5/19/2015 Morning Comments

Good Morning,

 

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.

Min Temp 5-19-15\

Tregg Cronin

Market Analyst

Tregg.Cronin@halocommodities.com

www.halocommodities.com

@5thWave_tcronin

 

 

COMMODITY TRADING INVOLVES RISK AND MAY NOT BE SUITABLE FOR ALL RECEIPIENTS OF THIS EMAIL. Neither the information presented, nor any opinions expressed, constitutes a solicitation for the purchase or sale of any commodities. The thoughts expressed in this email and basic data from which they are derived are believed to be reliable, but cannot be guaranteed due to uncertainty about future events and complexities surrounding commodity markets. Those acting on the information are responsible for their own actions.

 

5/18/2015 Morning Comments

Good Morning,

 

Outside Markets as of 6:20am: Dollar Index down 3.75 at 2115.25; Euro down 0.00540 at 1.14150; S&P’s are down 4.00 at 2115.00; Dow futures are down 23.00 at 18,206.00; 10-yr futures are down 0.09%; The Nikkei closed up 0.80% at 19,890.27; The DAX is up 0.11% at 11,460.09; The IBEX-35 is down 0.578% at 11,252.60; Gold is up $3.20 at $1228.50; Copper is down $0.85 at $291.60; Crude Oil is up $0.59 at $60.28; Heating Oil is down $0.0012 at $2.0036; Paris Milling Wheat is up €3.00 at €177.50/MT.

Most financial media outlets are focusing on the Greek saga this week as the indebted country has just a few weeks’ worth of cash remaining as bailout talks grind to a halt.  Greek leaders are standing by their election promises of no austerity, but are quickly realizing how difficult it will be to take such a stance and secure funding from other Eurozone countries which have had to tighten their own belts.  US economic data continues to disappoint with the US Economic Surprise Index remaining at -0.841 Friday, just off the 6-1/3 year low set May 1.  Last week saw particularly disappointing data on consumer confidence and spending, which will end up hurting business confidence and hiring.  The federal funds futures market indicates the market is now expecting the first interest rate increase to come in January 2016 and the second increase in June 2016, much later than just a few months ago.

A chilly morning in the plains, although not quite as cold as originally forecast.  Temps as of 6:00am this morning saw 27-28* in ND, but only 33-34* in SD, and nothing freezing south of there.  The cooler morning is tomorrow, and will be a focus in SD with chances of 27-30* in the northern part of the state.  Moisture moving across the Delta and southern Midwest this morning, adding to what has already been a very wet weekend.  The map below shows observed precip over the last 72-hours with the majority of the Plains seeing 1.00”+ rains with heavier amounts localized.  The Delta also saw additional precip, which will put planting progress in focus this afternoon.  Additional precip is seen for the southern plains this week with heavy amounts the next 3-days in N-TX/OK/KS/E-CO.  Follow up rains are expected towards the end of the week, and when all is said and done the plains are expected to see 2.00-5.00” by the weekend as shown in the 7-day forecasted precip map below.  HRW areas in TX/OK/KS/E-CO are all sitting between 200-600% of normal precip over the last 14-days.  Extended maps keep things wet and cool through the 15-day.

 

Firmer markets to begin the week led by the wheat market which is posting 1.2-1.5% gains across all three exchanges as more wet weather moves into the southern plains.  It’s interesting that two-weeks ago, the wheat market didn’t seem to have a story or a prayer but sitting here today has several issues traders are paying attention to.  To wit, heavy rains in the southern plains and north delta are putting both the SRW and HRW crop at risk for quality downgrades and localized flooding concerns.  In addition, dryness over S-Russia and parts of Ukraine is getting more traction this morning with forecasts leaning dry for both areas the next 10-days.  S-Russia hasn’t experienced much heat to speak of, but will see moisture stress by the end of the month without a change in pattern.  Further, the USDA attaché to China made several increases to FSI demand for wheat which led to severe cuts in stocks over the last 3-years.  Immediate implications aren’t clear, but anytime 30MMT is sliced off the balance sheet, it’s noteworthy.  Lastly, Indian and Australian production will remain a wildcard with the developing El Nino.  Developing concern about the cool temps and lack of emergence on row crops in the US as well.

As it is old news today, wanted to get the Chinese attaché story out of the way.  On May 8th, the USDA attaché to China issued their grain and feed annual on which they increased 2013/14 FSI consumption of wheat by 16.2MMT, which cut ending stocks by the same amount to 44.312MMT vs. the USDA at 60.274MMT.  In 2014/15 they increased FSI consumption by 15.5MMT, but cut feed and residual by 8MMT.  Combined with the lower beginning stocks, the revised ending stocks were seen at 39.976MMT vs. 62.774MMT officially by the USDA.  For their 15/16 balance sheet, demand estimates were left mostly unchanged from 14/15, which put ending stocks at 35.676MMT vs. the USDA’s latest WASDE estimate which put ending stocks at 71.644MMT.  Analysts have been quick to point out the USDA WASDE board had this data in before they released their latest WASDE, but rarely does the USDA incorporate attaché estimates this quickly, especially when such large scale revisions have been made.  The reason to believe the USDA will adopt these changes at some point, however, is the fact the attaché is merely bringing his data in-line with official Chinese estimates.  These are not figures pulled from the air without causation.  If attaché  estimates are assumed, Chinese ending stocks/use ratio falls to 27.34% which would be the lowest since at least 1980/81, but still above the world at 23.36%.  Until China becomes a major importer again, this data may not have direct implications, but I do believe it lowers the threshold at which point a quality or production issue could force them to start importing.  Fluid situation, but one worth keeping track of nonetheless.

With the increase in rains, the market has watched KCBT protein scales pick a shoulder off the mat even with better producer movement to end the week.  Going home Friday, 12.0% protein wheat was bid +100/110N vs. +80/90N just one week before.  The KWN/KWU has also remained firm at the upper end of its 5-month trading range with -9.00c acting as resistance the last four sessions in a row.  WN/WU has also seen firm trade with the spread sitting at -6.50c this morning, just off highs of -5.50c from last week, but still near the highest levels since January.  Should forecasts verify, I would also foresee the KWN/WN and KWU/WN trading firm as witnessed last week with the KWN/WN sitting at +33.25c this morning, just below the 50 & 100-day moving averages.  There is still the chance we see harvest pressure impact this spread, but that window should come at the end of the month of the first week of June if at all.  I expect to see these spreads remain firm in the days and weeks ahead with both moving inside the +40-45c window.

Switching gears over to row crops, April NOPA crush data was released Friday during the session which came in at a record large 150.363mbu vs. 147.8bu expected by the average trade guess.  This would compare with 162.8mbu last month and 132.7mbu last year which would put April ’15 up 13% from a year ago, well better than the 8% needed throughout the rest of the marketing year to hit the USDA objective.  One also needs to remember that crush declined seasonally last year to rather depressed levels given the incredibly tight old crop soybean situation during the summer of 2014.  This shouldn’t be an issue this year with ample soybean supplies, so the real question could be how much more the crush estimate needs to be raised if we remain on the current trajectory.  Equally impressive was the level of implied domestic soymeal demand despite the ongoing avian flu situation.  Implied domestic soymeal usage was around 110,000 short tons larger than expected and has yet to show a meaningful impact from the 33-34 million affected birds.  Doesn’t mean we won’t see an impact this summer, but to date haven’t witnessed a meaningful drop which also bodes well for corn demand.

Informa Economics released their latest acreage survey during the session Friday indicating corn plantings down 462,000 from the USDA’s March 31st PP report at 88.737 million, while they saw soybeans up 2.550 million to 87.185 million.  Other spring wheat plantings were seen up 250,000 to 13.219 million, while durum was up 330,000 to 1.977 million and sunflower acreage was up 11,000 to 1.797 million.  Informa’s overall acreage pie is up 2.8 million from the USDA’s Prospective Plantings report thanks in large part to lower prevent plant acres in ND/SD/MN.  If these acreage ideas are assumed, the corn balance sheet would tighten slightly even with a trend line yield, but the soybean balance sheet would balloon to almost 600mbu and a stocks/use ratio of 15.77%, the latter of which would be the highest since 2006/07.  Additional surveys will be released when the calendar flips to June.

Trade looking for corn planting progress at 85% complete tonight vs. 75% last week and 76% average.  Soy planting seen at 50% seeded vs. 31% last week and 38% average.

 

Bottom Line: With funds maintaining large short positions, we’ve seen what a large scale short-covering event looks like.  The weather has turned much more variable, and given bears reason for pause in pressing to the downside.  There are more flies in the ointment today than there were just a couple weeks ago and much more reason to employ a neutral/friendly price bias.  Firm markets heading into the crop progress report, which along with weather, should set the tone for the week.

 

Good Luck Today.

RFC 5-18-15 HPC 5-18-15

Tregg Cronin

Market Analyst

Tregg.Cronin@halocommodities.com

www.halocommodities.com

@5thWave_tcronin

 

 

COMMODITY TRADING INVOLVES RISK AND MAY NOT BE SUITABLE FOR ALL RECEIPIENTS OF THIS EMAIL. Neither the information presented, nor any opinions expressed, constitutes a solicitation for the purchase or sale of any commodities. The thoughts expressed in this email and basic data from which they are derived are believed to be reliable, but cannot be guaranteed due to uncertainty about future events and complexities surrounding commodity markets. Those acting on the information are responsible for their own actions.

