8/18/2017 Morning Comments

Good Morning,

 

Outside Markets as of 6:30am: Dollar Index down 0.175% at 93.5060; Euro up 0.009% at 1.17600; S&P’s are down 1.25 at 2428.25; Dow futures are down 14.00 at 21719.00; 10-yr futures are up 0.05%; Crude Oil is up $0.11 at $47.20; Heating Oil is up $0.0019 at $1.5839; Paris Milling Wheat is down €1.00 at €155.50/MT; Paris Rapeseed is down €0.25 at €367.25/MT; Dalian corn closed up 0.18%, Dalian soybeans finished up 0.08%, Dalian oil closed up 0.48% and Dalian meal settled up 0.29%.

More rain across the Plains and WCB this morning, adding to what has been an active week in these areas.  In the last 24-hours, rains have fallen in the Dakotas, NE, KS, the OK panhandle and E-TX while IN and OH have also seen rains.  Rains for the week have been best in NE where localized flooding has occurred, both Dakotas and MN with widespread 1.00”+ totals.  While the W-1/2 of IA saw rains earlier this week, the E-1/2 of IA, IL and W-IN have been relatively dry this week.  14-day percent of normal precip shows meaningful deficits across IA/IL/IN/OH/MI and NE-MO.  IA does have rain chances on and off over the next 7-days, as does N-IL but many of the best chances on radar have fizzled out once they hit the drier air mass over IA.  The Great Plains remain active the next week which will continue to build moisture profiles ahead of fall planting.  Cool and wet in the 6-10 and 8-14 day according to NOAA.

 

Very quiet markets overnight with corn sitting in a 2c range, soybeans in a 6c range and Chicago wheat a 4.5c range.  All three markets feel as though they are waiting for more fundamental input which could come in the form of FJ Tour data this next week.  The selloff in wheat futures has brought about improved US export sales, with next week’s sales likely being even better.  As we’ve discussed in this space frequently over the last several weeks, US-HRW is competitive into many major importers and the 17/18 marketing year sales objective is on the rise.  Most analysts are carrying 1.0bbu+, and if US demand remains solid in the first half of the year then the second half will take care of itself.  HRW basis on the spot floor was firmer yesterday as grower selling is non-existent.  North Dakota is trying to harvest spring wheat around the rain showers which are now said to be impacting quality slightly in the way of test weight and color.  The spring wheat farmer is going home with all of the wheat he possibly can as he is not impressed with the price and has the ability to sit.

Weekly export sales yesterday morning were solid with wheat at 23.3mbu vs. the 13.9mbu needed weekly to hit the USDA export forecast.  Total export commitments are now even with a year ago, while the USDA is calling for an 80mbu decline y/y.  By-class sales were just as impressive with commitments being led by HRW at 11.7mbu vs. the 6.0mbu needed weekly.  In HRS, sales measured 8.0mbu vs. the 4.1mbu needed weekly to hit the USDA forecast.  Total HRS commitments are 110.1mbu vs. 128.9mbu a year ago.  If we see another solid HRS sales week next week, it should probably be a sign HRS prices need to move back toward $7.00 as meaningful rationing of exports needs to occur this season.  Corn sales were 2.5mbu of old crop, pushing total commitments to 2.223bbu.  Census exports are indicating much stronger corn exports so it looks as though we should meet the USDA’s 2.225bbu objective.  26.4mbu of new crop corn sales pushed that total to 225.9mbu vs. 398.1mbu a year ago.  Soybean sales totaled 16.7mbu of old crop bringing that total to 2.248bbu vs. the USDA objective at 2.150bbu.  New crop sales measured 33.0mbu bringing the new crop total to 291.4mbu vs. 563.8mbu a year ago.

Open interest changes during yesterday’s session reflects a continuation of money flow into the Ag space, and based on price action would imply managed funds are building net short positions.  SRW open interest rose another 5,516 contracts, corn was up 15,524 contracts, KC wheat was up 4,984 contracts, soybeans were up 5,661 contracts while meal was up 5,611 contracts and oil was down 2,186 contracts.  This price action and market structure change is incredibly important as funds look to build short positions while price appears to be stabilizing around support levels.  If funds continue to pile into the short side, but the market reasons the bearish news has already been discounted, then the last positions added become vulnerable to covering.  Of the three major Ag contracts, Chicago wheat looks to be the most vulnerable to a short-covering air pocket as momentum has diverged, price has found relative support around the 200-day moving average and On-Balance-Volume is trending higher which means more volume is occurring on higher days than on lower over the last 20-days.  This afternoon’s COT data will be important to see how much fund size has been thrown to the short-side.

While most of the reaction and focus has been on corn and soybeans since the August WASDE, data from last week on minor feed grains continues to paint a picture of supportive price moving forward.  The world barley balance sheet tightened further with ending stocks now projected at 18.171MMT, the smallest since 1983/84 with the stocks/use ratio of 10.71% the smallest since the same year.  The world oat balance sheet shows ending stocks of 2.185MMT and a stocks/use ratio of 8.56%, both of which would be the smallest on record going back to at least 1960/61.  In the United States, ending stocks of 496TMT will be the smallest since 2013/14’s 359TMT and the second smallest on record.  The US relies on about half its oat supply coming from Canada via exports with the current Canadian balance sheet showing 504TMT, the fourth smallest ending stocks since the early 60’s.  Both of these markets will be worth tracking as we move into fall and winter when logistics regularly become snarled due to adverse weather.

Other tidbits include Saudi Arabia tendering for 480,000MT of hard wheat for Oct-Dec delivery.  The US should be well positioned to capture some of this business if the price levels are attractive enough to get hedged inventory to actually participate.  Also, the 2018 winter wheat insurance pricing period has also started this week (8/15) and will continue through September 14th.  Pricing for the nation’s largest wheat producer KS is based off the KWN18 futures contract, and has a running average this week of $4.97/bu.  Earlier, when winter wheat prices were at or above $6.00, it was a no-brainer we would see 10-15% higher HRW plantings this fall.  With futures now below $5.00 for next year, that calculation is much more difficult, especially when a 70-90c basis is applied in many areas of W-KS.  At current levels, most believe HRW acres will be flat to down slightly.  With a stocks/use ratio still close to 50%, the market probably needs another year of tightening stocks to clear supply and bolster prices.  Soil moisture will be much improved this fall compared to recent history, however.

 

Bottom Line: Should be a fairly uneventful close to another lower week in the Ag room.  We are watching a familiar story play out in row crops with USDA saying one thing while private tours and anecdotal reports say another.  Crop Tour should shed some light on the situation, but the Tour would have to show a yield 4-5bpa below USDA to get markets excited in our opinion.  We have to get 17/18 carryout below 2.0bbu or there is no story in corn.  Wheat continues to act like it is building a base of support.  Watch for tender results this weekend from Saudi Arabia.

 

Good Luck Today.

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.

8/17/2017 Morning Comments

Good Morning,

 

Outside Markets as of 6:00am: Dollar Index up 0.481% at 93.9270; Euro down 0.645% at 1.17125; Swedish Krona is down 0.669% at 8.1162; S&P’s are down 3.75 at 2463.75; Dow futures are down 25.00 at 21,986.00; 10-yr futures are down 0.10%; Crude Oil is down $0.13 at $46.66; Heating Oil is down $0.0114 at $1.5630; Paris Milling Wheat is unchanged at €158.75/MT; Paris Rapeseed is up €2.00 at €368.25/MT; Dalian corn closed up 0.42%, Dalian soybeans finished up 0.36%, Dalian oil closed up 0.36% and Dalian meal settled up 0.18%.

Fairly active Midwest radar this morning with showers falling in E-TX/OK/AR/S-MO/IL and MI with a separate system also dropping rainfall in MN.  The upper-Midwest will remain active over the next 5-7 days with additional rainfall hitting E-NE/E-SD/MN/WI and most areas below I-80.  Total 7-day accumulations are putting 1.00-2.00” across the entire state of IA which would still be very welcome for developing soybeans.  The southern plains also remains active ahead of next month’s sowing campaign.  Mixed bag in the extended maps with the 6-10 showing normal to above temperatures for most of the corn belt with above normal precip for the heart of the belt and below normal precip in the Northern Plains.  The 8-14 slips to below normal temps in the heart of the belt while the Northern Plains stays a bit warmer which would be welcome for slow developing crops.  Precip slips to normal/below for most of the belt in the 8-14 while the 3-4 week maps are still suggesting an upturn in precip for the Plains the last couple days of August through September 9th.

 

Better prices overnight, led by soybeans which are up nearly 1.0% at this writing, although winter wheat prices just cannot find any footing.  In the last week, Chicago wheat prices have lost another 43.5c from the 8/10 highs which combines with the previous losses since the 7/5 highs to make a $1.35 selloff in total.  The open interest increases across the Ag room have been especially consistent this week which suggests managed funds adding heavily to net short positions.  Yesterday, SRW was up another 8,650 contracts with the highest open interest since early June.  Corn open interest was up 4,637 contracts, while KC wheat was up 9,266 contracts.  Soybean open interest was up 5,649 contracts and is up 27,792 contracts since last Thursday while prices is off 44c from the highs.  The next major event for the market will be the Farm Journal Crop Tour, formerly the ProFarmer Tour, which kicks off early next week with legs beginning in South Dakota and Ohio.  The market will be anxious to see if Tour numbers confirm or deny USDA’s August WASDE estimate, although expecting the Tour to provide the bullish shot in the arm to turn these markets around would appear unlikely.

