Outside Markets as of 5:35am: Dollar Index up 0.0780 at 80.0810; Euro is down 0.00240 at 1.36900; S&P’s are down 4.75 at 1862.75; Dow futures are down 37.00 at 16,384.00; 10-yr futures are up 0.08%; The Nikkei closed down 1.41% at 14,069.59; The DAX is down 0.66% at 9,592.56; The IBEX-35 is down 0.32% at 10,331.80; The Russian MICEX is down 0.17% at 1,379.61; Gold is up $1.20 at $1294.80; Copper is up $0.25 at $314.70; Crude Oil is up $0.16 at $101.67; Heating Oil is up $0.0067 at $2.9573; Paris Milling Wheat is up €0.75 at €199.75/MT.
Global equities weaker to close the week after sluggish growth statistics yesterday in Europe, and ahead of housing data in the US today. April housing starts, due out later today, are expected to show an increase of 3.6% to 980,000, adding to the 2.8% increase in March. April building permits are expected to show an increase of 1.3% to 1.01 million, following the 2.4% decline to 990,000 in March. Early-May US Consumer Confidence from the University of Michigan is expected to show a 0.4 point increase to 84.5, adding to the 4.1 point increase in April. After hitting 37.72 in early March, the Russian Ruble has strengthened right at 7.0% to 35.07 vs the Dollar, suggesting less perceived risk in the Ukrainian/Russian tension than a month ago. Reports suggest Russia and Ukraine are closer to reaching a deal on Ukraine’s outstanding natural gas bill due by June 1st.
Light showers across W-SD/W-ND this morning as well as a few showers across IL/IN impacting growing regions this morning. Showers will impact the southern Midwest/northern Delta today with E-KS seeing some precip, but the majority of the Midwest should be dry. More chances for the southern plains tomorrow with W-KS seeing prospects for precip. Sunday/Monday still exists as the best chance for precip in the Northern Plains with MT/W-ND seeing 0.25-0.92” in the heaviest locales. Otherwise moisture should move into MN/IA/WI later on Tue/Wed. Given the open weather until mid-week next week, the vast majority of the corn belt should wrap up corn planting with even farmers in the west making substantial progress where able. ND/N-MN will remain slow. No change in NOAA maps: normal/below temps and normal/above precip for most of the Midwest, but warmer central/east. Below are the soil moisture profile and days since significant rainfall in the south.
Quiet markets to close out the weak with bulls still licking their wounds from yesterday’s trouncing. Heavy charts, poor export sales and prospects for moisture in the southern plains all combined to weigh on wheat heavily yesterday, and spillover selling hit corn as well. Planting progress has improved substantially this week, and it appears likely we will cross the 75% planted threshold by Monday, a big line in the sand. Most analysts’ yield models contain a planting date component based on when national planting progress reaches 75% complete. Usually, negative implications don’t occur until after May 15th-20th, keeping this year’s crop on pace for trend yields, making the huge assumption of normal weather the rest of the summer. With the length wielded by managed money in the Ags, our markets will be subject to downdrafts without a bullish influence to support prices.
NOPA crush data was released yesterday, and even though estimates were achieved, it seemed as though markets were hoping for a bullish surprise. April NOPA member crush was 132.7mbu vs estimates of 132.3mbu and 120.1mbu last year. Soybean oil stocks were 2.058 billion pounds vs estimates of 1.990 billion. This year’s April crush was still the highest in five years, and adjusting for total US crush, Sept-Apr soybean crush is estimated to total 1.233bbu, up 3% from last year. To hit the USDA’s marketing year crush estimate, May-Aug crush would have to decline 6% from last year to total the smallest May-Aug crush since 2003/04. With board crush margins still 37-50c, and cash margins closer to 80-90c, the task of rationing crush to that degree will prove incredibly difficult. Old/new spreads and basis should continue firming to help achieve this formidable task. One other note on soybeans, it’s worth noting the very big bearish expectations for new crop soybeans via the options pit. The November put/call ratio this morning is sitting at 293.6% vs 283% a week ago and 275% a month ago. Always worth keeping abreast of this contrarian indicator.
Informa Economics released their revised acreage ideas yesterday during the session, dropping corn acres slightly to 91.581 million from 91.691 million, and increasing soybean acres to 82.073 million from 81.493 million. Other Spring wheat acres were inched higher to 12.059 million from 12.009 million in March.
Several SE-Asia feed grain importers bought or are working tenders this week with South Korea’s MFG buying 188,000MT of corn for new crop delivery, and 106,000MT of feed wheat for October delivery. South Korea’s NOFI bought 130,000-140,000MT of corn without a delivery date specified. Would appear importers are stepping up on the break to book, and old crop corn basis would suggest the same as it firmed again yesterday. PNW corn shuttle bids for old May/Jun are now seen at +90/92N vs +86/89N a week ago. HETX basis is now +76/78N vs +65/70N a week ago. Looks as though business was booked just before the board break with basis having to strengthen even further to help shorts get bought in. CN/CU had been in a firming trend until yesterday’s downdraft, but it’s not uncommon for managed money downdrafts to squash the forward curve despite underlying cash strength.
World Weather, Inc. put together a nice summary of global wheat growing weather yesterday with the underlying theme being favorable growing conditions almost everywhere except the US Southern Plains. Australian rainfall during May has been above average with just southern Australia remaining in deficit. Chinese rainfall has been well above average in March/April/May with wheat development right around joint stage. Pakistan and India received a bit too much rain during harvest which has caused some quality issues, but total tonnage was healthy. Europe has had above normal rainfall this spring with rainy weather expected to prevail for the majority of the continent. Weather in the Commonwealth of Independent States has been ideal in western growing areas, but areas in the East including a portion of Russia and Kazakhstan have witnessed 50-80% of average precip. Temperatures are expected to rise to above normal in much of this area in the next two-weeks. The developing El Nino should produce better rainfall for this area, but the slow onset may not arrive in time to bring widespread relief. This remains the only area outside of the US with troubling production prospects.
Bottom Line: Mixed/weaker markets to close the week with July wheat sitting on 43c losses and July corn off 23c as of this morning. We have to feed the bull every day, and right now there isn’t enough fodder to keep the sizable managed money long positions content. Crops are getting planted, moisture prospects are favorable across the Midwest, US wheat isn’t competitive and technical sellers have shown up en masse. Continue monitoring basis and spreads for signs the rout is over, and review marketing targets early and often.
Good Luck Today.
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