5/11/2018 Morning Comments

Good Morning,

 

With respect to commodities, difficult to find anything more pressing in the financial markets than the moves in various currencies over the last several weeks.  To wit, the Brazilian Real rallied to 3.6166 on Wednesday, the weakest trade against the USD since June 3rd, 2016.  The Argentine Peso fell to 23.2507 against the USD this week, the weakest trade on record.  The USD itself hit 93.4160 on Wednesday, the strongest trade since December 22nd, and is now firmly above its 50/100/200-day moving averages.  The weakness in the South American currencies obviously pays South American farmers more for each bushel of corn and soybeans they sell, and with a fairly steady Chinese Yuan, it isn’t difficult to see which beans look more attractive when priced in their local currencies.

More rain across the Upper-Midwest this morning, keeping fields wet and planters idle.  Rains this week have been heaviest in S-MN/NE-IA/WI, while lighter amounts have fallen across E-SD, E-ND, N-MN and the rest of IA.  Rains will continue on and off for the next 24-36 hours, before moving out to the east.  More rain comes in at the beginning of next week, impacting IA/S-MN/IL/IN/OH.  Most areas will welcome the rain, although S-MN needs a stretch of open weather to catch up on corn and soybean planting.  Extended maps keep things mainly warm and wet during the 6-10 and 8-14 day, especially for the Northern Plains which will be welcome assuming progress can be made before the wetter weather arrives.

 

Easier markets overnight, led lower on a percentage basis by soymeal and wheat.  Yesterday’s WASDE report had to be construed as bullish for corn and soybeans, and bearish for wheat, but the muted reaction in row crops to fairly bullish data seems to be giving off two conclusions: 1) the supportive factors have already been priced in, or 2) the bullish conjectures from the USDA have yet to be realized and weather the next 6-weeks is more important than these balance tables.  The US wheat balance sheet was not nearly as bullish as the corn and soybean S&D, but the major exporter balance sheet is interesting.  Many of the bullish talking points came from assumptions made about China, especially the world corn balance sheet which sees ending stocks drop precipitously thanks to China ramping up their ethanol program.  As mentioned earlier, many of these assumptions have yet to be realized, but if they come to fruition could be long-term bullish.  Getting the corn and soybean crops planted will take precedence the next 2-3 weeks, and we would argue progress is well ahead of what the USDA showed on Monday.  Final acreage will remain a talking point until June with the unsettled weather.

Going to focus on the most important aspects of yesterday’s WASDE, instead of going through the entire report line item by line item.  The full report can be found here https://www.usda.gov/oce/commodity/wasde/ .  In corn, the world balance sheet saw production come in at the second highest on record at 1,056,066TMT.  Global corn yield would be the highest on record at 5.80MT/ha.  The demand side of the balance sheet is where things get interesting, however, with feed/residual implied up 16.9MMT, and FSI Consumption up 5.785MMT.  With total supplies down 7MMT from last year, ending stocks fall to 159.1MMT, down from 194.8MMT last year and the record corn ending stocks at 227.525MMT from two years ago.  Ending stocks for 18/19 are implied at the lowest level since 2012/13, while the stocks/use ratio of 12.79% would be the smallest on record going back to at least 1980/81.  There is no way to spin this except supportive, and much of it is due to China.  Chinese corn production is forecast at a record 225.0MMT, but total supplies would be down 11MMT from last year due to lower carry-in.  Feed/residual use is implied up 5MMT, and FSI consumption up 3MMT.  This drops Chinese ending stocks to 60.5MMT vs. 79.5MMT last year and the record 110.7MMT stocks from 2015/16.  The Chinese stocks/use ratio on corn of 24.29% would be the lowest on record after being the highest since 2000/01 just two years ago.  This is a massive fundamental shift, and helps remove the large supply of stocks hanging over the market.  Now, all of this still has to be realized, but one can begin to understand the long-term implications this could have on the corn market.  Major exporter stocks (ARG/BRAZ/EU/RU/UKR/US) sees ending stocks fall to 68.4MMT from 80.3MMT this past year, but would still be above the level from two years ago.  Stocks/use ratio for this group at 10.57% is down from 12.70% last year but still above the stretch from 2010/11-2013/14 when the ratio was 7.68-9.98%.

Also a lot going on in the world wheat balance sheet which sees production slip to 747.7MMT in 2018/19, down from the record production last year of 758.3MMT.  Total supplies would still be a record, however, thanks to the burdensome carry-in.  Feed/residual use is flat, but FSI consumption is up another 7MMT thanks to expanding global GDP.  Ending stocks are seen declining by 6MMT, the first y/y drop in ending stocks since 2012/13.  That, in and of itself, is a major fundamental shift for the wheat market as we will finally see a decline in stocks as opposed to the relentless upward trajectory we’ve been subjected to for the past 6-7 years.  Much of the focus in the wheat market was on Russia which the USDA sees producing a 72.0MMT crop vs. 84.992MMT this past year.  This would still be the third largest wheat crop on record for Russia, and allow them to export another 36.5MMT, the second largest amount on record.  Ending stocks would halve in 18/19, and the stocks/use ratio would drop to 7.29% which would be the lowest since 2000/01.  The world’s largest wheat exporter will remain the world’s largest wheat exporter in 18/19, but the world will also be much more reliant on them with smaller crops elsewhere.  Major exporter wheat stocks fall to 55.65MMT in 18/19, down from 68.2MMT last year and the lowest since 2013/14.  The stocks/use ratio for this group at 13.52% is the smallest since 2007/08, and everyone remembers what happened in 2008 right?  Fidel Castro retired as President of Cuba, so just let that one sink in.

We will dig into the US balance sheets and the Global Soybean balance sheet next week, as covering everything is beyond the scope of this letter today.  Other data worth noting yesterday included export sales which were abysmal for wheat, and ho-hum for corn and soybeans.  Wheat sales totaled 1.3mbu of old crop sales and 1.8mbu of new crop wheat sales.  These sales are so bad they aren’t really worth talking about, and should tell one everything they need to know about the level of rationing we need to do for the short HRW crop this year.  Huge board carries are ruining our demand, and that looks like it will remain the theme in 18/19.  Corn sales totaled 27.4mbu vs. the 11.0mbu needed weekly, taking total commitments to 2.032bbu which is down just 1% from a year ago.  Zero concern about hitting the USDA’s export forecast, and the agency could be prompted to raise that forecast on subsequent WASDE’s.  Soybeans ales totaled 13.0mbu of old crop sales vs. the 3.8mbu needed weekly.  Total commitments now stand at 2.025bbu vs. 2.094bbu a year ago, just a 3% deficit vs. the USDA calling for a 5.0% decline.

 

 

Bottom Line: Easier markets into the weekend as the trade puts this WASDE behind them and focuses on planting weather and final acreage changes.  The changes from the WASDE board presented yesterday will hold long-term implications for the corn and wheat markets, and point toward moving away from a period of burdensome stocks around the world.  This does not mean $5.00 corn and $7.00 wheat are here at last, but it does mean our markets will be more sensitive to weather issues in the upcoming year, especially in the US corn belt.  If the US produces another 176-178bpa crop, we have no issues and ending stocks go back over 2.0bbu.  However, anything south of 174bpa will require the trade to retain premium.  Feels to us like the HRW production estimate has upside if weather forecasts verify.

 

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.

 

5/8/2018 Morning Comments

Good Morning,

 

Rain began last evening in the western Dakotas, and has moved eastward into MN this morning.  Not much for rainfall returns from the system last night just yet, but it will continue to be an active week across the upper-Midwest.  7-day forecasted precip maps this morning are putting another 1-2” in S-MN/N-IA/WI, which will further delay an already behind schedule Minnesota.  South Dakota and NE will also see chances of 0.50-1.00” by the weekend broken into a couple of systems.  Not much in the way of rain for the southern plains.  Temps remain above normal for the entire Midwest during the 6-10 and -8-14, while precip is mainly below normal.  Regardless of planting progress, most areas outside of Minnesota would like to see a rain to either help germination of recently planted crops or boost behind schedule winter wheat crops in the central and northern plains.