The big event in the wheat market yesterday, and what probably contributed to the pressure in HRW, was the latest GASC tender which saw a tremendous amount of wheat offered from Russia.  From Russia alone, there were 17 cargoes offered at an average price of $196.82/MT FOB, with the lowest price at $192.29/MT FOB.  Romania offered three cargoes at an average price of $200.78/MT, while Ukraine through in one cargo at $194.00/MT and France one at $198.69/MT.  All told, there was 1.295MMT of wheat offered with Egypt buying 295,000MT from Russia and 60,000MT from Ukraine.  Said another way, there was 360% more wheat offered than was purchased, showing the desire of Russian exporters to keep wheat moving in 17/18.  IKAR released their latest Russian wheat crop estimate the day before yesterday, bumping their number to 80MMT vs. the USDA’s latest at 77.5MMT.  Debate also rages over what can be exported from Russia in a single marketing year.  USDA currently expects 31.5MMT, but there are some people who think the number could be as high as 34-35MMT with another 3.8MMT of barley and 6.5MMT of corn.  Weather will play a role, currency will play a role and Russian farm marketing will also play a role in determining what can actually be shipped.  If any hiccup occurs, US-HRW should be the beneficiary with European quality taking a hit, Australia working with a shortened crop and hard red spring availability down in the US and Canada.

Speaking of US-HRW, basis continue to chug along to the upside as the bushels are locked away and cash remains the only device able to keep wheat moving.  Both the CFTC data and anecdotal reports from the country suggested the HRW farmer sold heavily off the combine at harvest with some areas seeing 60-70% of the crop shed in June and July.  This wheat is now in commercial hands who are licking their chops at 28-60c board carries from now out to December-May.  With US wheat getting competitive into various major importers basis has correspondingly firmed.  11.40-12.80% protein was up 5-60c yesterday with 12.0% pro now at +95/110U vs. +75/85U a week ago and +95/105U a month ago.  Higher pro has been even stronger with 13.0% protein at +205/220U vs. +165/175U a week ago.  One can be especially bullish basis moving forward in an effort to pry hedged bushels loose.  The same argument can be made in spring wheat as well once the harvest is put away by the end of the month.

PNW corn premiums have been firming over the last week with nearby bids up 5-7c with BNSF rail freight relatively unchanged over the same period.  The strength is not really being felt at the Gulf, however, with bids there flat over the last week at +18/20U for August/September.  Even using the offer side of the Gulf bids, cash remains woefully under gross delivery equivalence by 20-25c.  This suggests we could see decent sized deliveries at the end of the month, and with the anecdotal reports of corn piles being made along the Illinois River, certainly should keep a foot on the cash corn market.  Despite the sloppy situation at the Gulf, the US still remains expensive compared to Brazil and Argentina.  FOB indications going home last night put US corn for September at $158.46/MT while the PNW was $165.54/MT.  Argy corn was indicated at $149.41/MT and remains cheaper than both US origins through the end of the year.  Black Sea corn is more expensive at $166.50-177.50/MT.  With Argentina talking about increasing corn area by another 5-10% again next year and crop estimates already being floated at 46MMT vs. 40MMT this year, the US could be in for a grueling export season in 17/18.

Data yesterday included weekly ethanol production which hit the second highest weekly average on record at 1.059 million bbls/day, up 47,000bbls/day on the week.  Most expected a bounce back in production given falling corn prices and an improvement in margins, but the jump was even more than expectations.  The weekly increase of 47,000bbls/day was the largest single week jump since October 2011.  Ethanol stocks saw a corresponding jump of 481,000bbls to 21.828 million bbls which would be 7% higher than a year ago.  Unclear whether the improvement will be enough to keep the USDA’s marketing year estimate for ethanol production at 5.450bbu.  Prior to this week’s data, it looked like there was no way the estimate would be reached but it might be enough to keep the number unchanged until official Census data is tabulated in October.

 

Bottom Line: Looks like another mixed session as wheat prices remain under pressure and the market comes to grips with what might in fact be back-to-back years of 2.0bbu+ corn carryouts.  Export sales out later this morning and traders will be keen to see whether the selloff in wheat has allowed any export business to be conducted. Expectations for the Farm Journal Crop Tour need to be managed, understanding that a crop size sharply underneath USDA might not be realistic.

 

Good Luck Today.

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.

 

 

8/15/2017 Morning Comments

Good Morning,

 

Outside Markets as of 6:50am: Dollar Index up 0.327% at 93.7710; Euro down 0.381% at 1.17600; British Pound is down 0.755% at 1.2886; S&P’s are up 5.75 at 2469.25; Dow futures are up 53.00 at 22,005.00; 10-yr futures are down 0.26%; Crude Oil is down $0.29 at $47.31; Heating Oil is down $0.0137 at $1.5920; Paris Milling Wheat is down €0.50 at €158.50/MT; Paris Rapeseed is down €0.25 at €366.25/MT; Dalian corn settled up 0.18%, Dalian soybeans are down 0.34%, Dalian oil closed up 0.03% and Dalian meal closed down 0.07%.

A decent sized system is bringing rain to SE-SD and NE-NE which should be the first moisture in what could be a wet couple days for the upper-Midwest.  Over the next 48-hours, rain is expected to fall across E-SD, MN, IA, NE, NE-KS, MO, and W-IL with a broad 0.50-1.50” with localized totals stretching as high as 2.50” in portions of MN/NE/SD.  Another round of light showers will pop up toward the weekend with another shot of rain in the aforementioned areas, bringing the 7-day forecasted totals to 2.00-3.00” in IA/S-MN/NE-NE/SE-SD.  Warmer temperatures are finally on the way with above normal temps forecast for most of the Midwest in the 6-10 and 8-14 day, although searing heat is not expected.  Above normal precip should remain for most areas of the Midwest which will help mitigate any issues from the heat. Chances look good for IA this week, but they need to verify.

 

Easier markets this morning after the mixed session yesterday, although the recovery in wheat contracts late in the session was rather impressive.  To-date, the month of August has been pretty beneficial weather-wise compared to basically any month since planting which has yield ideas inching up for soybeans especially.  Markets are still reacting to last week’s USDA report which almost everyone has taken issue with for one reason or another.  It would seem the unifying theme across the analyst community is the corn yield does need to come down, especially as the USDA is using the third highest ear-weight on record despite less than ideal growing conditions for most of the corn belt.  Despite this, even with taking yield down, it remains very difficult to move away from the 2.0bbu carryout figure for the 17/18 marketing year, and until that happens there is no call to action for bulls.  Soybean yield is still being determined, but weather has been beneficial for most areas outside of IA.  Rains are expected in the largest corn and soy producer in the US, but the debate about what the weather to-date has already done will rage on until the USDA updates in October.

Monday afternoon gave us updated crop conditions, but after last week’s swing and miss by analysts employing both crop condition and weather-based models, I’m not sure there is much value in continuing to analyze the crop conditions too deeply.  A great point would be the condition changes in the Colorado corn crop.  This week they improved 14pts to 72% G/E, but it’s the changes the previous four weeks which are a real head scratcher.  G/E ratings on the CO corn crop since mid-July have gone from 68%, down to 57%, up to 66%, down to 58% and finally up to 72%.  Hard to believe conditions were swinging that much for the state of Colorado, and illustrates the subjective nature of these conditions.  Up until the last report, there seemed to be some correlation between conditions and yield but that relationship has been trashed so we will treat conditions for what they are moving forward: a number.  Nationally, corn conditions improved 2pts to 62% G/E with IA down 3pts and MI down 10pts, but most other states up led by CO (+14) and ND (+8).  16% of the crop is denting vs. 7% last week and 20% average.  61% of the crop is doughing vs. 42% last week and 62% average.

In soybeans, conditions declined 1pt to 59% G/E which compares with 72% a year ago.  Like corn, most states improved, led by ND which was up 7pts to 44% G/E.  IA and MI led declines, however, with the former down 3pts and the latter down 7pts.  As we wrote about last week, the actual number of good/excellent conditions shouldn’t be near as important in the Dakotas as the trend of conditions with recent weather greatly improving yield prospects for both states.  79% of the crop is setting pods vs. 65% last week and 75% last year.  In spring wheat, 33% of the crop was rated G/E which was up 1pt on the week and compares with 66% last year.  Conditions improved in MN, ND and ID but dropped swiftly in WA.  Increases in conditions this late in the marketing year are usually due to better than expected yields at harvest time.  Spring wheat harvest was estimated at 40% complete nationally vs. 24% last week and 35% average.  SD is 79% complete while ND is just 36% complete as progress is halted by frequent rain showers.  Winter wheat harvest was estimated at 97% complete vs. 94% last week and 96% average.  The PNW has some progress left to complete but this should be the last WW harvest report.

