4/20/2018 Morning Comments

Good Morning,

Commodities are the buzz.  Yesterday, the CRB Index, which measures a basket of commodities, hit the highest level since October 2015 as crude oil and other hard assets continue to push higher.  The index has been driven in large part by crude oil, which hit the highest level since the fall of 2014 yesterday.  Spot month crude oil futures missed the $70/bbl mark by just 44c/bbl.  Brent Crude oil futures on the other hand, missed $75/bbl by just 25c/bbl.  Rising energy markets have been in response to the draw down in US crude oil stocks, as well as a fairly strict adherence to OPEC’s production caps.  This rise in crude oil was met with tweets from President Trump this morning, however, as rising gasoline prices usually don’t sit well with the American Consumer.  It is very difficult to have a roaring economy and cheap gasoline prices, so if given the chance I’d think he would be happy with the former.

All eyes on the southern plains rain forecast for the weekend which is still showing 0.50-1.25” for the western ½ of the state, although down from early week model runs.  The system will blanket Oklahoma and most of N-TX as well.  E-CO will probably be the area short changed.  The heart of the corn belt looks mainly dry the next 7-days which should allow planters to roll in spots by mid-week next week.  Normal/above temps in the 6-10 and 8-14, while above normal precip moves in for the entire Midwest and Southern Plains in the 8-14 day.

 

Easier markets to close the week with losses being led by KC wheat which has been the price leader multiple times this week.  HRW is definitely in a weather market, living and dying with each model run.  However, expectations should be tempered for how much recovery can take place if rains do verify.  When one considers it began raining/snowing around this time last year leading to a substantial recovery in the crop by harvest, one needs to remember the vastly JFM period for 2017 vs. 2018.  February 2017 was rather dry for the heart of the HRW belt, but January and March were actually rather wet with most of the state seeing 2.0-3.0” of moisture during that month.  April was particularly wet for Kansas with the entire state seeing 2.0-5.0” by the turn to May.  This was not the case with 2018, and while stabilization and even some recovery can occur with an up-turn in rains, I think expectations need to be tempered about returning to an average crop, even if development is behind.  Today is option expiration for May options with the 1030/1040 strikes being watched closely in soybeans as well as the 3.80 strike in May corn.  Soybean charts and spreads are looking tough.

Data out yesterday included weekly export sales which were decent for row crops, and disastrous for wheat.  Wheat export sales featured net cancellations of old crop of 2.5mbu vs. the 11.5mbu needed weekly to hit the USDA forecast.  Total commitments of 844.0mbu are down 17% from a year ago vs. a 15% deficit last week.  With just six weeks left in the marketing year, it looks as though USDA will be downgrading the wheat export sales forecast next month, leading to a rise in carryout.  New crop sales totaled 8.9mbu which puts total new crop commitments at 51.0mbu vs. 57.9mbu a year ago.  Corn sales were solid at 43.0mbu vs. the 13.9mbu needed weekly.  Total commitments are down 1.940bbu, down just 2% from a year ago, consistent with the last several weeks.  Soybean export sales of 38.2mbu were much stronger than the 5.2mbu needed weekly to hit the USDA forecast.  Total commitments of 1.985bbu are down just 3% from a year ago vs. the USDA calling for a 5.0% decline.  Shipments of 1.557bbu are down 224mbu from a year ago, and are definitely the indicator to watch as we move into the summer months.  Meal and bean oil sales were both much stronger than the level needed.

Several Chinese headlines out yesterday regarding their corn market including an article which is pegging their 2018/19 corn demand rising to 225MMT, 15MMT larger than 2017/18.  There must be something being lost in translation as 2017/18 total consumption was 232MMT, and straight feed/residual demand was 162MMT while FSI consumption is 70MMT.  We had been plugging 240MMT into our 2018/19 balance sheet, but this will evolve.  Also on the demand front China sold 2.696MMT of the 2.958MMT offered during yesterday’s corn auction at an average price of $241.70/MT.  There have been four auctions held total in 2018 which saw a combined 8.955MMT sold.  For reference sake, May corn futures on the CBOT are trading at $149.34/MT.  The strong demand for corn is not all that difficult to square given the recent bump in tariffs against US sorghum, a commodity which China had been consuming copious amounts of.  If China’s demand continues to grow at the current pace, and to meet the additional ethanol demand, greater imports will be needed.