 

Mixed markets this morning with the soy complex stabilizing after yesterday’s drubbing while the wheat market is featuring small follow through losses.  The combination of excess length from the managed fund community, continued uncertainty regarding the Chinese/US trade situation, big progress across the corn belt during the last week and a bit less concern over dry Black Sea wheat areas all seemed to help markets set back yesterday.  In addition, open interest had been rising across all three major Ag markets the last week with a lot of johnny-come-latelys, especially in the corn market.  Over the last six sessions, corn open interest was up 86,279 contracts, which continues to speak to the idea that “everyone is bullish.”  Trade probably turns a bit more consolidative ahead of the USDA’s May WASDE report which will give us the first balance sheets of the 18/19 marketing year.

Weekly crop progress report yesterday which featured big gains in corn planting across the central corn belt.  National progress jumped from 17% last week to 39% this week and compares with 44% average.  IL saw progress jump from 32% complete to 74% complete, ahead of 56% average.  Large gains were also featured in IA, MO, IN, OH and NE.  South Dakota, North Dakota and Minnesota continue to be the largest laggards with MN posting just 9% complete vs. 44% average and a wet week of incoming weather.  Farmer’s Business Network publishes a poll each Wednesday with responses from their membership about planting progress, and last Wednesday they pegged Illinois at 82% complete vs. the USDA’s 32% complete from the previous Monday.  Point being, while a smaller sample size, would tend to agree with the FBN numbers which suggest progress is ahead of schedule across most of the corn belt and no serious delays exist outside of the Dakotas and MN.  8% of the corn crop is emerged vs. 3% last week and 14% average.  National soybean planting progress was 15% complete vs. 5% last week and 13% average.

Spring wheat planting progress made headway last week, and here again, we would argue progress is much further advanced than USDA numbers would suggest.  National progress was estimated at 30% complete vs. 10% last week and 51% average.  South Dakotas was estimated at 51% complete vs. 12% last week and 78% average.  We would argue South Dakota’s progress is closer to 75-80% complete with massive acres seeded during the open week last week.  North Dakota should also make big strides this week based on current weather models, closing the gap with its 38% average progress vs. 20% complete as of yesterday.  MT is 30% behind average and MN is 22% behind.  Winter wheat conditions improved 1pt to 34% G/E with HRW conditions mixed, while SWW was stronger and SRW was lower.  Winter wheat heading was pegged at 33% complete vs. 19% last week and 41% average.  Kansas is just 19% headed vs. 41% average which suggests any rains would continue to benefit this crop which is 2-3 weeks behind schedule.  OK and TX are on par with average heading progress.

Export inspections yesterday which saw wheat at 12.0mbu vs. 20.9mbu needed weekly to hit the USDA’s export forecast.  Total inspections of 817.3mbu are down 11.2% from last year, and it is a foregone conclusion wheat exports will be cut on this week’s May WASDE.  Corn inspections were solid at 75.4mbu vs. the 47.8mbu needed weekly, and were the second largest of the marketing year.  Total inspections of 1.306bbu are down 15.7% from a year ago, closing the deficit of 20.3% two weeks ago.  The current corn export figure looks safe.  Soybean inspections totaled 19.6mbu vs. the 22.4mbu needed weekly.  Total inspections measure 1.618bbu, down 11.7% from a year ago.  We think the soybean export figure is safe this month, with more time needed to assess the USDA’s current export forecast.

Lastly, Brazilian consultancy Ag Rural estimated the second crop corn harvest at 57.2MMT, down another 4.2% from its April forecast.  They are estimating the total corn production number at 87.6MMT compared with 97.8MMT last year, while CONAB is currently at 88.6MMT and USDA at 92MMT.  Most analysts expect USDA to trim their Brazilian production forecast further on Thursday.  Each ton reduced from South America should be a ton increase for 18/19 US corn exports.

 

Bottom Line:  Soybean charts look tough, wheat charts look as though they put in tops at last July’s highs and failing to hold the March highs as support.  Corn would do well to hold the $4.00 level as support basis CN futures, although trends remain up for most time scales.  Planting progress is being made outside of Minnesota, and enough progress that it could be argued USDA could come in with a new record yield estimate later this week.  Trade tension with China remains bearish as we rely on other destinations to pick up the difference.  The real proof will come later this summer when China begins its new crop buying program and whether they are able to continue shunning US beans.

 

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.

5/3/2018 Morning Comments

Good Morning,

 

Severe weather moved through Iowa last night, dropping as much as 2-3” in parts of S-IA in the span of an hour.  Iowa will remain active in the next 7-days with several rounds of heavy rain expected.  Through next Thursday, the entire state of Iowa is seen receiving 1.25-2.50” with these totals extending to N-IL and S-WI.  NE and SD will also have shots at rain with 7-day totals adding up to around 0.50”.  Most of Kansas looks to be mainly dry during the coming week.  Extended maps keep temps above normal for the entire Midwest, including the southern plains which should continue to promote quick germination for recently planted crops.  Precip maps suggest above normal moisture continuing for NE/IA/SW-MN, but below normal elsewhere.  Precip turns below normal for most everywhere during the 8-14.

 

Mixed markets this morning with grains taking a breather after both corn and wheat made new highs for the move.  It is debatable which pit was leading the strength yesterday as July corn, but the spreading against soybeans was undeniable.  While wheat and corn were posting strength, new crop beans dropped around a dime and remain 15-20c from recent highs.  The focus for bulls is definitely the ongoing dryness in Brazilian safrinha areas as well as the dry trend in S-Russia/Ukraine.  Add in heightened tension around US and Chinese trade diplomats meeting in Beijing today, and the wind is out of the sail of beans for the moment.  Wheat markets also have underlying support from the Wheat Quality Council Tour moving through Kansas, feeding the market a steady diet of poor looking wheat pictures via social media.  Our read on Day 1 and Day 2 of the WQC tour was more optimistic than most, especially considering the delayed maturity of the Kansas wheat crop.  Corn open interest surged on the early day buying, up 18,170 contracts.  Soybean open interest was up just 800 contracts, SRW wheat was down 1,417 contracts and HRW wheat was up 2,421 contracts.

Beginning with Day 2 of the Wheat Quality Council Tour, the band of cars made 284 total stops which compared with 205 stops last year thanks to the blizzard which covered many fields in W-KS.  The tour found a Day 2 average yield of 35.2bpa vs. 46.9bpa a year ago.  2018 continues to get compared to recent drought years, especially 2014 which the tour found a Day 2 yield of 30.8bpa.  The two-day average for the tour is 36.8bpa with 601 stops which compares with 44.9bpa a year ago and 427 stops.  The 36.8bpa average yield would be below the last two years, but above 2015 at 34.4bpa and obviously 2014.  In our view, the tour yields are better than expected, a phrase which seems to be more common each and every year.  Having said that, some analysts are questioning whether the tour got out into some of the worst wheat in W-KS?  We can’t speak to this, but a KS production estimate which approaches 275mbu should be viewed bearishly by the trade.  The WQC tour will produce their full tour average later this afternoon.

Weekly ethanol production was also released yesterday morning which shot back higher after several weeks of seasonal maintenance caused production to swoon.  Weekly production totaled 1.032 million bbls/day, up 47,000bbls/day from the previous week and just missing the “needed” level on a per week basis to hit the USDA marketing year forecast.  This week’s production bested last year’s same week production by 4.7%, which is a big enough y/y change to hit the USDA estimate, but the seasonal pace will need to be a bit higher this summer.  Weekly ethanol stocks jumped 441,000bbls to 22.142 million bbls, but remain 4.6% below year ago levels.  RBOB remains at a substantial premium to Ethanol, which should continue supporting discretionary blending.  Front-month RBOB/Ethanol is sitting at $0.64/gln this morning, which ticked above $0.70 yesterday.  This is the highest level for this spread since June 2015 and possibly late 2014.  Having said that, the front-month ethanol calendar spread hit fresh contract lows yesterday as stocks could be weighing on time spreads.

