9/20/2017 Morning Comments

Good Morning,

 

Outside Markets as of 6:15am: Dollar Index down 0.158% at 91.6960; Euro up 0.054% at 1.20615; Aussie Dollar is up 0.462% at 0.80400; S&P’s are up 0.50 at 2505.25; Dow futures are unchanged at 22,336.00; 10-yr futures are up 0.09%; Crude Oil is up $0.60 at $50.08; Heating Oil is up $0.0127 at $1.7853; Paris Milling Wheat is up €0.50 at €162.50/MT; Paris Rapeseed is unchanged at €368.00/MT; Dalian corn closed up 0.29%, Dalian soybeans finished down 0.60%, Dalian meal closed down 0.55% and Dalian oil closed down 0.28%.

Quiet Midwest radar this morning, although decent rainfall fell overnight across E-SD/E-ND/NW-MN with many areas receiving 0.50-1.00” and localized totals as high as 3.00” in E-ND.  Light chances of rain around the next couple of days before the next round of rainfall rolls in Friday through early next week.  NE/E-SD/MN are still expected to see the best rainfall totals, although this morning models have the beginning of the band stretching down into W-KS/E-CO/OK/N-TX as well which could delay WW planting but bolster soil profiles.  Totals as of this morning along the band look to be 1.50-5.00” depending on which state one looks.  Not a lot of change in the extended models although temperatures do still look to slip below normal in the 8-14 day.  Precip models are above normal before slipping to normal later in the period.  Doesn’t look like any notable harvest delays just yet.

 

Better markets this morning, much the way yesterday started out before price gave back everything before the close.  The path of least resistance at the moment in corn and wheat is definitely lower, while soybeans have been a bit more resilient and can make the argument the intermediate term trend is still higher.  Open interest made another surge yesterday in corn, up 9,404 contracts, and bringing the total for September to an increase of 81,321 contracts.  Odds are good the increase in open interest is managed funds selling and commercial end users buying given the reluctance so far to trade meaningfully below $3.50 until more harvest progress is made.  The yield reports received so far have been better than expected on both corn and soybeans which seems to be weighing on trader sentiment.  It is always difficult to quantify “better than expected,” but the more yield reports which come in that way, the more difficult it will be to justify lower national yield ideas.  Wheat markets received larger StatsCan production estimates yesterday which the markets somewhat expected, but should also offset the drop in US-HRS production.

Starting with Canada, StatsCan released their updated all-wheat production figure of 27.1MMT which compared with 25.54MMT last month and 31.72MMT last year.  These also compare with the USDA’s last estimate of 26.5MMT.  The important thing to focus on in the data is almost all of the decline in all-wheat production came from durum and winter wheat as spring wheat is pegged at 20.075MMT vs. 20.453MMT a year ago.  The North American durum balance sheet is going to be especially tight this year, and should see price supported throughout.  What Canada has added in production, they have lost in protein as the reports from the north continue to be solid yields and declining protein.  Based on export quotes, protein scales are widening out in Canada, and are likely to get worse.  At current, scales are 10c per 1/5th from 12.5-13.5% with another 25c premium from 13.5-13.8%.  Conversely, MGEX spot floor quotes show 5c per 1/5th from 13.0% to 14.0%, but 16c per 1/5th from 14.0% to 15.0% as 15.0% pro spring wheat traded up 45c on the bid side yesterday to +145Z.  Back to Canada, plugging in StatsCan numbers against USDA demand gives us carryout of 5.715MMT and a stocks/use ratio of 19.91% which compares with 16/17 at 6.865MMT and 22.51%, respectively.  Both the carryout and stocks/use ratios are a little below the 5-yr averages, but manageable and certainly more workable than the 25.5MMT type numbers being used previously.

In the other hemisphere, however, things seem to get worse by the day as mentioned earlier this week.  Australian weather looks dismal with little for rainfall chances, continued frosts at night and searing heat expected for much of NSW this week and weekend. Would appear most crop estimates are grouping right at 20MMT, although some front-runners slipping below.  If we use 20MMT against USDA demand, carryout falls to 1.196MMT, which would be the lowest on record and completely untenable.  Boots on the ground think top end exports are closer to 14MMT vs. USDA’s current 18.5MMT, which improves carryout to 5.696MMT which would be about 1MMT above the 5-yr average.  Still, 4.5MMT of export demand which needs to be pushed elsewhere.  We will continue updating our combined Australia/Canada/US-Hard Wheat balance sheet as the year progresses as this supply of high quality wheat is going to be tightened drastically vs. a year ago.  A much better picture will be available after next week’s Small Grains Production report on the 29th.  Russia will be there to help fill the void, but export capacity will not allow them to make up for everyone.

GASC tendered for wheat yesterday, buying 175,000MT of wheat for October 21-31 delivery, which brings YTD total to 3.085MMT.  The 175,000MT consisted of three cargoes of Russian wheat at an average price of $196.67/MT FOB with an average landed price of $211.98/MT.  The cheapest FOB price was up around $9/MT from their last tender.  The number or origins has decreased from three each month July-September to just two in October, and just one in the last tender.  Will be difficult for anyone to compete with Russia going forward given the trepidation about being rejected over quality or contamination issues.

 

Bottom Line: Firmer to start, but that hasn’t meant much lately.  Yield reports continue to roll in “better than expected,” even in areas which saw little to no measureable rainfall during the month of August and early September.  While early, it almost seems as though we need to adjust our crop condition and rainfall assumptions for these corn and soybean crops given what has to be improving genetics.  If national soy yield isn’t 1.0-2.0bpa lower than current USDA ideas, SX soybeans could have a difficult time of being near $10.00 without threatening weather in Brazil.

 

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.

 

 

9/19/2017 Morning Comments

Good Morning,

 

Outside Markets as of 6:00am: Dollar Index down 0.185% at 91.8530; Euro up 0.312% at 1.20465; Aussie Dollar up 0.541% at 0.79880; S&P’s are up 1.75 at 2504.75; Dow futures are up 18.00 at 22,317.00; 10-yr futures are up 0.06%; Crude Oil is up $0.49 at $50.40; Heating Oil is up $0.0117 at $1.7913; Paris Milling Wheat is up €0.50 at €162.00/MT; Paris Rapeseed is down €0.50 at €367.25/MT; Dalian corn closed up 0.24%, Dalian soybeans finished down 0.3%, Dalian soy oil closed down 0.25% and Dalian meal settled up 0.40%.

The Federal Reserve’s FOMC committee meets today to discuss monetary policy, issuing their policy decision tomorrow afternoon.  The federal funds futures market is putting odds at a very low 12% chance of an interest rate increase at the conclusion of tomorrow’s meeting, although odds for a December rate hike have improved substantially in recent days.  Two-weeks ago, the market was putting odds of a December rate hike at just 38% due to weak inflation readings and the back-to-back hurricane damage inflicted by Harvey and Irma.  Since then, however, odds of a Christmas rate hike have improved to 64% thanks in part to rising crude oil prices and a jump in the August CPI.  The last set of Fed dot plots still put three interest rate hikes per year for 2017 through 2019 which would leave the federal funds rate at 3.0% by the end of 2019.  Market expectations are much lower at 1.65%.

Shower activity in IL/IN/OH this morning as well as E-MT, otherwise the Midwest is fairly quiet ahead of the next major round of precip in the WCB.  Shower activity will flare up later this evening into tomorrow in SD/NE/MN, bringing 0.25-1.45” to the eastern portions of the Dakotas and NW-MN.  Things will then go quiet for a few days before the next band of heavy rain moves into NE/SD/MN by the weekend.  Heaviest rain chances will be in C-NE/E-SD and a band through MN which could see 4-5”.  The periphery of the heavy rain still looks to drop 1-2” in many areas of the aforementioned states, so some disruption to early harvest efforts is expected.  IA has light chances while the ECB is mostly wide open the next 7-days.  The Midwest remains uniformly above normal on precip in the 6-10 and 8-14 day, while temps slowly moderate toward below normal in the 8-14 for the WCB and much of the Plains.  If those below normal temps end up pushing toward frost/freeze, it would still be a concern for late corn and soybeans in the Dakotas.

