7/30/2017 Morning Comments

Good Morning,

 

Outside Markets as of 6:30am: Dollar Index up 0.511% at 96.1170; Euro down 0.445% at 1.14165; British Pound is down 0.483% at 1.2982; S&P’s are up 7.75 at 2428.75; Dow futures are up 77.00 at 21,377.00; 10-yr futures are down 0.11%; Crude Oil is up $0.16 at $46.20; Heating Oil is up $0.0054 at $1.4881; Paris Milling Wheat is up €3.00 at €179.50/MT; Paris Rapeseed is up €5.25 at €367.25/MT; Dalian corn closed down 0.06%, Dalian soybeans finished up 0.96%, Dalian soy oil closed up 1.15% and Dalian meal settled up 3.19%.

Some light showers in the southern plains and Delta, but a mostly clear Midwest this morning.  Rain over the last 3-days has been confined mainly to OK/AR, parts of NC-KS and separately decent showers in IN/OH.  Very little precip in the WCB the past 72-hours.  The next couple days will see chances for rain in the WCB, predominantly SE-SD, S-MN, IA, WI, IL, although totals call for a general 0.50-0.75” with isolated areas heavier up to 1.50”.  The totals are made up of several smaller chances which could leave open the chance for disappointment.  The ECB and Mid-South will stay well-watered the next week, and temps will also remain cooler in the ECB.  Heat moves back in after the 4th of July holiday for the WCB and Northern Plains which will compound moisture stress.  Little to no relief seen for the Northern Plains in the next 15-days.

 

Sharply higher out of the gate last night, following through on the solid gains made on Friday as forecasts remain threatening for the Northern Plains and less than ideal for the WCB.  After our travels over the weekend from C-SD to the Twin Cities of MN, MN definitely looks like their 73% G/E rating on corn vs. SD’s 46% G/E.  The crop holds much better color and more uniform height when one crosses the board while the SD crop is uneven and still trying to fully crack the extra nitrogen it might have to grow into.  One thing which did stick out about the row crops along that route is their lack of maturity for the 4th of July.  While the old saying is “knee high by the 4th of July,” many times on that route we have seen knee high corn by the middle of June.  Very few fields were taller than knee high or certainly not to the waist yet which leads one to believe pollination for much of the corn from C-SD to C-MN will be pollinating toward the end of the July or even into the first half of August.  This lengthens out the need for beneficial weather during the critical pollination phase, and unless Growing Degree Units are picked up quickly will keep lingering doubts about the ability to finish this fall.  Lots of potential, but the Northern Plans and WCB will need better luck for the second half of the growing season than they’ve received during the first half.

Spring wheat continues to be the headline grabber, rallying another 25-30c overnight to add to its 32.25c gains from Friday.  The USDA surprised the trade by putting ‘other spring’ wheat acreage at 10.899 million acres vs. the average estimate of 11.206 million, the March 31st report number of 11.308 million and 11.605 million a year ago.  Using a 95% hard red spring ratio for ‘other spring,’ this gives us 10.352 million planted acres of HRS.  The real question is harvested acreage, however, and everyone in the trade immediately recognized the fact USDA’s 96.3% harvested percentage had no basis in reality.  Averaging other drought years together, we are using a conservative 92% harvested percentage, but this could very easily fall below 90% with the forecasted weather.  With a national average HRS yield of 37.5bpa, we arrive at a crop of 357mbu which would be the smallest since 2002/03.  Due to necessity, we increased marketing year imports to 75mbu which would be just two million bushels below the record imports of 2013/14.  With our current demand estimates, we have a carryout of 122mbu and a stocks/use ratio of 23.21%.

Obviously a lot of interest in Friday’s Commitments of Traders report, even though it didn’t capture some of the gains made late in the week including report day.  Nonetheless, in Minneapolis wheat, funds bought another 2,627 contracts to put their net long position at 15,347 contracts.  This is still the January level of 16,717 contracts and the record net long of 18,610 contracts in 2010.  Probably even more important is the fact because Minneapolis has been so popular lately, and open interest has risen to record levels, the managed fund share of open interest at 17.7% is well below the record levels over 31%.  In Chicago wheat, funds bought 11,963 contracts to put their net short at -63,485 contracts.  With the limit up close Friday, most believe this short is close to being covered.  More impressive in Chicago wheat was the selling by the gross commercial long as they clearly have no interest in being long at these levels.  That group dropped 24,000 contracts to put their position at the smallest since 5/20/14.  In KC, funds added 6,174 contracts to put their net long at 46,534 contracts which is still well below the record levels over 60,000.  The commercial selling was the real story in KC, however, as the gross commercial short rose to the highest levels since 2011 while the gross commercial long dropped to the lowest level since February.  Anecdotal reports certainly confirm the huge selling by the farmer in the southern plains as they reward a rally during gutslot harvest.

Also worth noting the fund position in soybeans jumped by 30,964 contracts to a now record -146,696 contracts.  Funds are also record short soymeal to boot.  Completely opposite of wheat, commercials are buying soybeans in droves, driving the gross commercial long position to a record as a percentage of total open interest as shown on the chart below.  Certainly more understandable the rally Friday and the follow through today in the oilseed as we remain 30-45 days away from the key reproductive weather for soybeans.  Heavy selling in corn pre-report to the tune of 55,227 contracts, pushing their net short right back out to -150,516 contracts.  Commercial activity was light.

 

Bottom Line: New month, new quarter and new buying as conditions remain tough in the WCB and Northern Plains as we cross the half way mark of the growing season.  Important to remember, however, that corn didn’t receive anything fundamentally constructive from Friday’s data.  There is more corn on-farm and off-farm and there are more acres planted than originally thought.  But the market is focused on weather, and things could be better.  Northern Plains are offered no relief in the next two weeks, and drought conditions are taking hold in the Canadian Prairies.  Balance sheets for global hard wheat exporters are tightening quickly.

 

Good Luck Today and have a Happy Independence Day!

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.

6/29/2017 Morning Comments

Good Morning,

 

Outside Markets as of 5:55am: Dollar Index down 0.188% at 95.8620; Euro up 0.175% at 1.14495; S&P’s are up 2.00 at 2440.50; Dow futures are up 12.00 at 21,416.00; 10-yr futures are down 0.17%; Crude Oil is up $0.36 at $45.11; Heating Oil is up $0.0136 at $1.4526; Paris Milling Wheat is up €1.00 at €170.75/MT; Paris Rapeseed is up €0.75 at €359.75/MT; Dalian corn closed down 0.65%, Dalian soybeans closed up 0.23%, Dalian soy oil finished up 1.09% and Dalian soy meal closed unchanged.

Very quietly, crude oil has managed to string together five winning sessions in a row, and will be working on its sixth higher close today.  While a long way from the 50-day moving average at $47.26/bbl, spot price crude at $45.07 is closing in on the 38.2% retracement of the $52.00-42.05 selloff at $45.87.  The weekly EIA energy inventory report didn’t offer much for direction with stocks building 120,000bbls to 509.21 million bbls.  This compares to 495.94 million bbls last year and the 3-yr average of 428.62 million bbls.  Crude should continue its steady seasonal decline until early October.  Interestingly, crude oil calendar spreads have barely budged on the short little reversal the last several sessions.  Crude oil calendars are still mired in the middle of their 3-4 month range dating back to March.

Some scattered rain in NW-SD as well as a system moving along the NE/KS border and into MO this morning.  Some highly anticipated rains are expected to fall over the course of the next 5-days in the central and southern corn belt which should help alleviate dryness concerns.  Off today’s models, areas of E-KS/E-NE/IA/MO/IL/IN should be looking at 2-5” from tomorrow until mid-week next week.  The important thing will be what kind of holes the rains leave as some areas are running healthy deficits over the last 30-days.  Little relief seen for the Northern Plains or the PNW the next 7-days which should increase stress for crops there.  Extended maps keep the furnace on during the 6-15 day outlook, especially for the Northern Plains.  The entire Midwest will see above normal temps, but the highest concentration will be over the Dakotas.  Northern Plains remain in below normal precip while the ECB remains above normal on moisture.  The WCB could be in tough shape by the middle of July.

 

Firmer to sharply higher markets overnight once again as Minneapolis wheat continues its surge in search of fair value.  Minneapolis wheat will be working on its 6th higher close in a row, and is already up 64.0c on the week before we even get to the USDA reports tomorrow.  Many in the trade have expressed skepticism over spring wheat’s relentless rally and how “overdone” the move is.  However, Minneapolis has only closed lower five days during the month of June, not allowing anyone to buy a dip or enter the market on a correction.  What better sign of a bull market than one who won’t let anyone in?  The forecasts don’t look good for the Northern Plains as a whole, and there will now be concerns about the E-ND/MN crop which should be flowering and filling heads during the dry/hot stretch ahead.  If this crop does come in closer to 350mbu than 400mbu, then the rationing job in the HRS market is far from over.  Winter wheat is also getting on board this morning with Chicago wheat trading at its highest level since June 16th, 2016.  While the real story is in HRS, the need to buy back a few winter wheat acres for this fall is readily apparent and winter wheat harvest is already halfway complete.

