Outside Markets as of 5:55am: Dollar Index up 0.6280 at 94.8430; Euro down 0.00960 at 1.12120; British Pound is down 0.89% at 1.5514; S&P’s are up 5.50 at 2131.50; Dow futures are up 53.00 at 18,312.00; 10-yr futures are up 0.17%; The Nikkei closed up 0.68% at 20,026.38; The DAX is up 1.66% at 11,786.26; The IBEX-35 is up 1.35% at 11,497.60; Gold is down $7.50 at $1220.10; Copper is down $4.85 at $285.80; Crude Oil is down $0.43 at $59.81; Heating Oil is down $0.0154 at $1.9714; Paris Milling Wheat is down €2.25 at €177.75/MT.
Trade data released early this morning has European equities on the up-and-up, but is keeping currencies under pressure. Trade data from the Eurozone showed the 19-countries which use the euro had a surplus in their trade goods of €23.4 billion, up from €16.1 billion in March 2014. That widening gap was due to an 11% increase in exports, while imports were up by 7%. The weak euro has obviously been the impetus for this improvement in trade, the biggest benefactor of which would be Germany. The United Kingdom also made headlines as it entered its first period of deflation in more than half a century with prices falling by 0.1% y/y in April. The data marks a new record low for the consumer price index since the data first began back in 1996. This should keep the Pound weak as UK leaders fight to cause inflation, and hopefully additional economic growth.
Another cold night on the plains with the map below showing freezing temperatures across ND/N-MN/SD/E-MT. Areas surrounding the freeze zone likely awoke to frost as well, although damage from the past two nights isn’t likely to be known for another 5-7 days. Of biggest concern was winter wheat, although emerged canola, corn and soybeans are all at risk this morning. This morning looks like the last of the freezing temps in the Dakotas, although minimum temps will remain just above 32*tomorrow morning as well. Emergence will remain a problem. More rain in the southern plains this morning with E-CO and the panhandle seeing showers. Rains will fall in TX/OK/CO/KS/NE/MO the next 3-days with heaviest amounts along the TX/OK border. Rains will continue in the south through the weekend, pushing flooding concerns even higher. Temps remain cool in the extended outlook.
Weaker prices this morning led by wheat as it corrects part of yesterday’s advance, the second such rally in three days. Wheat contracts notched a technical win yesterday by trading through the 100-day moving average for the first since January, but couldn’t manage to close above that level and it trading just below this morning. The 100-day has blunted rally attempts in February and March before halting the current advance, but the managed fund short position is much larger now that it has been at any other time in recent history. As has been shown time and time again, the globe needs at least two production issues at the same time for a sustained rally and while several issues are now on the front-burner, none of which could be considered a disaster. Dryness in the Black Sea, quality concerns in the US and potential demand growth in India/China are all balls traders have to keep in the air at the moment. Row crops are also correcting as progress maintains the pace needed, but frost damage will linger the next several sessions. The fact remains the corn belt is well watered, progress is ahead of schedule and acreage ideas are increasing for the June acreage report.
A quick note on the COT data from Friday which wasn’t broken down in yesterday’s comments. Very little change occurred in the wheat positions during the last reporting week with funds still short the three exchanges a combined -148,233 contracts, just off the record short from last week of -153,307 contracts. Commercial activity was also very subdued, although the reporting week didn’t catch the wheat rally which followed later. In HRW specifically, despite harvest about to begin, the commercial gross short position, a proxy for farmer selling/hedging, sits at just -49,938 contracts, the lowest since 7/28/2009. It is no secret the farmer is unhappy with the price, and is going into harvest with the lowest stocks in 7-8 years. Also worth noting has been the commercials willingness to sell the recent soybean oil rally, much more so than the spec funds have been willing to buy it. The net commercial short position now stands at -145,454 contracts, the largest since 9/4/2012. By comparison, the gross commercial long of 87,660 contracts is the smallest since 3/18/14.
Yesterday afternoon’s crop progress report offered few surprises with corn planting progress estimated at 85% complete vs. 87% expected, 75% average and 71% last year. Corn planting remains about 5-6 days ahead of schedule, even with the delays which have hit the WCB/Northern Plains. Still several states in the ECB with around 25% of the corn crop left to plant, but all are ahead of average with little concern seen. The southern plains are actually the largest laggards with CO at 59% planted vs. 76% average, KS at 78% planted vs. 82% average and TX at 75% vs. 91% average. This could affect availability of corn early this fall, but it also could imply more sorghum acreage going in the ground. 12% of ND’s corn was emerged as of yesterday, while 46% of SD and 72% of MN was out of the ground. Soybean planting progress was 45% complete vs. 31% last week and 36% average. Again, no real concerns, although KS is at 17% planted vs. 31% average due to the recent wet weather. 3% of ND’s soybeans were out of the ground, while SD was 4% emerged and MN 21% emerged, all of which will be at-risk with this morning’s frost. Soybeans are susceptible as soon as they emerge as the growing point is out as well.
Winter wheat conditions improved 1pt to 44% G/E vs. expectations for unchanged, with the most improvement witnessed in the ECB. 68% of the nation’s winter wheat was headed out with TX at 96%, OK at 99% and KS at 86%. Spring wheat planting is essentially complete at 94% vs. 65% average with all top four producing HRS states over 90% seeded. ND has 53% of its HRS emerged, but damage isn’t likely given the current vegetative state. The first initial spring wheat condition score was 65% G/E, but no comparison score was available as usually there isn’t enough wheat emerged to even start a score at this point in May. ND led all states at 72% G/E while SD was the lowest score at 42% G/E.
Not much change in wheat basis yesterday even with the rally which continues to suggest there are enough issues, and it is still early enough, producers aren’t excited about unloading a huge chunk of wheat just yet. Hinting at the speculative nature of the past two rally attempts in wheat has been the sideways/softer nature of spreads at all three wheat exchanges. Commercially-driven rallies don’t usually see weaker spreads to boot. Deliverable supplies in HRS especially remain large heading into summer with only around 5-7mbu of available space in Duluth/Superior elevators. If as much spring wheat needs to move as commercial handlers think, wheat basis could become especially sloppy in June/July unless protein quality is once again threatened. Farmers should be reviewing storage and protein considerations regularly at this stage. Corn basis was weaker yesterday with PNW shuttles down 6-8c in many slots with spot premiums indicated +86/91N. However, BNSF shuttle freight is also weaker, with spot cars said to be changing hands as low as -$500/car. Barge freight has also been under pressure, along with slightly easier CIF NOLA corn and soybean premiums. CN/CU remains at -7.00c.
Export inspections from the USDA were delayed due to technical difficulties yesterday morning and will be released as soon as the problem is resolved.
Bottom Line: Our markets our entitled to a “Turnaround Tuesday” with a bit of back and fill today. Damage from the last two days’ worth of frost/freeze conditions won’t be known for several days yet, but sub-32 weather with the level of emergence is never favorable. Funds have made their beds with heavy short positions, and must now lie in them as we enter the silly-season. Marketing targets need to be reviewed constantly as we move through May and into June.
Good Luck Today.
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