 

Mostly better markets this morning as we bounce from yesterday’s losses.  Markets received another round of crop progress reports, but traders are much more focused on incoming yield reports from early progress around the corn belt.  Mixed open interest changes yesterday, but it’s the corn open interest changes which should give us pause.  Corn open interest rose 8,086 contracts as the market closed down 3.25c, continuing its upward march.  Since the end of August, corn open interest is up 72,802 contracts while price is up a net 7c.  Much of this open interest increase is managed funds rebuilding their net short position which could be looked at in a supportive light if price can keep working higher and put these positions underwater.  However, if prices can make a run at the August lows, it could lead to an even larger push by trend following funds, especially as harvest pressure increases over the next several weeks.  SRW open interest was down 3,042 contracts, KC wheat was up 1230 contracts and soybean futures were up 1588 contracts.

The crop progress report showed corn conditions unchanged at 61% G/E vs. 74% G/E last year, although conditions were a real mixed bag with declines in the WCB vs. improvements in the ECB and South.  Corn harvest was pegged at 7% complete vs. 5% last week and 11% average.  No progress has been made in either of the Dakotas, Minnesota or Wisconsin while only 1% of IA has been harvested and 2% in NE vs. averages of 6% and 7%, respectively.  34% of the corn crop was rated as mature which is down from 47% average with nearly every state showing large deficits with average.  The incoming change to cooler temps is definitely a concern given only 14% of SD is rated as mature, 17% of ND, 13% of MN and 37% of NE.  Soybean conditions declined 1pt to 59% G/E vs. 73% G/E last year.  Soybean harvest was estimated at 4% complete vs. 5% average.  41% of soybeans nationally are dropping leaves vs. 43% average.  Winter wheat planting progress was seen at 13% complete vs. 5% last week and 15% average.  KS is 7% seeded vs. 8% average while SD is 30% seeded vs. 24% average.

Wheat news today will focus on the overnight GASC tender which shows Egypt seeking wheat for October 21-31 delivery.  Plenty of anxiety over the tender by several supplies given the issues run into by France and Romania related to poppy seeds being found in previously purchased cargoes of wheat.  The cargoes remain quarantined until sieving can take place, but the action by GASC could lead to suppliers limiting the number of offers and origins they put forward.  Previously, GASC found issue with ergot content from a number of supplies and now the issue has shifted to poppy seed, leaving suppliers to question what is really going on?  If Egypt is running into financing issues, it would be easier to deal with than this uncertainty.  If GASC only wants to buy from one or two origins, then specify the tenders that way.  The way in which they are going about acquiring wheat is turning into a circus and will ultimately pull wheat off the table.  No offers available as of this writing, although the business should go to Russia.  In other wheat news, HRW basis continues to trade on a one-way street higher with firmer 12.0% pro basis at the TX-Gulf yesterday.  Trades were indicated at +175/185Z for Sept vs. +145/160Z a week ago, while Oct was seen at +170/185Z, unchanged from a week ago.  The domestic market was unchanged, but firm, helping to keep a bid under calendar spreads.  Lots of concern already about the availability of higher protein wheat which will be a precursor of things to come this winter.

Other data yesterday included weekly export inspections which were a little light for row crops and decent for wheat.  Wheat shipments came in at 17.1mbu vs. the 17.2mbu needed weekly to hit the USDA forecast.  Total shipments measure 320.5mbu which are up 1.7% from a year ago vs. the USDA looking for a 7.5% decline.  Corn shipments for the second week of the 17/18 marketing year were just 26.6mbu vs. the 34.8mbu needed weekly, although it isn’t uncommon to have light shipments at the beginning of the year as exporters await fresh supplies.  Soybean shipments were 34.1mbu vs. the 42.5mbu needed weekly, but here again, nothing to be concerned with the second week of the year.  More important to the soybean market has been the steady pick up in daily sales announcements.  Another 261,000MT of soybeans were announced for China and 126,000MT to unknown destinations yesterday.  There have now been daily sales announcements for soybeans for the last seven days straight.

One other wheat item, Australia’s wheat production continues to be a focus with drought conditions remaining in place and many growing areas having just experienced another round of frost the last few days.  Temperatures this coming weekend in parts of New South Wales are expected to hit 40* C (104* F) which would be the first 40* C+ temperature ever recorded in NSW during the month of September.  After rebounding slightly in August with rain in parts of the wheat belt, production ideas have slipped back toward 20MMT with some analysts projecting less than that.  This would of course compare to 16/17 production of 33.5MMT and exports of 23.2MMT.  The USDA is currently projecting production at 22.5MMT with exports of 18.5MMT.  There is no one on the island of Australia who thinks 18.5MMT of exports is close to realistic with most estimates already at or below 14MMT.  If production continues to slip, we should see a corresponding rise in FOB asking prices, and demand which needs to be filled somewhere.  HRW off the PNW should be well-positioned to pick up some of that business.

 

Bottom Line:  Markets feel like they are biding their time until more harvest takes place or more USDA data is available at the end of the month for small grains and next month for row crops.  While farmers will be keen to hold as much grain off the market as possible, there will still be harvest pressure on either cash, spreads or futures or a combination of all three.  If producers won’t be able to go home with 100% of their production, plans need to be made now so as to not end up selling grain at the weakest level on a seasonal basis.

 

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.

9/18/2017 Morning Comments

Good Morning,

 

Outside Markets as of 6:45am: Dollar Index down 0.003% at 91.8370; Euro up 0.109% at 1.19540; S&P’s are up 4.75 at 2502.00; Dow futures are up 54.00 at 22,273.00; 10-yr futures are down 0.09%; Crude Oil is down $0.28 at $49.61; Heating Oil is down $0.0115 at $1.7873; Paris Milling Wheat is down €0.25 at €163.00/MT; Paris Rapeseed is down €0.25 at €367.25/MT; Dalian corn closed down 0.24%, Dalian soybeans finished down 0.10%, Dalian soybean oil closed down 0.69% and Dalian meal finished down 0.15%.

Showers working across OK/KS/E-NE/IA this morning with more expected in IA and MO over the next 24-hours.  IA and MO also picked up nice rains over the weekend with nearly the entire state of IA receiving 0.50-1.00” with localized amounts close to 3.00” in W-IA.  It should be a fairly active week in the WCB and Plains this week with multiple rounds of rain and heavy totals expected.  The 7-day forecasted precip map shows a large swath of KS/NE/W-IA/E-SD/MN to receive 1.75-5.00” with C-NE up through SD and W-MN the best chances of those heaviest amounts.  Temperatures will slowly moderate in the WCB and Plains as we move from the 6-10 to the 8-14 with more normal to even slightly below normal temps seen at the end of the period.  Precip looks to remain above normal for the entire 6-14 day period which could interrupt soybean harvest but will continue to cut moisture deficits.

 

Mixed to weaker markets this morning with soybeans and spring wheat slightly firmer, but corn and winter wheat lower.  Soybeans and winter wheat will be trying to add to their positive performance last week, while spring wheat will be desperately trying to stem the flow this week after losing 25c last.  Soybean harvest will ramp up in a big way this week in the central corn belt while progress should also be made in the Northern Plains where day length is speeding soybeans to maturity.  On this afternoon’s crop progress report, expectations are for US corn harvest to be 7-8% complete vs. 5% last week, 9% last year and 12% average.  Soybeans meanwhile are expected to be 4-5% harvested vs. 5% average.  The flow of anecdotal yield reports will also pick up and be important for gauging expectations moving forward.  Bulls remain steadfast in their ideas yield reports will disappoint and eventually prove the USDA is overstating national average yields.  So far, early flow of yield reports would have to be characterized as “better than expected” in IL/MO/KY but below expectations in IA.  Very early of course, but tone moving forward will be important.

Friday’s Commitments of Traders report didn’t offer too many surprises, mainly confirming price direction last week.  Funds sold 5,468 contracts of corn to put their net short position at -145,639 contracts which is the largest since late June.  This is also quite a bit larger than the 52-week average of -80,797 contracts.  In soybeans, funds bought 5,958 contracts to put their net short at -43,888 contracts.  The Gross Commercial Long position in soybeans remains historically large for this time of year, accounting for 37.25% of total open interest which is the largest position for this point in the year on record.  As Brazilian dryness worries intensify, commercial activity could be a good indicator to watch.  In Chicago wheat, funds bought 4,797 contracts to leave their net short at a still large -99,798 contracts.  No real trend either way in commercial activity, but the outright positions still look supportive in CGO wheat.  In KC wheat, funds continue to whittle down their net long which is now only +7,928 contracts, the smallest since June 6th.  In Minneapolis, the same is true with funds down to +7,005 contracts which is the smallest since May 30th.  Here too, commercial activity has not moved that much despite the selloff in prices.  Across the seven grain and oilseed contracts, funds remain net short -220,600 contracts which is down about 19,000 contracts from two weeks ago.