Data yesterday included weekly ethanol production which came in 25,000bbls/day above the week prior at 1.015 million bbls/day.  While a big bounce back from the week before, and the highest production in four weeks, this was still not enough to hit the level needed to reach the USDA’s marketing year target.  The USDA will not update demand estimates Friday, but will instead wait for the July WASDE, allowing for several more weeks of production to be calculated.  Weekly stocks declined sharply by 442,000 bbls to 21.838 million bbls/  Stocks at that level are the lowest since early 2017, but still remain plentiful on a seasonal basis.  Ethanol prices continue to run in a rather narrow range between $1.45/gln on the low side and $1.70 on the high side, but more broadly, $1.35-1.75.  Ethanol is between a 1.3c premium and a 2.2c discount to RBOB gasoline futures, providing little incentive for a ton of discretionary blending.  Analysts will be anxious to get  May import/export data out next week to gauge the continued demand for ethanol abroad.

The rally in spring wheat futures, which has now spanned $2.00 since late April, is certainly drawing out some more cash wheat from producers and country elevators.  On Wednesday there were 208 cars including four trains on the spot floor vs. 67 cars and one train a week ago.  This is solid volume, and did cause the spot floor to trade lower by 5-15c for 14.0-15.0% protein.  13.5% was up 5c on the bid side.  The rally hasn’t produced a lot of cash weakness, however, as 14.0% pro is indicated at +100/135U vs. +120/145N a week ago with the spot floor rolling at 5c.  15.0% protein is indicated at +185/190U vs. +175/185N a week ago.  Inter-market spreads between Minneapolis and Chicago/KC continue to hit new contract highs on a daily basis, not allowing participants a chance to buy a dip.  On a spot month basis, MW/W is trading at +261.50, the highest since mid-December 2011, while MW/KW is at +258.25c, also the highest since December 2011 and only ticks away from the highest print since June 2008.  With the perceived tightness in spring wheat not coming until Q4-2017 or Q1-2018, still plenty of opportunity in the back month inter-market spreads based on where the front end is trading.

Despite the rally in wheat futures, winter wheat calendar spreads have remained fairly stagnant which would indicate a reluctance for flat price to trade higher.  This is in-keeping with rising deliverable stocks which we commented on yesterday.  Kansas City wheat elevators saw stocks up 12mbu w/w and are now 17mbu larger than a year ago.  This includes a jump of 1.9mbu of non-deliverable wheat in Salina, which is most likely wheat which didn’t make the 10.5% protein minimum spec per anecdotal reports on the ground.  Chicago wheat warehouses saw stocks increase 14mbu w/w and are 20mbu higher than a year ago.  Both of these supply situations should continue to grow until well after harvest has completed, which will keep pressure on calendar spreads.  The opposite is of course Minneapolis which continues to see calendar spreads rally as deliverable stocks drop on a weekly basis.  Deliverable supplies are known as the “supply of last resort,” and when you have a market as tight as spring wheat watching its deliverable stocks drop, traders need to price in how valuable that wheat is and how little you should be paid to store it.  Deliverable stocks should continue to drop until late July.

Later this morning, StatsCan will provide their latest update to Canadian planted acreage with market participants expecting all wheat acreage of 22.70 million acres vs. 23.18 million in April and 23.21 million in 2016.  Non-durum acreage is seen at 17.70 million vs. 18.04 million in April and 17.02 million in 2016.  Canola acreage is pegged at 22.20 million acres vs. 22.39 million in April and 20.37 million in 2016 which would be a new record for Canola acreage.  Oat acres are seen at 3.40 million vs. 3.42 million in April and 2.83 million last year.  Peas, barley, lentils and soybeans are all expected to move very little from the April intentions.  Back to all-wheat, the USDA is currently using roughly 23.648 million planted acres which the market is expecting to fall to 22.70 million.  If we use an average harvested percentage on the StatsCan estimate with a 3.30MT/ha average yield we produce total wheat production of 28.628MMT vs. the USDA’s current 28.350MMT.  Unfortunately, it doesn’t feel like the market is still comfortable with this sort of yield and production figure based on the dryness in southern Canada and the continued rally in Minneapolis.  If yield falls to 3.00MT/ha, which is right in line with the 10-yr average, production drops to 26.025MMT and ending stocks based on USDA demand fall to 2.838MMT.  Some in the trade think Canada could be closer to 23-24MMT.  Minneapolis wheat could very well be the indicator on Canadian weather moving forward.

 

Bottom Line: Always difficult to get married to a position the week of major USDA reports, but the mood in the market place feels to be shifting.  WCB conditions are not ideal, and rain forecasts the next 15-days don’t look to improve anything west of IA.  Spring wheat production prospects are still falling, and now Canada is a much more serious concern.  If we shave bushels off of Canada, where will the importer of high protein wheat turn?  The Minneapolis Grain Exchange increased margins last night, so please be aware of any open positions.

 

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.

6/28/2017 Morning Comments

Good Morning,

 

Outside Markets as of 6:45am: Dollar Index down 0.302% at 96.1840; Euro up 0.215% at 1.14220; Canadian Dollar up 0.473% at 0.76500; S&P’s are up 3.00 at 2423.25; Dow futures are up 18.00 at 21,309.00; 10-yr futures are down 0.22%; Crude Oil is down $0.15 at $44.10; Heating Oil is down $0.0014 at $1.4179; Paris Milling wheat is down €1.50 at €169.25/MT; Paris Rapeseed is down €1.50 at €356.50/MT; Dalian corn closed up 0.41%, Dalian soybeans closed up 0.21%, Dalian soy oil finished up 1.27% and Dalian soymeal closed up 0.08%.

The USD is back to its losing ways, trading down to 96.1550 overnight, the lowest trade since the election night plunge on November 8th.  Election night saw a low of 95.8850, which if broken would lead to the lowest levels since October 4th.  The USD is trading well below the 50/100/200 day moving averages, and we just went through the 61.8% Fib retracement of the 91.9190-103.8200 rally at 96.5460.  Part of the recent pressure came after the IMF revised its growth forecast for the United States, lowering expectations for 2017 GDP to 2.1% from 2.3%.  In addition, many of the policies President Trump campaigned on and which the USD rallied on last year and early in 2017 appear unlikely to be passed this calendar year.

Rain showers moving across the Northern Plains in very scattered fashion, with moisture also hitting the ground in IA this morning.  Western and central corn belt is expected to remain active the next 5-7 days with solid rain chances for E-NE/IA/MN/MO/IL/WI/IN on tap.  The heart of the belt in IA could see totals as high as 6.00” over the 7-day span.  It will be important these rains fall as the extended maps continue to point toward much warmer and drier weather for the western and northern reaches of the corn belt.  Above normal precip will still be present for the ECB during the 6-14 day, but anything west of the MS-River will be hot and dry into mid-July.  Many of these crops are much further behind than average, so don’t believe we will quite be pollinating corn but follow up forecasts will be very important to the market.

 

Mostly firmer markets overnight as row crops take a breather from the weakness experienced the last week or so as forecasts begin to turn warmer and drier post 4th of July.  In addition, traders are most likely busy squaring positions ahead of Friday’s high-risk reports from the USDA which will provide and update to planted acreage as well as stocks-in-all-positions as of June 1.  Planted acreage will grab most of the headlines considering we are still working with very comfortable old crop balance sheets, but it isn’t uncommon to see 100mbu swings in corn on the June 1 stocks report.  Volatility is certainly ramping up to the reports as one would expect with August ATM soybean vol at 17.98% vs. 17.38% a week ago, August corn vol at 28.88% vs. 28.30% a week ago but ATM Chicago wheat vol has declined to 26.42% vs. 29.07% a week ago.  Corn, Chicago wheat and soybeans all saw declines in O/I yesterday.

While deliverable stocks reports are usually glanced over 95% of the time, during times of short crops and tight stocks they take on increased importance.  Enter Minneapolis wheat.  Last week, total deliverable stocks saw another healthy draw of 1.103mbu which brought combined Duluth/Minneapolis stocks down to 17.787mbu.  This is the lowest stocks level since September 12th, 2014, and should continue declining until stocks hit their seasonal low ahead of harvest in late July.  The lower deliverable stocks get, the more support they lend to spreads as the supply of last resort gets smaller and smaller.  Given the added importance protein is going to play this year with the low pro HRW crop, 13.0-13.5% protein deliverable stocks could be even more valuable than usual.  While Minneapolis is still declining, the two winter wheat exchanges are watching stocks levels rise as new crop finds its way to the terminals.  Chicago wheat stocks rose to 56.338mbu from 54.663mbu last week and compare with 40.911mbu a year ago.  Still around 4.6mbu of HRW sitting in Chicago warehouses.  KC stocks jumped sharply to 117.743mbu from 105.136mbu last week and 100.424mbu a year ago.  KC deliverable stocks could rise to record levels this year as elevators look for a home on another round of low protein wheat.

