Outside Markets as of 6:15am: Dollar Index down 0.1180 at 79.6910; Euro is up 0.00380 at 1.38480; S&P’s are down 1.75 at 1870.00; Dow futures are down 5.00 at 16,462.00; The Nikkei closed up 0.11% at 14,304.11; The DAX is off 0.07% at 9,579.99; The IBEX-35 is down 0.26% at 10,434.00; The Russian MICEX closed down 0.34% at 1,300.37; Gold is down $6.80 at $1292.20; Copper is down $2.05 at $307.25; Crude Oil is down $1.25 at $100.03; Heating Oil is down $0.0167 at $2.9468; Paris Milling Wheat is unchanged at €214.75/MT.
More political rancor out of Russia this morning as President Vladimir Putin is threatening to retaliate for further economic sanctions against Russian companies and citizens. Experts think Putin could make life difficult for western companies operating in the country. This comes as Kiev appears to be losing control over the pro-Russian militants in several of its eastern cities. Still no impact to Agriculture shipments or sowing of spring crops. FOMC meeting today with another $10 billion expected to be tapered from the Federal Reserve’s bond buying program. This would scale the program down to $45 billion per month. This morning will see the April ADP employment report which is expected to see 210,000 jobs added by private companies in April, up from 191,000 in March. Weekly EIA inventory report is expected to show crude oil inventories up 1.1 million bbls to a new 26.5 year high.
Quieter radar returns this morning as most of the heavy storm systems exit the Midwest. Scattered precip is still falling in E-ND/MN/WI. The Midwest will see drying the next 3-days before precip begins moving back into the western corn belt and northern plains by late weekend/early next week. Precip amounts should be heaviest in the Dakotas and MT with portions of C-ND seeing up to another 1.0” by next week. Interesting maps from NOAA yesterday with the 6-10 showing a split right through the heart of the US with below normal temps north of I-80 and above normal temps south of there. Precip is expected to see a similar pattern with above normal to the north and below normal to the south. Essentially, cold and wet for corn growing areas and hot and dry for wheat areas. About the opposite of that wanted by farmers. KS temps will see 32* for lows and 90* for highs all in the next 5-days.
Mostly weaker trade this morning across the major Ag markets led by wheat as it back and fills following the solid rally witnessed yesterday. News flow out of the Wheat Quality Council Tour remains supportive with Day 1 results showing a tour average yield of 34.7bpa, the lowest in a decade and compares with 43.8bpa last year and 53.4bpa in 2012. Total KS production is being estimated at 299mbu according to a Bloomberg survey of analysts and would compare with 319mbu in 2013 and 378mbu in 2012. Yields are expected to get worse as they move west and south. Precip maps for the next 7-days show almost nothing south of NE, but all other major wheat producers in the world are enjoying favorable growing weather. One of the other concern areas in the world was the Black Sea, but the map below shows forecasted precip the next 15-days there. Also, charts are taking on a rather bullish tilt this last week. On a monthly-continuation basis, Chicago wheat looks like it’s confirming a bullish divergence in monthly momentum, something that hasn’t happened since June of 2012 when prices rocketed towards $9.00 on the Midwest drought. Both Minneapolis and Chicago are showing a possible inverted head and shoulders pattern which has many upside targets over $1.00 higher. More confirmation will be needed in weeks and months ahead, but the US production situation isn’t improving and charts are really looking supportive.
Divergence occurring in corn basis this week with rail corn bids continuing to soften with weakening rail freight while CIF bids keep marching higher. PNW, Hereford-TX and over Chicago markets are all weaker this week, while CIF is up 1-2c. This is keeping local corn basis in the upper-Midwest weak without much hope for strength by the time producers need to make room before wheat harvest. Ethanol plants are getting all the corn they need without having to pay up for it, and the strong export pull is occurring out of the Gulf, not the PNW which is supporting CIF bids. Difficult situation for where the corn crops were some of the strongest last fall.
First Notice Day today for May futures with 144 Chicago Wheat being delivered out of the 253 certs registered for delivery. There were also 2,596 soybean oil. In an impressive sign, 64 soybean certificates were canceled last night with 1 barge placed for load out at ADM-Hennepin. This left 1 certificate outstanding, and is a show of commercial support for the SK/SN spread. Soybean supplies in the interior are still tight and will remain that way until SAM imports make a difference. Cash traders said there are 420TMT of SAM soybeans in the lineup for the US. There were 0 corn deliveries, but 453 Minneapolis wheat deliveries by Louis Dryfus. 437 were in Duluth, but there were no strong commercial stoppers which is why the MWK/MWN puked as bad as it did yesterday. The quantity totals right around two Laker sized boats, so unsure if LDC canceled part of a Laker program due to slow ice thaw?
Bottom Line: A little back and fill trade today wouldn’t be unreasonable after the rallies we’re on in all of the major grains. Wheat charts are flashing a breakout, soymeal is hit new contract highs, soybeans are back at the upper-end of their range and corn remains in a strong up channel. Charts are bullish, and most of the weather related chatter in the US is supportive. Still, moisture in the corn belt long-term isn’t bullish and the drought monitor is slowly deteriorating in the Midwest.
Good Luck Today.
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