 

5/14/2015 Morning Comments

Good Morning,

 

Outside Markets as of 5:45am: Dollar Index down 0.3650 at 93.2520; Euro up 0.00750 at 1.1400; Swiss Franc up 0.84% at 1.10150; S&P’s are up 9.75 at 2104.25; Dow futures are up 78.00 at 18,093.00; 10-yr futures are up 0.14%; The Nikkei closed down 0.98% at 19,570.24; The DAX is down 0.05% at 11,345.32; The IBEX-35 is down 0.01% at 11,323.10; Gold is up $0.90 at $1219.10; Copper is down $0.60 at $292.30; Crude Oil is up $0.15 at $60.65; Heating Oil is up $0.0166 at $2.0217; Paris Milling Wheat is up €1.00 at €172.00/MT.

The US Dollar Index finally made new lows for the move yesterday, pushing through the 5/6 corrective low at 93.8820 to trade to the lowest level since January 22nd.  The next level of support for the Dollar would be the 38.2% retracement of the entire 78.9060-100.3900 rally at 92.1831, followed by the 200-day moving average at 90.5089.  Price this morning is also sitting on the 161.8% progression of the initial 100.39-96.1700 sell off from the corrective high at 99.9900, so some support may be seen here.  On the fundamental front, equities and the US Dollar traded weak yesterday after data on US retail sales for the month of April were flat vs. an expectation for growth of +0.5%.  Weak data like this sets the tone for a weak quarter, which could eventually mean weaker than expected GDP growth.  Markets now seem confident no interest rates will be raised until December 2015 at the earliest.

More rain in the last 24 hours for TX/OK/KS with many areas in TX seeing 1.00”+ totals which continue to push % of normal levels well over average.  Rains were also witnessed in NE/SD/ND/MN last night with areas seeing 0.10-0.25” with 0.50” in heavier, localized areas.  The system is working its way east this morning, bringing rain to IA/MO/MN and additional moisture falling in ND with expectations for a generally wet weekend in the WCB and Northern Plains.  Rains will fall on and off again throughout the next 3-days with totals by Sunday seen as a broad 0.50-1-50” throughout the Plains and WCB.  MT is expected to see a widespread area of 1.25-5.00” which could induce some localized flooding.  More rain chances in the southern plains next week which will keep things well watered for the recently planted row crops.  NOAA maps are taking on a cooler bias for the 6-10 and 8-14 in the Plains.

 

A little bit firmer markets this morning as grains look to extend gains for the week which could see wheat post the first back-to-back weekly gains since mid-March.  Soybeans are simply trying to make it out of this week without breaching the April lows which are the last line of defense before the September lows at $9.35 basis July futures.  Planting progress, especially on soybeans, is likely to have slowed this week given the heavy weekend rainfall and the intermittent showers expected this coming weekend.  The slower pace may temper bears a bit, and cash remains a supportive feature with farmers still not interested in doing much marketing at current levels.  As has been stated, this is a supportive feature until the farmer does start selling and as long as movement doesn’t overload the system with weeks to go before harvest.  Corn received a double dose of bearish news Wednesday, and needs to see improved interest at current prices to prevent another lurch lower.

The USDA’s Animal and Plant Health Inspection Service (APHIS) reported an avian flu outbreak in a Nebraska chicken operation, marking the 16th state in which avian flu has been detected.  The poultry farm, which the USDA says contained 1.7 million birds, pushes the total affected number to 33.335 million birds since mid-December.  The avian flu outbreak seems to be quickly surpassing the PEDv virus which wreaked havoc in the swine industry, simply because of how easily the virus seems to be spreading.  At 33.3 million birds, it is quite conceivable we have already lost between 20-25mbu of corn demand for the second and third quarters of this calendar year.  The USDA didn’t directly address the virus on Tuesday’s WASDE, but increased focus will be given to the June SIAP report at the end of the month.

Weekly ethanol production improved last week by 25,000bbls/day to 912,000bbls/day, but still fell well short of the level needed to reach the USDA’s 5.200bbu corn for ethanol demand target.  Last week marked the sixth straight week which failed to hit the level needed, and with 16-weeks remaining in the marketing year doubts are certainly starting to form.  Adding to the negative sentiment is the still comfortable stocks situation, although we did see a decline of 463,000bbls to 20.299 million barrels.  With driving season beginning in earnest in another 2-3 weeks, the plentiful stocks situation won’t require as large of a ramp up in ethanol production as normally would be needed.  Some seasonal recovery is still expected, but run rates need to be pushing a 1.5-2.0% increase over a year ago to hit the USDA target through the end of August.  Estimated ethanol margins this past week were seen at $0.91/gln which is down from last year’s solid $1.22/gln, but still the highest since late-December/early-January.  RBOB/Ethanol spreads also remain high enough to encourage discretionary blending with the 6-month strip sitting at 39.3c/gln this morning.

Wheat basis improved again yesterday with the lack of movement being felt in more than just corn and soybeans.  Spot floor values at the MGEX were seen up 5-10c for most protein classes with 14’s indicated +180/225N and 15’s seen at +350/400N vs +190/225N and +340/410N a week ago, respectively.  KCBT basis was also firmer for the second day in a row with most classes up 4-11c and 12’s listed at +98/108N vs. +80/90N a week ago.  With regards to KC wheat specifically, it should be remembered that wheat stocks (on-farm+off-farm) as of March 1 in TX/OK/KS measured 271.916mbu, the lowest since 2008/09.  Couple that with the lowest prices since 2010 and a July ‘15/July ’16 calendar spread of -50.75c and it is hard that storage will be bidding for wheat just as aggressively as millers or exporters.  This could create a typical post-harvest basis rally much earlier than normal, provided the overrun which normally gets sold at harvest isn’t above and beyond anything we’ve seen in recent history.  The KWN/KWU should be a good indicator of farm marketing intentions as harvest picks up steam in TX later this month.

Export sales due out later this morning with estimates showing wheat at -150/+600TMT, corn at 450-1,000TMT, soybeans at 0-850TMT, meal at 80-200TMT and soyoil at 0-20TMT.  A lot of the time I wonder why estimates are even reported when you see a spread of 30mbu on soybeans and 25mbu on wheat.

 

Bottom line: Grains are holding together relatively well considering the dose of bearish news dealt about world supplies on Tuesday.  At the end of the day, the large crops still need to be harvested, and it is far too early to be extracting weather premium from crops which aren’t even planted yet, regardless of how ideal the weather has been.  Corn and wheat do have a demand problem, however, and that needs to be rectified to prevent prices continuing lower.  The Dollar Index retreating lower may have some managed funds question the move to add additional Ag shorts at the moment.

 

Good Luck Today.

HRW Stocks 5-14-15

Tregg Cronin

Market Analyst

Tregg.Cronin@halocommodities.com

www.halocommodities.com

@5thWave_tcronin

 

 

COMMODITY TRADING INVOLVES RISK AND MAY NOT BE SUITABLE FOR ALL RECEIPIENTS OF THIS EMAIL. Neither the information presented, nor any opinions expressed, constitutes a solicitation for the purchase or sale of any commodities. The thoughts expressed in this email and basic data from which they are derived are believed to be reliable, but cannot be guaranteed due to uncertainty about future events and complexities surrounding commodity markets. Those acting on the information are responsible for their own actions.

 

5/13/2015 Morning Comments

Good Morning,

 

Outside Markets as of 5:45am: Dollar Index down 0.0760 at 94.4590; Euro up 0.00070 at 1.12320; Australian Dollar up 0.51% at 0.80170; S&P’s are up 6.50 at 2101.75; Dow futures are up 49.00 at 18,078.00; 10-yr futures are up 0.22%; The Nikkei closed up 0.71% at 19,764.72; The DAX is up 0.88% at 11,573.59; The IBEX-35 is up 0.88% at 11,422.60; Gold is up $1.40 at $1193.80; Copper is down $0.35 at $292.80; Crude Oil is up $0.59 at $61.34; Heating Oil is up $0.0087 at $2.0076; Paris Milling Wheat is down €0.25 at €173.25/MT.

European equities are leading the globe higher this morning after a better than expected Q1-GDP figure of 0.4% y/y.  France and Italy, the second and third largest eurozone economies, showed the best performance, but GDP in Germany slowed to 0.3% from 0.7% last quarter.  Also making headlines today was Chicago’s credit rating falling to junk status by the rating agency Moody’s, making Chicago and Detroit as the only US cities in 500,000 with a credit rating of junk.  The move came four days after the Illinois Supreme Court tossed out a law which was aimed at cutting the state’s growing pension liabilities.  Economic data today will include retail sales which are expected to show an increase of +0.2% m/m, a weak figure and driven in part by depressed auto sales.  Retail sales have been weak most of the winter, notching declines of -0.9% in Dec, -0.8% in Jan and -0.5% in February due to the bad weather.