The other big talker in our littler corner is the Russian balance sheet and its implications for the 18/19 global wheat flow.  Russia’s wheat exports in 2017/18 have absolutely blown away expectations, and are now being estimated at 40MMT vs. early season ideas which had them struggling to put through 30MMT.  The open winter definitely aided these efforts, something which can’t be counted on every year.  Nonetheless, if we assume 2017/18 wheat exports at 40MMT, carryout falls to 11.222MMT, which would still be the largest since 2010/11.  Production ideas for 2018/19 are somewhere between 75-78MMT, so we are using 76.850MMT with an average yield of 2.90MT/ha.  This would be the second largest yield on record behind last year’s 3.10MT/ha, which many have described as an outlier given the perfect growing conditions.  Total supplies would therefore be down around 8MMT y/y, while we see demand easing to 82.50MMT vs. 85MMT this year thanks mainly to a 2MMT drop in exports.  Russia will still be position to export a huge book, but repeating an open winter will be tough.  Carryout would therefore fall to 6.072MMT if domestic demand is flat, which would be a three year low.  More impressive is the stocks/use ratio at 7.36% which would be the smallest since 2000/01.  When a huge demand base gets put underneath the market, even with solid supply, it raises the bar for countries relying on this country continuing to perform seamlessly throughout the year.  The fact Russia will not have as large of stocks hanging over the market for an entire marketing year should help elevate global offers.

MW/KW inter-market spreads have very likely seen their highs in the near-term around $1.20 basis the July, which was resistance back in mid-March as well.  Minneapolis began to exert premium over KC as planting delays mounted and rainfall prospects improved for the southern plains.  As the week has progressed, rain fall totals have been dialed back in the south, and weather seems to be improving in North Dakota.  Crop progress reports on Monday should still show a complete lack of progress seeding across the Northern Plains, but the following week could begin to see progress being made.  How acres change on the June planted acreage report is another matter, but spring wheat will go in the ground in May in short-order if forecasts hold.  Having said that Commodity Weather Group did issue a blog post yesterday suggesting the 11-15 day is turning cooler and wetter with the 16-30 day backing that prediction up as well.

 

Bottom Line: Easier as we await midday model runs.  Opex could keep us lower today as prices try to gravitate toward a major strike.  Sunday night open will be about rainfall returns in the Southern Plains and the updated outlook for corn belt weather.  If the forecast holds, planters will be rolling hard in Illinois and Iowa by next weekend.  As many have pointed out, we can plant 30-50 million acres of corn in a week.  We are not late.  Outsides remain supportive.

 

Good Luck Today.

 

JFMA-2017

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.

4/18/2018 Morning Comments

Good Morning,

 

Another winter storm impacting SD/ND/NE-NE/IA/SW-MN this morning, although this one is much less severe than the last two.  Nonetheless, more rain/snow mix is falling in areas which don’t particularly need it, slowing dry down and preventing fieldwork from occurring.  The current system will continue into this afternoon and evening as it moves east.  Friday/Saturday is still the focus for the southern plains for their best chance at precip in months.  Models this morning have certainly backed off the heavy amounts seen this last weekend, but most of the HRW belt is still slated for 0.50-1.00”, with best totals across the state of Oklahoma which is seen receiving 0.75-2.00” across 100% of the state.  The central plains see more precip move in next week Monday-Wednesday with W-NE/W-SD looking at another 0.25” of water-equivalent moisture.  Temperatures are generally seen warming with most of the Midwest above normal by the 8-14 day.  Precip generally looks to be normal/above, especially the southern plains by the end of that period.  Dryness in safrinha corn areas is becoming a concern in South America which we will touch on below.

 

Firmer markets across the board this morning led by KC wheat which is up 1.40% at this writing.  Precip models have definitely tamped down totals expected for the southern plains, even if it is still the best shot at rain all season.  When we ended last week, and even the beginning of this week, widespread 1.00-2.00” totals were seen on 80-90% of the HRW belt.  As of this morning, things are looking like 0.50-1.00” on 70-80% with localized amounts heavier.  However, analysts and producers alike are raising the question of how much this can revive the crop which has already been stressed to the max?  The last two weekends featured frost/freeze events across much of OK/KS/S-NE, and the roller coaster of temps in Kansas has witnessed temps as high as 94* to as low as 15* within the span of 48-hours.  Some stabilization, and even some recovery, is probable, but returning to trend line yields seems a bit far-fetched given what this crop has gone through.  Corn and soybeans have the feeling of slow, leaking markets which hasn’t inspired much buying or selling.  You’re not supposed to sell a quiet market, which the corn market certainly is right now, but it also feels as though most of the trade is bullish corn based on 18/19 carryout projections.  Acres are still in flux, but there is no reason to be cutting corn acres on April 18th in our opinion.  A lack of progress across IA and IL after the first week of May would be cause for concern.

There has been plenty of chatter on Twitter lately about soil temps across the corn belt, which any John Doe could figure are not suitable for corn planting when air temperatures are dipping below freezing on a consistent basis.  Nonetheless, looking at soil temps, and the prospects for warming might offer clues as to when the green flag could drop on planting.  The Iowa Mesonet site showed the southern 1/3 of Iowa with soil temps at 40-42* at 4” deep.  The east and west borders were right at 40* to as low as 39”, while the NW-1/4 was still around 32* at midnight.  Corn germinates at 50*, although farmers will begin throwing seed in the ground before then if it looks as though temperatures will warm enough in the next 5-7 days to begin that germination process.  Seed companies will tell you seed should be germinated and out of the ground within about 10 minutes to achieve maximum yield potential.  Anyone who farms north of I-80, and especially I-90, knows this is not always possible.  Temperatures in Des Moines feature a high of 55* through Saturday with lows below 40* until Sunday.  Early next week temps rise to the mid-60’s with an average temp around 54-55* by mid-week next week.  It is conceivable soil temps could be approaching 50* by the end of next week which would give farmers the confidence to plant if soils are suitable.