While harvest will dominate headlines in coming days and weeks, the structure of the corn market remains a major market worry.  Late last week, CIF corn traded down to +14Z which is the lowest spot trade since 2009.  This is due to the large amount of old crop corn still trying to move as well as the lack of a nearby export program relative to recent years.  Traders knew the competition from SAM corn supplies would be fierce, but export commitments as of last Thursday are the 2nd lowest for this time of year in the last 11 years.  The aforementioned is understandably weighing on calendar spreads with CZ/CK and CZ/CN sitting at contract lows this morning as are CH/CK and CH/CN.  At last trades this morning, corn spreads are sitting at 65-70% of full financial carry (LIBOR+200bp).  This will encourage farmers to sell soybeans off the combine and store corn which has been the trend the last couple of seasons.  While many still expect yield ideas to prove smaller than current USDA estimates, cash and spreads are clearly indicating too much supply for the foreseeable future.

Late last week, the International Research Institute for Climate and Society released their latest CPC/IRI ENSO forecast.  That is a lot of jargon which means this group issues the official El Nino/La Nina forecasts which are updated monthly.  The headline grabber was the rising chances for a La Nina weather pattern to take hold later this fall and into winter.  Chances are put at La Nina developing in Sept/Oct/Nov at 55%, OND at 62%, NDJ at 62% and DJF at 61%.  The reason this is significant is La Nina can be associated with dry conditions in Brazil during their key developmental weather for corn and soybeans.  This becomes even more important considering Brazil has been especially dry going back a month now, and isn’t expected to see much for meaningful moisture by the beginning of October.  This can delay soybean planting and push flowering weather deeper into their summer heat.  Stay tuned.

 

Bottom Line: Prices are uniformly slipping into the red as we moved into the 7:00 hour with traders awaiting more harvest reports to gauge yield ideas moving forward.  Next week will also see the Small Grains Production report which will shed additional light on the spring wheat situation.  Spring wheat prices have certainly not traded as though we have a supply problem the last several weeks as yields got bigger in ND/MN and even Canadian yield ideas are improving.

 

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.

9/13/2017 Morning Comments

Good Morning,

 

Outside Markets as of 6:30am: Dollar Index down 0.124% at 91.7810; Euro up 0.084% at 1.19830; Aussie Dollar up 0.224% at 0.80390; S&P’s are down 3.25 at 2492.75; Dow futures are down 16.00 at 22,108.00; 10-yr futures are unchanged; Crude Oil is up $0.42 at $48.65; Heating Oil is up $0.0074 at $1.7480; Paris Milling Wheat is up €2.25 at €161.75/MT; Paris Rapeseed is up €0.25 at €363.75/MT; Dalian corn closed down 0.06%, Dalian soybeans closed down 0.03%, Dalian oil settled up 0.35% and Dalian meal settled down 0.37%.

Scattered rain across the radar this morning in the Plains and ECB.  Light rains moved through SD and NE last night dropping 0.10-0.25” with locally heavier amounts along the border.  The heavier round of showers is expected to start in MT tomorrow and spread into the Dakotas Friday/Saturday before eventually making it into N-MN.  The 5-day forecasted precip totals are impressive with 1.25-3.00” for all of MNT/ND/MN with slightly lighter amounts in SD.  Rains eventually make their way into IA/N-MO/IL/IN with totals there close to 0.50”.  Rains in the central and ECB are needed badly but again reaching the point where additional moisture will do little for yields.  Above normal temps and above normal precip is the trend for the Midwest in the 6-10 and 8-14.  Not too many folks going to argue with that kind of forecast as we try to speed immature crops across the finish line.

 

Mostly better markets this morning led by the three wheat contracts which are adding on to impressive gains from yesterday’s session.  While the focus after the USDA report was the losses witnessed in corn and soybeans, wheat staged a late session rally to see winter wheat close 5-7c higher as world carryout dropped, major revisions to past production in Australia has that country’s balance sheet seriously tight and the increases to Russian production were clearly already in the market.  As we’ve written about here, the global wheat S&D is counting on massive exports from Russia, but it will still come down to export capacity and eventually winter wheat which can impact loadings.  Further, all signs lead to stable to lower winter wheat plantings in the United States again this year which will keep pressure on carryout and the need for trendline yields next season.  Corn and soybean markets were caught off-guard by the USDA as they increased the size of both crops when the average trade estimate had both crops getting smaller.  The tools employed by the trade and the analyst community this year has not lined up well with USDA methodology, and unfortunately, we may never know why.

The USDA pegged the corn crop at 14.184bbu vs. the average trade estimate of 13.992bbu and 14.153bbu last month.  They left harvested acreage unchanged which gave us a yield of 169.9bpa vs. 169.5bpa last month and 174.6bpa last year.  The increase to production overshadowed the increase in old crop exports and decline in old crop carryout, but new crop demand also dropped by a net 50mbu.  It is very difficult to find positives with the corn market at the moment as balance sheets are oversupplied, export cash markets are weak and calendar spreads are trading in excess of 80% of full-financial carry.  Given the increase to yield from August to September, and the historical tendencies of the USDA between now and January, hoping for a 3-5bpa cut to national yields doesn’t look like a solid proposition.  World carryout for 17/18 is expected to decline to 202MMT from 16/17’s 227MMT, but there is no shortage of corn anywhere in the world, and early ideas on South American production have them down just 2MMT.  Anecdotal yield reports once harvest begins at the end of the month will be important for gauging both the USDA and analyst community.

Soybean production was increased to 4.431bbu vs. 4.381bbu last month, the average trade guess of 4.323bbu and the 4.307bbu last year.  This increased the national average yield to 49.9bpa vs. the average trade guess of 48.7bpa, 49.4bpa previously and 52.1bpa last year.  Changes to demand included a 20mbu increase to old crop exports and a 5mbu increase to crush.  In the new crop balance sheet, exports were increased 25mbu which kept 17/18 carryout unchanged at 475mbu.  Analysts are taking both sides of this situation with some lauding the fact supply increased but we remain below 500mbu carryout, while others think the onus is now on demand to prove it is worthy of such lofty levels given the slow start to the new crop export season.  No changes were made to South American production in either marketing year, although Brazilian soybean exports for 16/17 were raised 1.5MMT to 62.5MMT.  Old crop Chinese soybean imports were raised 1MMT to 92MMT while new crop imports were increased 1MMT to 95MMT, which is a new record.

No change to the US wheat balance sheet as that carryout remained unchanged at 933mbu with production to be updated at the end of the month on the Small Grains Production report.  Yet, there were still plenty of global changes to work through.  The big change was to Australia which saw both 15/16 and 16/17 production and exports aligned with official Australian Bureau of Statistics figures.  Planted area was reduced for both marketing years resulting in 15/16 production being cut by 1.9MMT and 16/17 being cut by 1.6MMT.  These are look-back, book-keeping cuts which would ordinarily be brushed aside.  However, when one removes that supply as we head into a year hampered by drought and frost, supplies grow especially tight.  When one makes the appropriate changes to balance sheets, 17/18 ending stocks tip all the way down to 3.696MMT, the lowest ending stocks since 2008/09, and a stocks/use ratio of 14.49% which is the lowest since 2008/09 as well.  Unfortunately, production ideas today are closer to 20MMT or under as opposed to the 22.5MMT the USDA is currently using.  If 20.5MMT is used for production, ending stocks and stocks/use fall to levels not seen since the mid-90’s.  Few in Australia are using an export figure anywhere near 18.5MMT, but that simply means importers will need to look elsewhere to secure their needs.

Segue to Russia which saw production increased to 81.0MMT and exports raised to a new record 32.5MMT, but the market seemed to already have this data discounted based on our close.  The 32.5MMT of wheat exports would be up 17% from last year’s record and would be 53% larger than the 5-yr average.  There are many who don’t believe Russia can execute on such a program while still maintaining exports of corn of barley in the neighborhood of 10MMT.  The best indicator will be FOB offering prices out of the Black Sea which haven’t shown any signs of disagreement yet.  When winter approaches, however, the real test will be at hand.

 

Bottom Line: Futures markets are holding together fairly well considering the size of the production misses witnessed yesterday.  The market will quickly be shifting to yield report mode as its main fundamental input, leaving the USDA data on the back burner for the moment.  Wheat has performed well and would certainly lead one to believe there is more in the market than we currently have priced in.  US wheat exports in 17/18 are on the rise and could end up meaningfully higher than the USDA has them.

