Outside Markets as of 6:00am: Dollar Index down 0.0520 at 79.7170; Euro is up 0.00120 at 1.38350; S&P’s are down 4.75 at 1868.25; Dow futures are down 54.0 at 16,377.00; 10-yr futures are up 0.2%; The Nikkei closed up 0.17% at 14,429.26; The DAX is down 0.84% at 9,468.22; Gold is up $4.80 at $1295.40; Copper is down $0.65 at $308.15; Crude Oil is down $0.46 at $101.48; Heating Oil is down $0.0155 at $2.9940; Paris Milling Wheat is up €0.75 at €216.75/MT.
Groundhog’s Day once again with tensions escalating in Ukraine which is weighing on global equities as we cap off a mostly positive week in US financials. Amid the chaos, the rating agency Standard and Poor’s cut Russia’s credit rating from BBB to BBB- as it warns of capital flight and risks to investment due to the crisis. Ukraine continues to stand by its operation to drive pro-Russian insurgents out of occupied building in the eastern part of the country while Russia stands firm on its threats of invasion should its citizens be harmed. The Russian MICEX finished down another 0.69% on the day and is down 14.09% YTD. According to the US State Department, additional sanctions are “teed up” and ready to go should Russia continue not honoring the Geneva agreement. In the US today, we’ll see April Consumer Confidence which is expected up 0.4 to 83.0, but is still below the 6 ¾ year high hit last July.
Additional moisture falling in the ECB this morning, but a pretty wide open Midwest otherwise before the next significant system rolls through this weekend. The first map below shows past 48-hour precip totals for the Midwest, while the second map shows 5-day forecasted precip. As one can plainly see, fieldwork is going to come to a grinding halt later this weekend as heavy rains impact almost every portion of the corn belt. This is behind some of the strength witnessed this week, especially with the below normal temps following it up in the 6-15 day period. Eastern portions of the southern plains should see some decent rain totals, but dry areas of SW-KS and the panhandle will remain dry. Forecasted temps in HRW country this weekend will see solid 90’s followed up by 50’s next week for highs. Still no alarm bells for planting, but behind average we will stay. Estimates for Monday are 18-20% planted.
A little bit of a bounce as we close as we round a positive week for the grains and a negative week for the complex. On the week, July soybeans are down 24.75c, July corn is up 9.75c and July Chicago Wheat is up 0.75c. Export sales kept the ball rolling yesterday with sales at or above expectations in all categories, and shipments of corn hit 62.88mbu, the highest weekly total going back 24 years. In addition, the sweltering temps forecast for the southern plains and the general lack of rain helped wheat futures claw back to positive on the week from earlier week losses. Several analysts are bringing their HRW production forecasts down, and the Wheat Quality Council Tour begins Monday in the Southern Plains. The constant threat of world wheat importers going outside of the Black Sea has also lent support, but to date we’ve seen no incremental business to any major MENA destinations.
CIF corn premiums continue to slowly firm at the Gulf, up another 2c yesterday with spot barges pegged at +66K vs +62K a week ago. This is putting Zone 3 basis at 3.7-7.1c above gross delivery equivalence, meaning buying the CK/CN spread and standing in for delivery is currently at 9c winner. Should help with spread stability and keep futures firm on the front-end. In addition, Argentine FOB premiums keep firming, likely part of the strength in CIF as imports keep tapping US supplies. June basis was up another 3c yesterday to +80N vs US June CIF at +63N. The chart picture for July corn gets a whole lot more positive with a push over $5.13 ¾ which would open up a test of the highs at $5.24. Demand from exports remains strong, but despite strong weekly ethanol production data, ethanol plants continue to bid as though they have adequate coverage, limiting domestic homes for WCB corn.
Old news this morning, but StatsCan said Canadian farmers plan to plant much less canola than analyst originally figured. Canola plantings are seen at 19.801 million acres, down 0.7% from last year and well short of the 21.1 million forecast. All-wheat acres are pegged at 24.766 million, down 4.8% from last year but exceeding the average analyst estimate of 24.4 million. Oats acres are seen at 3.188 million, up 0.6% from a year ago and in-line with expectations.
Strong seasonals begin soon on many old crop/new crop spreads in corn and soybeans with CN/CZ typically weakening from now through June. Many analysts tout the bullish old crop story has been priced in, and the market is solely focused on weather from here through planting. Certainly hard to argue with, especially until the next major old crop update at the end of June. Ethanol and exports are towing the line, but not yet doing enough to warrant another increase in either category.
Bottom Line: Look for firmer trade in the early going today as there is more supportive news around this morning than negative. Soybeans will continue battling with rumors of imports, defaults and cancellations, likely keeping us in a range 30c either side of $15.00. Forecasts remain supportive for grains, as does solid export pull on corn. Wheat is a weather market and will live and die with each model run. Sometimes it’s helpful to take a step back and look at the last 3-6 months of price movement. $5.00 new crop corn is still available on the board.
Good Luck Today.
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