PNW corn bids remain firm on a combination of solid demand and poor logistics across the Northern Plains thanks to the recent winter storms.  Last night, spot shuttle bids went home at +135K against offers at +150K, while May trains were +125/130K.  These compare with +123K for spot a week ago, and +116/120K for May trains.  BNSF equipment is indicated at $1500 car on the bid side against offers of $2000, which would be up around $500 car from a week ago.  So, call freight up 10-12c and corn bids up about the same.  Would have to call CIF bids up around 5-7c for April/May, despite barge freight having a slightly easier tone w/w.  The firmer cash should come as no surprise: the US farmer is not selling and is not likely to sell any corn until he has confidence about getting in the field.  Funds are long to be sure, but they need a reason to dump that position because the natural seller is disengaged for the moment.

Several private forecasters have begun to talk about developing dryness in Brazilian 2nd crop corn areas, predominantly Mato Grosso do Sul, Parana and Sao Paulo.  Parana comprises around 31% of 2nd crop corn production, while Mato Grosso do Sul is around 14% and Sao Paulo about 5% based on the last data from the USDA.  It needs to be pointed out these drought conditions are very short-term in nature and are just beginning to surface as the 1-month and 2-month drought conditions from the USDA’s crop explorer program are not yet indicating drought-like conditions.  In addition, Mato Grosso, which comprises 37% of 2nd crop corn production is still in good shape.  The USDA is currently forecasting Brazilian corn production at 92MMT vs. 98.5MMT last year, with an average yield of 5.38MT/ha vs. 5.60MT/ha a year ago.  The 5.38MT/ha would be the second largest on record, just behind 2014/15’s 5.40MT/ha.  CONAB, Brazil’s official crop forecaster, is using a production figure of 88.6MMT, which would imply an average yield of 5.06MT/ha on the same acreage.  CONAB did not list a planted or harvested acre figure in their latest release.  The distinction is an important one as USDA is currently forecasting carryout of 10.919MMT with demand of 95.5MMT, while CONAB’s production figures would see carryout drop to 8.519MMT on the same demand, a three year low.

A couple tidbits to close.  The German Coop Association pegged new crop wheat production at 24.29MMT yesterday, which would be about 1% below a year ago thanks to winter wheat acres being down 4.7%.  They are indicating higher spring wheat plantings which is expected to mitigate some of the production drop.  The USDA Ag attache to Australia put 2018/19 wheat production at 24MMT which would compare with 21.5MMT a year ago.  The East Coast of Australia has been drier than normal all winter long, and is still in need of recharging rains as farmers get set to sow later this month and into May.  Russian wheat is trading above like-quality German and Baltic offerings on a FOB basis for the first time in 2018.

 

Bottom Line: KWN has extracted 53c of premium from the highs on 4/9 to the lows yesterday.  This is probably enough, especially if rain totals don’t live up to the forecasts.  One rain is not going to fix 6-months of drought, but the low end production estimates are starting to come up.  Analysts still trying to figure out what a 70-75MMT Russian crop is going to look like in trade grids.  One thing seems certain, they will continue exporting until they are out of wheat.  Capacity constraints are not an issue, thanks in large part to a wide-open winter which will be difficult to replicate.  Corn and soybeans in wait-and-see mode until someone starts planting I the corn belt which will probably be by the end of next week.

 

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.

 

4/17/2018 Morning Comments

Good Morning,

 

Wide-open Midwest radar this morning ahead of another round of rain/snow mix across the upper-Midwest.  Fortunately, after the next round of moisture, some heat finally moves into the Midwest for the rest of the week and the foreseeable future.  Highs will move into the 50’s and even 60’s across the Dakotas, S-MN and IA during the 6-10 and 8-14 day.  Precip will linger with on-and-off systems passing through, but snow pack should recede quickly.  The much-anticipated rain event for the southern plains still looks on tap for Friday-Sunday, although totals do look lighter this morning as opposed to yesterday.  Most of Kansas looking at 0.50-1.25” vs. 1.00-2.00” yesterday AM.  Oklahoma, N-TX and E-CO will all see precip with the event.  Extended maps slowly warm to above normal temps by the 8-14 day, with mostly normal to below normal precip.  The southern plains sees above normal precip during the 8-14 which would be welcome news for producers looking at follow up moisture to this weekend’s event.

