Outside Markets as of 6:15am: Dollar Index is up 0.1840 at 98.7.40; Euro down 0.00490 at 1.07040; S&P’s are down 2.50 at 2098.00; Dow futures are down 22.00 at 18,047.00; 10-yr futures are down 0.02%; The Nikkei closed down 0.35% at 19,476.56; The DAX is up 0.08% at 11,932.10; The IBEX-35 is up 0.76% at 11,134.40; Gold is up 11.80 at $1163.10; Copper is up $6.15 at $263.20; Crude Oil is down $1.29 at $45.36; Heating Oil is down $0.0299 at $1.7426; Paris Milling Wheat is up €0.50 at €192.75/MT.
The long-awaited Federal Reserve meeting came and went, and with it a sharp reversal in the US Dollar and rallies in US equities and treasuries. The FOMC met market expectations by dropping its “patience” language from the meeting statement as well as saying that a funds rate hike was “unlikely” at its next meeting in April. This leaves June open, but the market has substantially reduced its expectations for a June rate hike with the federal funds futures curve on a yield basis fell 8bp to 0.43% for Dec 2015 contract and 17bp for the Dec 2016 contract. As noted, the US Dollar Index plunged on the news, falling 3,169 ticks from high to low before closing around 98.5500. Crude oil was substantially lower prior to the meeting minutes being released, thanks in large part to the surge in weekly inventories which beat market expectations. At the low, May crude was trading at $44.03 before closing at 46.64 after data showed inventories rising by 9.62 million barrels to 458.51 million barrels, a new record, and well better than the 4.10 million barrel jump expected. Mid-40 dollar crude doesn’t seem to be restraining production the way many analysts predicted.
Fairly active Midwest radar with snow showers in ND/MN and rain working across both the southern plains, Delta and Mid-south. Precip returns in TX and the Gulf the last 24-hours have been meaningful in spot, but not much has fallen in HRW areas. Precip which has fallen and is likely to fall in the next 12-24 hours looks to delay spring field work and planting more so than provide relief to HRW. SRW in the Delta is receiving rain, however, and several states noted quality concerns already on Monday’s crop progress reports. 5-day forecasted precip maps as of this morning have dialed back the rain for KS/OK severely, but much of TX should see decent rainfall. The Midwest stays dry this week, and 6-10 and 8-14 day maps have dropped from above normal precip to normal while temps stay normal/below.
Yesterday would have to be described as a mild session until the FOMC minutes were released at 1:00pm at which time almost every commodity on the planet caught a bid. The minute-by-minute and tick charts show the sharp rallies at 1:00, and grains are carrying that bid into today’s session. Weekly demand indicators for corn were strong enough to keep serve, but export sales at 7:30am will be watched especially close for corn, soybeans and wheat with expectations for softening sales. US corn and wheat still aren’t the low cost supply of choice, and the South American harvest continues to roll forward. The March 31st reports are now 8-trading sessions away, although it is still a bit early to be able to make the claim range bound trade will be the order of the day until then. Outside market volatility is playing as big of a role as grain market fundamentals at current, and the real “story” is still new crop for most of our markets. The cool temps will keep an incredibly fast start to spring at bay for at least another 10-15 days. Insurance planting dates on corn don’t get started until April 1-5for many corn belt areas.
Weekly ethanol production came in up 3,000bbls/day to 947,000bbls/day, and essentially matches the needed level to hit the USDA’s 5.200 billion bushel corn for ethanol estimate. Ethanol stocks dropped swiftly by 353,000bbls to 20.820 million bbls, although stocks at that level remain near the highest levels since December of 2012. Helping stocks ease was a surge in weekly gasoline demand which was the highest of 2015 to-date, and well above any week in the 5-year range Jan through mid-Mar at just over 9.25 million barrels/day. Ethanol calendar spreads remain fairly lifeless, although off recent lows in February. RBOB/Ethanol spreads peaked around 50c/gln in late-February and are now trading between 27-30c/gln, but still providing blenders with enough reason to up discretionary blending. Timely export data would help shine even more light on current ethanol economics.
Calendar spreads have been rather lifeless the last several sessions, especially in corn with the CK/CN unchanged at -8.00c this morning, remaining in its -7.50c to -8.50c range. CIF NOLA corn bids have been especially quiet, resisting the urge to trade lower given the SAM maize import chatter, but clearly not indicating any undue demand pickup. PNW corn premiums have stabilized or even ticked up 1-2c, also following import rumors to California out of Argentina. Nothing to report from wheat calendar spreads at any of the three exchanges either although KW/W and MW/W seasonals tend to kick in right around this time frame. With a growing focus on the southern plains HRW crop and planting conditions in the Dakotas be mindful of these inter-market spreads.
Export sales estimates for this morning’s report show wheat at 300-650TMT, corn at 300-850TMT, soybeans at 0-425TMT, meal at 0-200TMT and oil at 0-20TMT. The surprise would be better than expected sales given the lackluster futures trade the past week and the general belief US supplies are not the cheapest stem into major importing destinations.
Bottom Line: Higher trade looks to be the order of the day, and hard to argue with given the lack of news flow. Most markets are biding their time until the end of the month, even though new lows were set Tuesday. Certainly appears to be too much weather uncertainty the next 45-60 days in order to plunge lower and take out fall lows just yet. Watch export sales and spreads for short-term signals but realize weather is slowly becoming the chief concern for our markets both here and abroad. Time to shake off the winter dust and strap in for another growing season.
Good Luck Today.
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