 

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.

 

9/12/2017 Morning Comments

Good Morning,

 

Outside Markets as of 5:40am: Dollar Index down 0.055% at 91.8450; Euro down 0.038% at 1.19615; British Pound is up 0.766% at 1.3278; S&P’s are up 4.00 at 2491.50; Dow futures are up 44.00 at 22,097.00; 10-yr futures are down 0.20%; Crude Oil is down $0.19 at $47.89; Heating Oil is down $0.0091 at $1.7336; Paris Milling Wheat is up €0.75 at €159.75/MT; Paris Rapeseed is down €0.25 at €360.75/MT; Dalian corn closed down 0.06%, Dalian soybeans finished up 0.13%, Dalian oil closed up 0.35% and Dalian meal closed up 0.04%.

Nitrogen prices have been on the move as of late with both UREA and UAN swaps at the Gulf appreciating in price as hurricane activity disrupts loading and unloading in both the Gulf and Florida.  Continuous UREA prices closed yesterday at $224.00/MT, which is just off the highs set from the day before at $232.50/MT, but up from the late summer lows set in August at $195.00/MT and up sharply from the June lows around $162.50/MT.  OND UAN swaps have also been trending higher with October settling yesterday at $144.00/MT which compares with $134.50/MT on September 6th and $124.50/MT in the middle of July.  A metric ton of corn priced off the December 2017 contract divided by spot UREA swaps has declined from a high of 97.7% down to 62.3% which shows both the declining price of corn and the rising price of fertilizer.  For reference sake, December ’18 corn divided by December ’18 UREA swaps closed yesterday at 86.6%. although there is no volume in swaps out that far so must treat as an indication.

Hurricane Irma continues to dissipate across the US-SE and Mid-South, bringing soaking rains to areas trying to get fall harvest either wrapped up or started.  Rest of the Midwest is mainly quiet.  The story today and the next couple days across the Plains will be the unseasonably warm temps which will crack the low to mid-90’s in the Dakotas and central plains, exactly what is needed to speed immature crops toward maturity and avoid the pitfalls of early frost.  The warm temps hang on until Friday/Saturday when a cool down hits most of the Northern Plains.  With the cold front will also come rain chances which should see most of the Dakotas, MT and MN receive 0.75-3.00” all together.  Most areas could use a drink ahead of winter wheat planting.  IA could also see rain chances with the weekend system, although would most likely be too little, too late at this point.  Warm and wet bias hangs on through the 8-14.

 

Quiet ahead of this morning’s WASDE report with most every contract well inside its recent range.  Another surge in corn open interest yesterday, up 9,337 contracts to 1,361,259, and is now up 45,866 contracts over the last seven sessions.  Given the trends on the latest COT data of building large spec net short positions, would assume that has continued and that position is even larger.  Soybean open interest up another 5,221 contracts, but that has been much more two-sided than corn as funds covered last week for the first time in five weeks.  Sharp changes to corn and soybean production are not expected later today given big updates are usually not seen on the September WASDE, but soybean yields are much more up in the air than corn yields it would seem.  14 and 30-day percent of normal precip maps are flat-out not good for areas IA and east, while the Northern Plains witnessed favorable rainfall and temps for much of the last month.  As we’ve been saying for much of the summer, the variability of this crop is going to make it incredibly difficult to estimate and we might not have a firm handle on it until January.

Looking at the average trade estimates quickly, the trade sees 17/18 corn production at 13.992bbu vs. 14.153bbu last month with an average yield of 167.8bpa vs. 169.5bpa previously.  Soybeans are seen at 4.323bbu vs. 4.381bbu last month while yields are pegged at 48.7bpa vs. 49.4bpa.  We should see an increase in 16/17 exports while ethanol demand could be cut slightly and feed/residual could also come down.  These changes are seen putting ending stocks at 2.325bbu vs. 2.370bbu last month.  Soybean exports are also seen rising while crush should be left unchanged to bring carryout down to 366mbu for 16/17 vs. 370mbu last month.  17/18 ending stocks are seen at 2.145bbu vs. 2.273bbu previously and soybeans are seen at 438mbu vs. 475mbu last month.  One chart I would draw your attention to would be the one below showing total corn supplies which consists of beginning stocks plus expected production.  As one will notice below, 17/18 is expected to have total supplies of 16.525bbu which would be the second largest on record and down just 350mbu from last year provided we don’t get a sharp change from the USDA this morning.  The corn market looks as though it is in for another year of oversupplied market conditions in which price attempts to buy bushels as cheaply as possible and keep next year’s production from growing any further.  For the last several seasons, wheat had been the anchor in the grain room, but corn may be taking that torch in 17/18.

On wheat, little is expected in the way of market moving changes as production will be updated at the end of the month on the Small Grains Production report.  17/18 ending stocks are seen at 919mbu vs. 933mbu last month as most assume exports will be raised by 25-30mbu.  Many analysts see unchanged wheat exports from a year ago as importers are forced back to the US in the second half of the year when milling quality supplies are exhausted in Europe and export capacity becomes an issue in Russia.  Updates are also expected for Canadian and Australian production with the former seeing “better than expected” yields as harvest advances while the other is back to seeing production estimates drop due to dry conditions.  One other thing to watch on Australia is the update issued by the Australian Bureau of Statistics to the 2015/16 balance sheet.  The official statistics agency said planted wheat area that year was 1.5 million hectares below ABARES which resulted in production declining by 1.9MMT.  If one carries this through the balance sheet to 2017/18 and combines it with expected lower production, the Australian balance sheet gets untenably tight.  The change to 2015/16 also makes a person wonder if the 2016/17 crop was as massive as originally thought.  USDA usually adopts the official data from ABS, but not sure whether they will do that this month or not.  Stay tuned for this potentially constructive data update.

Elsewhere in wheat, another day, another higher premium structure in HRW.  11.40-12.80% basis was up another 5-10c with 12.0% protein now worth +140/155Z which compares with +111/126Z a week ago.  The basis appreciation continues to be about the inability to buy wheat out of storage from either the farmer or the elevator when the cash carry is still so lucrative.  7-10c/mo to do nothing but sit on wheat is an attractive proposition, and one which should keep basis firm in its plight to pry bushels out of locked bins.  Spring wheat basis hasn’t been quite as quick to respond as HRW, due in part to the change to lower protein supplies as harvest wraps up in ND/MN and advances in Canada.  Protein was incredibly high in the SD and early ND crop with the USW Associates testing showing a crop average of 14.8% so far vs. 14.2% last year, although it was down 0.2% on the week.  This lower protein could keep basis subdued and spreads weak until the expected supply shortfall makes itself known in JFM.  Domestically, mills are well covered for OND, but everyone knows wheat will be tougher to buy after the first of the year, especially when weather becomes a factor.

Data yesterday included export inspections which showed wheat at 16.4mbu vs. the 17.2mbu needed weekly, while corn was reported at 26.1mbu vs. 34.7mbu needed and soybeans were seen at 40.6mbu vs. 41.9mbu needed.  Crop progress was also released which has little value at this stage of the crop year outside of harvest progress.  Corn conditions were unchanged at 61% G/E and compare with 74% G/E last year.  Corn harvest was pegged at 5% complete vs. 6% average.  Only 21% of the crop is rated as mature vs. 31% average and big deficits across the Northern Plains and WCB.  A real need for an extended fall this year to reach remaining potential.  Soybean conditions fell 1pt to 60% G/E which compares with 73% G/E last year.  Soybeans dropping leaves was estimated at 22% vs. 25% average.  Winter wheat planting progress was estimated at 5% complete vs. 6% average with KS seen at 3% complete vs. 3% average.  CO was seen at 11% complete and MT at 13% complete.

 

Bottom Line: September report is usually not a game changer, but traders will be interested in the direction of change made by the USDA.  Odds are not on the side of bulls who are expecting large yield reductions either this month or by January given where August yield ideas came in.  Wheat and soybeans still have stories to tell while corn is finding it more and more difficult to shake the bearish supply situation which has been created.

 

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.

 

9/8/2017 Morning Comments

Good Morning,

 

Outside Markets as of 6:10am: Dollar Index down 0.500% at 91.0790; Euro up 0.495% at 1.20700; Aussie Dollar up 1.009% at 0.81100; British Pound is up 0.879% at 1.3202; Japanese Yen is up 1.168% at 107.3767; S&P’s are down 8.25 at 2458.25; Dow futures are down 81.00 at 21723.00; 10-yr futures are up 0.18%; Crude Oil is down $0.16 at $48.93; Heating Oil is up $0.0082 at $1.7943; Paris Milling Wheat is down €0.75 at €159.50/MT; Paris Rapeseed is down €3.00 at €362.00/MT; Dalian corn settled down 1.22%, Soybeans up 0.21%, Oil down 0.19% and Meal down 0.33%.