 

Better markets to start as we claw back some of yesterday’s hefty losses in the Ag room.  KCBT wheat prices were under duress all session, finally dragging corn and soybeans materially lower by the close.  The losses in soybeans were particularly notable as most contracts showed only nominal losses through the noon hour before closing lower by double figures.  There are three sessions remaining before May options expire with notable open interest at the 10.40 puts and calls, but also a fair amount of 1020 puts open as well.  Crop progress figures took center stage yesterday afternoon, although there were few surprises.  Corn and spring wheat planting are well behind average, but with the weather beginning to change, attitudes are likely to change as well.  Monster planting weeks in 2011 and 2013 are being cited a evidence of how fast the US farmer can plant corn.  There is no doubt that given the proper window, the crop can go in quickly.  Chatter about below trend yields due to a lack of progress on April 17th is absolute rubbish.  If the last 5-years have shown us anything, it’s these genetics cannot be counted out during any sort of growing conditions.

US corn planting progress was reported at 3% complete vs. 2% last week and 5% average.  Other than a 1% figure in Nebraska, nothing has been done in the corn belt with all other major producers recording a 0% complete figure for the week ended 4/15.  Delta and US-SE states are all at or above their 5-yr averages.  Average progress typically crosses 50% complete by the first or second week in May, so this is really the figure the market will be watching.  Spring wheat planting progress was reported nationally at 3% complete vs. 2% last week and 15% average.  Outside of 1% complete in South Dakota, all national progress was attributable to Washington and Idaho.  ND, MT and MN are all still 0% complete.  From a national perspective, the 3% complete for week #15 is the slowest since 2009, and second slowest since 1997.  Individual state progress also notable with Idaho at 24% complete vs. 49% average, and would be the slowest progress for week #15 since 2009.  MN at 0% planted ties 2013 and 2014 and compares with 13% average.  MT at 0% planted is the slowest on record for this week although 2002 at 1% was similar.  MT is usually 12% planted for this week.  ND at 0% planted also ties 2013 and 2014 for nothing being done while average progress is usually 6% complete.  SD’s 1% complete is the slowest progress since 1997, a particularly awful spring for the state, and compares with 34% complete for am average.  Washington is 37% complete vs. 52% average.  Given the forecast and the current field conditions, little to no progress will be made in the next 7-days which will start to see progress vs. average disparities widen further.  For week #16, South Dakota is usually 56% planted, North Dakota 22% planted, Montana 31% planted and Minnesota 41% planted.  Still should not be any alarm bells sounding for spring wheat, although anecdotal reports continue to suggest acres will be switched from spring wheat to soybeans for areas creeping in on their Prevent Plant dates.

We also had winter wheat conditions which improved 1 point to 31% G/E which compares to 54% G/E a year ago.  HRW conditions mainly declined with the exception of South Dakota, while SRW conditions were almost uniformly improved.  SWW conditions were also much better, and California saw its wheat conditions improve by 20pts to 95% G/E vs. 100% G/E a year ago.  The condition score for the winter wheat crop as a whole slipped one point to 284 from 285 last week, and would be the lowest for this week since 1996.  It might take a week or two for this week’s rain event to be reflected in conditions, although as we saw in 2017, there is a risk of already low conditions giving the impression yields cannot recover.  Crop conditions are a subjective measure, and are not always comparable across years.  It is the best we have, but if 2017 showed us anything, it is not to draw too many parallels off crop conditions alone.  Winter wheat heading progress was reported at 9% nationally vs. 3% last week and 10% average.  Kansas has not yet begun to shoot heads, and probably won’t for a week or two given the delayed maturity of the crop, something which is probably saving potential this year.

Other data reported yesterday included March NOPA crush which blew away expectations, and the previous monthly record.  NOPA members crushed 171.858mbu of soybeans vs. the average trade guess of 168.2mbu, and compared with 153.7mbu in February and 153.1mbu in march 2017.  The total also beat the previous monthly record of 166.3mbu which was set in December 2017.  Margins, weather and logistics were all very supportive of a strong month of crush, although these conditions might not all line up perfectly again.  Crush activity will also slow as we get into seasonal down-time for maintenance in April and May.  Soybean oil stocks totaled 1.946 billion pounds which was below the average trade estimate of 1.962 billion, and impressive considering the stronger than expected crush.  Soybean oil stocks were 1.856 billion pounds last month and 1.815 billion a year ago.  Soybean oil yield was implied at 11.51lbs/bu vs. 11.50lbs/bu last month and 11.69lbs/bu last year.  Since the beginning of the month, front-month board crush rallied from $1.51 up to $1.64/bu on April 6th and is trading at $1.33/bu this morning.  Oilshare remains especially weak at 29.3%.