Minneapolis wheat turned in another strong performance yesterday as chatter in the trade picks up the hard red spring crop may be closer to 350mbu than 400mbu.  Keep in mind, the USDA is still working with a 493mbu estimate from earlier this month, one which will be cut drastically on next month’s July WASDE report.  We will get an update to planted acreage Friday from the 10.66 million acres of hard red spring we are currently working with.  It is undeniable the harvested acreage percentage will drop sharply this year, especially as the anecdotal reports of large farmers in South Dakota and SW-North Dakota spraying out their entire crop circulate.  Looking at past drought years, the harvested percentage could easily slip to 91.0-92.0% vs. the 5-year average of 97.5%.  If we plug 92.0% in with a 39bpa yield, we get production of 382mbu.  If the USDA cuts acreage by 200,000 acres Friday, production falls to 375mbu.  What gets really interesting is when we use a harvested percentage like 2002 of 85.5%, because national conditions this year at 40% G/E are actually lower than the 55% G/E posted at this time in that year.  If we use an 86% harvested percentage nationally, the crop falls to 351mbu.

The situation gets more tenuous when one considers the fact eastern ND and MN were expected to offset much of the drought area in W-ND, SD, E-MT and parts of the PNW.  This was until forecasts in the 6-10 and 8-14 day time frame turned warm and dry for the entire region.  As of last Monday’s crop report, 33% of the ND crop was headed while 42% of the MN crop had headed.  Both of these are right at average to just a tick behind.  This should mean most of the crop will be headed by next week and possibly be flowering during the warmer temperatures.  More something to monitor than anything, but if the national yield slips much below the current 39bpa we are using, the balance sheet gets untenable quickly.

The Minneapolis spot floor rolled to the September yesterday afternoon.

 

Bottom Line: Minneapolis is on a one-way street to find out how small the crop is and how many bushels are still available for purchase out of the farmer’s bins.  Row crops should muddle along more clarity is available on planted acreage, and also until we get a look at weather forecasts on July 3rd and July 5th.  This outlook should get us out into the pollination window for much of the corn belt, although one needs to remember how far behind much of the crop is in the eastern corn belt and Northern Plains.  The pollination window is likely to be long and drawn out this year.

 

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.

6/27/2017 Morning Comments

Good Morning,

 

Outside Markets as of 5:50am: Dollar Index down 0.437% at 96.9910; Euro up 0.681% at 1.13080; Russian Ruble is down 0.060% at 60.0060; S&P’s are down 2.00 at 2434.00; Dow futures are down 16.00 at 21,352.00; 10-yr futures are down 0.17%; Crude Oil is up $0.42 at $43.80; Heating Oil is up $0.0185 at $1.4049; Paris Milling wheat is down €0.25 at €171.00/MT; Paris Rapeseed is up €1.00 at €357.00/MT; Dalian corn closed down 0.06%, Dalian soybeans closed down 0.39%, Dalian soy oil finished up 0.17% and Dalian meal settled up 0.38%.

A stray shower here or there on the radar this  morning, otherwise mostly quiet before storms move into the central and northern plains later this evening.  The Northern Plains is expected to see severe weather move through NE/SD this evening with high winds, hail and possible tornadoes to add to the lovely suite of weather already received this growing season.  Rainfall projections are seen around 0.25-0.75” for the Dakotas/NE/MN.  Rains will pick up in the central belt tomorrow with IA looking at 0.50-2.00” for the south eastern half of the state which will also bring good rains to WI.  The belt remains active almost every day through early next week with 7-day forecasted precip maps showing IA/IL/WI/MO/IN/E-NE/OH all picking up 2.00-6.00” over the week, while periphery areas like MN will be looking at 1.50” and most of SD 0.50-1.00”.  Rains have been underwhelming in the WCB and leaving plenty of dry spots, so if the rains fall as forecast they would go a long ways to eliminating drought conditions.  Extended maps slowly pick up the heat with above normal temps forecast by the 8-14 for all of the Midwest and Plains, while above normal precip is confined to the ECB.

 

Firmer markets overnight led by spring wheat and soybeans as both saw another cut in condition ratings which was not expected in row crops.  While forecasts have been beneficial for many areas of the corn belt during June, actual conditions on the ground have been far less than optimal.  After a water logged start, corn and soybean crops in the ECB are seeing cool temps which are hindering maturation ahead of pollination.  Meanwhile, the Northern Plains continue to suffer under a lack of rainfall for fall crops while time has simply run out for a large swath of spring wheat country.  Add in several counties in both states receiving a killing frost Sunday morning, and unlikely to see conditions spring forward anytime soon.  In addition, opinions vary widely for the June 30th acreage and stocks reports which is sure to keep volatility elevated into the data dump.  Interesting open interest changes yesterday with Chicago wheat seeing a drop of 15,294 contracts despite price being down 8.0c at settlement.  Corn was also down 14,404 contracts with price closing up 1.25c while soybeans O/I was up 1,235 contracts with price up 2.75c.  Funds are still thought to be short corn, wheat and soybeans.

The big news yesterday was obviously the crop progress report which showed corn conditions unchanged at 67% G/E vs. estimates of 68% G/E, 67% last week and 75% last year.  Conditions were split with WCB conditions generally declining while ECB conditions mostly improved.  Conditions are the lowest since 2013, and below both the 5-yr and 10-yr average condition ratings.  Even more impressive is some of the individual state rankings with IL at 62% G/E which is the lowest since 2012, but the second lowest since 2009.  IN at 46% G/E is the lowest since 2012’s 27% G/E, but is the second lowest since 1996.  North Dakota is at 56% G/E is the lowest rated crop since 2002, while South Dakota at 46% G/E is the lowest on record going back to 1986.  With national condition scores where they are, and some of these individual state rankings as low as they are, it makes it especially difficult to be confident with a 170.8bpa national average yield.  We would need an almost perfect July and August to ensure a yield like that, and unlikely conditions will be perfect from ND to OH.  The Pro Farmer Crop Tour will be highly anticipated when it heads to the fields in August.  4% of the crop is silking vs. 5% average.

Soybean conditions came in at 66% G/E vs. 68% expected, 67% last week and 72% last year.  Here again, market participants were expecting improving conditions, not declining ones.  Most states in the heart of the corn belt saw a decline in conditions with the exception of IL and OH which were up while IA was unchanged.  The IN soybean rating at 51% G/E is the lowest since 2012’s 24%, but the second lowest since 2007.  The ND conditions rating of 53% G/E is the lowest since 2002 while SD at 39% G/E is the lowest on record.  It goes without saying that soybean conditions in late June are much less important than conditions in late July or late August, but it should still be cause for concern.  National conditions are right at the 5-yr and 10-yr average.  94% of the crop is emerged vs. 91% average while 9% of the crop is blooming vs. 7% average.

Spring wheat conditions were once again looked to with high anticipation, but they fell once again to 40% G/E vs. 41% last week and 72% last year.  Conditions improved by 3pts in MT to 22% G/E and 1pt in WA to 68% G/E, but fell in all other states.  Conditions in ID were hit the hardest as they fell 9pts to 53% G/E which is now the lowest rated crop going back to 1986.  ID relies on a fair amount of irrigation, and the drought conditions experienced the last couple weeks are clearly not allowing irrigation to keep up.  MN fell 3pts to 86% G/E, but hung on to the top spot in the country and the highest rating for the state since 2003.  Even with the improvement, the MT crop at 22% G/E is the lowest rated for this week 1986.  SD and ND remain the lowest-rated since 1988, while WA and OR are still in decent shape. The 7-day forecast shows very little precip for WA/OR/ID/E-MT and W-ND, so expectations will probably be for another condition decline next week which will continue to support futures.  36% of the crop is heading vs. 35% average with SD leading the way at 86% vs. 58% average and WA at 63% vs. 66% average.  Winter wheat conditions were unchanged at 49% G/E vs. 62% G/E last year nationally.  Winter wheat harvest was pegged at 41% complete vs. 28% last week and 39% average.  KS is now 48% harvested vs. 22% last week and 47% average.  Only two areas in KS left to report protein content, and that would be NW-KS and NC-KS.  Protein has witnessed an improvement, but is still running below last year as a whole across the state.

Still plenty of folks trying to peg the national spring wheat yield, and looking to conditions to provide a framework.  Unfortunately, the relationship between week #25 conditions and final yield is still incredibly low thanks to a select few years which saw late rains benefit the crop greatly.  Nonetheless, the chart below shows final yield on the Y-axis and G/E condition scores for week #25 on the X-axis.  The R-squared for these two variables is 26.6%, so not especially strong, but improving with each week that goes by.  If we use the current condition rating for 2017 of 40% G/E nationally, it would imply a yield of around 30bpa which would be the lowest since 2002’s 27.9bpa.  Very few people would be in that camp just yet, but a yield of 30bpa on current USDA acres would imply a crop of around 396mbu and this is without taking into account higher abandonment which is sure to happen this year.  If abandonment of 92-93% were attached like in similar drought years, production falls to 387mbu assuming USDA does not drop acres Friday.  Most in the trade think spring wheat acres fall another 100-200,000 acres.  Spring wheat is in for a very long 2017..

Sticking with spring wheat for a moment, also worth noting the 200 warehouse receipts canceled out of Minneapolis/St. Paul last night which left 8 outstanding.  In Duluth/Superior, there are still 453 receipts outstanding which amounts to 2.265mbu which users can readily get their hands on.  Expectations are for the DUL/SUP receipts number to continue declining as well, which should keep calendar spreads supported and most likely inverted in Minneapolis.  MW/KW and MW/W inter-market spreads all made new contract highs yesterday, and there is really no reason for them to stop running now.  The last time we had similar balance sheet differentials between winter and spring wheat, MW/W went to +300.00c, and MW/KW went to +240.00c.  The market will need all protein levels of spring wheat this year for blending purposes, so expect scales to remain stout.

