Outside Markets as of 5:40am: Dollar Index up 0.0420 at 80.3570; Euro down 0.00040 at 1.36070; S&P’s are up 0.75 at 1959.25; Dow futures are up 14.00 at 16930.00; 10-yr futures are up 0.01%; The Nikkei closed down 0.08% at 15,349.42; The DAX is up 0.27% at 10,030.91; The IBEX-35 is down 0.12% at 11,173.90; The Russian MICEX is down 0.36% at 1,489.67; Gold is down $2.20 at $1311.90; Copper is up $1.5 at $309.10; Crude Oil is down $0.01 at $106.02; Heating Oil is down $0.0037 at $3.0562; Paris Milling Wheat is up €0.25 at €188.50.
Would appear as though the Federal Reserve-high global equity markets have been trading on is finally fading out as bourses around the world trade rather subdued heading into the weekend. News from the major financial media is almost non-existent this morning as even the Iraqi conflict is receiving precious little coverage aside from President Obama deciding to send 300 ‘military advisors’ into Iraq, but remains steadfast about not engaging in another war there. Iraq’s government is desperately trying to hold off extremists at the Beiji oil refinery which has a capacity of 320,000 barrels per day.
Two systems on the radar this morning with one moving across W-ND and another hitting WI and the Great Lakes. 5-day radar returns from the upper-Midwest show moderate to heavy rainfall across the entire area with portions of IA/S-MN seeing up to 6-8” this week alone. It felt like the market was finally responding to the water-logged fields during yesterday’s session, although many areas still have crops developing in near ideal condition. The weekend will see rain fall in KS/NE/IA/N-MO/IL with heaviest totals along the NE/KS border where up to 2.6” is being forecast, but a general 0.50-1.00” is expected. The rest of the corn belt will see rain Monday-Wednesday. No real changes to extended maps as temperatures look to remain non-threatening while the Northern Plain is still slated for a bit drier weather, while the ECB remains above normal.
Easier markets to begin the last trading day of the week with bulls and bears still vying for control as currently wheat is up 5c since last Friday, corn up 2c and soybeans down 10c. Condition reports on Monday will be a focus as the excess water in parts of SD/NE/IA/MN are grabbing a lot of attention via social media, but crop conditions should better reflect the overall status of the crop in these select states. Several analysts are still keeping open the potential for record breaking yields of 165bpa+ on corn and 45bpa+ on soybeans. So far, one can’t rule those out provided the weather remains ideal. With those type of yields, carryouts will balloon, and prices will remain under pressure. We’re a long way from a 1.7bbu and a 350mbu carryout, respectively, however. Wheat markets are trying to retain some measure of premium for the moisture expected to disrupt harvest in KS this weekend.
The Minnesota River pushed above 702 ft. yesterday, bringing barge loading to a halt at the four elevators in Savage, MN. It looks as though these elevators will remain offline until close to July 7th according to the NOAA forecast. CIF corn and soybean bids held steady yesterday, and the CN/CU continues to trade near +6.00c. Based on the river trading 5-17c above gross delivery equivalence, there doesn’t seem to be a lot of reason the CN/CU doesn’t head towards 10.0c in my opinion. Yesterday’s rally barely moved the marketing needle for the farmer, and the crop remains miles away from throwing tassels in the heart of the corn belt. The KWN/KWU continued to tack on premium, rallying to +4.00c yesterday as harvest remains dreadfully slow in Kansas. No changes to 12.0% protein HRW, bracketed at +110/120N.
Old crop board crush continues to trade softly with the July dropping to +18.5c yesterday before settling at +21.0c. July appears to be tracking 2013 fairly closely as last year board crush dropped all the way to -2.0c/bu by June 26th, but recovered to trade up to 70.0c while in delivery. Soymeal basis remains under pressure thanks to the higher availability of domestic DDGs and the Chinese trade dispute. Technically, soybean charts have held some key Fibonacci retracement levels, and momentum appears as though it has bottomed and is trying to trace out a divergence. New crop soybeans don’t appear to want to trade below $12.00 just yet, having tested that level several times the last couple weeks. There is a lot of grass between the ball and the hole on soybean development, so we’re not ready to give the farm away just yet.
Reuters published an article yesterday quoting an official with the Chinese National Development and Reform Commission who said the government is seeking opinions on how to deal with their “massive corn stocks” before this year’s harvest. The government stockpiled more than 90MMT of corn over the last two-years to leave total stocks near 150MMT with supplies going out of condition. Opinions so far include lowering the bidding prices for its weekly sales, as well as offering subsidies and tax incentives to loss-making industry processors. The current stocks situation in China reflects how poor their infrastructure is given their stocks levels, yet it is still cheaper for feedlots and corn processors in southern China to import corn from the US than buy supplies from the north.
Bottom Line: Call markets softer to get started, although more short-covering going into the weekend wouldn’t be a total surprise either. Traders will be anxious to get additional yield reports from KS as harvest progresses north, and to assess quality after the forecasted rains. Corn and soybeans continue to receive mostly beneficial weather aside from the trouble pocket in MN/IA/SD/NE, so a sustained rally will be difficult to mount if adverse conditions are limited to 5-10% of the crop. Cash and spreads say weakness should be limited, but right now crops appear to be getting bigger.
Good Luck Today.
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