As mentioned here in days past, the wheat selloff has brought US wheat back into the export grids for many destinations previously thought to be out of reach this marketing year.  One glance at MATIF/KW spreads tells that tale in full.  The spread between the two futures prices, adjusted for currency, is sitting at $32.97/MT this morning which is off from yesterday’s high of $33.92/MT but well above the 200-day moving average of $22.27/MT.  This spread does not spend a great deal of time above $30.00/MT, which speaks to just how competitive US-HRW is into North Africa and the Middle East thanks to quality damaging rains in Germany and the Baltic States.  The increased competitiveness has not resulted in spreads being bid just yet, however as KWU/KWZ remains just 0.50c off contract lows this morning and KWK/KWN hit new contract lows of -17.00c yesterday which accounted for 112% of full financial carry.  It is quite easy to get bullish basis when one looks at how much wheat the farmer sold, how intent commercials are of carrying said wheat to earn storage revenue, and how competitive US wheat is on the front-end.  We should see improved sales on this week’s export report Thursday.

Weekly export inspections were also released yesterday showing wheat shipments at 18.8mbu vs. the 15.9mbu needed weekly to hit the USDA forecast.  Total shipments now stand at 226.8mbu vs. 202.1mbu a year ago.  Corn shipments totaled 29.8mbu, bumping total shipments to 2.147bbu vs. the USDA’s marketing year forecast of 2.225bbu.  It is also important to point out that as of the June Census data, corn shipments were above weekly inspection data by almost 70mbu.  We should easily achieve USDA’s export estimate and it will most likely be bumped higher in future reports.  Soybean shipments totaled 20.9mbu vs. the 17.2mbu needed weekly.  Total shipments now measure 2.044bbu vs. the USDA’s current target of 2.150bbu.  Here again, Census data shows shipments running 30-40mbu above weekly data which should allow marketing year exports to prove higher than the USDA target.

While this space is usually dedicated to fundamental analysis, there are times when the technicals are worth noting.  Now is such a case in wheat as the selloff brings futures prices down into what looks to be a real value zone.  First and foremost, all three wheat contracts are giving off a textbook bullish divergence in momentum using Stochastics as the preferred measure of momentum.  Essentially, price has made new lows as momentum stopped declining and has actually turned up on the most recent plunge.  This says momentum is not with the bears, and is actually higher on days in which futures prices increase.  In addition, in Chicago wheat, On-Balance-Volume while still sharply negative, has turned up as futures have continued lower meaning the net volume total over the last 20-days has swung toward more volume on up days than down.  In Minneapolis, futures found support yesterday at the 61.8% retracement of the $5.20-8.68 rally at $6.53.  Combined with a bullish divergence in momentum, the bounce off Fibonacci retracement is certainly positive.  The aforementioned pared with the fundamental points outlined above would seem to indicate value near current levels.

 

Bottom Line: Markets are still trying to find footing after the bombshell dropped on price last week by the USDA.  The ProFarmer crop tour, now called the Farm Journal Tour, has taken on added importance this year after the discrepancy between anecdotal reports, crop conditions and USDA’s yield ideas.  A game changer isn’t likely, but most believe yield prospects for corn will come down in the future while soybean yield has yet to be fully determined.  Funds don’t usually like to hang around for demand led rallies which can take an entire marketing year to develop, instead preferring supply driven spikes which offer much more bang for your buck.  We’ve progressed through the major yield determining checkpoints of the US growing season, so expected them to come back in full force looks less than likely at this stage.

 

Good Luck Today.

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.

 

8/10/2017 Morning Comments

Good Morning,

 

Outside Markets as of 6:00am: Dollar Index up 0.224% at 93.7050; Euro down 0.259% at 1.17465; S&P’s are down 10.50 at 2462.50; Dow futures are down 55.00 at 21,963.00; 10-yr futures are up 0.04%; Crude Oil is up $0.30 at $49.86; Heating Oil is up $0.0099 at $1.6632; Paris Milling Wheat is up €2.25 at €163.75/MT; Paris Rapeseed is up €1.00 at €373.50/MT; Dalian corn closed up 0.82%, Dalian soybeans settled up 0.43%, Dalian oil closed down 0.10% and Dalian meal settled up 0.14%.

Crude oil is holding gains built from yesterday’s supportive weekly energy report from the EIA.  Weekly stocks of crude oil fell 6.45 million bbls vs. the 2.70 million draw expected by the trade to put supplies at 475.44 million bbls.  This marks the third straight week in which crude oil stocks in the United States have been below year ago levels, although remain well above the 3-yr average at 416.37 million bbls.  Crude oil has recovered 61.8% of the selloff from the 55.28 high back in January down to the 42.06 low in June with next serious overhead resistance present at the May 25th corrective highs at $52.00.  Currently trading above the 50/100/200-day moving averages, and momentum not yet showing any sign of bearish divergence.

Scattered showers all over the Midwest this morning, although the only real concentrated system would be around the Great Lakes.  Rains so far this week have been confined to the Dakotas, Southern Plains states of CO/KS/OK/TX as well as parts of MO/AR.  IA/MN/WI/IL/IN/OH/MI have very little to show for the last four days, and that doesn’t look to change much over the next 7-days with the exception of OH.  The Dakotas will turn active again this week, especially this weekend and again midweek.  7-day totals for ND/SD look to provide excellent coverage of 0.75-2.50” with the heavier amounts in E-SD.  The southern plains will also be very active with multiple storms bringing heavy rains to the entire HRW belt.  OK should see the best rains with up to 6-8” by the end of the period.  Cool temps and above normal precip for pretty much the entire Midwest during the 6-14 day.

 

Mixed markets this morning on the dawn before the USDA report with soybeans a tad firmer, corn softer and the wheat exchanges mixed.  Yesterday was another day of declining open interest across the grain room which most likely signaled short-covering ahead of today’s data.  Corn open interest fell 11,064 contracts, KC wheat was down 4,520 contracts, soybeans were off 3,049 contracts, meal was off 2,962 while Chicago wheat was up 1,626 contracts.  Over the last week, corn open interest has declined 81,115 contracts while price is up around 9c/bu.  The yield estimates from the USDA will be the most important pieces of information today, but several things to keep in mind while the algos are beating each other up.  1) The soybean yield is still a major wild card, despite what the USDA tells us later this morning.  Many areas which had poor crop conditions earlier in the season have recovered nicely with recent rainfall and cooler temps.  Iowa on the other hand has been dry and will remain so for the next 7-days, so how do we square better conditions elsewhere and declining conditions in our largest producer?  For corn, regardless of yield, we still have a 2.400bbu carryout to chew through with evidence of this massive carryout being felt from one end of the belt to the other.  In addition, US Gulf corn prices are carrying a $3-11/MT premium to Argentine and Brazilian FOB prices through the end of the year.  17/18 export demand looks in serious peril.  Lastly, Northern Plains corn crops are behind schedule and will require a wide open fall with a late frost date in order to reach whatever potential is still left.

Data yesterday included weekly ethanol production which up-ticked by 10,000bbls/day to 1.012 million bbls/day, which was still below the same week a year ago at 1.018 million bbls/day.  This was the third week out of the last four in which weekly production slipped below the same week a year ago, raising more doubts about the current 16/17 marketing year estimate for corn.  Based on weekly data for much of Q4, it looks as though USDA’s 5.450bbu estimate will need to be trimmed by 15-25mbu.  Ethanol stocks jumped by 495,000 bbls to 21.347 million bbls which are just off the lows dating back to early 2017.  Monthly export data for the month of June was released late last week, and shower exports for the month at 92.7 million gallons vs. 119.2 million last month and  54.2 million gallons a year ago.  Exports to Brazil dropped sharply to 20.9 million gallons from last month’s record 64.3 million gallons amid the continued talk over ethanol import duties being imposed on US ethanol.  India bounced back to a solid 13.6 million gallons.

After a brief correction, Minneapolis has moved back to a contract high premium over both KC and Chicago in the last few days.  MWZ/WZ traded to +267.00c last night, while MWZ/KWZ pushed to +261.75c.  This is the highest premium for MW/KW since 2008, while the MW/W premium is the strongest since 2011.  Depending on what we get from the USDA later this morning, Minneapolis ending stocks this year should be at the tightest level relative to the other two classes on record, and also be the tightest percentage of all wheat stocks on record.  The premiums are certainly warranted, and should probably get stronger as we get deeper into the marketing year and more intense rationing is needed after the current glut of old crop is worked through.  The shape of the forward curve in Minneapolis tells the entire tale of when the spring wheat issue will really come home to roost.  MWU/MWZ is trading at -12.00c, MWZ/MWH is sitting at +1.75c and MWH/MWK settled yesterday at +15.00c.  December is the highest priced futures contract at $7.48/bu.  New crop MWU18 settled yesterday at $6.45.