The collapse in the USD continues with the benchmark basket trading to fresh lows for the move and the lowest level since January 2nd, 2015.  Financial media this morning is focusing on the ability of the Federal Reserve to raise interest rates once more before the end of 2017, something the market seemed to have already priced in previously.  The Fed may find it difficult to raise rates with inflation indicators remaining stubbornly low.  According to CME Federal Funds Futures, the market sees just a 32% chance of another rate increase before the end of the year  In addition, major hurricanes battering the United States and requiring government assistance could be a precursor to a slowdown in overall growth for the country.  There looks to be little in the way of solid support for the USD until the 89/90 handle.

Another dry radar for the Midwest, and that should be the case for the next 7-days at least.  The Northern Plains will see some scattered chances of rain later in the weekend/early next week, but the heart of the corn belt will be dry.  Precip models are below normal for the 6-10, but flip to above normal for the 8-14 day period over NE/SD/NE/MN/MT.  Temperatures looks to remain normal/above for the entire time period, which should keep frost risk to a minimum.  The Northern Plains row crops are almost uniformly behind schedule, and need every heat unit available to achieve whatever potential is left.

 

Slightly better markets again this morning as row crop markets attempt to close higher on the week while Chicago wheat is clinging to small losses.  Open interest has been a mixed bag most of the week, and yesterday was no exception.  Chicago wheat open interest was up 725 contracts, corn was up 8,796 contracts, KC wheat was down 283 contracts, soybeans were down 4,452 contracts, meal down 684 contracts and soybean oil was up 3,679 contracts.  While corn futures have been trending higher as of late, export bids have been heading the other direction swiftly, and the rising open interest since futures bottomed at the end of August has the feeling of commercial hedging.  Open interest is up 38,562 contracts since the end of August while spot CIF bids are down 10-14c and into the single digits over the September.  Adding to the bear story is the fact new crop corn export sales commitments for the 17/18 marketing year as of yesterday were the lowest for the end of August since 2005/06.  Soybeans are not much better, but are closing the gap quickly.  There is an abundance of South American corn looking for a home, and that is something we will have to deal with through the end of the calendar year.

Data out yesterday included weekly ethanol production which jumped notably by 18,000bbls/day to 1.060 million bbls/day.  While the increase was definitely encouraging, it doesn’t look like it will be enough to offset what appears to be a looming production cut by the USDA on next week’s WASDE report.  Based on known ethanol grind for July and estimated grind for August, looks as though we could see the USDA cut ethanol production by 15-25mbu depending on their yield assumption for the month of August.  Fortunately, this should be mostly offset by an increase in export demand of the same magnitude which would keep carryout mostly unchanged.  Ethanol stocks declined by 187,000bbls to 21.116 million bbls, but are still up over 2.0% from a year ago and near record levels for this time of the year.  While on the topic of ethanol, the US Census Bureau released July ethanol and DDGs exports while we were out of the office.  Ethanol exports bounced back solidly to see shipments of 116.6 million gallons vs. 92 million gallons last month and 82 million gallons last year.  Ethanol exports for the YTD are up nearly 30% from 2016, an encouraging trend for corn demand into 2018.  DDGs exports came in at 1.003MMT which were up from 889,114MT last month but down slightly from 1.072MMT a year ago.  YTD DDGs exports of 6.541MMT are up from 6.392MMT over the same period a year ago.

Switching to wheat, KCBT domestic basis was firmer again yesterday with 11.0-12.80% up 4-30c while 14.00% pro was up 46c alone.  12.0% protein wheat is now indicated at +131/146Z vs. +110/125Z a week ago, while 13.0% protein is unchanged at +205/220Z and 14.0% is +261/276Z vs. +215/230Z a week ago.  There is no HRW moving except what still needs to find a new home before fall harvest.  Commercial elevators can earn 17c/mo between board carries and cash carries storing wheat out to December, with nearly 11c/mo out to February and 9c/mo out to April.  Commercial elevators can earn a 13% return above and beyond full financial carry (LIBOR+200bp) by sitting on cash wheat until December, which is a decent margin to make on your space.  Without a flat price rally to pull the farmer onto the dance floor, HRW basis should continue higher to pry hedged bushels out of commercial hands.  Spring wheat basis on the spot floor was mostly weaker with 14.0% indicated at +75/80Z and 15.0% seen at +105/115Z.  HRS values should exhibit similar behavior as HRW once US and Canadian harvest is complete and excess bushels are mopped up.

We incorrectly indicated export sales would be released yesterday, but were instead delayed until this morning due to the Labor Day holiday.  Export sales this morning are expected to show 350-550TMT of wheat, 650-1,250TMT of corn, 500-1,400TMT of soybeans, 140-450TMT of meal and 0-25TMT of soy oil.

 

Bottom Line: There is more to be supportive soybean and wheat than there is corn based on market structure, cash markets and still unknown production variables.  While corn may have seen lows set at the end of August similar to 2016, we would be wary of getting bullish as the new crop export program remains soft and 14bbu of corn are still to be harvested.  The USD weakness needs to translate into some real demand before it can be counted as a bullish input.  $4.00 futures have been a luxury the past several growing seasons, and 2017/18 doesn’t look to be any exception so far.

 

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.

9/7/2017 Morning Comments

Good Morning,

 

Outside Markets as of 6:00am: Dollar Index down 0.416% at 91.810; Euro up 0.604% at 1.19910; Swiss Franc is up 0.507% at 1.05100; Canadian Dollar is up 0.373% at 0.82075; Brazilian Real is up 0.498% at 3.0959; Russian Ruble is up 0.600% at 57.1102; S&P’s are up 1.00 at 2466.50; Dow futures are down 3.00 at 21,809.00; 10-yr futures are up 0.16%; Crude Oil is down $0.18 at $48.98; Heating Oil is up $0.0028 at $1.7623; Paris Milling Wheat is unchanged at €161.75/MT; Paris Rapeseed is up €0.75 at €370.50/MT; Dalian corn settled unchanged, Soy down 0.68%, Oil down 0.31% and Meal up 0.04%.

In the US, nothing is as important as the impending landfall of Hurricane Irma, which is expected to happen sometime Saturday morning in Miami.  In the financial world, however, the continued demise of the US Dollar Index is grabbing attention from Wall Street to LaSalle Street.  The USD continues to hover near the lowest levels since January of 2015 with individual pairs hitting the highest levels since the same time.  One of particular interest to grain farmers would be the Canadian Dollar which hit the highest levels since May 18th, 2015.  This has been in part of general USD weakness, but also Brent crude oil rebounding to the highest level since May, Canadian Q2-GDP growth surge to 4.5% vs. 3.3% expectations and the Canadian Central Bank raised interest rates for the second time in 2017.  Continued CAD strength will make for an interesting North American hard wheat export season.

As noted above, difficult to talk about weather outside of Irma in the US at the moment.  Nonetheless, Midwest weather is still an important component during September.  Radar returns this morning showing essentially nothing across the major growing region.  Rain this week will be especially light, with only some scattered chances late in the weekend for N-NE/S-SD, otherwise it is expected to be a dry week for the Midwest.  Once Irma makes landfall and begins moving up the coast, there are increasing chances for moisture in the Mid-South and ECB areas of OH/KY/TN/WV.  There are expectations Delta and US-SE soybeans and cotton will be negatively affected.  For the areas with row crops furthest behind, extended maps remain positive with above normal temps seen for the Dakotas, MN, WI, IA through September 20th.  The ECB, Mid-South and US-SE will be below normal, but frost chances are not expected.  Below normal precip looks to remain the theme the next 15-days for the entire Midwest which will further draw down moisture supplies in the central and ECB which have been dry for the last month.  The soybean finish in the central/ECB has not been positive.