Otherwise, Brazilian safrinha dryness remains a big talker with that area running between 2-51% of normal over the last month for a large swath of production.  The very NW portion of the belt has been well-watered, but that would be about it.  The 5-day forecast sees little to no rain, and the 6-10 more or less continues this trend.  Brazil’s first crop corn production is more or less agreed at about 25MMT, leaving debate open about the 2nd crop.  Analysts have begun shaving production this week, and all are well below USDA at 92MMT combined.  Most would describe the crop between 85-88MMT vs. CONAB’s estimate last month at 88.6MMT.  If CONAB is correct, against USDA demand, carryout for Brazil would fall to 8.519MMT vs. USDA’s 10.919MMT.  The 8.519MMT would compare with the 5-yr average of 10.350MMT.  If production is closer to 85MMT, carryout against USDA demand falls to 4.919MMT, the lowest since 2006/07.  Supply and demand are not in separate vacuum, so obviously demand will decline as supply falls, but gives us a sense of how much demand might need to be sourced from elsewhere.  With Argentina already seeing production fall 8MMT from a year ago, it leaves few viable choices, and is shaping up to make 2018/19 US corn export demand very strong.  We are not in the camp of low-80MMT type production numbers yet, but continued dry weather will keep downward pressure on these estimates which need to be monitored closely.

 

Bottom Line: The recent gains in corn and wheat have been impressive, but we have to wonder if prices will turn a bit more two-sided “up here?”  Farm gate selling is increasing above $4.00-CN, and funds have undoubtedly rebuilt a sizable long position in KW.  How much of their net short position is left to cover in Chicago wheat could give clues about how much further this rally is prepared to go.  Russia will be carrying in a large buffer of old crop stocks to make up for any production setback.  However, with FOB prices in the Black Sea up $30-35/MT from year ago levels, and 8MMT of supply removed from the world’s largest exporter, some added risk premium is warranted.  Planting progress will turn a bit more start and stop over the next week, but progress ahead of the rain was much higher than the USDA implied on Monday.

 

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.

5/1/2018 Morning Comments

Good Morning,

 

In quiet fashion, The US Dollar Index has climbed back above its 50/100/200-day moving averages to trade at the highest level since January 11th.  With solid economic data, markets continue to believe the Federal Reserve will raise benchmark interest rates another 2-3 times in 2018 after bumping them higher in March.  Last week, benchmark 10-yr Treasury yields rallied above 3.0% for the first time since 2014 and various measures of inflation continue to hit new highs for the cycle.  Adding to this sentiment has been the rebound in crude oil prices to the highest level since the fall of 2014.  It will be interesting to see if members of the Trump Administration try to talk the USD back down with comments about trade as they’ve done in the past.

Rain across W-IA and S-MN this morning, kicking off what should be a rather wet week for the western corn belt.  Iowa, E-Nebraska, N-Illinois and, SE-Minnesota and S-Wisconsin have rain chances almost every day for the next 7-days.  In total, Iowa is expected to pick up nearly 1.25-3.00” across the entire state by the end of the weekend.  This should completely halt planting progress in the state, but monster progress was made before the rains.  The Northern Plains will enjoy a fairly open week of fieldwork, allowing producers there to catch up after a terrible April.  Fairly dry in the heart of the HRW belt this week with the exception of C-KS.  The 6-10 and 8-14 day maps put above normal precip in the southern plains, which could still benefit wheat there given the delayed maturity.  The corn belt and Northern Plains see below normal precip the next 2-weeks, so no serious delays expected.  The Climate Prediciton Center also released their outlook for the month of May, putting above normal precip and above normal temps in for nearly the entire Midwest.  This would be welcome news to most.

 

Weaker markets to begin the month of May following the surge to close the month of April.  All of our markets posted solid gains out of the gates Sunday, but the oilseed complex closed weakly as prompt month soymeal once again rejected the $400.00 level.  The wheat market seemed to rally on the expanding dryness across S-Russia/Ukraine as well as ongoing dryness in Australia, but the better than expected HRW conditions on yesterday afternoon’s crop progress report seemed to catch some off-guard.  Boots-on-the-ground continue to suggest the crop is not as bad as condition ratings would lead you to believe, and the delayed maturity of the crop is allowing more time for moisture to add benefit.  The Wheat Quality Council tour hits the field today, so expect a barrage of tweets of all shapes and sizes.  Kansas produced a wheat crop of 333.6mbu in 2017 and 467.4mbu in 2016 but the analog year of 2014 with 246.4mbu is the one being compared to this year.  Bet the over.  Open interest changes yesterday included corn up 18,739 contracts, SRW wheat up 9,563 contracts, HRW wheat down 3,854 contracts and soybeans down 1,160 contracts.

The big focus yesterday was the arrival of the crop progress report, although everyone always has a different opinion of the “true” number anyway.  Corn planting progress was reported at 17% planted vs. 5% last week and 27% average.  This is probably a bit lighter than the trade was expecting just based on anecdotal reports from farmers who finished planting corn in Nebraska, Iowa and Illinois before the weekend was over.  This would put national progress at the slowest pace since 2013 when progress was just 5% on this date.  In talking with farmers in the corn belt, it does appear this week’s report will underperform, but next week’s report will overperform once progress gets fully counted from the weekend even with the pending rain.  Nationally, corn was 3% emerged vs. 6% average.  Soybean planting progress was seen at 5% complete vs. 2% last week and 5% average.  A few beans have gone in the ground in corn belt states, but corn should take precedence.

Spring wheat planting inched ahead to 10% complete nationally vs. 3% last week and 36% average.  Like corn, the report probably didn’t pick up all of the progress made as South Dakota made big gains over the weekend, and should be more than 12% planted as a state.  ND, MN and MT finally registered their first progress of the season, and with the current forecast should make up ground quickly.  Nationally, 10% planted is the slowest spring wheat planting since 1997 when just 5% of the crop had been planted.  As we found last night, however, there is no correlation between late planting and below trend yields even if there is a higher correlation between late planting and less acres.  In Minnesota, 2% of the crop is planted which is the slowest since 2013 and 2014 when state yields were 1-2bpa better than the 5-yr average.  Montana is 6% planted, the slowest on record but near 2011 when 7% of the crop was planted.  Yields in 2011 for the state were 31bpa vs. the 5-yr average of 28bpa.  North Dakota at 3% planted is similar to 2013 and 2014 like Minnesota, both of which beat the 5-yr average by 3-4bpa.  In South Dakota, progress at 12% is the slowest since 1997 when 2% of the crop was planted.  In 1997, the state-wide yield was 28bpa vs. the 5-yr average of 29.5bpa.

Winter wheat conditions improved nationally by 2pts yesterday to 33% G/E vs. 54% a year ago.  The charge was led by HRW states which saw widespread increases led by SD (+12) and CO (+13).  NE, KS, OK and TX all saw their condition ratings improve, although the national condition score would still be the lowest since 2011.  Heading progress was estimated at 19% nationally vs. 13% last week and 30% average.  Kansas at 2% headed vs. 24% average shows the WQC tour will find a lot of fields without anything to objectively measure.  Their insights will rely heavily on the eye test and tiller counts, which really only measures potential.  The tour will release its results on Thursday afternoon.

Export inspections released yesterday morning were decent with the exception of wheat.  All-wheat inspections totaled 13.8mbu vs. the 20.9mbu needed weekly to hit the USDA’s estimate.  Total inspections measure 804.5mbu, down 10.3% from a year ago which is better than the 12.9% the USDA is forecasting for a year over year decline, but we believe the export estimate will need to be reduced further.  Corn inspections were solid once again at 57.7mbu vs. the 49.3mbu needed weekly to hit the USDA forecast.  Total inspections measure 1.230bbu vs. the 1.515bbu a year ago, an 18% decline vs. a 21.8% decline two weeks ago.  The corn export program needs to remain solid well into the summer months to assure the current export estimate.  Soybean inspections were 25.0mbu, just better than the 22.6mbu needed weekly and hitting the level needed for the first time in four weeks.  Total inspections are 1.598bbu, down 12.1% from a year ago.  Sorghum inspections of 7.6mbu met the level needed for the ninth week in a row.  With all of the stories about vessels being diverted, this could be a figure to watch.

Delivery activity worth mentioning included 576 corn with LDC being the big issuer there.  52 soymeal, 265 soybean oil, 159 HRW, 26 oats and 145 soybeans.  There were no Chicago wheat deliveries.  On Friday, ADM issues 605 deliveries in Duluth along with 271 from a Wells Fargo customer, but CHS House account stepped in and stopped all but two of them.  Last night, a CHS segregated account issued another 150 contracts, but CHS House once again stepped in and stopped 152 of them.  Appears as though CHS will have a Lakes program to get rid of the wheat and also do some blending of the lower protein thought to be socked away in Duluth.