While probably the last thing on any farmer’s mind right now, fertilizer prices have slowly been working their way higher over the last couple of weeks as we get closer to winter wheat planting and fall N application.  FOB UREA prices at the Gulf closed up $4-6/MT for spot through March 2018 yesterday with the spot contract at $196.75/MT and carry out to September of $206/MT but flat through next spring.  The $196.75/MT spot price compares with a summer low of $162.50/MT on June 28th, while the September swap traded as low as $162.00/MT on the same day but closed yesterday at $206.00/MT.  Looked at another way, A metric ton of corn divided by a metric ton of UREA closed yesterday at 77.2%, which was down from a peak of 97.7% on July 10th.  In other words, a metric ton of corn was almost the same price as a metric ton of UREA at the Gulf for the first time in at least four years.

 

Bottom Line: Let’s get the data out in a couple of hours and see what the USDA is going to give us to chew on until the private tours hit the fields.  The first paragraph outlined some of the risks with today’s numbers, which skipped over wheat.  USDA will issue an updated HRS production number, but it won’t be the last word until the September 30th report.  If the USDA cuts more than 30mbu from HRS production, we are likely headed back to $8.00 very quickly.

 

Good Luck Today.

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.

 

 

8/9/2017 Morning Comments

Good Morning,

 

Outside Markets as of 6:00am: Dollar Index down 0.048% at 93.5620; Euro down 0.153% at 1.17590; S&P’s are down 8.00 at 2464.75; Dow futures are down 24.00 at 22,006.00; 10-yr futures are up 0.21%; Crude Oil is up $0.27 at $49.44; Heating Oil is up $0.0043 at $1.6339; Paris Milling Wheat is down €0.50 at €161.25/MT; Paris Rapeseed is up €0.25 at €371.75/MT; Dalian corn closed up 0.84%, Dalian soybeans finished up 0.45%, Dalian oil closed up 0.99% and Dalian meal settled up 0.42%.

Dalian corn and soybeans were quite firm again overnight with the former rallying by the equivalent of 5c/bu, the fifth straight day of gains for the contract.  Continuous corn prices in China are still just below the mid-July highs, which were the highest prices since November 2016.  Soybean prices were also quite firm, closing higher for the third day in a row and pushing to the highest level since March.  The price rallies come despite news reports of plugged ports and crushers canceling cargoes which always underscores the point that few know the true extent of commodity flows inside the world’s most populous country.  Soy products were also firm, with oil near the highest levels since March while meal is well inside the last 6-week range.

Showers across the Dakotas this morning which have brought a scattered 0.10-0.50” in various parts of the two states and N-NE.  The corn belt has been mainly dry since the start of the week.  Showers will spread into MN later today, bringing solid coverage to the entire state of 0.50-1.80” with the heaviest totals by Duluth/Superior.  KS and OK will also see showers on and off for the next 5-7 days which look to bring 1.25-7.00” to the region by this time next week.  Almost 100% of the HRW belt looks to see solid shower potential over the next week.  Dakotas stay active as does NE, but IA/N-IL/N-IN/NW-OH will be mainly dry over the next week.  Extended maps keep us below normal on temps the next 15-days, while precip stays above normal in the Plains during the 6-10 day before slowly moving east to cover most of the corn belt.  Iowa will need water in the next 7-10 days to avert yield loss in soybeans.

 

Position squaring yesterday ahead of the report pushed markets lower while traders heading to the sidelines have things mostly quiet this morning.  Open interest changes yesterday certainly in-keeping with traders exiting positions ahead of the all-important WASDE tomorrow.  Corn open interest dropped 21,858 contracts, Chicago wheat was down 3,248 contracts, KC wheat fell 4,063 contracts and soybeans were up just 681 contracts.  The open interest changes in soybeans have been a bit peculiar, with total open interest staying within 5,000 contracts of 620,000 since July 26th.  Over that timeframe, price has dropped a net 25c/bu, but has rallied as high as $10.07 and as low as $9.45.  With the managed fund position as of 8/1 at -7,434 contracts, it would appear the group keeps jumping from net long to net short trying to figure out the next solid trend.  Corn open interest has fallen a combined 66,997 contracts since 8/3 while price is up a net 7c/bu.  Drop seems attributable to funds covering their short position into tomorrow’s report, and pretty easy to leave it at that.  Wheat open interest changes have also been small, and at decent support levels with basing/reversal behavior being noted.

With the selloff in wheat futures as of late, always important to confirm with basis and spreads to see the impetus for the pullback.  At all three exchanges, spreads have taken a beating with the KWU/KWZ hitting new contract lows of -28.25c two days ago, the WU/WZ hit a new contract low of -28.00c a day before that and the MWU/MWZ hit new contract lows of -13.50c multiple times last week.  Cash basis also traded weakly compared to levels witnessed in June and July as farmers rewarded the rally with both old and new crop sales.  At the time most of the selling was taking place, export demand was difficult to come by because of the US’s premium to most origins into key import destinations.  Fast-forward to August and the US has put itself in a competitive spot against France and the Black Sea into key homes.  With the KWU/KWZ sitting at 88-90% of full financial carry nearby, and WU/WZ sitting at 74%, one needs to take a hard look at moving hedges further out the curve to await the basis appreciation as farm gate selling slows and export sales need to be covered.  The market says take hedges to December and wait to gauge market direction although the nominal carries to spring look attractive.

Protein continues to be the hot-topic in wheat land with US-HRW starting out especially low in early harvest before climbing as harvest pushed into NE, SD and MT.  The latest US Wheat Associates report posted last week showed 424 samples of HRW having been tested this year vs. 483 in total for 2016.  Average protein has pushed above last year with the average for 2017 at 11.4% vs. 11.2%, while other quality characteristics like falling number are a bit lower at 371 seconds vs. 392 last year and test weight is 60.4lb/bu vs. 60.7lb/bu a year ago.  This is especially important as we watch high protein supplies either cut production forecasts or downgrade the bushels they do have due to rain/adverse growing conditions. We discussed Germany’s rain woes yesterday, and have discussed Canada and Australia plenty over the last month, but now Russia appears to have protein issues of its own.  Consultancy IKAR reported yesterday Russian protein spreads are pushing to record highs with 11.5% protein trading at a $15/MT discount to 12.5%.  This is the equivalent of 40c per point, or 8c per fifth which is in-keeping with spreads witnessed in the US.  Currently, however, KCBT protein spreads from 11.5-12.5% are around 3c per fifth.  While most in the market place are counting on Russia to export around 30MMT to fill gaps here, there and everywhere, it could be difficult to find 30MMT+ of export demand is meeting quality standards becomes an issue in the second half of the year.

Tomorrow’s WASDE is expected to show corn production at 13.855bbu vs. 14.255bbu in July with a national average yield of 166.2bpa vs. 170.7bpa last month.  Would seem as though the market is trading a yield a bit lower based on crop conditions and private surveys.  The soybean crop is expected to be 4.212bbu vs. 4.260bbu last month while the yield is seen at 47.5bpa vs. 48.0bpa.  The USDA does not have an enviable job in estimating the soybean crop at this stage given the upturn in rains for many places in the WCB, while IA has gone dry.  So much potential is gained or lost with August rains and looking at the number of pods can only tell a person so much.  All wheat production is seen at 1.711bbu vs. 1.760bbu last month as HRW drops 2mbu but ‘other spring’ falls from 423mbu to 393mbu.  With the USDA pegging HRS last month at 385mbu, this would imply a HRS number this month of 355mbu which would be in-line with average trade estimates and solidify the rationing job in front of this market.  The USDA will not adjust harvested acreage this month, but instead try to account for the abandonment with yield which could be like trying to fit a square peg in a round hole.  Stay tuned.

Ending stocks are seen at 2.386bbu for 16/17 corn vs. 2.370bbu last month, while 17/18 is seen at 2.003bbu vs. 2.325bbu last month.  Bottom line is anything over 2.0bbu is bearish and the market needs to see something sub-1.9bbu to push back toward $4.00 CZ in our opinion.  The large carryout stocks have been a big part of the reason corn hasn’t been able to sustain $4.00 futures and until carryout drops decidedly below 2.00bbu it will remain that way.  Soybean carryout is expected at 401mbu for old crop vs. 410mbu last month while new crop is seen at 424mbu vs. 460mbu last month.  Stronger exports could pull old crop carryout below 400mbu which would be a bullish development, especially as opinions are being formulated about new crop demand.  Wheat ending stocks for 17/18 are seen at 907mbu vs. 938mbu last month, but don’t sleep on new crop wheat exports as those could push close to 1.00bbu.

 

Bottom Line: Should be a fairly quiet session as risk is taken off the table and we await for updated balance sheets.  Barring USDA estimates which are way outside of trade estimates, range bound trade could continue until the last push of old crop gets moved or harvest starts making its way north.  With the variability of this crop, this will be anything but a fast harvest with a concentrated slug of harvest pressure.  Corn in the Northern Plains will be late and wet barring a switch to warm weather in September.

 

Good Luck Today.

