bought 360,000MT of wheat yesterday from Romania and France at $261.34-264.95/MT C&F.  US-SRW was the cheapest FOB offer at $243.00/MT, but this was up $5/MT from the last tender despite the more preferential tender terms which had cash traders wondering if commercials are having a difficult time coming up with the quality?  HRW was offered at $249.00/MT C&F which was even further out of contention.  There were four offers from Russia totaling 235,000MT but those offers were up $5/MT from the last tender as well.  The lack of Russian wheat sold into Egypt lends a lot of credibility to the idea stocks of wheat near Russian ports are depleted.  With near record high wheat prices in Rubles, would appear Russia will be out the market until new crop.  The inverse in Russian wheat is severe with May Black Sea wheat futures trading at $254.25/MT vs. June at $225.25/MT and July at $210.00/MT.  Importers will do everything they can to buy as little US wheat as possible and get to the cheaper new crop prices.  With US exports still running such a large deficit, it will be difficult to attain the USDA’s December export estimate of 1.000bbu.

A few South American data points released yesterday including Mato Grosso winter corn planting progress.  As of January 25th, planting progress was 15% complete which is about two weeks ahead of average and one week ahead of last year.  Brazil’s soybean crush industry association , ABIOVE, released their estimate of the country’s soybean crop yesterday.  The group sees the soybean crop at 117.9MMT vs. 120.9MMT last and is below CONAB’s 118.8MMT.  The general grouping of estimates as of late has been between 115-117MMT.  They see Brazil’s 2019 calendar year exports at 70.1MMT vs. 73.9MMT previously and 83.9MMT in 2018.  Crush is expected at 43.2MMT which would be a new record and sharply above 2018’’s 33.9MMT and 2017’s 41.8MMT.  Much of that export/crush forecast will be predicated on Chinese demand, especially as it relates to the ASF virus.

Bottom Line: We need a major announcement from the USDA or the trade talks to move us out of recent ranges.  Otherwise, we will continue consolidating with volatility dropping as we await more clarity on final South American crop size.  Spring acreage ideas are a moving target, but in our opinion, new crop prices are not doing nearly enough to move acreage away from soybeans to wheat and corn.  Not that wheat or corn desperately need acres, but soybeans certainly don’t need them.  February is a strong month from a seasonal perspective for both corn and soybeans, something which should be kept in mind as we price the spring crop insurance prices.  Once those prices are set, farmers should have a good baseline to work from, and unless things change drastically over the next month, corn insurance prices will be the highest since 2015.  The volatility factor could have a lot to say about the actual cost of the insurance, however.

Good Luck Today.

Tregg Cronin

Market Analyst

Tregg.Cronin@halocommodities.com

www.halocommodities.com

@5thWave_tcronin COMMODITY TRADING INVOLVES RISK AND MAY NOT BE SUITABLE FOR ALL RECEIPIENTS OF THIS EMAIL. 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.

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