One last data item released yesterday were export inspections which showed wheat shipments at 23.1mbu vs. the 18.2mbu needed weekly.  Total shipments of 82.9mbu are up 32.3% from a year ago.  Corn shipments continue to grind along at 38.0mbu vs. the 25.5mbu needed weekly.  Total shipments of 1.873bbu are up 40.6% from a year ago and now account for 84.1% of the entire marketing year forecast.  Soybean shipments totaled 11.6mbu which is ahead of the 8.0mbu needed weekly, and pushed total shipments to 1.918bbu, up 17.5% from a year ago.  Total shipments now account for 93.5% of the entire marketing year forecast with over two full months left.  On the export vein, worth noting new crop soybean export commitments currently stand at 3.4MMT, which is about 3MMT behind last year and 6MMT behind the 5-yr average.  For this date in June, we are currently off to the slowest start for a marketing year since 2006/07.  It would appear China and other importers are taking advantage of the large South American crops and staying hand-to-mouth.  This will be especially important to remember if we do run into any adverse weather during July and August which trims US crop prospects.  If crops develop normally, then the problem becomes a bearish one with carryout levels possibly rising above already hefty projections.

 

Bottom Line: Firmer markets on lower than expected conditions should keep us firm today.  Pre-report estimates for Friday are in the market with traders likely to be especially sensitive to any meaningful changes given the weather we’ve experienced to-date.  Have seen some supportive June 1 corn stocks estimates floating around thanks to larger than expected Q3 feed demand.  Time will tell.  Forecasts are bringing in more heat for after the July 4th holiday which will be welcomed by some and feared by others.  Have to love weather markets.

 

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.

 

 

6/23/2017 Morning Comments

Good Morning,

 

Outside Markets as of 6:15am: Dollar Index down 0.125% at 97.4130; Euro up 0.183% at 1.12190; British Pound is up 0.504% at 1.2767; S&P’s are up 0.25 at 2432.00; Dow futures are down 38.00 at 21,310.00; 10-yr futures are down 0.02%; Crude Oil is up $0.09 at $42.84; Heating Oil is down $0.0014 at $1.3771; Paris Milling Wheat is up €0.25 at €174.25/MT; Paris Rapeseed is down €1.50 at €355.50/MT; Dalian corn closed up 0.30%, Dalian soybeans finished down 0.39%, Dalian soybean oil closed down 0.31% and Dalian meal closed off 1.05%.

Fairly active Midwest radar this morning with rains over NE, but lots of shower activity east of the MS-River from LA all the way up to OH and MI.  Rain in the last 24-hours was best in the southern half of WI, NE-IA, SE-MN, and N-MI.  Totals were mainly 0.50-1.00” with decent coverage.  Rains will work east and south today, leaving the WCB and Northern Plains to be mostly dry until Tuesday/Wednesday.  Then the area will see a follow up system Wednesday-Friday which puts 1.00-2.50” across the entire state of IA as well as NE-KS, most of WI, N-IL and the eastern half of MN.  If those rains verify, corn won’t be going anywhere.  Will be very few dry spots left in the major production areas after the 7-day period if all the rains fall as forecast.  Temperatures look normal/below for the 6-15 while precip will turn to above normal, especially for IA/N-MO/IL/WI/S-MN.  Not the forecast bulls want to see.

 

Firmer markets overnight led by soybeans as we bounce back from yesterday’s selloff which hit row crops the hardest before wheat staged a late session comeback.  For the week, corn is down 20.75c, soybeans are down 31.0c, Chicago wheat is down 1.75c, KC wheat is down 6.25c and Minneapolis wheat is up 14.50c.  For those keeping score at home, Minneapolis wheat is looking for its sixth higher weekly close in a row, and over that time has added $1.24 in value.  While Minneapolis has had its share of headlines this week, the poor performance in the row crops has been the narrative.  Many analysts are actually confounded with the fact reports of reduced acreage, uneven stands, slow development and top-end yield potential being gone doing nothing for the corn market.  One must also factor in the largest carryout in decades, the largest South American corn crops on record and real uncertainty over what the starting point for corn planted acreage was.  Was it 89.966 million as the USDA suggested on its March planting intentions report, or was it closer to 90.5 million or even 91.0 million?  Losing 500,000-1,000,000 acres of intended corn acres really depends on where the starting point was.

Lots of questions and calls regarding the spring wheat balance sheet lately, so we have decided to piece meal the supply and demand situation of the spring wheat market out each day.  Today we decided it would be good to look at harvested acreage, especially compared to other years of extreme drought in the Northern Plains.  The USDA said US farmers planted 11.308 million acres of other spring wheat this year which most think is a bit high, but will suffice for this discussion.  The 10-yr average for harvested percentage on other spring is 97.4% which produces harvested acres of 11.013 million.  This is not a typical year, however, as the pictures of farmers spraying out or baling spring wheat acres have hit social media websites this week.  Taking a look at the last four times harvested acres have taken a notable hit due to drought, we see 2011, 2008, 2006 and 2002.  The worst harvested acreage percentage was 85.5% in 2002 while the best was 97.4% in 2011.  If we average all four, we come up with 92.8% for a harvested percentage.  It is so difficult to compare years, although abandonment has already occurred in SD and will continue into ND, but the price rally of the last 6-weeks has also probably pulled some acres back into the harvested category which might have went unharvested.  If we use the average, harvested acreage comes out at 10.501 million.  Using the usual hard red spring/white mix, this would mean 9.660 million harvested acres of hard red spring.  Many yield estimates are already 40bpa or below, which would automatically push production below 400mbu and put us in extreme rationing mode.  As we’ve written about in this space recently, the job of rationing the domestic demand for 13.0-15.0% pro spring wheat to be blended with low pro HRW will be huge this year.

The Northern Plains have been garnering the lion’s share of the attention related to spring wheat as of late, but the PNW has been quietly drying out over the last 14-days, especially WA and OR.  Washington comprises 5% of total spring wheat production, while OR just 1% and ID around 8%.  Much of the ID spring wheat is irrigated, but dry conditions can still affect irrigated wheat when heat and drought are combined.  The PNW came out of winter with solid soil moisture which has carried them quite a ways into their growing season.    Conditions had begun slipping the last two weeks in the PNW, part of the reason the market was looking for an uptick in conditions on Monday but the national rating fell another 4pts.  Conditions in the Northern Plains may have stabilized, but if the PNW continues to slip, it could put downward pressure on national ratings and keep support under price.  Limited chances for rain in the next 7-days for those areas of ID/WA/OR.

StatsCan will release their update to planted acreage on June 29th with newswire services publishing estimates yesterday afternoon.  The trade sees planted acreage at 22.70 million acres which would be down from the April report of 23.18 million and down from last year’s 23.21 million.  Lots of uncertainty over what got planted in Alberta where areas continue to be inundated with water.  Some acres were thought to still not have last year’s crop harvested.  Non-durum acres are seen at 17.70 million vs. 18.04 million in April and 15.4 million last year.  Durum wheat is seen at 5.0 million vs. 5.15 million in April and 6.19 million last year. Canola acreage is pegged at 22.20 million vs. 22.39 million in April and 20.37 million last year.  Oat acreage is seen at 3.40 million vs. 3.42 million in April and 2.83 million last year.  Barley was pegged at 6.00 million acres vs. 5.88 million in April and 6.39 million a year ago.  Not much change at all expected for pea, flax, lentil and soybean acreage from the April estimate.

Egypt’s GASC bought wheat yesterday which included 120,000MT of Romanian wheat at an average FOB price of $193.96/MT and 60,000MT of Ukrainian wheat at $190.13/MT FOB.  The prices were about $2/MT higher than the last tender Egypt conducted, and there was no Russian wheat purchased for the first time in several tenders.  Egypt has already purchased over 1.0MMT of wheat for the 2017 crop year which is more than double the total purchased for any of the last four years.  In fact, the total purchased for July delivery would be the second largest month of procurement for any month dating back to July of 2013.  Whether that is a sign of things to come or not will be worth monitoring, but anytime the world’s largest wheat importer jumps out to that kind of start to a marketing year it is worth noting.  Still believe low pro HRW could be well positioned to compete with GASC later this marketing year.

 

Bottom Line: Market act as though they want to bounce to close the week, but the damage to row crops is done.  Wheat is trying its best to divorce itself from the row crop situation, which will be no problem for the spring wheat market but much more difficult for the winter wheat contracts.  Weather looks non-threatening as we head into the largest report of the summer next week.  Lower acreage would indeed be supportive to corn, but South American FOB offers are undercutting exports in a big way right into new crop.  There’s no Brazilian drought this year to make the US the only game in town.

 

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.

 

6/22/2017 Morning Comments

Good Morning,

 

Outside Markets as of 6:00am: Dollar Index down 0.011% at 97.5370; Euro down 0.00160 at $1.11780; Russian Ruble is off 0.72% at 59.8465; S&P’s are down 2.00 at 2431.50; Dow futures are down 13.00 at 21,365.00; 10-yr futures are up 0.01%; Crude Oil is up $0.16 at $42.69; Heating Oil is up $0.0039 at $1.3687; Paris Milling Wheat is down €1.25 at €174.25/MT; Paris Rapeseed is down €0.75 at €357.25/MT; Dalian corn closed down 0.12%, Dalian soybeans down 0.62%, Dalian soy oil finished down 0.10% and Dalian soymeal closed down 0.71%.