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.

8/8/2017 Morning Comments

Good Morning,

 

Outside Markets as of 6:10am: Dollar Index down 0.150% at 93.2880; Euro up 0.152% at 1.18375; Aussie Dollar up 0.316% at 0.79340; S&P’s are down 1.25 at 2476.25; Dow futures are unchanged at 22,062.00; 10-yr futures are down 0.02%; Crude Oil is up $0.15 at $49.54; Heating Oil is down $0.0058 at $1.6340; Paris Milling Wheat is up €0.75 at €162.75/MT; Paris Rapeseed is up €1.25 at €369.75/MT; Dalian corn closed up 0.30%, Dalian soybeans settled up 1.28%, Dalian oil closed up 0.63% and Dalian meal finished up 0.96%.

China released import and export data for the month of July with both slightly missing estimates.  July imports rose 11.0% y/y vs. expectations for a 16.4% gain, while imports rose 7.2% vs. expectations for a 10.5% gain with the trade surplus tipping the scales at $46.74 billion vs. $46.4 billion expected.  Some of the highlights included iron ore imports at 86.25MMT, down 2.4% y/y, crude oil imports of 34.74MMT, up 12% y/y, coal imports of 19.46MMT, down 8.3% y/y.  Most important for our space, Chinese July soybean imports surged 30% vs. a year ago to 10.08MMT which would be the highest single month of imports on record with data going back to 2010.  This helps square the stories of recent Chinese soybean cargo cancellations as port stocks pile up.  Jan-Jul soybean imports have now totaled 54.89MMT which are up 17% y/y and likely means the USDA is still underestimating Chinese import growth.

Wide open Midwest radar this morning ahead of the next round of rain.  The WCB, and specifically South Dakota, will see several rounds of this week beginning tomorrow with scattered showers bringing 0.10-0.25” to most of the Dakotas.  The systems grow and push east, with MN seeing chances Wed/Thur of 0.50-1.05” for much of the state.  The southern plains also sees a steady storm track this week with most of KS/OK/CO/NE/TX looking at accumulated totals of 1.25-5.00” which should recharge soil profiles ahead of winter wheat sowing next month.  The 7-day outlook brings rains to most of the Northern Plains, Central/Southern Plains, Great Lakes and US-SE.  The spot which doesn’t get rain continues to be IA which will raise their growing moisture deficits.  Below normal temps and above normal precip pretty much remains the theme in the 6-14 day outlook.

 

Better markets overnight as declining corn crop conditions and a lack of rain in IA for soybean development seem to support prices once again this morning.  When looking at the 30-day percent of normal precip map, it is difficult to argue with the picture painted for IA.  The southern ¼ of the state is running 5-50% of normal for the last month while the southwest half of the state is facing similar deficits.  In fact, only the far eastern part of the state is running anywhere close to normal or above for moisture received.  Fortunately for US crop prospects, this is about the only area running such severe deficits, although E-ND, extreme SW-MN and parts of N-MO are also running drier than normal over the last month.  This has led to supportive trade heading into Thursday’s WASDE report which should finally shed some light on US crop production ideas from the only body which matters.  As important to traders and producers in our part of the world will be an updated look at HRS production, although USDA is not expected to adjust harvested acreage until the September 30th Final Small Grains report.  Nonetheless, the trade is looking for a 33mbu reduction in other spring production to 390mbu.

USDA released crop conditions after the close yesterday with the national corn rating declining 1pt to 60% G/E vs. 61% expected and 74% last year.  Biggest eye-catchers were IL declining 5pts to 58% G/E vs. 83% G/E last year, while NE dropped 2pts to 59% G/E.  The rating for NE continues to be the second lowest since 2006.  The national crop condition score when taking into account F/P/VP computes to 356 points this week, which compares with 251 in 2012 and 353 in 2011.  However, as many have discussed this year, it is important to remember crop conditions are subjective in nature and are only as good as the enumerator turning their opinions in.  For example, when crop conditions are plotted against final yields, and the current USDA yield is assumed, the correlation for these two variables is just 14%.  It also implies a final yield for 2017 of something around 135.5bpa.  Crop conditions are just one component the trade looks to for guidance, and are by no means the be-all-end-all.  93% of national crop is silked vs. 94% averaged, while 42% is doughing vs. 23% last week and 44% average.  7% of the crop is dented vs. 11% average for this week of the year.

Soybean conditions improved 1pt to 60% G/E vs. 60% expected and 72% G/E last year.  Conditions were broadly mixed across the belt with the Dakotas improving, IA/NE/IL declining and IN/OH improving.  The condition score for this week totaled 355 points which is the second lowest outside of 2012 since 2007.  Once again, if yields are plotted against simply condition scores, the correlation is a very weak 12.7% with a final yield for 2017 implied at 42.3bpa.  A great example of needing to filter the conditions a bit would be the Dakotas.  Both states saw conditions slip to the lowest or near the lowest on record during the dry July.  Well as most know, August conditions are what make a soybean crop.  The up-turn in rains for much of the two states have arrived at exactly the right time, with crop prospects rising.  Yet, looking at the condition scores, one would be led to believe both crops are still suffering under extreme dryness.  This isn’t meant to dismiss the dry weather for much of June and July which will undoubtedly have an impact, simply to point out the relative number of the crop conditions might not be as important as the trend.  90% of the crop is blooming vs. 88% average while 65% is setting pods vs. 62% average.

Spring wheat conditions improved 1pt to 32% G/E vs. 68% last year thanks solely to a 4pt jump in ND.  With the crop as advanced as it is, the improvement in North Dakota conditions is most likely from better than expected yields as combines roll.  The crop condition score of 274 this week is now the lowest on record thanks to 1988 dropping from the data set due to harvest being completed already that year.  A regression analysis of this week’s condition score vs. final yield is still implying a yield in the high-20’s with 41% correlation.  Unlikely the USDA comes in with a yield this low on this week’s report, or ever for that matter, but strong chance production continue to decline.  Spring wheat harvest pushed to 24% complete vs. 9% last week and 21% average.  Winter wheat harvest is 94% complete vs. 88% last week and 92% average with only the PNW having meaningful progress left to complete.

While this is corn and soybean week for much of the trade, there are plenty of wheat headlines worth following.  The two maps below from USDA’s Crop Explorer program show accumulated precip for the time frame July 11-31st with much of Germany receiving 3-8” in the final weeks heading into harvest.  Germany is the second largest wheat producer in the EU behind France, and is responsible for a large percentage of the high protein/hard wheat which goes for export.  Several outlets are already calling 40% of the crop feed quality which will limit the amount of milling quality wheat available for export.  Private estimates for the EU are slipping to 147-148MMT vs. the USDA’s current 150MMT.  USDA is currently pegging exports at 30.0MMT which realized against private forecasts would put ending stocks and stocks/use ratios at record lows.  The US should be well positioned to fill some of the hard wheat demand left open by Germany and the other Baltic States.  After hitting a high of $31.68/MT, the MATIF/KCBT spread is off this morning to $26.24/MT.

 

Bottom Line: There is still enough weather uncertainty to support futures until the USDA gives us their take.  With the variability expressed from one corner of the corn belt to the other this year, USDA’s word on Thursday unlikely to be the final say.  US wheat has made itself competitive into the export grids for many destinations, but can’t afford to rally away from current levels or risk pushing that business right back out the door.  Once the Northern Plains harvest has come and gone, which it mostly has, it will be especially difficult to buy hard wheat with current board carries.

 

Good Luck Today.

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.

 

 

8/4/2017 Morning Comments

Good Morning,

 

Outside Markets as of 6:10am: Dollar Index up 0.002% at 92.7920; Euro down 0.004% at 1.18935; S&P’s are up 2.25 at 2474.00; Dow futures are up 45.00 at 22,019.00; 10-yr futures are down 0.05%; Crude Oil is down $0.19 at $48.85; Heating Oil is down $0.0024 at $1.6365; Paris Milling Wheat is up €0.75 at €164.25/MT; Paris Rapeseed is down €0.25 at €365.75/MT; Dalian corn closed up 0.36%, Dalian soybeans finished down 0.05%, Dalian oil closed down 1.08% and Dalian meal finished down 0.57%.

Later this morning will see the release of the July non-farm payroll report which is expected to show job growth of +180,000 which would match the 6-month average but be down from June’s 222,000.  The unemployment rate is expected to fall by -0.1 point to 4.3% which would put it exactly at the Federal Reserve target for later this year and on-pace for the 4.2% in 2018-19.  The market is also expecting July hourly earnings to ease to +2.4% y/y from June’s +2.5%.  Unlikely today’s unemployment rate on its own would be enough for the Fed to alter monetary policy at next month’s meeting, with odds for a rate hike at the next FOMC meeting in September at just 12%.  Odds increase to 34% for the Oct/Nov meeting and are up to 50% for the December meeting.