 

 

Bottom Line: Larger planting progress made last week than the crop progress report showed, but this week should help things shake out accordingly by next Monday’s report.  There is no correlation with late planting and low yields in spring wheat, but the USDA commonly raises and lowers the national average yield based on planting progress, whether right or wrong.  We are not concerned about planting progress, although the Northern Plains will struggle to get corn in the ground relative to average this month.  As important, the dryness in Brazilian safrinha areas as well as S-Russia/Ukraine is helping put a bid under this market.  More reliance on US corn exports or shaving tonnes off the world’s largest wheat export region is a big deal.  Russia has a solid amount of old crop stocks to buffer a yield shortfall, but shipping wheat like they have in 2017/18 would be a challenge.

 

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.

4/27/2018 Morning Comments

Good Morning,

 

Another open Midwest radar to end the work week.  Producers will get another 48-hours of open weather before the next round of showers impacts the Plains and Corn Belt Sunday into Monday.  The beginning of next week will bring with it an active 3-4 day stretch which will make most of next week unsuitable for fieldwork.  Model runs this morning are putting 0.50-0.75” across all of NE, most of SD, all of MN, all of IA, all of MO, E-KS and all of WI/IL/IN.  Heaviest totals look to be in SW-IA, NW-MO and E-NE where 1.00-2.00” is expected.  Mammoth progress is expected before that rain comes with some producers in Iowa and E-NE expecting to finish corn by Monday.  The rains will further delay corn planting in South Dakota and MN.  North Dakota looks to receive minimal rains over the next 7-days which should allow spring wheat progress to make big strides.  Temperatures are turning below normal for the 6-10 and 8-14 which is bringing frost risk into the OH-River Valley.  Precip is normal to above for the corn belt but below normal for the Northern Plains, allowing delayed planting progress to continue.

 

A reversal from yesterday’s price action with firmer grain markets and a mostly softer oilseed complex.  For the week, soybeans are down 4.25c, KC wheat is up 21.75c and corn is up 10.75c.  Soybeans continue to respect the 50-day moving average at 10.4175, which price has closed below the last four sessions.  Traders are looking forward to Monday’s crop progress report, although USDA enumerators aren’t likely to have captured all of the planting which took place.  In some cases, respondents estimate progress as of Friday and mail it in, which doesn’t capture progress on Saturday/Sunday.  This will be a big weekend across Nebraska, Iowa and Illinois before the next round of showers.  Multiple producers in the heart of the corn belt have described planting conditions as “the best ever.”  In addition, spring wheat planting has broken loose in South Dakota finally, almost 30-days late to the day for many.  Seed will go in the ground quickly as seed bed conditions are good and incoming temperatures will allow round the clock planting.  Still, the delayed development will need to be kept in mind as we move through the summer months and various weather anomalies are encountered.  Traditionally, spring wheat is headed and nearly ready to be harvested by the end of July/first week of August.  Much of South Dakota’s spring wheat will be harvested mid to late August this year unless hot and dry conditions are encountered like last summer.  Large open interest changes yesterday as positions are vacated ahead of first notice day.  Corn open interest fell 48,318 contracts in total with a drop of 51,253 in the May.  Soybean open interest fell 29,257 contracts, SRW fell 2,477 contracts and HRW was down 3,729 contracts.

Data yesterday included weekly export sales which many in the trade described as “disappointing,” although we question why expectations were so high?  In the last week, we saw zero daily sales announcements from the USDA, and Gulf basis didn’t imply big business being transacted.  Next week should be better, however, as the weekly sales report was followed by a daily sales announcement of 107,600MT sold to unknown destinations.  Weekly sales for corn totaled 27.4mbu which were better than the 13.2mbu needed weekly to hit the USDA forecast.  Total commitments of 1.967bbu are down 2% from a year ago, which is just slightly better than the USDA estimate of a 2.9% decline.  The average sales pace since the first of the year continues to be incredibly strong for corn at 57.3mbu, which blows away the only real comparable year of 2015/16 at 39.0mbu.  Shipments will remain the focus moving forward as we’ve sold 88.28% of the USDA estimate but only shipped 51.99%.  Soybean sales totaled 13.6mbu which was better than the 4.8mbu needed to hit the USDA forecast.  Total commitments now stand at 1.999bbu which is down 3% from a year ago vs. USDA calling for a 5.0% decline.  We’ve sold 96.80% of the USDA forecast, and we’ve shipped 76.23% of that total.  The shipment total is slightly below last year’s 83.15%.

All wheat sales were close to expectations, but that is about the only good news from the weekly report.  Total sales measured 10.9mbu vs. the 11.6mbu needed weekly to hit the USDA forecast.  Total commitments of 855.0mbu are down from last year’s 1.018bbu, a 16% decline vs. the USDA calling for a 12.3% decline.  The wheat marketing year ends the last week of May, and to hit that level we would have to sell an additional 70mbu and ship an additional 176mbu.  In other words, we would have to ship 20% of the entire marketing year forecast in the next weeks.  If President Trump were writing this comment, I believe he’d end it with SAD!  Wheat exports should see a cut of 15-20mbu in our opinion, which will flow through right to a higher carryout.  A cut to the export forecast as we get set to turn the page to the 2018/19 marketing year will also not leave analysts feeling very encouraged, especially with FOB differentials keeping US wheat out of most major destinations.  As we’ve written about in recent weeks, the fact production is expected to fall by 100-150mbu y/y, but we are paying elevators and farmers 8c/mo to store winter wheat out to December tells the entire tale.

StatsCan will be out later this morning with their initial estimates for Canadian planted acreage.  As a quick review, all-wheat acreage is seen at 23.038 million acres vs. 22.391 million last year with a range of 20.5-24.2 million.  Durum acreage is seen at 5.442 million vs. 5.205 million last year.  Canola acreage is pegged at a new record 23.663 million vs. 22.997 million last year and a range of 20.1-24.5 million.  Oat acreage is seen at 3.149 million vs. 3.20 million last year, while barley acreage is estimated at 6.218 million vs. 5.766 million a year ago.  Pea acreage is seen at 3.519 million vs. 4.093 million last year, flax acreage at 1.052 million vs. 1.040 million last year, lentil acreage at 3.510 million vs. 4.405 million a year ago and finally soybean acreage is seen at 7.117 million vs. 7.282 million last year.  The effect on the Indian import tariffs remains highly evident in pea and lentil acreage on both sides of the border, although as is usually the case, India had a dry spring and will probably require imports in the coming marketing year, putting a floor underneath these pulse prices.

The dryness in the southern plains has been well advertised and discounted fully.  However, several other major wheat producers worth keeping an eye on.  Since April 10th and out through the next two weeks, France has been running between 52-75% of normal, although very northern growing areas have been well-watered.  German and Baltic states have been running above 100% of normal precip.  Ukraine and southern Russia went through winter with average to above average snow pack, providing solid soil moisture.  Both areas have been trending drier of late, however, and look to remain dry through May 10th.  Most of that area is running between 15-80% of normal precip.  This is probably more of a concern for later heading winter wheat and any spring planted acreage.  Wheat producing areas in Australia remain dry following through drought last summer/fall as they send drills to the fields to plant another wheat crop.  April 10th to May 10th (forecast) for Queensland and NSW keeps values between 20-75% of normal.  WA is also dry with percent of normal values over that time period running 20-70% of normal.  None of the aforementioned is runaway bullish on its own, but with drought reduced crops in the US, it would likely only take one of the other countries to experience real dryness to support global FOB values.  With Russia looking at a 5-10MMT drop in production this year, we likely won’t be able to rely on them to export 6-7MMT every month forever.

 

Bottom Line: Mostly about planting pace and weather forecasts.  Several other global wheat producers worth keeping an eye, and it would probably take one of them seeing a meaningful drop in production to take out the March highs.  If next week’s forecast verifies, planting progress is likely to fall further behind average, especially in the northern corn belt.  Cash markets should remain supported with producers selling little until they get in the fields and see some emergence.  The Chinese trade mission will be a headline grabber next week.

 

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.