Finally, we also had export inspections which were so-so with the exception of corn.  Wheat inspections totaled 17.7mbu, which were the largest nine weeks, but were still short of the 20.4mbu needed weekly to hit the USDA forecast.  Total inspections of 766.2mbu are down 10% from a year ago which is still better than the 12.2% forecasted decline from the USDA.  Corn inspections were solid at 59.2mbu vs. the 50.8mbu needed weekly, notching the second largest total of the marketing year.  Total inspections of 1.107bbu are down 22.0% from a year ago.  Soybean inspections of 16.3mbu were light compared with the 22.4mbu needed weekly.  Total inspections of 1.556bbu are down 12.3% from a year ago which is a bit more than the USDA forecast is implying.

PNW shuttle bids for corn remain strong as freight remains tight with the poor logistics from the weekend blizzard.  Dalian futures continued their selloff overnight with soybeans down 1.13% and soymeal down 0.32%.  Dalian meal futures are off 6.5% from their highs set on 4/9.  Russian wheat is trading above similar grades of German and Baltic wheat on a FOB basis for the first time in 2018.

 

Bottom Line: Stabilizing trade as the trade remains on edge about planting progress across the corn belt.  If extended weather maps verify, there should be nothing to be alarmed about with planting progress on May 1st or May 15th.  Every year, the US producer amazes the trade with how quickly they can plant the crop, and it is unlikely this year will be any different.  The last several years have witnessed drought, flood, late freezes, early freezes and green-snap.  Each year, we have been impressed with how well our crops have handled the various levels of stress.  The 18/19 corn balance sheet does not have a lot of margin for error, but using one of the crops’ nine lives on April 17th because we aren’t 75% planted already doesn’t seem prudent.

 

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.

4/16/2018 Morning Comments

Good Morning,

 

A busy weekend of weather with snow showers still working across the Great Lakes this morning.  The focus was on the blizzard which hit SD/N-NE/S-MN/N-IA, dumping anywhere from 5-20” of heavy wet snow.  Some melting took place yesterday, reducing the area covered by snow to 69.1% across the upper-Midwest, although yesterday morning the total was as high as 80%.  The average snow depth across NE-WY/MT/ND/SD/MN/W-WI is 6.6” as of this morning.  Freezing temps also hit a large swath of W-KS Saturday, one more thing thrown at this HRW crop.  The other big focus will be the forecasted rains for the central and southern plains which begin mid-week.  As of this morning, the 7-day forecasted precip maps are putting 0.75-2.00” across almost the entire state of KS as well as 100% of OK and N-TX.  NE and S-SD will also see moisture prospects.  Afternoon 6-10 and 8-14 day models from NOAA were erratic, and we will prefer to wait until this afternoon’s guidance.

 

Not difficult to ascertain what markets are paying attention to overnight with Kansas City wheat leading losses as the southern plains looks forward to the best rain chances all season.  As many have pointed out, this crop is running 2-3 weeks behind normal development, allowing more time for moisture to help revive production prospects.  This isn’t to say production won’t still fall meaningfully below last year’s total, but some of the worst-case scenarios could be off the table if the forecasted rains fall later this week.  The other wheat class in focus is hard red spring in the Northern Plains with another weekend blizzard delaying fieldwork.  Crop progress reports this afternoon aren’t likely to show any progress over the previous 7-days, although wheat seeding in North Dakota has stretched into June a couple of time over the last 5-6 years.  We examined prevent plant data dating back to 2011 over the weekend and discuss that below.  Snow storms also hit Iowa this weekend with boots-on-the-ground there suggesting little to no corn will go in the ground during the month of April if forecasts verify.  Iowa can plant corn quickly, but markets will remain concerned until producers can really let loose.

Friday’s Commitments of Traders data showed another week of buying in corn by managed funds, with their net long up 28,511 contracts to +206,946 contracts.  This is about 25,000 contracts above their 6-week average, and a bit larger than most analysts were expecting.  The gross commercial short rose by 32,467 contracts to 1,136,624 contracts, the largest gross commercial short since February 22nd, 2011.  Funds sold 1653 contracts of soybeans to leave their net long at +142,298 contracts.  The gross commercial short did rise by 27,000 contracts to 629,250 contracts, which is a new all-time record for this position.  The gross commercial long is among the largest positions on record as well, so both end users and commercial hedgers are heavy participants in this market.  Prior to the late week selloff, funds in KC bought 7,287 contracts to leave their net long at +23,434 contracts, the largest in 3-weeks and greasing the skids for the current dump.  Funds in Chicago bought 16,333 contracts, cutting their net short to -58,214 contracts, which is the smallest net short since March 20th.  Funds remain net long over 100,000 contracts in soy meal, and are still net short a small position in Minneapolis wheat.