Crude oil entering a bear market, closing 20% below recent highs, is the talk of the financial markets these days.  At the lows yesterday of $42.05, spot month crude oil traded to the lowest level since August 11th, which is below the level hit when OPEC announced production cuts last November.  It would appear traders are losing faith in OPEC’s ability to manage the global oil balance sheet, especially as the drilling rig count in the US rose for a record 22nd straight week last week.  US shale producers are proving they can compete in a world of sub-$50/bbl oil, something OPEC producers are finding increasingly difficult.  The US supply glut is easing slightly as the weekly EIA data showed crude oil stocks drawing by 2.45 million bbls to 509.10 million bbls, but this compares to 499.99 million last year and the 428.60 million 3-yr average.

Showers moving across SD/MN as well as NE-IA and S-WI this morning as any area west of the MS-River welcomes additional precip.  Rain is expected to keep falling in the eastern half of IA, SE-MN and most of WI during the next 24-hours with totals ranging from 0.50-2.00”.  Then the Midwest dries out for a few days with the next rains for the corn belt not seen until Tuesday/Wednesday of next week where models are showing 0.50-1.25” for most of the state of IA, but not much for anyone else.  Over the next week, rains will be especially limited for the Northern Plains outside of MN, which should continue to stress crops there.  While wheat is still the chief concern, some areas of the Northern Plains will already be worrying about fall crops.  Dry areas in IL will also be monitored.  Temps remain mostly normal to below normal for the next 15-days without any threatening heat seen.

 

Easier markets over night, led lower by winter wheat as harvest expands across KS and the surge in cash premiums the last two weeks appears to have abated at least in the near-term.  During the euphoria of searching for protein, premiums in the US way overshot global export competitors, which should have essentially pushed all export business elsewhere.  While protein will be in short supply, I’m not sure it’s the market’s job to ration all export demand when we are still harvesting in Kansas.  Spring wheat will be its own animal most of the season as demand for spring wheat, and especially DNS, is so inelastic.  Looking over the last 15-years, food use for spring wheat has averaged 237mbu vs. 250mbu last year, while in 2008 when Minneapolis hit $25/bu it was 233mbu and in the drought year of 2011/12 it was still 223bu.  Exports will be rationed and most analysts are already carrying 50-60mbu less export demand than this past year.  Yet, spring wheat is the one with the bushel problem, while winter wheat is the one with the protein problem.  If exports are unable to meet protein specs, a lot of wheat will be destined for delivery warehouses and stored.  Tough way to chew through 700mbu.

While on the topic of wheat, there are several areas around the globe with dry conditions which are threatening to cut production including the EU, Ukraine and Australia.  Australia is trying to plant their winter crops right now, but a total lack of rain in W.A. and S.A. has limited progress the last several weeks.  Estimates flying around the trade suggest 10-15% of the intended acres may not be planted because of no moisture.  The concern is certainly being manifest in their export offers with 9% ASW ex-W.A. offered $229/MT FOB vs. $217/MT FOB a week ago, while 10.5% APW is offered $235/MT FOB vs. $220/MT FOB last week.  In S.A., 10.5% APW is offered $232/MT FOB vs. $217/MT FOB last week, while 11.5% AH is offered $250/MT vs. $232/MT FOB last week.  On average, up around 32-40c/bu.  Australia is coming off of a record setting crop last year when they produced 35MMT with exports expected to finish around 24MMT.  This coming season, estimates of production are as low as 20MMT to as high as 24MMT with exports expected around 19MMT.

Wheat has certainly garnered the lion’s share of attention lately, but several other minor crops are facing some serious balance sheet tightness.  Using current USDA supply and demand assumptions, the global oat balance sheet has quietly slipped to the tightest on record from both an ending stocks and stocks/use perspective.  At 8.74%, the global stocks/use ratio compares with the previous record low of 10.12% in 1986/87.  The world’s largest exporter, Canada, is expected to see ending stocks drop to the lowest since 2012/13.  The global barley S&D is expected to see ending stocks drop to the lowest since 1983/84 with a stocks/use ratio of 10.55%.  The balance sheets for these two commodities become especially important for countries who still feed a large amount of oats and barley, like the EU which is expected to see its barley stocks/use ratio drop to 7.8%.  This could force more reliance on wheat feeding, which could crimp an already tight wheat balance sheet as production prospects slip amid drought.  Lots of moving pieces with cereal grains around the globe, and plenty to keep our attention in 17/18.

Data yesterday included weekly ethanol production which came in at 990,000bbls/day which was down 12,000bbls/day from the previous week.  Usually, we are seeing weekly ethanol production ramp up into driving season, but production has mainly declined the last 4-5 weeks and is still in an overall downtrend from the beginning of the year.  Production was still 2.9% above the same week a year ago, but is well down from the 4-8% increases we were used to seeing a month ago.  Ethanol production margins have been under pressure and are undoubtedly contributing to the slowdown in grind rates.  Ethanol stocks did dip by 262,000 bbls to 22.280 million bbls, which is still 5.5% higher than the same week a year ago.  Spot ethanol prices closed below its 50/100/200-day moving averages yesterday for the first time in a month.

In other export news, Egypt’s GASC tendered for wheat overnight seeking option origin wheat for July 15-25 shipment.  Russian and Romanian wheat have been cleaning up most of the recent business, and that shouldn’t change based on FOB offers going home last night.  It could be very interesting to see how lower protein US-HRW stacks up down the road with FSU wheat into Egypt given the US should have copious amounts of that grade with limited homes.  Much of the Algerian and Moroccan business we enjoyed during 16/17 should be pushed back to France/Germany, and Argentina should be able to supply more of the Brazilian business we stole last year.  While some analysts think HRW production could still be revised lower by 20-30mbu, demand seems to be evaporating based on our inability to supply consistent protein content, something which has usually never been a problem for the US.

Export sales due later this morning are expected at 300-500TMT for wheat, 550-950TMT for corn, 250-900TMT for soybeans, 100-250TMT on soymeal and 10-35TMT for soy oil.

 

Bottom Line: Winter wheat contracts are under pressure as the market realizes we went a little too far a little too fast, and the job of the market shouldn’t be to eliminate all export demand for HRW 3-weeks into the new marketing year.  Protein is the big issue in wheat this year, and should continue to support cash premiums until or unless we run into better protein in N-KS.  Forecasts are wet and cool enough to keep the bulls at bay on corn and soybeans, but until we get a little closer to July and get a peek into pollination weather, tough to pressure those markets too much just yet.

 

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.

 

6/20/2017 Morning Comments

Good Morning,

 

Outside Markets as of 5:30am: Dollar Index up 0.005% at 97.5300; S&P’s are up 0.75 at 2448.25; Dow futures are up 12.00 at 21,473.00; 10-yr futures are up 0.01%; Crude Oil is down $0.89 at $43.31; Heating Oil is down $0.0187 at $1.3924; Paris Milling Wheat is up €1.75 at €179.25/MT; Paris Rapeseed is up €0.75 at €367.00/MT; Dalian corn closed down 0.48%, Dalian soybeans finished down 0.54%, Dalian oil closed down 0.81% and Dalian meal closed up 0.04%.

Fairly open Midwest radar this morning as the region enjoys cooler temps before a warm up tomorrow.  Temps will be mainly in the 70’s and low 80’s today before temps in most places rise to the mid-80’s to low-90’s Wednesday.  The southern plains will see temperatures soar to 97-99* in N-TX which will aid in harvest efforts but stress developing row crops.  The forecast for the next 7-days sees rainfall to move into E-IA/N-IL/S-WI and most of MI by the weekend and bring 0.50-2.30” in the localized areas.  Another broad system which encompasses all but the Northern Plains will hit over the weekend, dropping rains of 0.50-1.30” in most of the southern plains and mid-south, while the US-SE sees heavier rains closer to 2.00-3.00”.  Not much rain around for the Northern Plains in the 7-day, and extended maps keep the region below normal for the 6-10 before turning more normal on precip in the 8-14.

 

Firmer markets overnight, led by none other than the wheat market, specifically the Minneapolis variety which is up 2.40% at this writing.  Going into yesterday’s crop progress report, there were two schools of thought: 1) recent rains which fell in the Northern Plains helped revive yield prospects in drought-stricken areas while increasing yield prospects in areas which were in good shape.  2) That HRS crops in tough areas were already too far gone to help at this point and the solid areas of ND weren’t going to be blow off yields large enough to compensate.  The market was actually pricing in a condition bump of 4-5% nationally for the spring wheat crop, but when data came out at 3:00pm, the USDA crop surveyors saw the crop as 4% worse w/w.  This has given the impression the spring wheat balance sheet is still tightening and the market needs to get in front of the rationing process.  Winter wheat contracts are trading higher in sympathy, but also on lighter harvest marketings than expected and on elevators waiting for protein content to increase now that harvest has moved into C-KS.  Corn is clawing back meager gains after losing 5-6c on last weekend’s rainfall and the turn to cooler temps in the forecast.