 

Mostly better markets overnight led by soybeans and spring wheat with analysts slowly starting to accept the poor finish to much of the soybean belt.  The map below shows the 30-day percent of normal precip map for much of the Midwest with 2/3’s of IA and east running deficits of 10-75% of normal.  Anecdotal reports from the “I” states suggest pod counts are enough to attain solid yields, but recent weather has led to aborting of pods instead of filling.  The last month of weather shows how difficult estimating yields on soybeans in August can be when so much depends on August 15-September 15.  Analysts are busy plugging in a variety of yield ideas to various demand assumptions, but also important to remember soybean yields have had a tendency to outperform the last three years.  A national average yield of 48.0bpa vs. the USDA’s current 49.4bpa would be enough to get carryout down to 350mbu leaving demand unchanged.  A carryout level like that, this early in the marketing year, should be enough to support prices close to $10.00/bu.

Spring wheat futures have been battered over the last two weeks, trading down to the lowest spot price since June 15th on reports of increasing yields in North Dakota/Minnesota as well as Canada where decent progress has been made.  Accompanying the better yield reports has been a drop in protein levels as Duluth stocks begin to rise.  The weekly Manitoba crop report showed yield reports on spring wheat of 55-100bpa with uniformly low protein content due to the higher than expected yields.  This has led to a showdown on the Small Grains Report from the USDA at the end of the month between bulls who content production will drop further as harvested acres drop in the droughty areas of the Dakotas and Minnesota, while bears suggest the blow off yields in E-ND/MN will pull production values higher.  Regardless of what happens to production, provided it isn’t a massive revision, we can be certain we are not curtailing demand at current levels.  Grower selling has slowed to a crawl, export shipments remain solid and both farmer and elevator seem to have made the needed room for fall harvest.  What gets the farmer to sell spring wheat before January 1 which will absolutely be needed to meet current commitments?  In addition, the story domestically has been plugged mills since mid-July who have been living hand-to-mouth.  Dakota and MN elevators will not be keen to load hedged HRS inventory in the middle of fall harvest to satisfy mills when their OND coverage starts to dwindle.

Weekly deliverable stocks reports were delayed a day due to the Labor Day holiday, but hard red spring supplies saw a sharp jump in Duluth with combined stocks up 1.557mbu on the week.  Combined stocks now measure 22.794mbu which is still well below a year ago at 27.787mbu.  With much of the wheat which is tributary to Duluth being in the Red River Valley and N-MN, there are good odds the wheat moving into Duluth is a bit lower on the protein scale which traders should remember as delivery wheat becomes viable later in the crop year.  Also reports some of the wheat is low-grade Canadian wheat.  While hard red spring supplies are still very much on the move, SRW and HRW have slowed to a crawl with harvest complete.  SRW stocks were down just 108,000 bushels to 96.653mbu vs. 95.839mbu a year ago.  HRW stocks were down 675,000 bushels to 125.483mbu vs. 113.682mbu a year ago.

Deliveries overnight included 180 soybean meal, 432 soybean oil, 195 corn, 204 KC Wheat, 145 soybeans, 18 Chicago wheat and 13 Minneapolis wheat.  The 143 Chicago wheat delivered the day previous by JP Morgan (Big C) helped blow the WU/WZ spread back out to -25.75c after trading to -11.00c on the 5th.  The wheat delivered was low protein HRW which no one has a use for outside of storage revenue.

Export sales out later this morning are expected to show wheat at 300-600TMT, corn at 475-1,000TMT, soybeans at 650-1,500TMT, meal at 105-240TMT and oil at 10-35TMT.

 

Bottom Line: Soybeans and spring wheat seem to be finding their footing the best, and there also appears to be little interest in selling winter wheat at or below $4.00 spot futures.  These were the lows of the 2016/17 marketing year when major exporter supplies were much higher and protein was much more available.  Corn still feels sluggish with supply concerns allayed and old crop stocks still burdensome.  Everyone has corn, and there is still plenty of corn which would like to move before harvest.

 

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.

8/25/2017 Morning Comments

Good Morning,

 

Outside Markets as of 6:40am: Dollar Index down 0.143% at 93.1560; Euro up 0.127% at 1.18340; S&P’s are up 6.25 at 2447.00; Dow futures are up 42.00 at 21,828.00; 10-yr futures are down 0.01%; Crude Oil is up $0.33 at $47.76; Heating Oil is up $0.0235 at $1.6469; Paris Milling Wheat is up €1.00 at €155.00/MT; Paris Rapeseed is down €1.75 at €370.25/MT; Dalian corn closed down 0.12%, Dalian soybeans finished up 0.08%, Dalian oil closed down 0.19% and Dalian meal finished up 0.47%.

Showers along the IA/NE border this morning, otherwise the Midwest is fairly quiet.  Showers will fire up today and into the weekend in the WCB before working east to cover most of the belt by early next week.  Totals for the next 5-days are putting 0.50-1.50” amounts in SD/MN/NW-IA/WI with localized amounts in MN/WI pushing upwards of 2.25”.  The ECB is expected to see totals in the 0.50-1.25” range by the time it gets there next week.  The Delta is expected to get smashed by TS Harvey which is expected to turn into a Hurricane and make landfall as the strongest storm in 12-years.  Parts of TX and LA along the Gulf could see rain totals as high as 15-20”.  As of right now, the moisture is not expected to push up into the Plains or Midwest, but the mid-South region could see some remnants of the storm.  Cool temps and dry in the Plains, but wet in the ECB for the extended maps.

 

Mixed markets this morning with wheat firmer and row crops slightly softer as the former tries to add to positive gains yesterday.  It isn’t clear if funds started to pay attention to the firm cash markets in the US or not, but short-covering was definitely evident in yesterday’s trade.  KCBT open interest dropped 5,656 contracts yesterday, the first drop in nine sessions.  Chicago open interest declined 361 contracts, which was the second open interest drop in a row following a steady string of increases.  As we had been remarking, open interest has risen solidly on the latest decline, allowing managed funds to build back large net short positions at the bottom end of the range going back to April/May.  Lack of continued declines or simply time could both make these fresh positions flighty.  Minneapolis wheat has continued to hold the 61.8% retracement of the entire $5.20-8.68 rally at $6.53 especially well on multiple setback attempts.  Today will see the release of the Farm Journal Crop Tour soybean and corn yields after the close which will be a massaged number based on the entire weeks’ worth of field data.  More important are the individual state numbers and their relationship to history.

Crop Tour released their Iowa and Minnesota numbers last night at their final wrap-up meeting in Minnesota to a large crowd of farmers, end users and industry representatives.  The Iowa corn yield was pegged at 179.79bpa vs. 188.17bpa last year and 182.39bpa on the 3-yr average.  The USDA is plugging in a 188bpa number for the state now, while IA finished at 203bpa last year vs. the Tour’s 188.  Soybean pod counts totaled 1092.92 vs. 1224.28 last year and 1205.69 on the 3-yr average.  Soy yields from this year are currently pegged at 56bpa vs. 60.5bpa last year.  Minnesota corn yield was pegged at 191.54bpa vs. 182.32bpa last year and 181.32bpa on the 3-yr average.  USDA is currently using 183bpa while their final number in 2016 was 193bpa.  Soybean pod counts measured 1019.96 vs. 1107.60 last year and 1086.12 on the 3-yr average.  USDA is using a soy yield of 49bpa vs. 52.5bpa last year.  One thing to remember about MN is only the southern 1/3 of the state is sampled, which is generally the higher yielding portion of the state.  However, conditions are very solid in the northern 2/3’s this year which might not sway the state average all that much.

Other data out yesterday included weekly export sales which were generally unimpressive.  Wheat sales totaled 14.2mbu vs. the 13.7mbu needed weekly to hit the USDA mark.  This took total commitments to 424.3mbu vs. 425mbu a year ago, which will keep upward pressure on the USDA export sales estimate.  By-class sales were solid for HRS and White with the former adding 5.4mbu vs. the 4.1mbu needed weekly.  China bought 50,000MT of HRS as well.  Total HRS commitments are now 115.5mbu, which is down just 13% from a year ago.  Exports have not been rationed yet.  Corn sales totaled 4.0mbu of old crop, putting total commitments at 2.227bbu and over the USDA”s marketing year objective.  New crop sales totaled 16.7mbu which took total commitments to 242.6mbu vs. 439.8mbu a year ago.  New crop sales are definitely a concern.  Soybean sales had net cancellations of 14.7mbu which put total commitments at 2.231bbu vs. 1.937bbu a year ago.  New crop soy sales totaled 73.8mbu which pushed commitments to 365.2mbu vs. 635.0mbu a year ago.  The deficit with a year ago is meaningful, but the US being the cheapest origin should lead to a steady pick up in sales in coming weeks.