Scattered showers across the Dakotas and N-MN as well as more rain in TX this morning, which seems as though it’s becoming a broken record.  Shower activity will increase as the day progresses, bringing 0.50-1.75” totals to C-TX/OK/KS and even SE-NE, while a separate system will drop rain totals of 0.10-0.50” in the Dakotas later tonight.  Moisture will fall on and off in the Northern Plains through the end of the weekend, dropping totals between 1.00-3.00” when totals are tallied.  At the end of the 7-day period, TX will have seen a broad swath of 2.00-6.00” which might eventually raise localized flooding concerns.  Most notable feature from NOAA’s extended maps would be the below normal temps May 18-22 which cover most of the Plains region.  Frost/freeze potential will need to be monitored as another round could be much more damaging.

 

Mixed markets this morning, but not really in-keeping with how markets closed post-USDA report.  Soybeans are clawing back a portion of their losses from yesterday, while grains give back part of the gains with the trade realizing that all three markets were given a solid dose of bearish news in one form or another.  US and Global supplies remain plentiful in all major Ag commodities, and with benign weather, those supplies should grow again 15/16.  Having said that, our markets also realize the corn and soybean crops are a long way from being in the bin, even if the US wheat crop is close to maturity.  At the end of the day, there was nothing in yesterday’s data to cause managed funds to cover short positions, and likely won’t be until either acreage or old crop stocks data is altered at the end of June.  Our markets will revert to trading weather and weekly demand figures in the ensuing weeks.

Beginning first with corn, the USDA didn’t actually provide the trade with anything too far from what was expected, at least not inside the US.  14/15 ending stocks were pegged at 1.851bbu vs. the average trade estimate of 1.864bbu and 1.827bbu last month.  Old crop changes to the balance sheet included a 48mbu cut to FSI use, although none of it in the ethanol category which was seen as odd given recent production performance.  This could prove to be a bearish development yet as without a rebound in ethanol production, a cut to that line item could come next month.  Offsetting this in part was a 25mbu increase to exports, leaving the forecast at 1.825bbu which was also seen as a bit odd as recent export performance has been deemed good enough to leave the estimate alone, but probably not due for an increase.  This left ending stocks at 1.851bbu, increasing stocks ideas for the next marketing year.  The USDA’s first blush estimate of the 15/16 crop year left little to argue with.  They left the national average yield unchanged from the February Outlook Forum at 166.8bpa, while providing generally agreeable demand ideas.  Ending stocks of 1.746bbu would be down from 14/15, and with any sort of weather uncertainty could be down significantly more.  However, the demand picture for 14/15 could still prove weaker than current estimates given the ongoing avian flu situation, a Brazilian export program which is likely to ramp up in a big way July forward and the recent tepid pace of ethanol grind.  If 14/15 ending stocks end up being closer to 2.0bbu than 1.850bbu, even more buffer will be afforded the 15/16 balance sheet.

The world corn situation was probably a bit more bearish than the US situation as the USDA raised 14/15 ending stocks by 4.0MMT to 192.5MMT, and would be up 22MMT from a year ago.  This was thanks to increased Brazilian and Argentine crop estimates as well as the larger US ending stocks.  The USDA also continued the trend of raising Chinese ending stocks which grew to 80.0MMT from 79.7MMT, but are projected to rise all the way to 90.9MMT by the end of 15/16.  There are many in the trade that think true Chinese ending stocks could be as large as 140-150MMT which would add further bearishness to an already oversupplied market.  For 15/16, the USDA sees world ending stocks at 191.9MMT, off just slightly from 14/15 on lighter crop estimates in Brazil and the US.  China is seen at 228MMT for production, but interior estimates have the crop pegged at 232MMT.  The US has potential to pick up additional export business in 15/16 due to lower Black Sea crops, but it will only be done with competitive prices, something it doesn’t have at the moment.

In soybeans, the USDA made the expected changes, raising both old crop exports and crush by 10mbu to reduce ending stocks by 20mbu to 350mbu.  This was largely in-line with expectations, and it was clear the trade was much more focused on the new crop projections.  The USDA plugged in the March prospective plantings report estimate of 84.6 million acres and a yield of 46.0bpa to give us a crop of 3.850bbu vs. 3.969bbu in 14/15.  More importantly, the USDA cut demand ideas from the February Outlook Forum by cutting exports to 1.775bbu which would be 25mbu under the current marketing year.  Crush was increased 20mbu from 14/15, but with Chinese soybean imports pegged as rising 4MMT in 15/16, it was seen as bearish with the US losing market share.  All told, the USDA’s ending stocks estimate of 500mbu was a bucket of cold water to the face of bulls, and would easily be the highest ending stocks and stocks/use ratio in 10-years.  Another bearish feature was the USDA’s estimate of 15/16 Brazilian soybean production at 97MMT vs. 94.5MMT in 14/15.  If this proves to be accurate, planted area is seen up 3.2% y/y and would mark the 9th consecutive gain in planted area.  This obviously speaks to the devaluation of the Brazilian Real, and the enormous task the CBOT futures price has in front of it if it truly wants to discourage production.  The USDA listed an average farm price for 15/16 of $8.25-9.75 vs. $10.05 for 14/15.

The wheat market didn’t provide much for the bulls either with the USDA making the expected cut to exports of 20mbu which went straight to the bottom line to bump ending stocks up to 709mbu.  There is a possibility even this reduced export estimate proves too high.  The USDA’s 15/16 winter wheat production estimate came in at 1.472bbu vs. trade ideas of 1.470bbu as HRW came in slightly above trade ideas and SRW slightly below.  There is a risk the winter wheat yield does improve from here given solid conditions but a yield which is well below trend.  Total wheat production is seen at 2.087bbu vs. 2.026bbu last year.  Plugging this figure into the balance sheet yielded a total supply of 2.937bbu.  The USDA sees 15/16 exports at 925mbu on continued competition from the Black Sea and Europe, but was still disappointing to some in the trade hoping for a larger bounce back in exports this marketing year.  Ending stocks were tallied at 793mbu, the largest since 2010/11 with a stocks/use ratio of 37.0% which would be the highest since 2009/10.  The world balance sheet wasn’t much better with ending stocks rising to 201.0MMT from 197.2MMT last month, while 15/16 ending stocks rose further to 203.3MMT.  Chinese wheat production is seen up another 4MMT to 130MMT, while most exporting nations saw slight declines.  Still, stocks of the major exporters (CAN/US/ARG/UKR/RUS/AUS/EU) are only off slightly from last year and by no means constitute a tight situation as of May 12th.

The market clearly reacted negatively with the soy complex, although grains were much more positive.  Interestingly, spread trade behaved rather well and in some cases made new highs for the move.  For instance, the CN/CU traded to a high of -4.50c today, the highest trade since 1/13/15.  The CN/CZ pushed to -14.50c, the highest since 2/20/15 as it becomes clear the US farmer is planning to dig in his heals as much as possible with remaining old crop supplies.  The SN/SQ traded to +8.50c, the highest level since 7/25/14 as even the increased supply situation in the US might be hard to come by until successful development has occurred.  In wheat, the WN/WU hit -5.75c, the highest level since 5/28/14 before easing slightly to -7.00c.  The KWU/KWZ rallied sharply today, but remained within recent ranges.  The only market to record a truly negative performance in spreads today was Minneapolis with the MWN/MWU hitting the lowest level since 9/22/14.  Hard wheats should continue to maintain premium over soft red, especially once the first push of harvest activity begins in HRW later this month.

Looking back over history, changes in final yields from the May WASDE to the final production report in January usually range somewhere between 10bpa on corn and 2bpa on soybeans.  There are always exceptions as we saw in 2012, but generally speaking, changes normally fall in that range.  Assuming the USDA’s acreage estimates are correct, a yield change of 10bpa would equate to 820mbu of corn, and a 2bpa change in soybeans would mean 170mbu off of supplies.  Were this to occur, we would see a large scale short-covering event by the managed funds which are short up to their eyeballs.  But, it is important to remember that as it stands today, even with these kind of production cuts, rationing probably wouldn’t be needed.  Higher prices, sure.  Rationing, probably not.  The global farmer has been hitting his stride on corn, soybean and wheat production the past two years, and without a switch to inclement weather soon, time is running out to avoid hitting on a third.  Demand either needs to ramp up significantly in response to a lower price structure, or price will have to go low enough to discourage additional production.  A strong US Dollar against most exporting nations’ currencies will make this signal even more difficult as we are quickly realizing.  As a quick recap, the Brazilian Real is 7.8% off 10-yr lows, the Canadian Dollar is 6.5% off 6-yr lows, the Australian Dollar is 5.3% off 6-yr lows and the Russian Ruble remains more than 15% weaker than the weakest level it traded from 2004-2014.

 

Bottom Line: Ethanol production at 9:30am to see if run-rates have improved any from the recent string of week performances.  At the end of the day, it is important to remember that much of the aforementioned is still conjecture until crop development is assured.  There are plenty of issues which can be raised with the USDA’s estimates for countries like India, Australia and even the Black Sea, but those arguments aren’t likely to be heard in May.  Prices should remain depressed as long as weather remains favorable, and it is going to be hard to kill a crop in mid-May/mid-June.  Would obviously caution getting too bearish at 4-yr price lows with funds already touting record short positions in some cases, but the soy complex does have the most downside vulnerability.