Light showers in the ECB and patchy rain in OK, otherwise the Midwest is mainly quiet.  The Plains will be fairly active this weekend with multiple rain chances for the Dakotas and eastern portions of the southern plains.  After a fairly wet week, parts of North and South Dakota could pick up another 0.25-1.00” by Sunday.  Rains will also be heavy in E-KS/MO/OK/AR and the southern parts of IL/IN/OH.  Totals in the heaviest locales could be as high as 1.25-3.00”.  Iowa finally sees a decent rain chance next Wednesday/Thursday, but the forecast is only calling for 0.10-0.25” on fairly light coverage.  SC-IA is running a severe moisture deficit over the last 30-60 days and crops are likely going to deteriorate further.  Well below temps remain the norm through the 14-day outlook, while precip is mainly normal/above outside of the Northern Plains.

 

Light gains this morning as markets limp to the finish line after a particularly bruising week in wheat and soybeans.  For the week, Chicago wheat is down 21.50c, soybeans are down 51.25c and corn is off 8.0c as the forecast shift to cooler and wetter seemed to set production worries aside.  Open interest has risen in wheat and corn, but remained relatively flat in soybeans which is a bit of a head scratcher.  One would think the remaining fund liquidation in soybeans would have witnessed a drop in open interest, or if funds were adding short positions and increase.  Flat open interest suggests a change in ownership which could be commercials buying soybeans from the funds, a development which wouldn’t be all that bearish given current price levels.  Would appear funds are rebuilding short positions in corn and wheat which could be partially revealed on this afternoon’s COT report.  Corn has been unwilling to press to the downside, and likely won’t until next week’s WASDE report is released.  Bloomberg released their average survey results yesterday and are looking for a national average yield of 165.9bpa vs. 170.7bpa last month while soybeans are seen at 47.4bpa vs. 48.0bpa last month.

While much of the focus in wheat has been fresh contract lows in calendar spreads on a daily basis and the soft cash markets for most of July.  In the process, however, US-HRW has closed the gap with many of its key competitors into destinations like Morocco, Algeria and Saudi Arabia.  Earlier this year, most analysts were busy stripping North African demand out of the US export grids, but that may have been a bit hasty based on current relationships.  Using the MATIF/KW spread as a proxy, the spread is currently trading $31.59/MT premium MATIF which would compare with $3.67/MT premium MATIF in early July and the 200-day moving average at $22.25/MT.  To be clear, this spread doesn’t spend a great deal of time above $30.00/MT, but the concern over continued rainfall in Germany and other Baltic states impacting production and quality is definitely manifesting itself in these price spreads.  Informa Economics released their latest World Production estimates yesterday and took another 1MMT off of all-wheat production in the EU to 147MMT which compares with the USDA at 150MMT.  Without changing demand, ending stocks slip to 6.578MMT which would be the tightest on record.

In looking at the current corn and soybean balance sheets with USDA demand, some interesting observations are gleaned.  Current old crop carryout is 413mbu, which has the potential to change next week given the possibility of higher exports and slightly lower crush.  Acres will be left unchanged for 17/18, so applying a yield of 47.4bpa yields production of 4.204bbu.  USDA is currently using 1.950bbu for crush and 2.150bbu for exports, neither of which have much reason to change at this point although new crop soybean exports are running woefully behind the same point a year ago.  This is a situation which will need to be monitored closely.  Keeping all else unchanged, we get a carryout of 407mbu which would be down 6mbu from last year and just 7mbu above the psychologically important 400mbu threshold.  The fact we are already staring at a sub-400 carryout in August when the USDA has a striking history of overestimating carryout early in the year is noteworthy.  Now, better rainfall the last couple of weeks combined with a non-threatening balance of August could push yield back higher but difficult to just throw out the particularly difficult June and July many areas faced in the WCB.  Worth noting, a yield of 46.2bpa puts carryout at 301mbu if demand is left unchanged.

If the same exercise is completed with corn and a yield of 165.9bpa, production totals 13.856bbu.  One can take issue with USDA demand, but using it for now gives us a carryout of 1.923bbu.  This would not be considered especially bullish as plenty can be argued with USDA’s demand being too high.  However, it doesn’t take much more yield cut to turn the balance sheet more constructive.  Some prominent analysts have yield down as low as 162.5-163.0, which would provide a carryout of 1.648bbu and a stocks/use ratio of 11.49%.  We were not as inclined to use a yield that low until seeing some of the data published by private tours in spots which were thought to be better than average.  The USDA report will give us plenty to chew on until the combines roll, but caution against getting to bullish corn yield without considering demand looks inflated to compensate for a large crop.  In addition, December corn has remained especially resilient in its recent range, so there doesn’t seem to be a real call to action for bulls or bears until more is known about this crop.

Data yesterday included export sales which were fairly disappointing for most everything including wheat at 5.3mbu vs. the 14.0mbu needed weekly to hit the USDA marketing year forecast.  Total commitments now stand at 369.8mbu vs. 370.0mbu a year ago, although we would expect commitments to pick up in coming weeks given the price set back and the US’s newfound competitiveness.  Corn sales were dismal at 1.4mbu vs. the 13.3mbu needed weekly to hit the USDA mark.  Total commitments stand at 2.218bbu vs. 1.930bbu a year ago and the USDA full year estimate at 2.225bbu.  Soybean sales were 8.6mbu vs. the -11.5mbu needed weekly.  Total commitments are now 2.232bbu, up 16% from a year ago and already 130mbu larger than the full year USDA estimate.  Also important to remember Census exports are running stronger than the USDA inspections data by 30-40mbu.  New crop sales for corn were light at 17.2mbu and now push that total to 174.7mbu vs. 317.0mbu a year ago.  Soybeans aren’t much better with 234.9mbu of commitments vs. 402.5mbu a year ago.

 

Bottom Line:  Friday’s are trend days, and the short-term trends have slipped lower.  Rainfall has been solid in many parts of the Midwest the last several weeks, but not in Iowa.  It makes a person wonder how long we can maintain production estimates if the largest corn and soybean producing state in the US is running such severe deficits?  Still maintain we won’t know the full story until combines roll in October, and for the Dakotas that could be November in many spots given the cool off in temperatures.  2017 continues to be a unique growing season and it is far from over.

 

Good Luck Today.

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.

8/2/2017 Morning Comments

Good Morning,

 

Outside Markets as of 5:55am: Dollar Index down 0.082% at 92.9580; Euro up 0.245% at 1.18605; Russian Ruble down 0.821% at 61.2932; S&P’s are up 1.75 at 2474.00; Dow futures are up 40.00 at 21,944.00; 10-yr futures are down 0.11%; Crude Oil is up $0.06 at $49.22; Heating Oil is up $0.0087 at $1.6500; Paris Milling Wheat is down €0.50 at €165.50/MT; Paris Rapeseed is up €0.75 at €367.00/MT; Dalian corn settled down 0.24%, Dalian beans closed down 0.60%, Dalian soy oil finished down 0.88% and Dalian meal closed down 0.81%.

Showers in western ND/SD/NE this morning along with more rain in C-TX, but most of the Midwest is fairly quiet this morning.  Shower activity is expected to pick up in the Dakotas today with the entire state of ND receiving 0.50-1.25” with localized areas in the RR Valley seeing upwards of 2.00”.  SD is also expected to see a broad 0.50” with totals pushing into MN.  Another round of showers is expected for SD over the weekend with totals of 0.10-0.50” forecast this morning.  Late in the weekend and early next week shower activity is expected to pick up in the southern plains with solid totals expected for OK/TX to the tune of 3.00-4.00”.  There are rain chances for the central corn belt in the next 7-days, but not as widespread or as heavy as the Plains.  Two week percent of normal deficits continue to increase for SC-IA and NC-MO.  Extended maps maintain below normal temps and above normal precip.

 

A little bit of recovery today led by soybeans after the flogging they received yesterday on forecasts turning cooler and wetter, the surprise increase in national condition ratings and a negative August seasonal for soybean futures to boot.  While the entire growing season is important for achieving maximum potential, there is no denying that the last week of July through the last week of August is arguably the most important period of weather for a soybean plant.  The shift to cooler temperatures and more rain for every growing state from ND to OH cannot be denied, and certainly seems to have taken some of the low-ball yield estimates off the table.  Too early to put a trend line yield into the balance sheet with pen, but August is certainly shaping up better than July for the majority of the corn belt.  Wheat has been a bit more resilient after its futures selloff, thanks in large part to the newfound competitiveness of winter wheat into major import destinations.  Also, the selloff has taken new crop winter wheat prices back down to levels which don’t guarantee acreage increases this fall.  Corn has the benefit of yield uncertainty, but FOB prices are a major pressure point vs. SAM.