 

4/26/2018 Morning Comments

Good Morning,

 

The Brazilian Real continued its selloff yesterday, hitting 3.5267 against the USD, the weakest trade since December 5th, 2016.  This has obviously raised the price of corn and soybeans paid to Brazilian farmers in reais.  Spot month soybean prices rallied to 36.50 reais per bushel yesterday, the highest price since July 2016.  Corn hit 13.53 reais per bushel yesterday, the highest level since June 2016.  Both prices are sharply above their 50/100/200-day moving averages, and compare to 30.47 reais per bushel on soybeans a year ago and 11.68 reais per bushel on corn.  This should keep grower selling from the Brazilian producer steady, although cash sources suggest the farmers in South America’s largest producing country already let a large tranche go earlier this week.

Wide open Midwest radar which should keep planters rolling full steam ahead where progress has commenced.  Nothing in the way of precip until Sunday/Monday in the Midwest when shower activity will push into the Dakotas, NE, W-IA and MN.  This will be the beginning of a larger system which moves east and south by mid-week next week.  Totals as of this morning put 0.75-2.00” across most of IA, all of MO and NE-KS.  Most of Nebraska will also see 0.50” while totals to the north will mainly be under 0.50” and likely closer to 0.25” if anything at all.  IL will also see rain, but by the time this storm hits, a lot of progress will have been made there.  Below normal temps and above normal precip for most of the Midwest according to the NOAA 6-10 and 8-14 day maps.

 

Easier grain prices this morning while soybeans are managing 2-5c gains this morning.  Wheat contracts are consolidating the 3-day, 25.75c gain with easier markets this morning, although the move held the 200-day moving average and saw the July contract move back above its 50-day moving average for the first time since April 13th.  While wheat techs are much improved, we would need to take out the April 9th highs in order to break the trend of lower highs dating back to the Feb highs around $5.60 basis the KWN.  Corn has a similar technical set up, having posted lower highs each of the last two rally attempts, although higher lows have also been a feature.  It is our view bit progress will be made in Illinois, Iowa and Nebraska the next 4-5 days which will have national progress percentages headed in the right direction.  Enough progress should be made to keep bulls at bay about late planting, but that could change once we get into the first two weeks of May and little progress has been made in the Dakotas and much of Minnesota.  Areas which experienced the late April blizzard in E-SD and S-MN are 10-14 days away from hitting the fields on corn, let alone the producers who are still trying to plant HRS.  Open interest changes yesterday included corn up 4,009 contracts, soybeans down 6,021 contracts, meal up 2,668 contracts, bean oil up 3,006 contracts, SRW down 14,733 contracts and HRW down 4,423 caks.

Data yesterday included weekly ethanol production which fell sharply by 24,000bbls/day to 985,000bbls/day, the lowest level in 7-months.  Production was almost spot on with last year’s same week ethanol production as seasonal plant maintenance takes place.  This level is slightly below the y/y change needed to hit the USDA’s marketing year forecast, although production is expected to ramp backup once maintenance has concluded.  Weekly ethanol stocks climbed 357,000 bbls to 21.701 million bbls.  This was the first increase in stocks in 6-weeks, but stocks remain 6.7% below year ago levels.  Part of the stocks increase was probably related to a plunge in gasoline demand last week, which fell swiftly from the previous week’s 2018-calendar year high.  Speaking of gasoline demand, several outlets reported last night Ford Motor Company was planning to stop production on all but two car models in North America, shifting its focus to crossovers, pickups and SUV’s.  According to Ford’s President of Global Markets, trucks and SUV’s will soon become 86% of Ford’s US volume.  This could be a dramatic shift in gasoline demand away from more fuel efficient vehicles, and could provide even more ethanol demand moving forward.  The timing as gasoline prices rise to near 3-year highs is a bit perplexing.

The USDA Ag attache to Brazil released his latest monthly update on crops there yesterday, which also included preliminary estimates for the 2018/19 crops.  Post sees the 2017/18 Brazilian soybean crop at 115.5MMT, 0.5MMT larger than the USDA’s latest earlier this month.  They see exports at 69.0MMT, which whittles ending stocks down to 775,000MT on a local marketing year basis.  Unlike the WASDE board, which figures ending stocks on a US marketing year basis at the end of August, these local marketing year ending stocks at the end of February 2019 emphasize how little room there is for Brazil to meet all of China’s demand as well as other origins.  Brazil exports everything they don’t consume domestically, leaving little excess for swing business.  For the 2018/19 marketing year, Post sees planted area rising to 35.8 million hectares, a new record, with production mostly steady at 115MMT.  He sees exports declining slightly to 67MMT next year with crush up slightly.  In a separate table, Post showed China as consuming 79.05% of the 2016/17 Brazilian export program.  This should climb even further in 2017/18, and will be truly astonishing if it surpasses 90%.

South Dakota spring wheat producers are hoping to hit the fields in earnest this weekend, logging the first real progress of the season about a month behind average.  The hot-button topic is whether the calendar has gotten too late and whether those acres will be switched to corn or soybeans.  We just wanted to outline a few changes from a year ago as it might highlight the desire to plant or not plant wheat.  On March 29th, the USDA said producers will plant 12.627 million acres of ‘other spring’ wheat, which consists mainly of hard red spring.  This is up from 11.009 million a year ago, and 11.555 million two years ago.  Keeping the split for hard red and white the same as the past few years, this should give us around 11.995 million acres of hard red spring vs. 10.5 million a year ago.  Using our demand forecast of 560mbu vs. 504mbu this year, carryout would be projected at 220mbu vs. 191mbu a year ago and 215mbu on the 5-yr average.  Carryout could shift a little higher for old crop next month if the USDA cuts exports again which looks likely.  New crop September wheat prices are trading at $6.15 this morning vs. $5.57 a year ago.  The new crop soybean/wheat spread is trading at $4.23 this morning vs. $3.97 a year ago.  New crop wheat/corn spread is trading at $2.04 this morning vs. $1.72 a year ago.

 

Bottom Line: Better feelings about trade supporting the soy complex this morning as well as fears over reduced meal export availability out of Argentina.  Planting progress and weather remain the largest drivers in our opinion, and in general, both look good for getting the crop in the ground.  We still believe farm marketings will remain subdued until more progress is achieved.  Domestic corn basis is firming in response.

 

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.

4/25/2018 Morning Comments

Good Morning,

 

The night before last, China released import and export data for the month of March with several commodity highlights worth passing along.  March crude oil imports totaled 39.2MMT, up 0.6% vs. the same month a year ago while Jan-Mar imports of 112.1MMT are up 7.0% on the year.  March iron ore imports measured 85.8MMT, up 10.0% vs. a year ago while Jan-Mar imports of 270.5MMT are unchanged from the same period in 2017.  March wheat imports totaled 289,522MT which are down 42% y/y while Jan-Mar wheat imports of 563,267MT are down 47.33% y/y.  Barley imports totaled 863,287MT in March, up 21% from 2017 while Jan-Mar imports of 1.920MMT are down 11.95%.  Soybean imports of 5.661MMT were down 10.51% while Jan-Mar imports of 19.567MMT were up just 0.23%.  March soybean imports from the US were 3.099MMT which were down 26% y/y while Brazilian imports of 2.332MMT were up 33.3% y/y, in-keeping with the growing trade-spat.  YTD soybean imports from the USA of 12.259MMT are down 20% y/y while Brazilian imports of 6.152MMT are up 128% y/y.  Reuters reported the March import total from the US was the smallest in 10-years.

Rains across the southern plains this morning but a fairly open Northern Plains and corn belt after the system from yesterday exited.  Showers will linger in the south for the next day or so, before the entire Midwest turns dry Friday-Monday.  Another round of showers look to move into E-NE/W-IA next Tuesday/Wednesday with chances for 0.50-0.75” in the heaviest locales.  Eastern HRW areas could also see precip.  This will likely suspend planting activity which has really just got going in the last 24-hours for most of Nebraska and Iowa.  A stray shower had most stopped last night.  6-10 maps keep temps above normal before turning below normal for the majority of the Plains and Midwest in the 8-14.  Precip for most of the Midwest will be normal/above for the next 10-days, but the Northern Plains starts to turn below normal in the 8-14 which would be welcome news for all.