 

Good Luck Today.

Mid-May Corn Progress vs Yields 5-13-15

Tregg Cronin

Market Analyst

Tregg.Cronin@halocommodities.com

www.halocommodities.com

@5thWave_tcronin

 

 

COMMODITY TRADING INVOLVES RISK AND MAY NOT BE SUITABLE FOR ALL RECEIPIENTS OF THIS EMAIL. Neither the information presented, nor any opinions expressed, constitutes a solicitation for the purchase or sale of any commodities. The thoughts expressed in this email and basic data from which they are derived are believed to be reliable, but cannot be guaranteed due to uncertainty about future events and complexities surrounding commodity markets. Those acting on the information are responsible for their own actions.

5/12/2015 Morning Comments

Good Morning,

 

Outside Markets as of 5:55am: Dollar Index down 0.7060 at 94.2980; Euro up 0.00980 at 1.12590; Aussie Dollar up 0.94% at 0.79630; Swiss Franc up 1.13% at 1.08430; S&P’s are down 14.75 at 2083.00; Dow futures are down 127.00 at 17,914.00; 10-yr futures are down 0.36%; The Nikkei closed up 0.02% at 19,624.84; The DAX is down 1.87% at 11,455.60; The IBEX-35 is down 1.71% at 11,250.20; Gold is up $11.10 at $1194.10; Copper is up $3.60 at $293.90; Crude Oil is up $0.99 at $60.24; Heating Oil is up $0.0360 at $1.9814; Paris Milling Wheat is unchanged at €173.50/MT.

Equities are taking cue from global debt markets which have witnessed US Treasury yields climb to the highest level in 5-months.  Financial media outlets are citing overblown expectations tied to the ECB’s quantitative easing program which helped push global debt valuations to extreme levels.  It doesn’t help bailout talks between the ECB and Greece have yielded little more than additional negotiations which the market seems to be seeing through.  What had been a source of support for the US Dollar Index, the 100-day moving average has now turned into resistance at 95.2767 with the basket trading at 94.3550 this morning.  One thing is for certain, the decline of the Dollar has slowed markedly, and even appears to be giving off a bullish divergence in momentum.  Perhaps the correction is about over? Very little economic data on the docket today.

Pretty wide open radar across the Midwest this morning before the next round of moisture impacts the region.  Showers will bring moisture to TX the next 24-hours before moving north into OK/KS/NE tomorrow into Thursday.  Additional moisture will be seen in S-MN/IA/N-MO Thursday into Friday, and the Northern Plains will be impacted over the weekend to the tune of 0.50-2.50” across MN/SD/S-ND.  All told, the 7-day forecasted precip map looks wet for the entire Plains region, and almost all of the Midwest.  Precious little planting progress looks to be completed during this stretch.  Frost/freeze warnings were issued for several states in the Plains this morning, and air temperatures as of 6:00am do show some spots in WY/NE/SD which dipped down to 30-32*.  Can’t believe there were any lasting impacts.  Extended maps look favorable from NOAA this morning for the next 15-days.

 

Mixed to weaker markets this morning as the crop progress report from yesterday afternoon confirmed big progress again last week, although price movement should remain limited until after the WASDE data is released later this morning.  Planting progress should slow considerably given weather over the weekend and what’s forecast the next 7-days.  Emergence will also be a focus given the cooler, wetter weather being witnessed.  All of this will be talking points once we get the USDA report out of the way in a few hours and can go back to talking conditions and weather.  Plenty of technical indicators lining up and arguing for support in wheat, but precious little on the fundamental side of the ledger is offering support today.  Additional bird flu cases confirmed in the last 48-hours, which will keep a focus on feed demand heading into summer.

Avian flu was detected in a mixed poultry operation in Indiana Sunday, marking the 15th state in which traces of avian flu have been detected.  More importantly, Indiana has the third largest layer and egg population in the United States, increasing the importance of keeping the outbreak contained.  All told, since December 19th, 2014, there have been 147 separate detections reported which have affected 30,731,873 birds.  According to data from Iowa State, they estimate total corn demand from chickens at 0.9 bushels per bird, and 0.8 bushels per bird on turkeys.  Even dropping this number down to 0.6 bushels per bird to account for fowl which have been affected, we are still talking about the potential for 18.4 million bushels of lost corn demand.  The USDA has stated they think warmer temperatures will limit the spread of the virus, but this remains to be seen.  How the USDA deals with the issue on today’s WASDE or the June stocks report will be incredibly important for old and new crop feed demand ideas.

Export shipment data was released yesterday for the week ended 5/7 and showed wheat inspections at 13.9mbu vs. the 20.1mbu, and bringing MY shipments to 788.1mbu.  Only three weeks left in the marketing year, and total shipments are right around 100mbu less than the USDA forecast.  Corn shipments continue to run at an impressive clip with 44.7mbu shipped last week, well better than the 33.7mbu needed weekly to hit the USDA forecast.  Shipments over the last 3-weeks have averaged 46.3mbu, and bode well for the USDA standing pat on their export forecast later today.  Soybean shipments were 9.7mbu, above the 5.7mbu needed weekly to hit the USDA forecast and brought MY shipments to 1699.0mbu, up 10.9% from a year ago.  Total shipments of 1699.0mbu account for 94.9% of the USDA’s marketing year forecast, and those are beans which can’t be canceled or rolled.

Yesterday’s crop progress had numbers about as expected with corn planting at 75% complete vs. 55% last week and 57% average.  Planting remains about 1-week ahead of schedule, although should be close to average with a week of delays.  States furthest ahead of schedule include MN at 95% planted vs. 50% average, SD at 76% planted vs. 44% average, ND at 64% planted vs. 29% average and WI at 69% planted vs. 33% average.  Most states in the ECB and Delta have caught average progress numbers, so no big concerns out there today.  Corn emergence was estimated at 29% vs. 24% average, but could slow behind average given cool/wet weather forecast this week.  Soybean planting was seen at 31% vs. 13% last week and 20% average.  MN reported planting progress at 70% complete vs. 17% on average and is tied with MS for most progress nationally.  MN’s crops will remain vulnerable for the next couple of weeks, so we need to get out of May without a frost.  The WCB had the most progress.  Spring wheat planting was reported at 87% complete vs. 75% last week and 51% average.  Spring wheat planting is actually over 3-weeks ahead of the 5-year average pace with national progress usually not hitting 87% complete until the week of May 31st.  Winter wheat conditions improved 1pt to 44% G/E while national heading progress was listed at 56% vs. 45% average.  TX, OK and KS are 89%, 96% and 70% headed, respectively.

A few quickies to close: cash traders suggested French barley shipments may be getting held up either at origin or destination by China due to increased phyto-sanitary restrictions.  Should this prove true, French barley would be added to a growing list of commodities receiving increased phyto scrutiny from China.  May have something to do with their in-house think tank raising their corn production estimate to 232MMT, up 7.4% from a year ago.  Separately, also rumblings about Black Sea wheat working into NAFTA destinations which are normally a foothold for US supplies.  This same trade occurred in late 2014, and signaled US FOB prices were likely too high.  Based on new crop offers out of the Black Sea, US-SRW is $10-15/MT FOB too expensive and US-HRW is $35-40/MT FOB too expensive..

 

Bottom Line: Let’s get a look at the USDA reports and make some conclusions after.  Risks today would include the national average corn yield being increased based on early planting, a cut in ethanol demand based on weak production run rates as of late, wheat exports being axed on slow shipment/sales data and global corn production being increased more than expected.  Given funds are already short large amounts of corn and wheat, the negative price reaction to any of the above could be more limited.  More after 11:00am.

 

Good Luck Today.

HPC 5-12-15 Min Temp 5-12-15

Tregg Cronin

Market Analyst

Tregg.Cronin@halocommodities.com

www.halocommodities.com

@5thWave_tcronin

 

 

COMMODITY TRADING INVOLVES RISK AND MAY NOT BE SUITABLE FOR ALL RECEIPIENTS OF THIS EMAIL. Neither the information presented, nor any opinions expressed, constitutes a solicitation for the purchase or sale of any commodities. The thoughts expressed in this email and basic data from which they are derived are believed to be reliable, but cannot be guaranteed due to uncertainty about future events and complexities surrounding commodity markets. Those acting on the information are responsible for their own actions.

5/11/2015 Morning Comments

Good Morning,

 

 

Outside Markets as of 6:20am: Dollar Index up 0.2980 at 95.0920; Euro down 0.00550 at 1.11550; Brazilian Real is up 1.14% to 2.971768; S&P’s are down 1.00 at 2107.50; Dow futures are down 4.00 at 18,117.00; 10-yr futures are down 0.18%; The Nikkei closed up 1.25% at 19,620.91; The DAX is down 0.50% at 11,651.32; The IBEX-35 is down 0.03% at 11,421.80; Gold is down $3.80 at $1185.10; Copper is down $1.05 at $291.00; Crude Oil is down $0.40 at $58.96; Heating Oil is down $0.0131 at $1.9404; Paris Milling Wheat is up €1.75 at €175.00/MT.