In wheat news, the MGEX registrar showed 668 old crop certificates canceled last night, but the number of outstanding certificates didn’t drop so not sure what to make of that just yet.  Despite the cancellations, it didn’t stop MWU/MWZ from collapsing to -20.00c, a far cry from the +35.25c hit on 7/5.  Deferred spreads have also been soft with the MWZ/MWH hitting -5.75c yesterday, the lowest print since May 30th.  With soft spreads and stagnant cash markets, the thing to remember about the spring wheat market is what has been true since the rally started: this was never a spot issue.  There was always plenty of old crop stocks, much of which moved on the rally in May and June, but eventually things would get tight around JFM.  When logistics slow with winter weather, when farmer selling goes dormant and mills get panicky about a steady stream of wheat, the rubber will truly meet the road.  Inter-market spreads have relaxed, but are off lows with MWU/WU at +245.00c vs. a high of +281.75c and a recent low of +207.25c.  Similarly, MWU/KWU is trading +248.50c this morning vs. +283.50c at the highs and a recent low of +208.50c.  Based strictly on stocks/use ratios across the various classes of wheat, we likely have not seen the last of the volatility in these spreads either.  Canada will release their latest estimate of the wheat crop on August 31st with average trade estimates looking for another 0.3MMT off of the USDA’s latest 26.5MMT number.

 

Bottom Line: Likely a quiet end to the week with Crop Tour doing little to change the row crop narrative at the moment.  Finishing weather will be the most important thing to upper-Midwest row crops with an extended fall required to hit whatever potential is left.  The low pod counts across all Midwest states also feels like it might still have something to say about final yields.  Wheat markets are consolidating, as they should, with US wheat competitive and doubts about how high Russian exports can actually get to cover all of the world’s needs.

 

***I will be off markets Monday August 28th through September 5th, with Morning Comments returning on the 6th.  Any questions or inquiries can be directed toward our website and the Halo Commodities staff.  Have a great Labor Day weekend.***

 

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.

 

8/24/2017 Morning Comments

Good Morning,

 

Outside Markets as of 6:25am: Dollar Index up 0.097% at 93.2870; Euro down 0.241% at 1.18065; S&P’s are up 4.25 at 2445.75; Dow futures are up 44.00 at 21839.00; 10-yr futures are down 0.11%; Crude Oil is down $0.25 at $48.16; Heating Oil is up $0.0078 at $1.6366; Paris Milling Wheat is up €0.50 at €154.00/MT; Paris Rapeseed is up €1.00 at €371.75/MT; Dalian corn closed down 0.63%. Dalian soybeans finished down 0.53%, Dalian oil closed up 0.10% and Dalian meal finished down 0.22%.

Crude oil continues to consolidate inside its recent 1-month range as well as the larger 3-month range with supply data inside the US slowly working more positive.  Weekly energy inventories from the EIA show crude oil stockpiles in the US dropping 3.33 million bbls w/w which was in line with estimates.  Total stock piles now stand at 463.17 million bbls vs. 492.96 million bbls a year ago and 414.40 million bbls on the 3-yr average.  If seasonality holds, we should see crude oil inventories continues to decline for another 1-2 months, further balancing the burdensome crude supply in the US.

Scattered showers across IA this morning, but otherwise the Midwest is fairly quiet.  The WCB and upper-Midwest will be fairly active the next 5-days with rains expected in SD/IA/MN/WI to the tune of 0.50-1.50” in total.  IA especially will welcome all the rain she can get while the calendar still says August.  Extended maps for the 6-10 and 8-14 day outlook maintain the cooler than average bias the next 15-days for the entire Midwest, while precip forecasts turn more decidedly dry.  The Plains and WCB will be below normal, but the ECB will maintain a more above normal bias into the middle of September.

 

Firmer markets this morning as Ags try to cling to any semblance of positive trade amid clear and present downtrends and pervasive bearishness by what seems like all involved.  December corn hit fresh contract lows yesterday and again overnight, almost mirroring December ’16 corn which hit contract lows August 31st, 2016 before slowly recovering throughout the fall.  After hitting contract lows, December corn rallied 11.7% before expiring later in December.  As we’ve discussed ad nausea, it isn’t necessarily the size of the new crop, but the combination of a 2.0bbu+ carryout and the prospect of a 2.0bbu+ carryout at the end of 2017/18.  Some were hoping the Farm Journal Crop Tour would find evidence of a smaller crop, which it has to some degree, but not enough to think we have a smoking gun waiting from the USDA.  The supply and demand situation in the corn market looks to be another range bound, grind-it-out affair with plenty of supply abroad to meet any short-term supply short falls.  Chicago wheat has retraced the entire summer rally, hitting the lowest price since June 5th this week and has now put wheat back into livestock rations in some parts of the United States.

First to the Farm Journal Crop Tour, data for the state of Illinois was collected and tabulated last night with the tour putting the state wide corn yield at 180.72bpa which compares with 193.50bpa by the tour last year and 187.37bpa on the 3-yr average.  The USDA is currently using 188bpa for the state, while the Tour found 193.50bpa vs. the USDA’s 197bpa in 2016.  One tour observer noted that since 2001, the Crop Tour estimate for the state of IL has averaged just a 0.1bpa difference from the USDA final.  Essentially, based on the track record for the state of IL alone, we should feel fairly confident USDA is too high.  On soybeans, pod counts were seen at 1230.77 vs. 1318.09 last year and 1269.24 on the 3-yr average.  USDA is currently using 58bpa for a state wide soy yield vs. 59bpa in 2016.  The comment I heard from scouts on both legs in IL and IA was “where are the pods?”  Both states seemed to lack pod counts in relation to average, and even plants with pod counts had nothing in them or very little confidence they would fill those pods.  Soybeans are such a tricky plant to estimate yield on, but to hear that comment from different parts of the corn belt was indeed interesting.  IA results will be released tonight with scouts hitting MN today/tomorrow on their way to Austin, MN before releasing a tour wide yield estimate after the close tomorrow.

Other data out yesterday included weekly ethanol production which slipped 7,000bbls/day to 1.052 million bbls/day which was up 2.3% from the same week a year ago.  Adding up the last two months’ worth of weekly data, it certainly looks as though the USDA’s 5.450bbu ethanol demand for corn estimate in 2016/17 will prove too high.  This could change if the official monthly data shows a lower ethanol yield, or higher corn inclusion rate, etc., but barring something like that, we could see than estimate slip by 10-20mbu.  This would add to the already bearish carryout level for 2016/17, although much of the recent price slip has probably already factored that in.  Ethanol stocks fell 319,000 bbls to 21.509 million bbls, but barring a major drop the next two weeks will end the marketing year at the highest level on record for the end of August.  Ethanol production margins have improved as of late with the fall in corn price and the stability in products, so a continued strong run in production rates should hold into September.

Wheat flat price and spreads have been especially weak lately with both seeing fresh contract lows this week.  Basis has been a different story, however, as KCBT spot floor values were firmer again yesterday with 12.0% up 5c to +125/140U while 13.0% pro was up 25c to +230/245U.  These would compare with +100/115U and +205/220U a week ago, and +95/105U and +180/190U a month ago, respectively.  MGEX spot floor basis has also been mixed/firmer, especially on the high end with 15.0% up 20c on the offer yesterday to +110/145U vs. +120U a week ago.  The vast majority of the HRW crop was sold off the combine by the grower and is now in the hands of the commercial who’s best sale is storage at the moment.  Conversely, the HRS grower sold copious amounts of old crop spring wheat in May and June on the rally and now has plenty of storage to sit on the drought-shortened 17/18 crop.  He is a flat price seller and won’t be parting ways with spring wheat until futures rally sharply, especially now that he can earn 23c/bu sitting on wheat out to March.  Combine this with US wheat falling into the export grids for Algerian business this weekend and wheat has plenty of reason to stabilize at current levels.

As we noted above, wheat/corn spreads are hitting fresh contract lows this week for both W/C and KW/C.  Spot month spreads for both show wheat at 110-111% of the weight-adjusted price of corn from a futures perspective, but in Triangle, TX, one of the largest cattle feeding centers in the US, HRW is trading at 92% of the weight-adjusted price of corn.  This is easily low enough for HRW to work into feed rations for any feedlot which doesn’t have needs covered or has the ability to easily supplement wheat in for corn.  This is not an exercise feedlots like to do, as switching rations part way through a feeding term can often lead to slower gains than a steady ration throughout.  More than anything, the price valuation for HRW is acting as a check against corn price which could be more bearish corn than it is bullish wheat in the near-term.