 

Firmer markets once again this morning as grains try to string three higher closes together in a row on the back of start-and-stop planting progress across the Midwest.  Progress is going to make big gains the next two weeks across the heart of the corn belt, but averages will continue to lag for the northern half of Minnesota, South Dakota and North Dakota as progress there isn’t likely to begin in earnest for another two weeks.  The general consensus with many producers we’ve spoken to is original planting intentions will be stuck to unless the forecast makes that untenable.  With that in mind, producers in the Dakotas and N-MN will continue to try and plant HRS into May, which could push the start of corn planting back until the 10th or 15th of May.  South Dakota was able to throw corn in the ground rather quickly last year thanks to the beginning of the drought with many operations wrapped up by the 10th of May.  That will not be the case this year which will keep bulls anxious who continue to compare this year’s progress to last year and average.  In our opinion, planting pace and date have very little effect on yield at this stage, but holds far more implications for acres.  Open interest continues to see an overall decline across most of our markets as positions are moved out of the May and further out the curve.  Corn open interest was down 11,779 contracts, soybeans were down 8,818 contracts, SRW down 8,135 contracts and HRW down 3,041.

Data out Monday and Tuesday included South American crop progress which continues to be ho-hum in Brazil, but definitely suggest the drought conditions in Argentina are as advertised.  Brazilian soybean harvest was estimated at 91% complete vs. 93% last year and 91% average.  Three of the nine major states have finished harvest.  Brazilian 1st crop corn harvest was seen at 79% complete vs. 72% last week, 83% last year and right at 80% average.  Dryness in Brazilian 2nd crop corn areas remains a concern with production cuts currently being seen at 3-6MMT if rains don’t arrive soon.  Argentine soybean harvest was estimated at 40% complete vs. 28% last week and 26% on the 5-yr average.  Argentine corn harvest of 34% compares with 24% last year and 24% on the 5-yr average.  The harvest progress being so far ahead of average in Argentina should leave little doubt about crops being near current estimates.

On Friday morning, StatsCan will release their planting intentions report for the coming year’s crops.  All-wheat area is seen at 23.038 million acres with a range of 20.5-24.2 million.  If realized, that total would be up 2.9% from last year’s 22.391 million acres.  Canola area is seen at an all-time record high of 23.663 million acres, which would be up from last year’s 22.997 million acres.  The range on canola acres is 20.1-24.5 million.  New crop canola prices are trading around C$518.10/MT which compares with C$495.30 at this time a year ago.  On a front-month basis, canola is trading right up against resistance of C$540.00/MT which has capped this market going all the way back to 2013.  There have been four to five attempts at C$540.00 since 2013, all of which have failed to break through that level.  Oat acres are seen at 3.149 million vs. 3.200 million a year ago, while barley area is seen at 6.218 million vs. 5.766 million a year ago.  Acres for minor feed grains and specialty crops continue migrating further north in the US and into Canada, and 2018 does not look to break that trend thanks to the prevalence of corn and soybeans.

The Variable Storage Rate calculation period came to an end on April 20th for Chicago and Kansas City wheat futures.  From March 19th-April 20th, the WK/WN calendar spread averaged 62.48% of full financial carry, which leaves storage rates unchanged at approximately 11c/mo.  The KWK/KWN calendar spread averaged 93.90% of full financial carry, which triggered an increase in storage rates from 8c/mo to 11c/mo for the KWN/KWU spread.  The next evaluation period will begin on May 21st and run through July 18th for the N/U calendar spreads.  If the calculation period began today, the WN/WU at -17.75c would be trading around 66.22% of full financial carry which is -26.81c.  The KWN/KWU at -17.75c is trading around 65.79%.  Both would not indicate another VSR segment will be triggered.  For Kansas City wheat specifically, with the drought reduced crop, it would seem the concern would be securing enough bushels to actually fill available storage.  Regardless, the fact we are paying over 8c/mo to sit on wheat from July to December in a year which HRW production is expected to be down 15-20% to the lowest in 15-20 years, tells one everything they need to know about the current VSR program in KC.  We continue to maintain that regardless of how small HRW production is, we are doing more than enough to ration the necessary feed and export demand.

Weekly ethanol production later this morning.

 

 

Bottom Line: Firmer as we continue to monitor planting progress and potential acreage changes.  Traders will also be focused on a possible summit between US and Chinese diplomats over trade.  When the United States ships the smallest amount of soybeans for the month of March in over a decade, that’s a big deal.  The rest of the world will need US beans as China heads to Brazil more exclusively, but this isn’t a situation we want to see maintained for an extended period of time.  Soybeans seem to fear similar actions which have befallen the sorghum market which would be disastrous.

 

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.

4/24/2018 Morning Comments

Good Morning,

 

Brent crude oil futures are making new highs for the move this morning, trading back over $75/bbl for the second day in a row.  The highs are the best trade since Thanksgiving week of 2014, and mark a 176% gain on the $27.10/bbl lows set in January of 2016.  Next resistance candidates for Brent would be the 61.8% retrace of the $115.95-27.10 selloff around $82.06.  Brent is also exerting premium over WTI, trading up to $6.14/bbl, the highest spread since mid-January.  The high for WTI on this move came on April 19th at $69.56 which would be near-term resistance along with the $70/bbl handle.

Rain and snow across the Dakotas this morning with rain showers also impacting W-NE/W-KS and NE-CO.  What limited spring wheat planting progress that had been made over the weekend and yesterday will be halted for several days.  KS will welcome rains the next 24-hours, following up on the weekend system which dumped more than expected in the eastern half of the state but less than expected in the west.  The southern plains, especially Oklahoma, will see on-and-off showers the rest of the week with 7-day totals adding up to 0.50-0.75” for many spots.  The Northern Plains will see dry weather after today through Sunday/Monday before the next chance at rain.  IL and IA see a wide open 7-day stretch which should see big planting progress.  Temps are mainly above normal in the 6-10 and 8-14 while precip is below normal for the southern plains, and above normal elsewhere.

 

Despite a supportive crop progress report yesterday afternoon, markets have found the red side of the ledger this morning as forecasts look congruent for big progress in the week ahead.  Analysts and farmers alike are realizing that while progress is behind average, there is still no real reason to panic on corn and soybeans with the speed in which planting can take place.  Anecdotal reports from producers in Illinois suggest some farmers who started Thursday/Friday are already 60% done with corn as of Monday afternoon.  In addition, the benefit to the delayed start has been an improvement in drought conditions and soil moisture.  Much of the corn belt has solid root zone soil moisture with the only real concerning spots in MO/OK/OK/TX and parts of C-IL.  With the warming of temps and the improved moisture profile, crops are going to fly out of the ground, a sharp contrast to last year when cold, dry soils saw wheat crops in the Northern Plains sit for a month before sprouting while corn north of I-80 sat dormant for 2-3 weeks.  Open interest changes yesterday included corn up 1,782 contracts, soybeans down 5,938 contracts, SRW up 366 contracts and HRW up 324.

The weekly crop progress report was obviously the focus yesterday with national corn planting progress coming in at 5% complete vs. 3% last week, 7% expected, 15% last year and 14% average.  Other than 2% in Nebraska, 4% in Illinois and 1% in Indiana, there has been no progress in the heart of the corn belt.  As noted above, this is going to change rapidly in the next 7-days, although progress will be delayed throughout the spring in the Northern Plains.  Most producers we’ve talked to are planning to stick to their original planting intentions if at all possible, although corn acres will probably be the first to be switched to spring wheat or soybeans in the Dakotas and N-MN.  Average progress for next week jumps to 27% nationally, and it may take another week before progress is accounted for in the corn belt.  National soybean planting progress was estimated at 2% complete vs. 2% average with 1% done in Nebraska and 1% in Missouri.  No other soybean planting has taken place in the corn belt.  25% average progress isn’t crossed on average until week #19, or around the second week of May.

Spring wheat planting progress came in less than expected at 3% complete vs. 3% last week with South Dakota advancing just 1pt to 2% planted, while ID advanced to 40% planted vs. 24% last week and WA moved to 39% planted from 37% last week.  From a national perspective, this is a historically slow start with the 3% planted as of week #16 the slowest since 1997.  1996/97 was one of the worst winter/spring periods in South Dakota on record with multiple blizzards experienced throughout April.  On our farm in NC-SD, spring wheat planting didn’t commence in 1997 until May 3rd with corn planting beginning on May 5th at the same time.  With rain across SD this morning, some farms could be in similar shape to 1997, although progress should be made by the end of the week.  Looking at a state-by-state basis, MN at 0% planted is tied with 2013 and 2014 for no progress as of this week, which was also the case in 2001.  MT at 0% planted is the slowest progress for this week on record.  ND at 0% planted is tied with 2013 while 2014 had 1% of the crop planted as of this week.  SD at 2% planted is the slowest since 1997 and 1995 which had 1% planted on this week.  5-yr average progress for South Dakota in week #16 is 49% planted with 72-75% of the crop having been planted by this date each of the last three years.  We maintain producers haven’t made a lot of acre switching decision to the north of South Dakota, yet, but S-SD would appear to be losing acres with the current weather forecast.