Asian equities rallied overnight on the news the People’s Bank of China cut interest rates for the third time since November after poor economic data in April spurred leadership into action.  The PBOC cut their benchmark lending rate by 25bp to 5.10%, and cut the one-year deposit rate to 2.25%.  The data in April which spooked the central bank were exports off 6.4% y/y, imports off 16.2% y/y and the April CPI up just 1.5% vs. the full year target of 3.0%, which stoked deflationary concerns.  An interest rate cut is, in and of itself, a supportive thing, but the overall theme of China still trying to jumpstart their economy is not.  The CRB-Index is likely to struggle as long as China is still using measures to ignite their economy as opposed to cool it off.  Crude oil is back to trading below $60.00/bbl, an important psychological resistance level.

Where does one start after a weekend of weather like that? Snow showers are continuing to fall this morning in parts of SD/ND where as much as 12-24” fell in W-SD over the weekend.  Severe weather accompanied the snow and heavy rain with multiple tornado reports witnessed yesterday.  A separate band of moisture is moving up from the south this morning too, stretching from TX to IL.  Precip over the last 3-4 days is shown in the map below and was substantial across the Plains this weekend.  OK received another round of heavy rains, while areas in the Northern Plains/WCB saw their best shot of moisture in months.  The drought monitor should change substantially during the next 10-14 days.  Additional moisture is on tap for the affected areas from the weekend with heavy rains seen in TX/OK/E-KS as well as portions of NE/IA/SD/MN by the coming weekend.  The 7-day forecasted precip map is also below and looks as though it should keep planting progress halted the next week.  As has been noted, yield drag isn’t normally an issue until after May 15-20th.  NOAA’s extended maps keep precip above normal through the 8-14 day for the entire Midwest.

 

Mixed markets to begin the week across the Ag sector as rain gauges are tallied and traders try to compute fast planting progress against expected delays moving forward.  Position squaring is also taking place ahead of tomorrow’s WASDE report on which the USDA will release their first balance sheet and yield projections for the 15/16 crop year.  As it stands today, it might be difficult to find much to be bullish about following tomorrow’s release given the quick planting pace and ample moisture across the entire US.  Taking a step back, very few areas around the globe are witnessing adverse weather either, which will keep global production ideas on both wheat and corn growing, not declining.  This hasn’t been lost on managed funds who are touting record short positions in many markets, but to date they’re still on the winning side of these trades.  Difficult to kill crops in mid-May.

Friday’s COT data kept recent trends in place with managed funds pushing shorts to a new record -110,792 contracts in Chicago, while the commercial net position rose to -2,214 contracts, the 3rd smallest on record.  In KC, funds grew shorts to -40,160 contracts, the largest net short on record and now accounting for 21.4% of total open interest.  Commercials in KC are now net long +4,544 contracts, also a new record.  Including Minneapolis, funds are now short a record -153,307 contracts, which is 43.3% larger than the previous record from December 2013.  From a purely structural standpoint, the wheat market can’t really get much more supportive, but large short positions and bearish sentiment aren’t bullish until they are.  In corn, funds sold 32,604 contracts to push their net short to -157,745 contracts, the largest net short since December 2013 as well.

Turning to tomorrow’s WASDE report, the trade is looking for 14/15 ending stocks on wheat of 693mbu vs. 684mbu last month, 1.864bbu on corn vs. 1.827bbu last month and 360mbu on soybeans vs. 370mbu last month.  For 15/16, the trade is looking for ending stocks on wheat of 750mbu, corn at 1.752bbu and soybeans at 443mbu. On old crop, the focus will be on wheat exports, or the lack thereof, and the expected cut which should filter straight through to ending stocks.  When all is said and done, 14/15 exports are likely to go down as the lowest since 2002/03, and the second lowest since 1980/81.  On corn, the focus will be on ethanol demand and the string of disappointing weekly production rates.  The USDA has ample evidence to cut their estimate by 15-25mbu at this time.  Exports have improved enough to buy the USDA some time while the feed/residual estimate isn’t likely to be altered until after the June 30th stocks report.  Soybean ending stocks could actually dip further than the trade thinks as both exports and crush demand have been running above needed levels.  Ending stocks around 350mbu shouldn’t be a surprise, but at the same time isn’t bullish considering a comfy 9.5% stocks/use ratio.

On new crop, winter wheat production will be the most tangible estimate with odds strong for an increase given ample moisture in the southern plains, an improvement in conditions over last year and a likely increase in harvested acreage due to lower abandonment.  Spring wheat planting is essentially complete in the Northern Plains, so this report shouldn’t find anything wrong with the US wheat situation.  Some analysts think the USDA could increase their national average corn yield estimate from 166.8bpa based on the fast pace of planting.  There is equal track record for an increase vs. a steady reading, and I will error on the latter at this time given the moisture pattern which has set up and the delays which could be seen going forward.  New crop exports remain a concern for this analyst given increasing crop ideas for Brazil, favorable weather to date for Ukraine and growing crop and stocks ideas out of China.  New crop soybean exports are also a risk at this stage given the competition both old and new crop US soybeans are likely to face following the record South American crop.  As mentioned above, there might be precious little for bulls to sink their teeth into if the reports turn out as planned.

Going home Friday, corn basis remained firm at almost every demand center tracked from export to ethanol.  Given wet weather experienced and forecast, the farmer might turn a bit more aggressive in marketing the rest of this month provided timely emergence occurs.  One has to retain a bullish bias on spreads until the farmer turns a more “palms-out” seller, which isn’t likely to occur until July/August.  It is no secret the US farmer is still sitting on 40-60% of the 2015 corn crop, and how that moves to town over the next 2-3 months could make cash markets interesting.  Firm on soybean basis as well, but more mixed on wheat.  General tenor seems to be one of steady/weak HRW basis, but steady/firm HRS basis.  Movement should slow to a crawl with the moisture and road conditions being witnessed in the Northern Plains, so some appreciation in spot and to-arrive bids wouldn’t be out of the ordinary.

 

Bottom Line:  Not looking for much outside of the past few days today given tomorrow’s WASDE report.  Wheat has a demand problem with only one supply problem, India.  Corn has just enough demand to keep its nostrils above water, but supply is on the rise based on conditions up to May 11th.  Soybeans are enjoying some contra-seasonal demand, but barring a weather snafu, stocks are set to grow there too.  Funds are susceptible, but we need to give them a reason to cover first.

 

Good Luck Today.

RFC 5-11-15 HPC 5-11-15

Tregg Cronin

Market Analyst

Tregg.Cronin@halocommodities.com

www.halocommodities.com

@5thWave_tcronin

 

 

COMMODITY TRADING INVOLVES RISK AND MAY NOT BE SUITABLE FOR ALL RECEIPIENTS OF THIS EMAIL. Neither the information presented, nor any opinions expressed, constitutes a solicitation for the purchase or sale of any commodities. The thoughts expressed in this email and basic data from which they are derived are believed to be reliable, but cannot be guaranteed due to uncertainty about future events and complexities surrounding commodity markets. Those acting on the information are responsible for their own actions.

5/8/2015 Morning Comments

Good Morning,

 

Outside Markets as of 6:10am: Dollar Index up 0.1720 at 94.8070; Euro down 0.00490 at 1.12260; British Pound up 1.09% at 1.5420; S&P’s are up 4.50 at 2088.75; Dow futures are up 41.00 at 17,930.00; 10-yr futures are up 0.01%; The Nikkei closed up 0.45% at 19,379.19; The DAX is up 0.57% at 11,472.86; The IBEX-35 is up 0.66% at 11,254.50; Gold is up $4.40 at $1186.60; Coper is up $0.55 at $292.35; Crude Oil is up $0.24 at $59.20; Heating Oil is up $0.0016 at $1.9633; Paris Milling Wheat is up €0.25 at €172.75/MT.

Despite weaker than expected economic data out of China last night, global equities are firmer as we head into the April employment report.  Chinese imports for the month of April fell 17.3% y/y, adding to March’s 12% decline, and coming in weaker than forecasts of -10%.  Weaker than expected imports will raise more doubt about the country’s 7% growth target.  Worth noting, however, April crude oil imports by China hit a new record, with Jan-Apr crude imports at 111MMT, up 7.8% y/y.  Also making headlines this morning is chatter Monsanto is in talks with Goldman Sachs on a takeover of Swiss Chemical company Syngenta which would create an industry giant with more than $31 billion in sales. Monsanto is said to be offering Syngenta $487.59 per share, a premium of 35% to Syngenta’s closing price last night.  Payroll report expected to show an increase of +230,000 jobs.