As noted above, snow cover yesterday morning across the Midwest totaled 80.2%, the highest percentage for April 15th since 2013 when 93.50% of the area was covered by snow with an average depth of 12”.  In 2013, snow receding fairly quickly over the next 10-days, with most of the snow gone by the end of the month.  Snow cover this year receded across parts of the Dakotas yesterday, and should do more of the same today.  Still, it is difficult not to look at 2013 as a potential proxy for planting progress and decisions this year.  In 2013, spring wheat planting progress nationally as of May 1 was just 12%, and was only 43% planted as of May 15th.  Spring wheat acreage fell from the March intentions report to the final in January by 1.095 million acres, and fell 653,000 acres from the year before.  Spring wheat acreage this year is forecast to rise 1.319 million from 2017.  2011 and 2013 were also large prevent plant years in the US, which we took a closer look at this weekend.  In 2013, national prevent plant acreage totaled 8.318 million acres, 2.8 million of which were in North Dakota.  1.668 million was filed under spring wheat with the rest split fairly evenly between corn and soybeans.  In 2011, there were 10.3 million prevent plant acres across the US, 5.6 million of which were in North Dakota.  In 2011, spring wheat planting across the US was just 10% complete as of May 1 and 36% complete as of May 15th.  In both years, spring wheat planting was still being reported in North Dakota during the last two weeks of June.  The last two years have featured below average prevent plant acres across the US compared with the prior 5-years.  Much will depend on the next 2-4 weeks of weather, but the financial incentive to plant soybeans could see many of these acres still seeded even if progress lags through April.

NOPA member crush data will be released later this morning with expectations for 168.247mbu to have been crushed during the month of March.  This would be close to 10% above March 2017, and be a new record for the month of March, eclipsing the previous record from March 2015 at 162.822mbu.  Soy oil stocks are seen at 1.962 billion lbs, up 5.7% from the end of February and 8.1% above March 2017.  These would be the largest stocks for any month since June 2016 if they are realized.  Because of this last stat, oilshare remains incredibly weak at 29.0% this morning, just off the lowest levels since July 2016.  Front-month board crush is around 40c off the highs posted in early April, but remains historically strong at $1.33/bu.  The spread is below the 50-day moving average this morning, but above both the 100 and 200-day moving averages.

 

Bottom Line: The weekend events in Syria don’t seem to have the market rattled on any front, leaving our space to concentrate on weather.  Traders will be looking forward to the crop progress report this afternoon which should show a lack of progress on both corn and spring wheat.  The evolving rain chances for the southern plains will also be a focus as wait to see if models verify.  Still feels as though the market doesn’t know what it has for acreage on any one crop.  The resiliency of soybeans is impressive, but keep in mind the back end is leading which needs to be monitored.

 

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.

 

4/13/2018 Morning Comments

Good Morning,

 

Earlier this morning, crude oil prices made new highs for the move at $67.76/bbl, the highest trade since December 2014.  In addition, Brent crude oil is back firmly above $70.00/bbl, trading at $71.76 this morning.  The spread between the two contracts has reversed with WTI gaining on Brent, trading at $4.87/bbl this morning.  The spread made a high of $5.64/bbl Wednesday before reversing.  Both crude oil contracts and the spread between the two are all above the 50/100/200-day moving averages.

The major winter storm forecast for the last 10-days is finally hitting the upper-Midwest with South Dakota nearly covered with either rain or snow showers this morning.  W-ND and W-NE are also seeing some form of moisture, while rain is falling in S-MN/N-IA.  The storm continues for the next 24-36 hours in the upper-Midwest before moving east across the Great Lakes.  Precip totals as of this morning are still putting 0.50-2.00” of water across the entire state of SD, while S-MN and 80% of IA will also see 1.00-2.00” of water-equivalent moisture.  WI/N-IL/MI/IN/OH will all be wet through the weekend.  Fortunately, ND, N-MN and MT all look to avoid most of the moisture, although all three of these areas still have a fair amount of snow cover which needs to be melted first.  Temps remain below normal and precip above normal for the entire Midwest the next 14-days.  The southern plains continue to point toward above normal precip in both the 6-10 and 8-14, suggesting the best rainfall chances in months for the HRW belt.

 

The last sentence of the weather section is all one needs to know about wheat price action the last two days.  Kansas City wheat is leading losses once again this morning on better moisture prospects, and with the delayed development of this HRW crop, an up-turn in moisture could still leave Kansas with an average wheat crop.  The progression of the crop, and the disastrous crop condition reports since the end of January is another good lesson in not using these statistics as gospel.  If going by nothing but crop condition scores for TX/OK/KS, one would think this crop is dead with zero chance for recovery.  Boots-on-the-ground have been reporting this crop is 2-3 weeks behind most of this month, however, leaving ample opportunity for recovery.  While there are plenty of other balls in the air with regard to delayed spring planting in the Black Sea, cold temps in Europe, and droughty conditions in Australia and Argentina, rain in Kansas would help alleviate one of the situations which propelled KW over $5.00.  Price action in soybeans has most analysts dumbfounded as spot prices close in on March highs and new crop prices are butting up against contract highs.  New crop prospects for soybeans in the US remain bearish, but some analysts suggest Brazil is tapped out and the Argentine crop could still prove smaller.  Add in Argentine buying US soybeans, and now chatter about Brazil possibly doing the same, and bulls have plenty of ammunition.