Winter Wheat Conditions were unchanged last week at 31% G/E nationally, with sharp declines in MT (-8), SD (-7) and CO (-2) keeping HRW conditions under pressure.  Kansas and Oklahoma were unchanged despite the pick up in rainfall last weekend, while TX saw conditions improve 1pt to 14% G/E.  OK conditions at 8% G/E seem a lot lower than their recent precip would suggest which always reminds us to view these conditions as subjective and not always comparable year-to-year.  Winter wheat heading progress was reported at 13% nationally vs. 9% last week and 19% average.  In the southern plains, Texas is 56% headed vs. 48% average, while OK is 23% headed vs. 38% average and Kansas hasn’t begun heading which is usually 11% complete on this date.  The delayed heading progress speaks to the delayed maturity of the crop as a whole and why recent rains should still be beneficial.

Export inspections were also released yesterday morning which were solid for wheat and corn, but light on soybeans, raising questions about the USDA’s current export estimate.  Wheat inspections totaled 22.8mbu vs. the 19.8mbu needed weekly, the first week which hit the level needed in 10-weeks.  Total inspections measure 789.8mbu vs. 874.9mbu a year ago.  The terrible export sales from last week, however, suggest USDA will be cutting their 17/18 export demand by 25mbu on the May WASDE.  Corn inspections were solid at 67.7mbu, the second highest of the marketing year and well better than the 49.8mbu needed weekly.  Total inspections continue to make up ground on last year which are now at a 20.3% deficit vs. 23.4% two weeks ago.  Soybean inspections were 17.3mbu vs. the 22.7mbu needed weekly, missing the level needed for the third week in a row.  The continued trade tension with China is taking its toll, and until the other destinations step up and begin taking their recent bean purchases, doubts will linger.

One other talker of late has been the inverted nature of Russian wheat prices.  Platts Black Sea wheat futures show the May contract settling at $214.25/MT yesterday, which shows a healthy inversion to new crop July at $199.00/MT.  A carry is featured from July out to December, which settled at $209.00/MT on Monday.  The incredible export pace of Russian wheat has drained supplies tributary to the ports, forcing exporters to reach deeper into inland Russia to secure stem, which gets expensive with added freight.  Add in a volatile stretch for the Russian Ruble of late which has caused farmers to cling to physical wheat instead of wanting to turn wheat into cash, and the inversion creeps higher.  In addition to the inversion, Russian prices themselves have been rallying with May Black Sea Wheat futures ascending from $208.25/MT to $214.25/MT since the beginning of the month, a rally of around 16c/bu.  After hitting a low of $4.00 premium Black Sea over KC Wheat on 4/11, Black Sea Wheat futures have added back on $17.54/MT worth of premium at yesterday’s settle.  Granted, this is essentially Russian cash vs. US futures, but the point is Russian wheat prices have been rallying, and it may be difficult to for US futures to ignore what has become the global benchmark the last 18-months.

 

Bottom Line: Markets act as though they’d rather pay attention to the forecast for better planting conditions than the historically slow start we’ve experienced.  Doubtful any serious acreage switches have occurred up to this point, but the lack of farm marketing speaks to producer apprehension about getting this crop in the ground in a timely manner.  Trade tensions with China continue to hang over the market as the US must consider what trade flows will look like without its largest trading partner of soybeans the last decade.  Corn continues to have little room for error in the 18/19 balance sheet, although analysts are starting to play with demand cuts if supply is not going to grow y/y.  Dryness in Brazil’s second crop corn area remains a focus.

 

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.

4/23/2018 Morning Comments

Good Morning,

 

The weekend rain event in the Southern Plains is now behind us with totals about as expected to maybe slightly less than what models were predicting last week.  As the map below shows, most of the state of Kansas picked up between 0.50-0.75”, while a decent sized area in W-KS saw between 0.25-0.50”.  This is certainly less than the 1.00-2.00” which was being touted this time a week ago.  Oklahoma saw good rains with best totals in C-OK to the tune of 1.00-2.00”.  The Plains will be active the next 24-48 hours with rain expected in NE/SD as well as separate storms in OK.  Totals this morning are putting 0.25-0.50” in most of SD and NE with another 0.50-0.75” for OK.  The central corn belt should see a mainly dry week ahead with planters expected to roll hard.  Reports of heavy planting activity in IL over the weekend with Iowa expected to start in force by mid-week.  Progress should remain behind average through May 1, but make up ground swiftly.  The Northern Plains will likely lag on corn and soybean planting progress as spring wheat planting finally gets going in South Dakota later this week.

 

Better markets this morning being led by KC wheat which led losses Friday.  As mentioned above, weekend rain totals across Kansas have to be called lighter than expected, with only minimal amounts expected in the week ahead.  Extended maps warm for most of the Plains, and above normal precip which was called for in the 6-10 on Friday is not rolling forward to start the week.  The Wheat Quality Council HRW tour will be out May 1-3 to give us the most complete assessment to-date of the below average conditions.  In our opinion, we are still rationing more demand at current price differentials to competitors than we have lost in supply, so expecting higher prices without another major exporter having a production issue seems to be a difficult task at the moment.  While slightly better this morning, corn and soybeans remain in an intermediate-term downtrend, pulled lower by May option expiration on Friday.  Both soybeans and corn are firmly below their 50-day moving averages and December corn is close to trading below $4.00 for the first time since April 4th.  Open interest declined by 17,824 contracts in corn on Friday, down 20,738 in soybeans, up 8,199 contracts in SRW and down 826 in HRW.

Friday saw Commitments of Traders data through April 17th released with funds selling a healthy amount of corn, dropping their net long by 45,014 contracts to +161,932 contracts.  Commercials mainly closed out previous short positions to accommodate the buying as opposed to initiating new longs.  Funds in soybeans bought 14,212 contracts to put their net long at +156,510 contracts vs. their 6-week average of +141,585 contracts.  Impressively, the gross commercial long in soybeans moved to +399,917 contracts, the second largest position for this group on record.  In HRW, funds bought 1258 contracts, leaving their net long at +24,692 contracts.  SRW saw funds sell 5,063 contracts bumping their net short back to -63,277 contracts, very near their 6-week average.  In Minneapolis, funds bought 1,537 contracts to put their net long at 716 contracts, the first net long since the middle of March.  Big commercial selling in HRS, however, with the gross commercial short of 38,007 contracts the largest since mid-December.  Would not appear commercials are buying the late-planting narrative in spring wheat, or that there is any shortage of wheat being offered from the producer.

Friday also saw the April 1 Cattle-on-feed data released with numbers coming out mainly in-line with estimates.  On-feed as of April 1 was reported at 107.4% of year ago levels vs. 107.5% expected.  Placements were 90.7% which were slightly above the estimate of 90.3% and in sharp contrast to March placements which were 107.3% of March 2017 levels.  Marketings were 96.1% vs. estimates for 95.9% and again shy of the March y/y change at 101.6%.  During the month of March, June live cattle futures fell $13.025/cwt, hitting the lowest levels on a front-month basis since October 2016, so not all that unreasonable to see cattle held back.

Pretty weak spread trade across the grain room last week with corn and soybeans certainly confirming the flat price move via calendars.  The CK/CN continues to sit at contract lows, while the CN/CZ tied the lowest levels since January overnight.  The CZ8/CZ9 spread traded -6.50c overnight, which compares with recent highs at +2.50c at the beginning of the month, although still well higher than the -20.0c area witnessed at the end of 2017.  Soybean spreads are also weak with SN/SX hitting -4.50c overnight after recent highs near +20.00c, and contract highs at +48.00c at the beginning of March.  KC and Chicago wheat calendar spreads are especially weak, with the former seeing new contract lows for most spreads on the new crop portion of the curve.  KC spreads saw a short-term uptrend last week as we got closer to the Southern Plains rain event.  We remain convinced as long as the artificially-wide calendar spreads exist, there will be no issue rationing the necessary exports and feed demand to accommodate less supply in the 2018/19 HRW balance sheet.  If the southern plains wheat farmer had the storage infrastructure his northern plains brethren did, the complexion of the HRW market might be a completely different story.  He does not, however, and therefore there is no way of forcing spreads tighter to push the warehousemen to actually move wheat and participate in the market place.  Spring wheat has gained on corn, but has given up ground to soybeans over the last 7-10 sessions.  Northern Plains spring wheat farmers will part with corn acres before they part with spring wheat acres.  Should be ample time for both spring wheat and soybeans to be planted.