Rains moving across MO/AR this morning, otherwise the majority of the Midwest is going to start the day dry.  The next system starts up Saturday into Sunday in the far WCB and Northern Plains with heavy rains forecast in W-SD/W-NE/NE-CO with separate rains falling in KS/OK/TX/MO and working east to begin the week.  Localized totals look as heavy as 3-4” in WY/SD/NE but a general 0.50-1.00” should be seen for the entire Plains region and WCB.  The real focus could be the cool temps to start the week, however, with the map below showing the forecast low temps for Monday morning.  As one will notice freezing temps will be witnessed in CO/NE/WY/SD/MT with the potential for frost/freeze in NW-KS.  The Midwest then looks to dry out during the 6-10 before turning above normal once again for the 8-14 with ideal weather conditions seen.

 

Lightly mixed markets to finish a week which saw new lows in grains and more range bound trade in soybeans.  For the week, July Chicago Wheat is up 0.75c, July corn is down 1.25c and July soybeans are up 9.50c.  If Chicago wheat managed a higher weekly close it would be the first in 5-weeks, and would bring this afternoon’s COT data into focus to see whether funds have slowed their buildup of short positions.  Hard to argue too much with price direction as of late with most Northern Hemisphere production areas seeing timely planting and favorable weather conditions.  Looking ahead, it appears as though it will take a weather event in June or July to stabilize the ship and build a longer term base.  It’s very difficult to kill a crop in LH-May/FH-June, but funds must also realize how far away harvest is when assessing their bulky short positions.

The Wheat Quality Council finished up their 3-day KS wheat tour yesterday, finding an average yield of 35.9bpa vs. a 5-yr average of 40.3bpa and a 2014 final yield from the USDA of 28bpa.  The total KS crop is seen at 288.5mbu vs. Informa Economics at 303mbu and a 2014 final crop of 246.4mbu.  Representatives from CO said the 2015 wheat crop should yield 38.0bpa compared with a 2014 yield of 38.1bpa with total production pegged at 89.3mbu.  The Oklahoma Grain and Feed Association estimated the 2015 wheat crop with an average yield of 29.4bpa compared with a 2014 yield of 17.0bpa.  The increased potential is well known, and now getting the crop out of the field will be the focus.  The frost/freeze event Monday will be watched closely with wheat at joint or after susceptible to damage.  As of last Monday, 41% of KS was heading, 7% of CO and 3% of NE.

A quick note on our neighbors to the north, Saskatchewan is making good seeding progress with 14% of the 2015 crop in the ground vs. about 2% the week prior and up from 2% last year at this time.  Moisture conditions have been favorable in the province with soil moisture rated as 16% surplus, 74% adequate and 10% short.

Yesterday saw export sales released with more bad news for wheat as another 5.4mbu was canceled and rolled to new crop, the second week in a row of net cancellations.  This all but guarantees the USDA will cut its export forecast on next week’s WASDE report as total commitments now stand at 848.0mbu, down 27% y/y.  China rolled 57,500MT of HRS to 15/16, while Brazil bought 60,000MT of SRW for 15/16, an encouraging sign.  Corn sales were impressive once again at 33.1mbu vs. 14.1mbu needed weekly to hit the USDA export forecast.  Total commitments stand at 1620.3mbu, down 7% from a year ago vs. the USDA forecast of a 6.1% decline.  No reason for USDA to change their estimate next week.  Soybean sales were also impressive at 12.5mbu vs. the 1.4mbu needed weekly to hit the USDA forecast.  Total commitments are now 1815.5mbu, up 11% from a year ago and vs. the USDA export forecast of 1790.0mbu.  Usually, we see 50mbu of cancellations or rolling of sales to the next marketing year.  If total commitments move materially above 1830-1840mbu, the USDA is probably warranted in increasing their export forecast.

While still on the topic of exports, there was chatter yesterday about a major Asian corn destination possibly limiting imports of corn from states/counties affected by the avian flu virus in the US.  Namely, IA and MN corn would be in the crosshairs as the largest outbreaks have occurred in those two states.  Cash traders aren’t certain if this can even be accomplished, but it could shift export pull to the ECB and the delivery warehouse system along the river.  Regardless, corn basis continues to appreciate both in the US and abroad with Argentine maize premiums once again firmer Thursday.  The Argentine farmer is choosing to store his recently harvested corn, which could be opening a window for the Brazilian farmer who is staring at a potentially record breaking 2nd crop safrina crop.  It seems as though handlers are expecting the last 40-50% of the US corn crop to move in July-August which could be interesting to watch unfold.  Widely known the US farmer is sitting on a large portion of the crop which has continued to decline in price.  Limited “give-up” selling to date, but successful planting and emergence could see more corn hit the street.

Firm wheat basis going home yesterday at the MGEX with 13.0’s up 20-35c, 14.0’s up 10c/dn 10c, 14.5’s up 25c and 15’s up 10c on the low side.  14.0s are now quoted +180/235N while 15.0’s are quoted at +350/400N.  KCBT basis was unchanged with 12.0’s at +80/90N.

 

Bottom Line: Feels as though markets could limp into the weekend with little to drive prices higher other than the already well-known structure of our markets.  Weather is deal, planting is rapidly advancing where it can and there remains plenty of grain in farmer bins.  Demand is doing just enough to hold serve, but plenty of doubts around with softer ethanol production, avian flu and competitor origins touting decent supplies.  Global wheat supply should be ample in 15/16, so increased demand needs to be spawned from the lower price structure.

 

Good Luck Today.

Low Temp 5-8-15

Tregg Cronin

Market Analyst

Tregg.Cronin@halocommodities.com

www.halocommodities.com

@5thWave_tcronin

 

 

COMMODITY TRADING INVOLVES RISK AND MAY NOT BE SUITABLE FOR ALL RECEIPIENTS OF THIS EMAIL. Neither the information presented, nor any opinions expressed, constitutes a solicitation for the purchase or sale of any commodities. The thoughts expressed in this email and basic data from which they are derived are believed to be reliable, but cannot be guaranteed due to uncertainty about future events and complexities surrounding commodity markets. Those acting on the information are responsible for their own actions.

 

 

5/6/2015 Morning Comments

Good Morning,

 

Outside Markets as of 6:05am: Dollar Index down 0.2950 at 94.7810; Euro up 0.00400 at 1.12410; Aussie Dollar is up 0.64% at 0.79760; S&P’s are up 4.00 at 2088.00; Dow futures are up 39.00 at 17,903.00; 10-yr futures are down 0.09%; The Nikkei closed up 0.06% at 19,531.63; The DAX is up 0.76% at 11,414.08; The IBEX-35 is up 0.52% at 11,173.80; Gold is down $3.30 at $1189.90; Copper is down $2.05 at $291.45; Crude Oil is up $1.41 at $61.80; Heating Oil is up $0.0315 at $2.0460; Paris Milling Wheat is up €2.00 at €172.75/MT.

The two most tracked futures markets by commodities traders are enjoying some technical spotlight this morning as the US Dollar Index trades below its 100-day moving average at 94.7970, while Crude Oil retains strength above $60/bbl for the first time since 12/11/14.  If the Dollar Index fails to close above current trading levels, weakness could be seen down to the 38.2% retrace of the 78.9060-100.3900 rally at 92.1831 if the consolidation area around 93.25-93.83 doesn’t hold.  Crude oil on the other hand is easily trading above both the 50 & 100-day moving averages with the 200-day and the 38.2% retrace of the entire 107.68-42.03 selloff both sitting at $69.11 and $67.11/bbl, respectively.  Today’s weekly EIA energy inventory report is expected to show a build of 1.2 million bbls of crude which would be the 17th consecutive weekly rise in US oil inventories.  Clearly, the market has moved passed the nearby supply outlook and is instead focused on demand prospects and how quickly shale drillers might be able to come back online in Q4-2015.  Other economic data of note today would include the Apr ADP private employment report which is expected to show an increase of +200,000, improving from +189,000 in March.

The wet weather forecast for the southern plains has moved in this morning, bringing showers from TX to ND.  Precip returns from the last 48-hours are shown in the first map below as heavy localized rains fell in TX yesterday while solid rains are falling on wheat tour participants across KS this morning.  Plenty more moisture is expected to fall over the next 7-days with the entire plains wheat areas receiving moisture, and in some cases in excess of 3.00” when all is said and done.  Localized flooding issues have been reported in portions of KS.  Importantly, the surge in corn planting seen in the WCB and Northern Plains this past week should see decent moisture to help germination efforts.  Temperatures will trend a bit cooler the next 10-days, although no frost/freeze threats seen this morning.  Moisture during the 6-10 is seen as normal/above for the Midwest and Southern Plains.

 

A little more price recovery this morning in row crops as corn looks for its first 2-day winning streak since April 16/17, while wheat continues to take one step forward and two steps back inside its declining trend channel.  Before recovering yesterday, July corn traded to a low of $3.5575, the lowest trade since October 3rd.  Supplies are still being held tight by the US farmer, but conditions for planting and moisture are just too ideal for the managed funds to resist at this point.  Soybeans have obviously enjoyed the most positive chart action, aside from soy oil of course, with the July contract knocking on April resistance levels and the $10.00 mark, which cash traders remark would lead to a “raining of soybeans” from the farmer.  This is exactly what was said to have happened yesterday in South America thanks to CBOT prices as well as currency influence.  Nothing to get too excited about today.