Data yesterday included weekly export sales which were super-solid for soybeans, but a bit disappointing for corn and wheat.  Wheat export sales were 4.4mbu vs. the 9.8mbu needed weekly to hit the USDA forecast.  Total commitments of 846.5mbu are down 15% from a year ago with just seven weeks left in the 2017/18 marketing year.  Total commitments as a percent of the marketing year forecast at 91.51% is the lowest for this week since 2010.  We still have 24% of the export forecast left to ship on top of that, making the 925.0mbu export objective look ripe for a downgrade.  Corn sales totaled 33.1mbu vs. the 15.3mbu needed weekly.  Total commitments of 1.897bbu are down just 2% from a year ago with the USDA calling for a 2.9% reduction.  The average sales pace since the beginning of the year at 60.5mbu is nothing short of impressive and a new record by an incredible margin.  Importantly, we have only shipped around 46% of the export forecast, a figure which will prove pivotal the last five months of the marketing year.  Soybean sales were massive at 55.5mbu of old crop and 35.1mbu of new crop.  The old crop sales were the second largest since December and compare with the 6.8mbu needed weekly.  Total commitments of 1.947bbu are down just 4% from a year ago while the USDA is calling for a 5% decline.  The average sales pace since the beginning of the year at 32.0mbu is stronger than the 2015/16 pace of 30.3mbu.  We’ve sold 94.29% of the marketing year forecast, which is the largest in three years, but we’ve only shipped 74.7% which is the smallest since 2008/09.  Plenty of work left to do.

Lots of movement in the MW/S and MW/C spreads the last couple of weeks, even though Monday’s crop progress report should keep most states in the Northern Plains at 0% planted.  Nonetheless, the SX/MWU spread has made a round trip from $4.10 premium SX, all the way up to $4.60 premium SX, and back to $$4.05 earlier this week before trading at $4.21 this morning.  Similarly, the MWU/CZ traded around $2.10-2.15 two weeks ago, sold off to $1.77, and is back to trading $2.22 this morning.  Some analysts believe this has brought the USDA Planting Intentions for “other spring” wheat right back to what they said on the report after most have been making cuts.  To that, I would say producers don’t swing decisions like that back and forth over the span of 2-3 weeks.  Weather will be the ultimate driver of planting decisions, and right now, South Dakota is still looking at 2-3 weeks before entering the fields.  Plenty of time to seed spring wheat in North Dakota, N-MN and MT, but the chatter of more soybeans is undeniable.

While the soybean flat price strength has garnered most of the attention, trade in spreads has also been noteworthy.  Front-end spreads have been firm, but the SN/SX is back to trading the highest levels since early March with analysts beginning to trim carryout another 10-20mbu on exports and improved crush.  Also impressive, however, has been new crop spreads with the SX/SH, SX/SN and SX/SX all hitting fresh contract highs yesterday and again overnight.  The SX8/SH9 spread at a +14.00c inverse would seem to suggest tighter carryout ideas than the 17/18 balance sheet, even though most analysts are carrying significantly higher stocks.  The SX8/SX9 spread is trading +57.00c vs. the SX7/SX8 trading +8.50c a year ago on this date.  Something doesn’t seem to be jiving, with either acres being lower or demand being considerably higher?  Normally, a market which is being led by the back end is not especially bullish, but these sorts of structural moves are worth paying attention to.  Some of the move could be money flow related with funds preferring to go straight to the new crop months as opposed to rolling to the July and then the September and then November.

 

Bottom Line:  Kansas on tap for rains, export demand remains strong in corn and soybeans, and tariff concerns have been tamped down for the time being.  Weather is less than ideal, but planters were rolling in parts of the corn belt yesterday, with even some in S-SD turning wheels.  Soybeans have a downside gap left to fill on both the old and new crop contracts, which will remain a magnet for bears.  New crop November soybeans at $10.57 are almost 50c better than the spring insurance guarantee price, and should be attracting producer interest.

 

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.

 

4/12/2018 Morning Comments

Good Morning,

 

Showers and snow around the Great Lakes, otherwise mostly quiet in the Midwest ahead of the next major winter storm.  This weekend’s system is expected to begin in the early morning hours tomorrow across the Dakotas and work east into MN and IA by Saturday.  Precip totals for the next 72-hours show 1.00-3.00” of water-equivalent moisture across N-NE/SD/S-MN/IA/WI/MI.  Totals have been reduced for ND as the system shifted southward, which is welcome news to farmers there.  The storm is expected to produce both rain and snow, with temperatures around freezing and gusts as high as 50-60mph in C-SD.  No meaningful change to extended maps with below normal temps and above normal precip seen through April 25th.  Most areas in the Northern Plains would need 10-14 days of sunshine from today to be in the fields, let alone once another storm moves through.  With that in mind, South Dakota could be out to May 1st before substantial spring wheat progress is completed, pushing closer to the May 15th Prevent Plant date.  PP dates in North Dakota begin on May 31 up to June 5, but doubtful producers wait until the PP dates to switch acres if they are considering it.