First the data of the day with deliverable stocks released yesterday morning.  Combined HRS stocks in Duluth/Minneapolis rose by 404,000 bushels last week to 20.608mbu, the third straight week of stock builds and the fourth out of the last five.  These stock levels would compare with 25.485mbu a year ago, and also sit well under levels from 2015.  Still, the pickup in movement ahead of harvest by the farmer has been felt in basis and spreads, causing cash prices to the farmer to fall considerably.  At current prices, it would appear the farmer will go home to his ample storage before selling any bushels off the combine, setting up what should be a period of basis strength Sept-Dec.  Chicago wheat stocks rose by 1.334mbu from last week to 95.854mbu and compare with 84.135mbu a year ago.  HRW stocks in Chicago sit at 4.678mbu vs. 2.885mbu a year ago and remain a threat to Chicago wheat calendar spreads if they get redelivered against a long who doesn’t have a need for HRW in St. Louis or Chicago.  Non-deliverable grades at 7.953mbu remain well below a year ago at 14.084mbu with reports of solid quality this year.  HRW stocks rose 1.355mbu to 124.784mbu vs. 111.380mbu a year ago.  Non-deliverable grades are about 900,000 bushels above a year ago, but nothing close to the level implied earlier in harvest.  Commercial hedged inventories are huge as everyone sits back and picks up the carry.  HRW basis should get firm later this year as well as bushels need to be pried loose from the elevator and farmer.

As noted above, US-FOB corn prices are getting beat up nearby and through December by our South American counterparts which has many analysts eager to trim exports further.  Spot offers at the Gulf yesterday were $157.28/MT FOB vs. no offer from Argentina but $152.55/MT from Brazil.  Argentina’s first offer was indicated for October at $152.16/MT FOB which compares with $163.18/MT for US-Gulf and $158.06/MT FOB for Brazil.  Even out to December, the US is carrying a premium at $167.51/MT vs. $154.13/MT for Argy and $158.06/MT for Brazil.  It is not difficult to see why new crop corn export sales commitments are running so far behind last year at 157.5mbu vs. 281.8mbu a year ago.  In addition, not difficult to explain the spread weakness with CU/CZ trading out to -14.00c this week, a new contract low.  CZ/CH is also sitting at new contract lows of -12.00c.  Contrast this with soybeans which were offered at the Gulf yesterday at $377.27/MT FOB for September vs. Brazil at $384.45MT/FOB and no indications for Argentina.  Even still, new crop soybean commitments remain well behind last year at 221.4mbu vs. 361.0mbu a year ago.  New crop soybean spreads remain weak as production prospects stabilize and/or increase.  New crop commitments for both corn and soy remain a concern, although for this analyst, corn is more of a concern than soybeans at the moment.

The second chart below shows the gross commercial short position in KC wheat as a percentage of total open interest which is another way of looking at producer/elevator selling and hedging.  As one will quickly notice, the amount of selling/hedging during June and early July shot 2017 way past each of the last four years and right below 2012.  While 2012 is still higher as a percentage of total open interest, 2017 has about 65,000 more contracts than 2012 thanks to the larger market size.  This surge is selling was completely consistent with the amount of selling off the combine which was reported from the southern plains and Nebraska.  Farmers with bushels rewarded the rally in a big way, and elevators socked those bushels away to earn the profitable carries available.  KWU/KWZ traded to a new contract low of -27.75c yesterday, a new contract low and 89.1% of full financial carry (LIBOR +200bp).  When one considers a farmer or elevator can earn 60c/bu sitting on wheat from now until May, there isn’t much risk in keeping the wheat hedged and waiting for basis appreciation.  As noted above, this should promote basis strength as US wheat offers are now competitive and bushels will be hard to buy outside of those who need to make room for fall harvest.

Commercial giant Bunge reported second quarter earnings this morning which missed estimates rather badly.  Earnings were reported at $0.17 in Q2 compared with $0.79 during the same period a year ago.  Net income attributable to shareholders fell 33% to $81 million.  Bunge cited “weak global margins and slower than expected farmer selling in South America led to a challenging environment in agribusiness.”  Bunge also said it expected the agribusiness unit to deliver earnings before interest of $550-650 million in 2017 which had been as high as $800-925 million before the profit warning last month.

 

Bottom Line: The selloff yesterday in the soy complex seemed a bit overdone considering we still have an entire month of weather to watch, and US FOB offers are competitive with SAM during a time in which they shouldn’t be.  Brazilian farmer selling has slowed appreciably as evidenced by the weaker Bunge earnings.  Wheat looks stout here after the correction considering farm gate selling has slowed, Northern Plains selling off the combine should be minimal, Canadian crop prospects are still getting smaller and US wheat is competitive against Europe.  Corn needs more verification from USDA.

 

Good Luck Today.

 

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.

 

 

8/1/2017 Morning Comments

Good Morning,

 

Outside Markets as of 6:00am: Dollar Index up 0.144% at 92.9820; Euro down 0.131% at 1.18445; S&P’s are up 5.25 at 2473.50; Dow futures are up 102.00 at 21,944.00; 10-yr futures are down 0.02%; Crude oil is down $0.12 at $50.06; Heating Oil is down $0.0039 at $1.6635; Paris Milling Wheat is down €0.75 at €167.50/MT; Paris Rapeseed is down €3.25 at €368.50/MT; Dalian corn closed unchanged, Dalian soybeans settled up 0.05%, Dalian oil closed up 0.65% and Dalian meal settled up 0.04%.

The USD and crude oil continue to be the largest headlines in the financial sector as the former hit the lowest level since May 3rd, 2016 yesterday while the latter hit the highest mark since May 25th earlier this morning.  No doubt the USD weakness has helped crude oil strength, with many analysts continuing to sight dim prospects for the Trump Administration’s agenda as the source of the selling pressure.  If the May 2016 lows are breached, the USD would be staring at the lowest levels since January 2015, erasing the entire consolidation pattern and rally to the high 103’s following last fall’s election.  Meanwhile, crude oil has clawed back above its 50/100/200-day moving averages, and has the next real resistance at the 5/25 corrective highs around $52.00.  Energy inventories appear to have hit their seasonal peaks earlier than normal this year, helping to ease the burdensome stocks present for much of 2017.

Scattered showers across the Dakotas and the far southern plains this morning, otherwise the Midwest is mainly quiet.  Weather watchers are focused on rains beginning today and continuing tomorrow in the WCB and Northern Plains which are expected to bring 0.50-2.35” to SD/ND/MN/NW-IA, which are still the driest areas of the corn belt.  NW-IA has been one of the fastest developing drought areas in the corn belt, and missed meaningful rains last week which supported the market.  More rain is around Friday/Saturdau for the Plains and WCB, especially KS/OK which could see totals of 0.75-2.50”.  The 7-day forecasted precip map shows a lot of moisture around the major growing areas of the US which would be hugely beneficial if verified, especially when combined with the cool down in temperatures the next 15-days.  The Northern Plains slips back drier during the 6-10 and 8-14.

 

Easier markets overnight, led lower by soybeans as the forecasted precip and cooler temperatures could be just what the doctor ordered for Midwest soybeans trying to set and fill pods.  November soybeans had been clinging to the $10.00 handle, but the surprise increase in crop conditions last night, combined with what should be another increase next week if weather verifies should have analysts stabilizing yield ideas or even increasing them a bit.  Difficult to believe either corn or soybeans are ready to run away to the downside given the uncertainty posed by lower than average crop conditions, solid old crop export demand for soybeans, declining exports from Brazil and the August WASDE just around the corner.  The first of several private crop tours have hit Midwest fields this week with plenty of pictures and yield estimates hitting social media yesterday.

National corn conditions declined one point to 61% G/E vs. 62% expected and 76% last year.  A real mixed bag with ND declining (-5), SD improving (+1), IA (-3), IN (+2), KS (-4) and OH (+1).  The combined national corn condition score slipped to 357 from 359 last week, which would be the lowest since 2012 and the second lowest since 2007.  WCB states remain the largest focus with IA at 65% G/E vs. 83% last year and 63.4% on the 5-yr average which includes 2012.  NE at 61% G/E vs. 77% last year and 64.6% average is also worth noting, while ND is the lowest rated corn crop since 2006 and SD at 29% G/E is the lowest rated crop since 2012 and the second lowest since 2006.  85% of the corn crop is silking vs. 85% average while 23% of the crop is doughing vs. 25% average.  Soybean conditions improved 2pts to 59% G/E vs. 57% expected and 72% last year.  The national condition score improved from 349 to 352 this week which is the lowest since 2012’s 280 but the second lowest since 2006.  48% of the national soybean crop is setting pods vs. 29% last week and 45% average.  Over half of the corn belt will be setting pods this week amid cooler temperatures and multiple rounds of moisture.

Spring wheat conditions declined another 2pts to 31% G/E vs. 33% expected and 68% last year.  Conditions were lower in ND, MT and ID while they improved in WA and MN which is probably a sign of better than expected yields given the maturity of the crop.  The national condition score felt to 271 points this week which is the lowest since 1988’s 200.  As we’ve continued to do the last several weeks, we plotted the national condition score of the spring wheat crop against final HRS wheat yields to get a feel for yield ideas this year.  If we plot current conditions against the USDA’s current yield idea, the 2017 plot point sits about 11bpa above the trend line with an r-squared of 37%.  If we adjust the 2017 yield to fit the trend line, we get a yield of 25.7bpa with an r-squared of 49.5%.  Obviously we don’t expect the USDA to post a national average spring wheat yield of 27bpa given their latest and the WQC tour yield of close to 38.0bpa.  However, depending on how the USDA adjusts harvested acreage, yield could go one direction while production goes the other.  Spring wheat harvest is estimated at 9% complete nationally vs. 9% average with SD leading the way at 46% complete vs. 31% average.  Huge progress should be made in SD this week until the rain tomorrow with harvest essentially wrapped up by next week’s report.  Winter wheat harvest is pegged at 88% complete vs. 84% last week and 86% average.  Only MT and the PNW have meaningful progress remaining with MT wrapping up by next week.