Beginning first with a rarely talked about market in this space, soy oil has enjoyed a 6.7% rally since the end of April, and is up 10.8% since the middle of March as crude oil has rebounded and drug the market higher.  In addition, traders noted China in buying several hundred thousand tonnes of South American soy oil last week, a rare purchase considering the amount of soybeans China crushes itself and the abundance of soy oil it would have at its disposal.  Add in the fact strike talks are still ongoing in Argentina with around 20% of crushing capacity currently on strike, and product from the world’s largest soymeal exporter comes in to question.  Continuous oilshare has rallied to a high of 34.7% overnight, the highest level since October 9th, 2014 while the July board crush at 72.5c/bu is above both the 50 and 100-day moving averages, although below the 200-day.

In the wheat markets, very little positive news came from yesterday’s session.  Several wire services reported the Russian Ag Minister was proposing to eliminate the $39/MT export tax on wheat effective May 15th which was a month and half earlier than the initial end date of July 1 as originally proposed.  This was no secret, and had been bantered about in the market place for a couple weeks, but it seems as though the removal is a direct indication of the country’s confidence in their developing wheat crop.  In addition, Egypt’s GASC purchased 120,00MT of Russian and Romanian wheat for June 16-25 shipment at an average price of $205.76/MT C&F. The wheat was said to be much cheaper than French, US and Polish origins, and would seem to solidify Russia’s move back to the export table.  Odds are good Russian crop ideas will be headed higher from this point forward.

Cash corn markets were firm Tuesday, and got firmer by the time traders headed home for the day.  PNW corn shuttles were bid +97/98N for spot and June shipment with +100N said to be saleable for JJ slots.  Call this up 3-4c for nearby and up as much as 10c for JJ slots compared with week ago values.  Hereford, TX was called up a similar amount.  In looking at a basis run-down for the month of April, major destination ethanol plants in IA were up around 7-10c, while IL plants were up 9-13c and the behemoth in NE was up 12c for the month.  CIF NOLA corn markets were up 5c on the month, and all of the aforementioned hasn’t been lost on spreads.  The CK/CN traded to even money yesterday, and is resting at -0.50c yesterday as the market tries to entice commercial hedged inventory or DP inventory into the market until the farmer reengages.  The CN/CU has enjoyed a renewed resurgence as well, trading to -6.00c overnight, the highest trade since February 13th as the market ponders when bulging on-farm supplies might move to town.  The SK/SN has moved supernova, touching +9.75c overnight, a new contract high as old crop soybean supplies remain drum tight.  Never a good idea to short basis heading into planting season, especially when futures prices are near their lowest levels in four years.

Seguing to the world scene, the South American farmer sold beans in handsome fashion yesterday with cash traders suggesting as much as 1MMT of Brazilian soybeans were priced yesterday alone.  This has been due in part to the CBOT price recovery, but also a resumption of weakness in the Brazilian Real.  After trading to a low of 2.8880 on 4/28, the Brazilian Real hit 3.123536 Monday before backing off slightly.  This has pushed soybeans priced in Brazilian Reais right back up to the highest level since early April, and near the highest level since July 2014 at 30.83 reais/bu.  Importantly, new crop soybean prices are also benefitting from the CBOT/currency influence with May ’16 soybeans priced in Brazilian reais sitting at 30.05 reais/bu as of this morning.  These sort of levels will not discourage the South American farmer from keeping production at current levels or expanding in 2015/16.

 

Bottom Line: Ethanol production at 9:30am will be watched closely as the last update before the May WASDE will leave a taste in traders’ mouths about corn demand.  Our markets remain split between tight old crop cash markets and growing new crop production ideas.  Plenty of supply in the US whenever the farmer finishes farming and reengages on the sell side.  That does little to reassure end users awaiting supply.  Wheat markets have little working for them aside from technical considerations and huge fund shorts.  Rain is making grain, especially inside the US.

 

Good Luck Today.

RFC 5-6-15 HPC 5-6-15

Tregg Cronin

Market Analyst

Tregg.Cronin@halocommodities.com

www.halocommodities.com

@5thWave_tcronin

 

 

COMMODITY TRADING INVOLVES RISK AND MAY NOT BE SUITABLE FOR ALL RECEIPIENTS OF THIS EMAIL. Neither the information presented, nor any opinions expressed, constitutes a solicitation for the purchase or sale of any commodities. The thoughts expressed in this email and basic data from which they are derived are believed to be reliable, but cannot be guaranteed due to uncertainty about future events and complexities surrounding commodity markets. Those acting on the information are responsible for their own actions.

5/5/2015 Morning Comments

Good Morning,

 

Outside Markets as of 6:00am: Dollar Index up 0.0890 at 95.5650; Euro down 0.00120 at 1.11330; S&P’s are down 3.00 at 2106.25; Dow futures are down 17.00 at 17,978.00; 10-yr futures are unchanged; The Nikkei closed up 0.06% at 19,531.63; The DAX is down 0.18% at 11,599.20; The IBEX-35 is down 0.48% at 11,373.70; Gold is down $1.00 at $1185.80; Copper is up $1.55 at $293.60; Crude Oil is up $0.47 at $59.40; Heating Oil is up $0.0147 at $1.9934; Paris Milling Wheat is unchanged at €176.25/MT.

While most investors are focused on when the Federal Reserve might raise interest rates, the Australian Central Bank cut interest rates last night in an attempt to revive their economy which has been weighed on by falling commodity prices and slowing demand from China.  The central bank cut its benchmark interest rate to a record low of 2.00%, which was the first cut in 3-months.  Australia’s jobless rate of 6.1% has overtaken the US rate of 5.5%, and the central bank is targeting inflation between 2-3%.  The Australian Dollar sold off briefly before recovering to trade up 0.34% last.  In the US today we’ll have the April ISM non-manufacturing survey which is expected to fall by -0.4 points to a new 10-month low of 56.1.  The non-manufacturing index is still in much better shape than the manufacturing survey which posted a 51.5 for April, much weaker than expectations.

 

A band of showers moving across the southern plains and central Midwest this morning in what kicks off a rather wet weak for the plains and Midwest.  Rains fall steadily in the plains the next 5-7 days with measureable precip in one state or another almost every day until next week.  The next 3-days will see heaviest rains in N-TX/OK/S-KS where a broad 0.50-1.50” is expected to fall while localized areas will see up to 2.50-3.00” in OK/TX.  The rains will extend up to NE and portions of SD.  Rains will continue falling into the weekend in OK/KS/N-TX with additional precip Fri-Sun totaling 0.50-2.50” and even more rain next week which finally heads east to bring rain to the cornbelt.  7-day forecasted precip is shown below with substantial rains for the plains which will finish the HRW crop and replenish soils for any fall crops as well.  Extended maps look good with below normal temps and above normal precip.

 

Softer tone this morning as markets digest the substantial planting progress made over the last week as well as the forecasted moisture which will leave precious few dry spots if it all falls.  The US farmer has once again shown how quickly he can plant a corn crop, highlighting the investment they’ve made the last 5-years during the “good-times” across the farm belt.  This also puts the market ease about moisture falling this week and keeping planters sidelined for a few days.  As long as no lasting delays occur past May 15th, this corn crop looks as though it will be off to as good of a start as the market could hope for.  There are anecdotal reports of more corn acres going in the ground because of the fast start, but little will be known on that front until the June 30th planted acreage report.  Funds have yet to be given a reason to vacate their large short positions, but the market remains conscious of them.

The weekly crop progress report confirmed huge plantings over the last 7-days with corn planting jumping to 55% complete from 19% last week and well better than the 38% average for the week.  Market expectations were for corn planting to be 49-51% complete, and puts this year about 1-week ahead of normal.  Huge advancements were made in the WCB/Northern Plains where conditions were nearly ideal as farmers there planted just over 20.0 million acres in IA/MN/MO/CO/KS/ND/NE/OK/SD/TX.  In total, a little over 30.0 million acres were planted last week, which almost doubles the highest 5-year average week of 16.0 million.  Outside of the Delta, MN is the most advanced at 83% complete vs. 34% average, while KY is the most behind at 25% complete vs. 52% average.  There are around 40.0 million acres of corn to plant across the US which should go into good moisture after this week.

Soybean planting progress was estimated at 13% complete vs. 2% last week, 9% average and market ideas for 11-13%.  Soy planting progress should make a big leap forward this week as many farmers who are able to go straight to soybeans will.  MN is also the furthest advanced outside of the Delta at 32% complete vs. 7% average while IA and IL are 11% and 12% complete, respectively.  There is an awful lot of crop already planted in MN which will make getting through May frost-free a must.  National winter wheat conditions were up 1pt to 43% G/E with improvements seen in CO/OK/KS/IN/OH, but declines witnessed in NE/SD/IL.  National winter wheat index is still above both the 5 and 10-yr average.  43% of the winter wheat crop is heading vs. 34% average as TX/OK/KS are all ahead of schedule.  Spring wheat planting made another huge advancement to 75% planted, up from 55% last week and vs. 40% average.  SD and MN are essentially done while ND is 65% seeded vs. 27% average.