Planting progress on this afternoon’s crop progress report is expected to show corn planting at 7-8% nationally vs. 3% last week, 17% last year and 18% average.  HRS planting should be around 9% vs. 3% last week, 22% last year and 38% average.  Some of the recent rains should also have HRW ratings ticking higher.

 

Bottom Line: Higher markets to start the week although it doesn’t feel like these markets have a ton of conviction to reverse the recent downtrend.  We had built in a bit of premium on late planting, but massive progress across the central corn belt is likely to be scored this week.  By the end of the first week of May, the only area lagging will probably be the Northern Plains.  The 18/19 corn balance sheet does not have a lot of margin for error, and that will remain supportive, especially if we lose a few acres in ND/N-MN.  The 17/18 wheat carryout will get larger and it already feels like we have rationed some 18/19 demand.  The HRS balance sheet will remain a question mark as acres have already been lost in South Dakota, but the jury is still out on ND/MN/MT.

 

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.

4/20/2018 Morning Comments

Good Morning,

Commodities are the buzz.  Yesterday, the CRB Index, which measures a basket of commodities, hit the highest level since October 2015 as crude oil and other hard assets continue to push higher.  The index has been driven in large part by crude oil, which hit the highest level since the fall of 2014 yesterday.  Spot month crude oil futures missed the $70/bbl mark by just 44c/bbl.  Brent Crude oil futures on the other hand, missed $75/bbl by just 25c/bbl.  Rising energy markets have been in response to the draw down in US crude oil stocks, as well as a fairly strict adherence to OPEC’s production caps.  This rise in crude oil was met with tweets from President Trump this morning, however, as rising gasoline prices usually don’t sit well with the American Consumer.  It is very difficult to have a roaring economy and cheap gasoline prices, so if given the chance I’d think he would be happy with the former.

All eyes on the southern plains rain forecast for the weekend which is still showing 0.50-1.25” for the western ½ of the state, although down from early week model runs.  The system will blanket Oklahoma and most of N-TX as well.  E-CO will probably be the area short changed.  The heart of the corn belt looks mainly dry the next 7-days which should allow planters to roll in spots by mid-week next week.  Normal/above temps in the 6-10 and 8-14, while above normal precip moves in for the entire Midwest and Southern Plains in the 8-14 day.

 

Easier markets to close the week with losses being led by KC wheat which has been the price leader multiple times this week.  HRW is definitely in a weather market, living and dying with each model run.  However, expectations should be tempered for how much recovery can take place if rains do verify.  When one considers it began raining/snowing around this time last year leading to a substantial recovery in the crop by harvest, one needs to remember the vastly JFM period for 2017 vs. 2018.  February 2017 was rather dry for the heart of the HRW belt, but January and March were actually rather wet with most of the state seeing 2.0-3.0” of moisture during that month.  April was particularly wet for Kansas with the entire state seeing 2.0-5.0” by the turn to May.  This was not the case with 2018, and while stabilization and even some recovery can occur with an up-turn in rains, I think expectations need to be tempered about returning to an average crop, even if development is behind.  Today is option expiration for May options with the 1030/1040 strikes being watched closely in soybeans as well as the 3.80 strike in May corn.  Soybean charts and spreads are looking tough.

Data out yesterday included weekly export sales which were decent for row crops, and disastrous for wheat.  Wheat export sales featured net cancellations of old crop of 2.5mbu vs. the 11.5mbu needed weekly to hit the USDA forecast.  Total commitments of 844.0mbu are down 17% from a year ago vs. a 15% deficit last week.  With just six weeks left in the marketing year, it looks as though USDA will be downgrading the wheat export sales forecast next month, leading to a rise in carryout.  New crop sales totaled 8.9mbu which puts total new crop commitments at 51.0mbu vs. 57.9mbu a year ago.  Corn sales were solid at 43.0mbu vs. the 13.9mbu needed weekly.  Total commitments are down 1.940bbu, down just 2% from a year ago, consistent with the last several weeks.  Soybean export sales of 38.2mbu were much stronger than the 5.2mbu needed weekly to hit the USDA forecast.  Total commitments of 1.985bbu are down just 3% from a year ago vs. the USDA calling for a 5.0% decline.  Shipments of 1.557bbu are down 224mbu from a year ago, and are definitely the indicator to watch as we move into the summer months.  Meal and bean oil sales were both much stronger than the level needed.

Several Chinese headlines out yesterday regarding their corn market including an article which is pegging their 2018/19 corn demand rising to 225MMT, 15MMT larger than 2017/18.  There must be something being lost in translation as 2017/18 total consumption was 232MMT, and straight feed/residual demand was 162MMT while FSI consumption is 70MMT.  We had been plugging 240MMT into our 2018/19 balance sheet, but this will evolve.  Also on the demand front China sold 2.696MMT of the 2.958MMT offered during yesterday’s corn auction at an average price of $241.70/MT.  There have been four auctions held total in 2018 which saw a combined 8.955MMT sold.  For reference sake, May corn futures on the CBOT are trading at $149.34/MT.  The strong demand for corn is not all that difficult to square given the recent bump in tariffs against US sorghum, a commodity which China had been consuming copious amounts of.  If China’s demand continues to grow at the current pace, and to meet the additional ethanol demand, greater imports will be needed.

The other big talker in our littler corner is the Russian balance sheet and its implications for the 18/19 global wheat flow.  Russia’s wheat exports in 2017/18 have absolutely blown away expectations, and are now being estimated at 40MMT vs. early season ideas which had them struggling to put through 30MMT.  The open winter definitely aided these efforts, something which can’t be counted on every year.  Nonetheless, if we assume 2017/18 wheat exports at 40MMT, carryout falls to 11.222MMT, which would still be the largest since 2010/11.  Production ideas for 2018/19 are somewhere between 75-78MMT, so we are using 76.850MMT with an average yield of 2.90MT/ha.  This would be the second largest yield on record behind last year’s 3.10MT/ha, which many have described as an outlier given the perfect growing conditions.  Total supplies would therefore be down around 8MMT y/y, while we see demand easing to 82.50MMT vs. 85MMT this year thanks mainly to a 2MMT drop in exports.  Russia will still be position to export a huge book, but repeating an open winter will be tough.  Carryout would therefore fall to 6.072MMT if domestic demand is flat, which would be a three year low.  More impressive is the stocks/use ratio at 7.36% which would be the smallest since 2000/01.  When a huge demand base gets put underneath the market, even with solid supply, it raises the bar for countries relying on this country continuing to perform seamlessly throughout the year.  The fact Russia will not have as large of stocks hanging over the market for an entire marketing year should help elevate global offers.

MW/KW inter-market spreads have very likely seen their highs in the near-term around $1.20 basis the July, which was resistance back in mid-March as well.  Minneapolis began to exert premium over KC as planting delays mounted and rainfall prospects improved for the southern plains.  As the week has progressed, rain fall totals have been dialed back in the south, and weather seems to be improving in North Dakota.  Crop progress reports on Monday should still show a complete lack of progress seeding across the Northern Plains, but the following week could begin to see progress being made.  How acres change on the June planted acreage report is another matter, but spring wheat will go in the ground in May in short-order if forecasts hold.  Having said that Commodity Weather Group did issue a blog post yesterday suggesting the 11-15 day is turning cooler and wetter with the 16-30 day backing that prediction up as well.

 

Bottom Line: Easier as we await midday model runs.  Opex could keep us lower today as prices try to gravitate toward a major strike.  Sunday night open will be about rainfall returns in the Southern Plains and the updated outlook for corn belt weather.  If the forecast holds, planters will be rolling hard in Illinois and Iowa by next weekend.  As many have pointed out, we can plant 30-50 million acres of corn in a week.  We are not late.  Outsides remain supportive.

 

Good Luck Today.

 

JFMA-2017

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.