Other data released yesterday included export inspections which continue to suggest good things for both 16/17 exports and 17/18 exports.  Wheat inspections totaled 21.3mbu vs. the 17.4mbu needed weekly to hit the USDA export forecast.  At 184.4mbu, shipments are now 15.0% ahead of last year’s 160.3mbu, a surprisingly solid start considering exports are expected to decline roughly 60mbu this year.  Corn inspections continue to plug along as well with 38.9mbu inspected for export vs. the 10.8mbu needed weekly to hit the USDA forecast.  Total shipments are up 31.4% from a year ago at 2.080bbu with 5-weeks left in the marketing year.  Soybean shipments were 17.5mbu last week vs. the 10.5mbu needed weekly.  Total shipments are now 1.999bbu which are up 16% from a year ago, and official Census exports suggest both corn and soybean exports could prove 40-60mbu larger than current inspection data.  The USDA’s corn export number appears to be on target given the slowdown in sales, but the soybean export number could be 30-40mbu larger than current USDA estimates.

Still lots of focus on Canada and their finishing weather for their spring wheat crop.  Most of southern Alberta and Saskatchewan have gone at least 20-30 days without recording more than 0.5mm of rainfall, while scaled back even further some areas of S-AB and S-SK have gone 40-48 days without more than 0.5mm of rainfall.  Northern stretches of both provinces have been much more fortunate with rainfall, but it remains difficult to see how anything close to a 5-yr average yield can be achieved with rainfall returns being posted like that.  Second map below shows the 60-day time frame.  The 5-yr average for Canadian wheat yield is 3.20MT/ha, while we are currently using 3.00MT/ha which is still above 2015/16’s 2.88MT/ha.  With USDA harvested acres and demand assumptions, this provides us with a carryout of 3.813MMT and a stocks/use ratio of 12.38%.  Both would be the tightest on record.

 

Bottom Line: Difficult to argue with the forecast even if no one is sure what damage has already been done and how much we can still recover?  The decline in futures and weak basis levels have pushed US wheat back into the export grids for major importers, undercutting European wheat by a noticeable margin.  Now we just have to connect on said business, but the point is US wheat doesn’t need to get cheaper at the moment.  Funds still hold large long positions in the hard wheat contracts and a small short in soft wheat which could limit rallies, however.

 

Good Luck Today.

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.

 

7/27/2017 Morning Comments

Good Morning,

 

Outside Markets as of 6:30am: Dollar Index up 0.2090 at 93.6020; Euro down 0.009% at 1.17355; Swiss Franc is down 0.722% at 1.04520; S&P’s are up 4.50 at 2477.75; Dow futures are up 27.00 at 21,673.00; 10-yr futures are down 0.07%; Crude Oil is down $0.30 at $48.46; Heating Oil is down $0.0034 at $1.5961; Paris Milling Wheat is up €0.50 at €168.50/MT; Paris Rapeseed is up €1.00 at €366.25/MT; Dalian corn closed down 0.18%, Dalian soybeans finished up 0.40%, Dalian oil closed up 0.03% and Dalian meal settled down 0.64%.

Some showers in ND and separately some moisture in the Southern Plains and stretching up into S-IL.  The weather story yesterday was the bust on rains in IA which had potential for 1.00-2.50” across the entire state, but once the dust had literally settled, the state got far less than that.  NW-IA which has been the driest spot saw trace to 1.00” amounts on spotty coverage, while W-IA saw 10-15% coverage of 0.50-1.00”.  Most of the eastern half of IA saw negligible amounts.  Rain also fell in IL, MO, KS and SE-NE.  The WCB will be mainly dry the next 7-days, especially IA which sees next to nothing for rain as does E-NE, S-MN and N-IL.  Temperatures do moderate with mainly low to mid-80’s in the central and ECB while upper-80’s to low-90’s are seen in the Plains.  Northern Plains are dry and normal to slightly above on temps while the central and ECB are dry and cool.  As the map below shows, still meaningful deficits in moisture across parts of IL, IA, MO, ND and N-MN over the last 14-days.

 

A bit firmer overnight as the rain chances for IA which the market was so sure of fizzled out to provide little to no relief.  After hanging a lot of weight on that rain, the market will now have to watch a mainly dry week ahead for much of the WCB although temperatures will moderate.  The vast majority of the corn belt has already silked, and therefore gone through the most important week of pollination weather.  Soybeans, however, were still 69% blooming and only 29% setting pods as of this past Monday.  The current week and next week of weather will be incredibly important, which should be aided in the cool down.  Rain will still be needed in August to reach trend line yields, and if there is one balance sheet which can’t handle a sub-trend yield it is definitely soybeans.  Wheat markets are also finding a bit of support as US-FOB offers get closer to being competitive and as the much poorer yields from W-ND show up on the WQC tour from yesterday.  The tour will finish up today in Fargo with their results expected after the close today.

Starting with the wheat tour, scouts made 225 stops yesterday which is up from 197 last year, finding an average yield of 35.7bpa compared with 46.5bpa last year.  The two-day average now stands at 37.2bpa vs. 44.8bpa a year ago.  Media outlets made note of the difficulty in estimating some of these fields which had a calculated yield of less than 10bpa.  The reality is there is very little chance these fields get harvested, which will increase abandonment.  The amount of HRS put into a bale was also readily apparent with scouts estimating abandonment at 10-40% on certain legs.  WQC head Dave Green said the tour has not estimated harvested and unharvested acreage in the past, but will do so this year and present it for the trade to do with it what they will.  For reference sake, the USDA is currently estimating the North Dakota spring wheat yield at 38bpa vs. 46bpa a year ago and the 5-yr average of 46.6bpa.  2011 was North Dakota’s most recent low yielding year with a final spring wheat yield of 30.5bpa and yields in the drought years of 2006 and 2002 of 31bpa and 28bpa, respectively.

Other data released yesterday included weekly ethanol production which slipped 14,000bbls/day to 1.012 million bbls/day, but was 1.4% above same-week production from 2016.  With the end of the marketing year in sight, we can get a better sense of just how close we are to meeting the USDA’s 5.450bbu corn for ethanol demand estimate.  Based on the last 6-8 weeks, it looks as though we may come up just short of that target, and be in jeopardy of missing the USDA’s number by 10-15mbu.  The 16/17 corn balance sheet does not need any help growing at this point, and with just over a month left there isn’t really anytime to make it up.  Ethanol stocks dropped sharply by 608,000bbls to 21.529 million bbls.  Despite the drop, ethanol stocks remain sharply above year ago levels and historically high for this point in July.  Ethanol export data will be available next week.

Cash wheat markets continue to trade softer as the last HRW bushels attempt to get marketed while HRS growers with old crop are trying to take advantage of protein premiums before they evaporate.  In addition, cash markets seem to be waking up to the lack of demand for hard or soft wheat at the moment, and also the realization we don’t need to ration any HRW demand.  The KCBT spot floor was down another 5-26c yesterday for 11.40-14.0% with 12.0% protein indicated at +70/80U vs. +95/105U a week ago and +168/178U a month ago.  HRW wasn’t alone, however, as HRS basis for 14.0% on the spot floor traded down 5-10c with those indicated at +55/115U vs. +80/115U a week ago and +120/140U a month ago.  Encouragingly, Algeria tendered for and bought 500,000MT of milling wheat yesterday with prices said to be around $214-216/MT C&F.  This is optional origin business, but was thought to be conducted with France and Baltic States.  When offers are looked at a bit closer, US-HRW should have been within $1.00/MT of competing with French, although chatter suggests it didn’t take place.  Still, US wheat might not be that far off from connecting on some high-profile international business.  On the spring wheat side, despite crop issues of their own, CWRS continues to be offered $13-14/MT cheaper than US-HRW ex. PNW.  They are obviously still focused on moving wheat in the near-term even if rationing needs to take place on the back end.

Export sales out later this morning are expected to show wheat at 350-550TMT, corn at 350-800TMT, soybeans at 300-900TMT, meal at 50-175TMT and oil 5-20TMT.

 

Bottom Line: Doesn’t feel like row crops are going down any further in the near-term until more weather can be assessed.  If row crops stop plummeting, should take some weight off wheat, especially as HRW is getting closer to being competitive in the export grids.  Markets will be watching for the wheat tour results this afternoon, but most assuming they find similar production to what is already being traded.  The wild card is harvested vs. unharvested which won’t be addressed until the September 30th Final Small Grains report.

 

Good Luck Today.

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.