Export shipments were also released yesterday morning with wheat shipments once again disappointing at 12.0mbu vs. the 18.4mbu needed weekly to hit the USDA forecast.  Total shipments now stand at 774.2mbu, 27.4% below a year ago and all but solidifies a cut to the wheat export forecast on next week’s WASDE report.  Corn shipments were solid at 41.4mbu vs. the 33.5mbu needed weekly and pushes total shipments up to 1088.7mbu, just 5.4% below a year ago vs. the USDA’s export forecast calling for a 6.1% decline.  Soybean shipments were adequate at 6.3mbu vs. the 5.6mbu needed weekly to hit the USDA forecast.  Total shipments are now 1689.3mbu, up 10.9% from a year ago and account for 94.3% of the USDA’s entire marketing year forecast.  Sorghum shipments remain very strong at 10.8mbu last week vs. the 4.8mbu needed weekly and making total exports 266.8mbu, up 124.3% y/y.

In other headlines, Reuters is once again reporting on the threat of another port worker strike at Argentina’s main grain export hub, Rosario.  Sources claim the workers are threatening to launch an open-ended strike as the bulk of the Argentine soy harvest moves to ports and crush facilities.  CIF NOLA soybean premiums were mostly unchanged on the day at +88K for spot and +80N for June, but the SK/SN continued its upward march to +7.00c yesterday and last night.  Basis is simply too high for anyone to make deliveries against the SK which should keep spreads elevated through delivery.  Also no large scale deliveries against CK for the same reason which helped keep CK/CN at -2.25c yesterday and last night.  Being short basis or spreads when the farmer’s attention has turned away from marketing is never advisable.  KCBT protein scales were weaker yesterday with 12.0-13.0% falling by 9c/bu to +75/85N.  MGEX proteins were firmer on the first day of the week with 14.0% up 5c to +190N while 15.0% was up 40c to +340/400N.

 

Bottom Line: Record planting pace, favorable forecasts and plenty of grain on-farm are all undermining grain markets at this time.  Funds have positioned correctly so far, and seem more than willing to add to these winning positions with relatively few caution flags being thrown.  The soy complex won’t be able to run away on its own, even if Argentina does have logistical issues.  Carryouts are set to grow for all three major crops and the only thing which will change that scenario is a weather issue.

 

Good Luck Today.

 

HPC 5-5-15

Tregg Cronin

Market Analyst

Tregg.Cronin@halocommodities.com

www.halocommodities.com

@5thWave_tcronin

 

 

COMMODITY TRADING INVOLVES RISK AND MAY NOT BE SUITABLE FOR ALL RECEIPIENTS OF THIS EMAIL. Neither the information presented, nor any opinions expressed, constitutes a solicitation for the purchase or sale of any commodities. The thoughts expressed in this email and basic data from which they are derived are believed to be reliable, but cannot be guaranteed due to uncertainty about future events and complexities surrounding commodity markets. Those acting on the information are responsible for their own actions.

5/4/2015 Morning Comments

Good Morning,

 

Outside Markets as of 6:00am: Dollar Index up 0.2770 at 95.5760; Euro down 0.00560 at 1.11420; S&P’s are up 5.00 at 2106.50; Dow futures are up 54.00 at 17,988.00; 10-yr futures are down 0.06%; The Nikkei closed up 0.06% at 19,531.63;  The DAX is up 1.17% at 11,588.73; The IBEX-35 is up 0.68% at 11,462.70; Gold is up $6.90 at $1181.40; Copper is down $2.70 at $290.25; Crude Oil is up $0.18 at $59.33; Heating Oil is up $0.0051 at $1.9873; Paris Milling Wheat is down €2.25 at €175.75/MT.

The US Dollar Index found support last week at the 100-day moving average both Thursday and Friday, and is rallying a bit from that level this morning.  Context is always important, and the correction off of the 100.39 highs hasn’t yet spanned even 38.2% of the entire 78.90-100.39 rally.  The 200-day moving average is resting at 89.9857 this morning, which is almost the exact same level as the 50% retracement, a level which would be considered solid support.  It feels as though the market went from thinking an interest rate hike between June and September was a foregone conclusion to wondering if one will happen in 2015 at all.  The Federal Reserve hasn’t raised interest rates since 2006, and if they were to put a rate increase off until 2016, the Dollar Index would probably need to be revalued, along with most US Dollar denominated commodities.

Very little weekend precip to speak of, but the Midwest is gearing up for a rather wet week, especially towards the weekend.  This morning’s models suggest widespread showers impacting the plains by mid-week which should even bring moisture to the WCB and Northern Plains, an areas which badly needs the precip.  Should the rains which are forecast fall, the winter wheat crop will be made as the majority of KS/OK/TX is heading.  Importantly, the Delta and parts of the ECB are expected to miss the bulk of the precip the next 7-days which should aid SRW development.  Corn planting progress is expected to stall out in the WCB, but huge progress has been made the last 7-days.  The 6-10 and 8-14 are keeping normal/above precip in place while temps will be normal/above with the ECB biased higher.  Nothing to complain about in the US weather as of yet.

 

Mixed markets to begin the week with soybeans leading the charge higher on better than expected export demand on the old crop portion of the curve as of late, even though analysts continue to dial back meal usage due to the avian flu outbreak.  The governor of IA followed suit with MN in declaring a state of emergency after more poultry operations were found infected with the strain over the weekend.  Checking the APHIS website this morning, there have now been 15,765,073 birds infected with the avian flu virus which have had to be destroyed.  The ultimate impact on domestic meal demand and therefore crush demand is uncertain right now, but will no doubt be impacted in Q3 and Q4-2015.  Grain markets appear to be looking at forecast maps, and expectations for the crop progress report this afternoon could show record breaking planting figures.  COT data confirmed more fund short positions.

The investment in planting technology the last 3-5 years is readily apparent, but much easier to quantify when using the example of a farmer upgrading from a 12-row planter to a 16-row and a 16-row to a 24-row.  A farmer planting with a 12-row corn planter going 5.0mph can seed a little over 18-acres an hour, but a farmer using a 16-row planter at 5.0mph can seed  24 acres of corn per hour.  If the same farmer bumped up to a 24-row corn planter, he could seed 36 acres of corn per hour.  In just this example, we’re talking about a 33% increase in productivity from a 12 to a 16-row, and a 50% increase in productivity from a 16-row to a 24-row.  Trade estimates have corn planting progress on this afternoon’s report between 47-49% vs. 42% average and 19% last week.  Some crop observers think IA could be at 60-70% complete on tonight’s report with farmers rolling directly into soybeans.  National soybean progress is estimated at 13-14% vs. 2% last week and 9% average.  Trade estimates think the winter wheat rating should improve 1-2% vs. last week’s 42%, but it wouldn’t surprise me to see it unchanged to weaker again as we’ve reached the point in the year where conditions stop improving.

Friday’s COT data had a lot of interesting observations, especially in the wheat markets.  Funds pushed their net short in KC wheat to a new record -37,969 contracts, accounting for 20.4% of total open interest.  In turn, commercials are now net long the KC wheat market by 1,276 contracts, something which has never happened in KC before.  The commercial gross short position, usually a barometer of farmer selling/hedging, is one week removed from the smallest gross short since 9/15/2009.  In Chicago wheat, funds sold another 7,436 contracts to push their net short to -103,680 contracts, the largest since 12/31/2013, and the 4th largest short position on record. In Minneapolis, funds are now short -2,332 contracts, the largest since 9/24/2013, while commercials are net long +1,793 contracts.  In Minneapolis, funds have been net short just 5.3% of the time since 2006, while commercials have been net long just 3.4% of the time.  In aggregate, funds are now short -143,981 contracts, the largest total position on record as price sits right at the fall lows.

Funds bought soybeans for the second week in a row, taking their net short position down to -25,819 contracts.  In soymeal, funds moved back to a net long position of +1770 contracts after a brief stay on the short side of the market which lasted all of four weeks.  Funds continued selling corn, however, adding another 20,345 contracts to put their net short position at -125,141 contracts, the largest since 1/28/2014.  Of a little concern was the large drop in the gross commercial long position which fell from 549,225 to 499,889 contracts in the span of one week.  At these sort of price levels, it would be encouraging to see commercials adding to coverage.  Worth noting, however, the gross commercial short of 563,82 contracts is the smallest since 1/21/2014 which would be an indicator of farmer selling/hedging, but also the amount of hedged length commercials have to throw at the market.  This would be part of the reason basis and spreads have been so firm as of late as much of the remaining old crop corn is still on-farm. This is short-term bullish cash, but longer term bearish depending on when and how this grain gets moved.

Still a fair amount of May open interest left open in corn and soybeans with 9,164 and 10,337 contracts, respectively.  This would appear to be a supportive factor for soybeans as it likely means there is consumptive pricing against the May which needs to occur yet.

 

Bottom Line: Mixed markets today with traders watching weather for impact to both the wheat crop and planting progress.  Still waiting for a weather issue somewhere, which is hard to find on May 4th.  Funds are heavily short grains which is a supportive factor as long as additional support levels aren’t violated.  Wouldn’t rule out two-sided trade today.

 

Good Luck Today.

 

 

 

HPC 5-4

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.