On the row crop side, the national corn condition rating did not change at 67% G/E, but 2% did move from Good to Excellent, raising the overall condition score.    The 67% G/E compares with 75% G/E last year and is still the lowest for this week in June since 2013.  Conditions were uniformly higher across the corn belt with the only states seeing conditions declines being CO (-10), KS (-4), TX (-2) and PA (-2).  The southern plains are in need of a drink, especially KS where producers have made the comment their corn crops are already rolling to protect themselves from the warm temperatures.  Soybean conditions were up 1pt to 67% G/E vs. 68% expected and 73% G/E last year.  Across the corn belt, MN was down 1pt, and NE down 2pts, but all other Midwest states saw an improvement in conditions.  Soybean planting progress was up 4% to 96% nationally which is ahead of the 93% 5-yr average.  89% of the soybean crop has emerged vs. 84% average.

The real story was once again the spring wheat market which saw conditions fall another 4pts to 41% G/E vs. an expectation for 47-49% G/E and compares with 76% G/E last year.  South Dakota conditions were actually unchanged at 13% G/E, but the western states were the ones posting big declines.  ID was down 11pts to 62% G/E while WA was down 8pts to 67% G/E.  The national spring wheat crop at 41% G/E is the lowest rated for this week in June since 1988 when only 5% of the crop was rated G/E.  For the individual state crop ratings, the WA crop is rated 67% G/E which Is the lowest since 2014’s 24% G/E, but is still better than the 5 and 10-yr averages.  The ID crop at 62% G/E is the lowest since 2012’s 61% G/E, but is well below the 72% and 77% 5 and 10-yr averages.  North Dakota, which comprises 45% of US spring wheat production, has a condition rating of 42% G/E which is the lowest since  1988 when that crop had no wheat rated good or excellent.  15% of the crop is headed which is actually slightly behind the 5-yr average of 17%, but the SD crop is 65% headed vs. 40% average.  The conditions will cause analysts to further ratchet down yield expectations, with sub-40bpa national yields becoming a reality.  This in-turn will keep downward pressure on national production, which is probably headed to or below 400mbu, while carryout could be headed for 100mbu.  The compounding factor of back-to-back low protein HRW crops will keep a bid for cash spring wheat like we haven’t seen in years.

Winter wheat conditions were down 1pt nationally to 49% G/E vs. 61% a year ago.  Conditions were mainly steady across the south with the exception of CO (-7), while most of the decline came from the PNW.  National harvest progress was pegged at 28% complete vs. 17% last week and 25% average.  KS is 22% harvested vs. 25% average with progress expected to take a big jump this week until rain toward the weekend.  Still plenty of low protein reports coming from KS with the central part of the state all the way up to Salina still posting a lot of 9-10% protein content.  Very, very few pockets of 12.0%+ type reports which is more common for the northern areas in an average year.  Farmer marketing across the truck scale has been as high as 60-65% in some areas and as low as 20-25% in others.  On average, still not seeing many locations post an average over 10.0% which puts an incredible amount of pressure on the northern tier of KS and NE to find some protein.  If they don’t, protein spreads will continue to add to their already record scales.

Export inspections were also released yesterday, all of which were supportive to current USDA demand numbers.  Wheat inspections were reported at 27.2mbu which was better than the 18.3mbu needed weekly to hit the USDA export forecast.  Total shipments of 59.8mbu are already up 36.5% from a year ago.  Corn shipments totaled 48.0mbu vs. the 26.7mbu needed weekly to hit the USDA forecast.  Total shipments were reported at 1.835bbu vs. 1.276bbu a year ago.  We’ve shipped 82.4% of the USDA total to-date with 2.5 months left in the marketing year.  Soybean shipments were reported at 10.1mbu vs. the 8.3mbu needed weekly.  Total shipments now stand at 1.906bbu vs. 1.621bbu a year ago.  We have now shipped 92.9% of the USDA’s total objective with plenty of time left in the marketing year.  If we are going to get the level of roll over sales some analysts are claiming (100-150mbu), shipments had basically better stop in the next week or two, otherwise the USDA’s objective not only looks achievable but probably low by 100mbu.

 

Bottom Line: The current row crop debate comes down to early season conditions vs. current beneficial weather and forecasts.  Will poor planting and early season weather hamper ultimate yield potential, or can beneficial weather, if it is in fact received, still allow us to hit top end?  Corn seems to be land-locked between the two-schools of thought, while soybeans are still several weeks away from weather being crucial.  Global wheat production prospects are declining from the US to EU to UKR.  Major exporter balance sheets are getting tighter, and protein/quality could be in high demand again this year.  Add in record tight barley and oat balance sheets and this wheat story looks far from over.  MW has an upside futures target at $6.70 in the crosshairs, and the way it’s been trading doesn’t look all that difficult for even today’s session.

 

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.

6/16/2017 Morning Comments

Good Morning,

 

Outside Markets as of 5:45am: Dollar Index down 0.161% at 97.3080; Euro up 0.206% at 1.11770; S&P’s are up 3.50 at 2437.75; Dow futures are up 23.00 at 21,386.00; 10-yr futures are down 0.04%; Crude Oil is up $0.24 at $44.70; Heating Oil is up $0.0137 at $1.4283; Paris Milling Wheat is up €1.75 at €172.25/MT; Paris Rapeseed is unchanged at €360.75/MT; Dalian corn closed unchanged, Dalian soybeans closed down 0.03%, Dalian soy oil finished up 0.75% and Dalian meal settled up 0.56%.

While much of the attention in commodities lately has been on the heightened volatility in grains, the overall sector has been under a good deal of pressure.  The Bloomberg Commodity Index sank to 80.3000 yesterday, the lowest level since April 16th, 2016.  This is due in large part to a floundering energy sector which has witnessed crude oil trade right down to 7-month lows as concerns mount over the renewed production cuts by OPEC and the consistent increase in US drilling rigs.  The swoon in commodities has also made them cheap against equities once again as the ratio between the S&P 500 and BBCI hit 30.0902 yesterday, the highest value on record going back to November 2006.  Despite the relative “cheapness” of commodities vs. equities, it hasn’t really produced a strong buy reaction from managed funds yet as interest rates continue to rise and commodity fundamentals remain bearish.

Rains across IL and scattered showers across many other corn belt states this morning as the corn belt braces for another round of showers this weekend.  Rains are forecast to fall in E-IA and most of N-IL the next 48-hours which would hopefully fill in the driest areas remaining in the heart of the corn belt.  The map below shows the 30-day percent of normal precip map with some notable deficits cropping up in IA/IL/MO/KS and to a lesser extent MI and IN.  Looking at the 7-day forecasted precip map, most of the hole should be filled in by this time next week, although deficits could persist in S-IL/S-IN as well as grow further in SD/W-ND/E-MT.  Extended maps keep precip below normal in the Northern Plains while the corn belt shifts from above normal to normal by the end of the period.  Temperatures look to remain most normal over the next 15-days with no oppressive heat seen.

 

Friday’s are trend days, and the trend has been mostly higher so firmer markets to close the week is not too much of a surprise.  Ag markets are once again being led by the wheat markets which look poised to close higher for the second week in a row.  For the week, Chicago wheat is up 12.50c, KC is up 19.50c and Minneapolis is up 33.0c.  In fact, Minneapolis looks set to close higher for the fifth week in a row, adding $1.02 since the lows in mid-May.  It is undeniable we have priced in something in the spring wheat market, but the question remains how much the recent rains have helped and how much spring wheat was already too far gone to be helped.  In addition, major production areas in E-MT/W-ND didn’t receive much of any rain the last 7-days and look to remain dry the next seven.  Dangerously low spring wheat carryout estimates are making the rounds which will be exacerbated by the second lower protein HRW crop in a row, heightening the demand for all protein levels of HRS.  Row crops will be focused on the incoming rains for IA/IL this weekend which need to fall to prevent dryness from expanding.  Quality and coverage of the forecasted rains will influence the open Sunday evening.

Export sales released yesterday morning were mostly in-line with estimates although wheat was a bit disappointing at 13.7mbu vs. the 14.8mbu needed weekly to hit the USDA forecast.  Total commitments for the 17/18 marketing year now total 256.5mbu which is up 7% from a year ago.  Corn sales were more than needed at 23.6mbu vs. 12.9mbu required to hit the USDA forecast.  Total commitments now stand at 2.150bbu vs. 1.792bbu at this time a year ago.  We have now sold 96.6% of the USDA’s full year estimate while we have shipped 77.9% with two and half months left in the market year.  Soybean sales totaled 12.5mbu which were well better than the net cancellations of -5.0mbu needed to hit the USDA forecast.  Total commitments are now 2.165bbu vs. the USDA’s full year target of 2.050bbu.  We have now sold 105.6% of the USDA’s target and shipped 93.1%.  Why the USDA chose to leave the 16/17 export estimate for soybeans alone on last week’s WASDE is ludicrous by anyone’s guess.  While many are quick to point out roll over sales could be larger than normal, it begs the question why importers would still be buying old crop slots and why we haven’t seen shipments slow to a pace which would imply exports could fall meaningfully short of the USDA’s total?  Neither has happened, and if the current pace continues, we will fit the USDA’s projections by mid-July.