 

Bottom Line: Should see another solid week of export sales for wheat which could help solidify current prices as the bottom end of a range.  The wheat market also needs Russian crop estimates to stop climbing, but more importantly to focus on the pace of Russian wheat exports over the next 2-months.  As we’ve seen time and time again, Crop Tour results rarely move markets, and this year looks to be no different.  If anything, we do need to watch soybean weather over the next two weeks with some questions about pod counts and yield potential permeating through the trade.

 

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.

8/22/2017 Morning Comments

Good Morning,

 

Outside Markets as of 6:00am: Dollar Index up 0.480% at 93.5290; Euro down 0.490% at 1.17690; British Pound is down 0.573% at 1.2837; S&P’s are up 2.25 at 2430.25; Dow futures are up 27.00 at 21,719.00; 10-yr futures are down 0.12%; Crude Oil is up $0.01 at $47.38; Heating Oil is up $0.0021 at $1.5733; Paris Milling Wheat is up €1.00 at €153.25/MT; Paris Rapeseed is up €4.25 at €369.75/MT; Dalian corn settled unchanged, Dalian soybeans closed down 0.18%, Dalian oil closed up 0.65% and Dalian meal finished down 0.61%.

A fairly wide band of rain stretching from E-KS through MO, IL, IN and up to MI is working its way east this morning while the rest of the Midwest is quiet.  In the last 24-hours, solid rainfall was reported across nearly 90% of IA, the northern half of MO and the western 1/3 of IL.  Those areas saw a broad 1.0” with a decent area seeing totals as high as 3.00”.  The Midwest will be fairly quiet until the next flair up this weekend when showers are expected to fall from C-KS up to C-MN with totals seen around 0.50-0.75”.  The Southern Plains and Delta will also be active over the next 7-days with heavy forecasted amounts which should impact early harvest efforts there.  Cool and dry is the forecast from NOAA for the 6-10 and 8-14.  In addition, the week 3&4 outlook also shows below normal temps for the Plains and WCB, which means nearly the entire month will be cooler than average.

 

A little bounce overnight as Ag markets begin to consolidate the losses from yesterday and last week.  Social media has been inundated with pictures and yield reports from the Farm Journal Crop Tour which began yesterday and released state yield estimates for Ohio and South Dakota last night.  Those results are discussed below.  Wheat and soybeans are giving off much better signs of traditional consolidation and even that an interim low might be in, while corn is still well within its downtrend and has the June lows in sight.  Unless the tour finds something shocking in IL or IA which would really give the market great pause, it feels as though we are setting up for another marketing year in which price grinds away inside a 40-50c range for corn and a $1.00 range in soybeans.  Once supply has been more or less determined, focus shifts to demand which is difficult to describe as robust for corn.

Before the Crop Tour released state yield estimates for Ohio and South Dakota, USDA released their weekly crop progress report even though most have written off the condition reports at this stage.  National corn ratings were unchanged at 62% G/E vs. 62% expected and 75% last year.  Notable changes included South Dakota up 8pts, IL down 8pts, IN down 2pts and CO up 9pts.  The rating changes in Colorado this year have been so erratic there can’t be an ounce of credibility lent to their numbers.  One observer pointed out the IL corn crop is rated just 4pts better than the ND crop, although direct comparisons cannot be made as we’ve discovered this year.  Of more importance to this analyst at this point in the year is the maturity which is behind average according to percentage dented.  Nationally, 29% of the corn crop is dented vs. 16% last week and 35% average.  Of the 8-major corn producers, only IN is ahead of average, while SD is down 8pts, ND down 8pts, IA down 11pts, MN down 11pts, WI down 9pts and OH down 10pts.  With the cool temps forecast for the next month, this will not rush this crop to maturity and leaves much of the crop north of I-80 susceptible to frost damage during September.

Soybean conditions improved 1pt to 60% G/E vs. 60% expected and 72% last year.  The WCB mainly saw conditions improve while the ECB saw conditions decline.  Much of IL, IN and OH have been running decent moisture deficits over the last 2-weeks, although IL did receive much needed rainfall in the last 24-hours.  Soybean conditions continue to bounce back in solid fashion in the Dakotas thanks to the upturn in moisture since August 1.  87% of the soybean crop is setting pods vs. 79% last week and 85% last year.  Spring wheat conditions improved 1pt to 34% G/E thanks to a 5pt jump in WA, although both MT and MN declined.  Harvest was estimated at 58% complete nationally, up from 40% last week and 51% last year.  ND progress has grinded along around frequent showers with progress 52% complete vs. 45% average.  Limited reports of sprout, color bleaching and falling test weight have been reported.

The Farm Journal Crop Tour had two legs traversing the eastern and western corn belts yesterday with the former leaving OH and the latter departing from Sioux Falls, SD.  The western leg made 74 stops in South Dakota, arriving at an average yield of 147.97bpa which compares with 76 stops last year and a yield of 149.78bpa while the 3-yr average showed 68 stops and a yield of 156.14bpa.  Last year, the USDA pegged the final SD corn yield at 161bpa, a full 11bpa above Crop Tour, which highlights the issues with the Tour only going as far north as I-90, both good and bad.  Pod counts in SD averaged 899.56 pods in a 3×3 area, which was down from 970.61 pods last year and the 3-yr average of 1027.80 pods.  For reference, the USDA put the final 2016 soy yield for the state at 49.5bpa with 2017 currently estimated at 41bpa.  In Ohio, the tour found a state yield of 164.62bpa on 120 stops vs. 148.96bpa last year and 159.81bpa on the 3-yr average.  For reference, the final Ohio state yield last year was 159bpa and the current state yield is estimated at 171bpa.  Pod counts in OH totaled 1107.01 vs. 1055.05 last year and 1174.24 pods on the 3-yr average.  USDA currently sees a state soy yield of 53bpa vs. 54.5bpa last year.  Reports from scouts on both legs of the tour suggested the variability seen on this year’s tour was as large as they’d ever seen.  Some routes saw 100bpa swings in yields for the same car.  In situations like that, averages don’t tell the full tale, but it is what we have to go on for now.  Scouts will be moving through IN and E-IL on the eastern leg, and NE and W-IA on the western leg.

Other data yesterday included export inspections which continue to come in at a strong clip.  Wheat inspections totaled 21.4mbu which is well above the 15.8mbu needed weekly to hit the USDA export forecast.  Total shipments now measure 248.2mbu which is up 11.9% from a year ago.  Corn shipments totaled 27.2mbu which pushed the marketing year total to 2.175bbu, a full 25% larger than a year ago.  Based on the June Census export data, corn shipments were running 75-80-mbu ahead of inspections which suggest we have probably already eclipsed the USDA objective provided that relationship doesn’t fall apart over the last two months of the year.  Soybean shipments totaled 24.4mbu which is sharply better than the 13.1mbu needed.  Total shipments measure 2.069bbu which is up 13.7% and compares with the 2.150bbu USDA objective.  Here again, shipments as of June were running 30-40mbu above the weekly inspections which suggests we are very close to going over that objective.  Attention has already shifted to the lack of new corn and soybean export sales, however, even with the recent frame contract announcement from China.

While dated now, Commitments of Trader data released Friday and covering trade through 8/15 showed a resumption of short position building by the managed funds.  In corn, funds sold 33,200 contracts to leave them net short -34,688 contracts, while in soybeans funds dumped 19,831 contracts to put them net short -46,985 contracts.  This was exactly in-keeping with the open interest increases we witnessed last week and have continued so far this week.  Yesterday corn open interest was up 10,412 contracts with price down 2.75c, while soybean open interest jumped 11,506 contracts with price up 2.75c.  In Chicago wheat, funds are back to wielding a -74,624 contract net short, the largest since mid-June.  Commercials have also been busy buying back wheat with the gross commercial long up to 101,512 contracts, the largest since June 6th.  None of the fund short positions are at extreme levels just yet, but we are about to move into a seasonally weak time period for soybeans as September usually posts the largest monthly losses of any on the calendar.  Wheat on the other hand usually sees September as its strongest month on the calendar according to 30-yr averages.

 

Bottom Line: A small bounce on Turnaround Tuesday, but volatility really feels as though it has been sucked from these markets.  The only supply-threatening even left in front of this market would be an early frost which is still a very real threat to many in the upper-Midwest.  Without that, however, we are transitioning to a demand market which features plenty of global competition for our three main exports.  Producers need to be prepared for a marketing year which features another grind-it-out range which offers precious few opportunities to sell with margin.

 

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.