Wheat cash markets continue to steal the show in the US as demand for protein is moving from a priority to full blown panic.  HRW protein scales on the spot floor were firmer for ORD’s, 11.40-11.80% and 13.0-14.0% pro yesterday.  12.0% protein wheat is now indicated at +168/178N vs. +130/140N a week ago, while 13.0% protein is indicated at +221/231N vs. +180/190N a week ago.  In spring wheat, 13.5’s were a tick weaker but the bid side of 14.0-15.0% were firmer.  14.0% wheat is now indicated at +120/125N vs. +100N a week ago while 15.0% protein is +185/195N vs. +160/175N a week ago.  Domestic markets weren’t the only market firmer, however as TX-Gulf bids for HRW rallied 5-20c on both the bid and offer.  Spot bids were shown at +180/200N vs. +160/170N a week ago.  To see cash values of HRW rally during harvest, and HRS values rally just before harvest as reports of better old crop demand circulate speaks to the larger issue at work in the wheat market.  Obtaining enough protein to meet both domestic and export demand will be a major challenge this year, and is likely to keep protein scales especially wide throughout 17/18.  If producers have protein, offer high.  One last cash market note, there were another 140 warehouse receipts canceled in Duluth last night, leaving 503 outstanding in Duluth and 208 in Minneapolis.  This should keep deliverable stocks coming down into harvest as they are want to do seasonally.

Other data released yesterday included the monthly NOPA crush which beat expectations handily in a reversal of the last several months.  May NOPA member crush was reported at 149.246mbu vs. the average trade estimate of 143.2mbu.  This also compares with 139.1mbu last month but below the 152.3mbu from May 2016.  While the crush number sharply beat average estimates, it still marked the fourth month in a row in which crush fell below the same month from a year ago.  Using a proxy for full US crush, we will need to see 466mbu of soybeans crushed in the US from June-August to meet the USDA’s current marketing year crush estimate.  This would be 18mbu higher than we crushed a year ago, and would reverse four consecutive months in which crush fell below the year ago level.  While the USDA just cut full year crush on the last WASDE report, they could be in jeopardy of needing to cut it once again on the July WASDE.  Soybean oil stocks were 1.749 billion pounds vs. the average trade estimate of 1.745 billion pounds, 1.725 billion last month and 1.994 billion pounds in May 2016.

 

Bottom Line:  Corn could struggle into the weekend as long as the midday models confirm rain in IA/IL tonight and tomorrow.  Still, one rain is not going to take care of the corn belt for good and the Northern Plains look to slip back below normal on precip for the next 15-days.  Plenty of holes left in the percent of normal precip map to throw caution to the wind.  Protein will be a driver in 17/18 once again, which should keep a bid under flat price to a certain extent.  The trend of protein reports in HRW as harvest moves into NC-KS will be important.

 

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.

 

6/14/2017 Morning Comments

Good Morning,

 

Outside Markets as of 5:45am: Dollar Index up 0.031% at 97.0300; Euro down 0.067% at 1.12080; Aussie Dollar up 0.597% at 0.75840; S&P’s are up 1.75 at 2441.75; Dow futures are up 24.00 at 21,346.00; 10-yr futures are up 0.07%; Crude Oil is down $0.48 at $45.97; Heating oil is down $0.0075 at $1.4402; Paris Milling Wheat is up €1.50 at €171.25/MT; Paris Rapeseed is up €0.25 at €359.75/MT; Dalian corn closed up 0.12%, Dalian soybeans closed unchanged, Dalian soy oil finished up 0.03% and Dalian meal settled up 0.75%.

Showers moving across North Dakota, Nebraska, Iowa and eastern Kansas this morning, bringing more relief to areas which have been hurt by drought.  The Northern Plains received additional moisture in the last 24-hours, putting two day totals at over 1.00” across a broad swath of ND/SD/MN.  Localized totals in NE-SD/C-ND/W-MN pushed between 2.50-3.00”.  Unfortunately, the driest areas of W-ND and E-MT did not see much relief and will be dry the next 7-days.  That goes for the larger Northern Plains as well with AM models showing light amounts across the four state region through mid-week next week.  The real focus for the market will be the forecasted rains for IA/IL the next several days. Some rain fell in IA overnight with 0.50-1.00” on about 50% coverage of the state.  Placement of the rains will be key, but if rains fall as forecast, some serious relief will show up for the central corn belt.  The ECB stays well-watered through the 7-day.  Extended maps show normal/below temps for much of the Midwest while precip remains below normal for the Northern Plains, and mostly normal for the corn belt.

 

Spring wheat is the word.  Sharply higher yesterday with closing gains of 27.50c which have been followed by another 15-16c overnight as the larger market wakes up to the conditions Northern Plains producers have been dealing with since mid-May.  While rains have moved through areas of the Northern Plains in the last 24-hours, much of this spring wheat in South Dakota and southern North Dakota is too far along to be helped all that much by rainfall.  Yield potential was determined weeks ago, and at this point rain might help heads fill, but a full revival of yield potential is not possible.  With that said, production estimates are being slashed and carryout levels for 17/18 are pointing toward some dangerously low levels.  The buying taking place at the MGEX is spilling over to winter wheat and helping both contracts trade up toward their upper range caps as the rather large managed fund shorts become uneasy.  Corn is also maintaining an upward bias until rainfall is received in Iowa and Illinois, while soybeans are simply trading in sympathy given the fact weather in June doesn’t determine much on a soybean crop.

While we have been tracking deliverable stocks levels for all of the major grains, most don’t pay any attention to these numbers until a crop issue rears its head.  Enter spring wheat.  Deliverable stocks of hard red spring fell last week by 996,000 bushels to 18.970mbu in both Minneapolis and Duluth.  This compares with 22.593mbu a year ago, and would be the lowest total wheat stocks level since September 19th, 2014.  Stocks got quite low in 2014, dipping all the way down to 9.809mbu in August before new crop supplies replenished warehouses.  The lowest combined MPLS/DUL spring wheat stocks since 2003 occurred in June of 2009 when combined stocks dropped to 2.419mbu.  We are not forecasting anything like that, but simply think it is a good idea to continue to monitor the level of deliverable stocks to get a sense of how reliant commercials will be on drawing down these stocks if production does take a hit and producers become slow sellers.  Also worth noting, another 69 warehouse receipts were canceled out of Minneapolis last night, which should keep the shipments flowing out of Minneapolis well into the summer.

On the winter wheat side, new crop supplies have started to flow into SRW warehouses with MS-River jumping close to 5.0mbu w/w.  Total wheat stocks in SRW warehouses moved from 63.784mbu last week to 69.403mbu this week.  Both compare with 47.788mbu a year ago.  In Kansas, total wheat stocks were tabulated at 96.249mbu vs. 96.449mbu last week and 71.910mbu a year ago.  Harvest has not let loose in a big way in KS just yet, but should make meaningful progress this week.  While deliverable stocks are massive at 96mbu going into harvest, there remain large concerns about the protein content of the HRW crop with more reports of 10.0% protein or less as custom crews move into Kansas.  This has undoubtedly fueled part of the response in Minneapolis as end users recognized the importance of getting 14.0%+ spring wheat to make blends.  MW/W moved to +194.75c overnight while MW/KW is up to +179.75c.  In 2011, we saw MW/W move to +300.00c and MW/KW move to +240.00c, both of which could be in the cards if production prospects continue to decline and HRW protein proves as low as some are fearing.

Inter-markets serve as a good segue to basis appreciation which seems like it is a daily occurrence at both KCBT and MGEX.  KCBT protein premiums improved by 5-15c yesterday for 11.80-14.00%.  12.0% is now indicated at +135/145N vs. +115/125N a week ago, while 13.0% pro is now indicated at +200/210N vs. +170/180N a week ago.  Spring wheat basis also firmed on the spot floor with 14.0% up 50c on the high side to +100/150N while 15.0% pro was up 15c on the high side to +180/195N.  High pro is now up 35c w/w and should see $2.00 plus basis in the near-term.

Analytics firm Informa Economics released their latest acreage estimates for the 2017 yesterday during the session, putting corn up 190,000 acres from the USDA’s March Prospective Plantings report at 89.996 million acres.  This was definitely a surprise to most as the wet conditions in the eastern corn belt seemed sure to drop acres, not add them.  This gets back to the question of what the actual starting point for corn acreage was?  Instead of 89.996 million acres, was it actually 90.5 million, or 91.5 million?  If the USDA raises acres on the June 30th report, the market would definitely take that as a negative.  Other changes included soybean acres down 120,000 to 89.362 million, which was also a meaningful surprise.  Informa sees double crop soybean acreage at 3.925 million which would be the lowest in at least 5-years.  Other spring wheat acreage was seen down 110,000 to 11.198 million which is in-line with anecdotal reports, while durum was unchanged at 2.004 million.  The moving target for wheat acres will be abonnement in the Dakotas as producers are busy haying HRW or might be close to getting wheat released and spraying it out.  Hopefully recent rains revive harvest ideas.

 

Bottom Line: The market’s focus is corn belt rains in IA and IL with both placement and amount very important.  In wheat, we continue to be observers of the spring wheat party with the big concern being the dry pattern forecast for the next 15-days after the recent rains.  In areas which weren’t fortunate enough to get a drink in the last 48-hours, production prospects could be all but done.  Add in the inelastic nature of spring wheat demand on top of another low protein HRW crop and the stage is set for 2017/18.  The all-important June 30th reports are just 13 trading sessions away, and producers would do well to take stock of growing conditions and on-farm grain levels.  Even in years of short crops, the market usually tries to price things in early with July turning decidedly negative from a seasonal standpoint.  Don’t get lulled to sleep by the constant stream of weather maps.

 

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.

 

6/13/2017 Morning Comments

Good Morning,

 

Outside Markets as of 5:45am: Dollar Index down 0.0873% at 97.0730; Euro down 0.031% at 1.12090; Canadian Dollar is up 0.520% at 0.75445; British Pound is up 0.513% at 1.2726; S&P’s are up 4.25 at 2432.75; Dow futures are up 23.00 at 21,249.00; 10-yr futures are down 0.07%; Crude Oil is up $0.20 at $46.28; Heating Oil is up $0.0027 at  $1.4279; Paris Milling Wheat is up €1.50 at €169.75/MT; Paris Rapeseed is unchanged at €359.25/MT; Dalian corn closed unchanged, Dalian soybeans were down 0.20%, Dalian soy oil closed up 0.10% and Dalian meal closed down 0.86%.

Today marks the beginning of the two-day FOMC meeting which is expected to culminate with another 25bp hike at the conclusion tomorrow.  Markets are currently discounting a 100% chance of a 25bp hike, which would mark the second increase in their benchmark lending rate this year.  Since another rate hike is all but a sure thing, the market will be focusing on expectations for additional rate hikes yet this year via the ‘dot plot.’  The Federal Funds futures market is currently discounting another 25bp hike by September at 34% while markets see a 62% chance they increase rates by December.  The current dot-plot sees three rate hikes per year during 2017, 2018 and 2019 which would bring the fed funds rate to 3.00% by the end of 2019 compared with 0.00-0.25% for much of the last 7-8 years.

Beneficial rainfall moved through the Northern Plains last night and is continuing to bring moderate to heavy rains still this morning to some of the driest areas of the Northern Plains.  While radar returns have been suspect the last couple weeks in the Northern Plains, radar returns this morning currently show a broad 0.75-1.00” falling across the western half of SD with totals increasing yet this morning toward the north east part of the state.  SC-ND also saw 1.0” amounts with the eastern part of the state picking up additional rainfall this morning.  S-MN also saw rains just above the IA border.  These rains were absolutely critical for South Dakota, as some spots in the northern half of the state had only seen 1.0-2.0” over the last month.  The same would be true for W-ND.  Rains will continue in the Northern Plains the next 24-hours bringing heavy rains to N-MN.  Rainfall will also firing up the balance of the week in the corn belt where they are badly needed.  Current 7-day forecasted precip models are showing a very broad 1.00-2.50” for everything east of NE.  Extended maps keep the Northern Plains in below normal precip for the next 15-days, however.

 

Firmer markets overnight led by none other than spring wheat as the decimation to weekly condition ratings seemed to finally wake market participants up to the problem in the Northern Plains.  Conditions for corn and soybeans were also a bit lower than expected, especially in the WCB and Northern Plains, helping to lift row crops overnight.  This space has been talking about the potentially tight hard red spring balance sheet for months now, with or without a production issue.  Fast-forward to today with the conditions experienced the last 30-45 days, and production is expected to take a meaningful hit in the Dakotas at the very least.  Over the weekend, Twitter shared pictures of producers haying their spring wheat crop in C-SD which followed a lot of HRW which found its way into a bale.  Condition reports from North Dakota don’t differ all that much, except for the fact the crop is anywhere from 2-4 weeks behind the South Dakota crop.  Still, anecdotal reports of spring wheat heading out this week as far north as Minot seemed to call into question how much benefit additional rainfall could provide.  Row crops in the Northern Plains still have a lot of potential with the rain received the last 24-hours.

The national corn condition rating fell 1pt to 67% G/E which was in line with expectations but down from 75% G/E last year.  The drop actually looked light based on some of the sharp declines witnessed, especially in South Dakota which fell 17pts to 45% G/E, North Dakota was down 9pts to 58% G/E, IL down 1pt to 58% G/E and IN was down 2pts to 44% G/E.  For South Dakota, the condition rating of 45% G/E is the lowest for week #23 since 1992.  North Dakota at 58% G/E would be the lowest for this week since 2002.  Both should see improvement on next week’s report.  The national condition rating for this week is the lowest since 2013 and the second lowest since 2002.  Worth noting, while the G/E rating fell 1pt, the P/VP rating climbed 2pts nationally.  Soybean conditions came in ranked 66% G/E vs. 69% G/E expected and 74% G/E last year.  This was the lowest initial rating since 2013 and the second lowest since 2008, but it’s difficult to be too steadfast with an opinion about soybeans in early June as not much can be gleaned this early.  Still 8% of the soybean crop to be planted, while 77% of the crop is emerged vs. 73% average.  Another reason to be patient with the soybean condition rating.

The real story was the national spring wheat condition rating which fell an astounding 10pts to 45% G/E vs. 53% G/E expected, although anyone who didn’t see another sharp decline coming doesn’t know what has been happening in the Northern Plains.  Declines were led by MT which saw its G/E rating fall 25pts to 23% G/E followed by SD down another 12pts to 13% G/E while ND fell 9pts to 43% G/E.  The national spring wheat condition rating of 45% G/E is currently the lowest rated crop since 1988, although when the F/P/VP is accounted for it is the lowest rated since 1992.  However, individual states like South Dakota at 13% is the lowest on record, while MT at 23% G/E is the lowest since 1997 and North Dakota at 43% G/E is the lowest since 1988.  Surprising the trade was the crop rating from MN at 93% G/E which was down 2pts on the week but remains the highest rated crop on record.  Were it not for the exceptionally strong rating in MN, the national HRS rating would look quite a bit worse.  The question now becomes what the recent rains have done for the Dakotas, and whether this will change any producer attitudes toward abandoning their wheat, harvesting their wheat or putting it up for hay.

Winter wheat conditions improved 1pt to 50% G/E which compares with 61% G/E last year thanks to some sharp increases in SRW ratings along the MS-River.  Given the advanced state of the crop, this is likely due to better than expected yields being reaped in those states.  HRW conditions declined by 1pt in NE and 9pts in SD, while SRW conditions declined 2pts in IN and 7pts in MI.  National harvest progress was pegged at 17% complete vs. 10% last week and 15% average.  Very little progress has yet been made in KS which is only 4% harvested vs. 13% average.  TX and OK are flying through their crop, however, at 72% and 52% complete, respectively.  Given the large amount of HRW put up for hay and simply sprayed out in South Dakota, HRW abandonment could be especially high this year which will need to be factored into national production estimates.

The reports of low protein HRW in the south and concerns over shortened HRS production in the north has not been lost on the cash market.  Both the KCBT and MGEX spot floors have been rallying over the last 7-10 days with KC seeing 12.0% pro now worth +130/140N vs. +100/110N a week ago and +110/120N a month ago.  13.0% protein is now indicated at +190/200N vs. +145/155N a week ago and +150/160N a month ago.  This despite the fact harvest is expanding across the southern plains and should be pressuring cash markets.  On the MGEX spot floor 14.0% was bid +100N last night vs. +85/105N a week ago while 15.0% pro was indicated at +180/190N vs. +150/175N a week ago.  Duluth still has a lot of high quality wheat available to the market, but if production is as low as what some estimates suggest, those stocks will be drawn down precipitously over the next 3-4 months.  As has been the trend over the last 2-3 years, the world is having no problem producing wheat, but raising high quality, high protein wheat has been quite the challenge.  Producers with high protein wheat of any variety look to be in the driver seat once again this year.

While old news today, the Commitment of Traders data released Friday had several noteworthy statistics.  These included the managed fund net short position across the entire soy complex moving to a new record of -219,066 contracts.  This beat the previous record from last week by 20,000 contracts, and is 70,000 contracts larger than the prior record from March 2016.  While the large crops which seem to keep getting larger in South America are a major bearish overhang, one has to remain a bit cautious about selling the soy complex into the ground ahead of the major developmental weather to come next month.  If the record corn short showed us anything, it is the managed funds can get a bit far out over their own skis.  Speaking of corn, managed funds bought 53,115 contracts to reign in their net short position to -171,456 contracts.  Small changes were recorded in the winter wheat crops to leave the managed fund short in Chicago at -139,732 contracts.  In Minneapolis, funds bought 4,510 contracts to put their net long at 9,486 contracts which is still well below the 16,717 contracts they wielded in January or the 18,000+ contracts held in 2010.  Funds likely own more spring wheat than indicated above, but with a market of only 70,000 contracts, one has to be wary of a quick flip of the position.  Funds currently account for 12.3% of total open interest which is far smaller than the 28-30% recorded in 2007 and 2010.

 

Bottom Line: The market appears to be woken up by the weekly crop progress report which showed declining conditions across major wheat and corn producing states.  It is imperative the weather turn solidly beneficial to reverse the trend in these ratings heading into the June 30th acreage reports.  Both spring wheat and corn could see further acreage declines based on the season to date which would put even more upside pressure on price.  Otherwise we are still living model run to model run waiting for moisture to cover the entire belt.

 

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.