 

Mixed markets this morning with KC wheat leading downside losses and soybeans managing small gains.  KC wheat losses accelerated around 2:00am, and is trading on the lows at this writing, off more than 2.0%.  During yesterday’s session the gap on daily charts had only been partially filled, but that has been taken care of and some with the overnight price action.  No change to the forecast in the southern plains with dry weather generally seen the next 7-days, although 6-10 and 8-14 day maps are putting better chances across KS/OK/CO.  Our contacts which have been through the area continue to suggest the crop is between 2-3 weeks behind normal, and a pick up in moisture would revive production prospects at least partially.  Last year’s upturn in rain and snow during the last week of April helped save the HRW crop, pushing yields toward trend after disaster was forecast.  With the crop having a bit more time to recover, some of the more dire scenarios could be avoided.  Otherwise, markets continue to react to Tuesday’s WASDE report which we viewed as a yawn in general.  The WASDE board made the necessary changes to South American crops, but didn’t grab headlines in the process.  USDA is taking a stair-step approach to crop estimates in the southern hemisphere, which shouldn’t move markets.  US balance sheet updates were negative for wheat, but mainly supportive for corn and soybeans as the cuts to residual demand were not as large as March 1 stocks would have implied.

The last two days have featured daily sales announcements of soybeans booked to Argentina, which has caught the market and traders off-guard.  When the third largest soybean exporter is booking soybean cargoes from the second largest soybean exporter, it is definitely noteworthy.  The last two days have seen purchases of 120,000MT each, totaling 240,000MT.  These would be the largest purchases/shipments since 1997/98, if they are in fact shipped.  They were bought for the 18/19 marketing year, so technically wouldn’t ship until after September 1st.  Some are looking at the purchases as a cheap insurance policy should their crop continue to get smaller, and if China continues to try and source all of her needs from Brazil and taps their excess capacity.  It is likely Argentina will have to import 1MMT+ of soybeans from Paraguay as well, but when one considers 1.24MMT of imports from Paraguay and the US against crop production cuts of 16-20MMT from last year, these imports really don’t move the needle.  More than anything, the production cuts should ensure solid crush margins and meal export inquiries well into 2019.  Export sales of soybeans for old/new combined should be large on today’s report.

Traders continue to pay attention to planting delays to various wheat producers with the Northern Plains delays well documented.  However, Ukraine and Russia are also seeing delays with the Ukrainian spring campaign of wheat and barley estimated at only 6% complete vs. 87% at this time a year ago.  In addition, only 62% of the winter grains have had fertilizer applied vs. 99% a year ago.  Conditions continue to be reported as good, but the delays to the spring sowing and fertilizer applications bear watching with the cold forecast still in place.  Having said that, Russian new crop offers remain glued to the $200/MT FOB level, inverted by $11/MT from spot offers.  Despite crop prospects being 5-15MMT smaller than 17/18, cash sources suggest Black Sea producers and exporters will be willing sellers at that $200/MT FOB level, capping global wheat offers.  The drastic selloff in the Russian Ruble is complicating matters slightly as producers hold wheat for the time being, but unless something dramatic happens to the Russian wheat crop, they will continue to be the global benchmark and keep a lid on physical wheat prices running too far.  Compare Russian offers being inverted by $11/MT from May to July while US-HRW offers feature a $4-7/MT carry from May-Jul/Aug.  One can see what the priority is for exporters of both countries.

Data yesterday included weekly ethanol production which was down 4,000bbls/day to 1.034 million bbls per day.  Despite production easing the last couple of weeks, the seasonal decline last year was much more severe, meaning this year’s production is clearing last year’s by 3-5%.  The 1.034 million bbls level is right where we need to be to hit the USDA’s ethanol production forecast.  Ethanol stocks posted a solid decline of 579,000bbls to 21.846 million bbls, and are now the lowest since December.  Stocks are still decent from a historical perspective, but the decline over the last four weeks has measured 102 million gallons, a 10% decline from mid-March.  This is the largest decline over a four week stretch on record, and comes despite generally poor weather which would not imply heavy gasoline use.  This could mean ethanol exports are maintaining a solid foot hold following the record ethanol exports set during the month of February.  Brazil’s sugar cane harvest has begun, which has been pressuring domestic ethanol prices.  One would think this would put an end to their heavy ethanol imports of the last several months, but only the official Census Bureau exports will tell us that next month.

With the April WASDE behind us, and USDA adopting a 115MMT production number for Brazil and a 40MMT number for Argentina, the focus is definitely shifting back to US new crop prospects.  With the delays in the Northern Plains, it looks all but certain we will see a meaningful jump in planted acreage on the June report for soybeans.  Even if one uses the March 29th soy acreage of 88.982 million, with a trend line yield of 49.1bpa, we come up with a carryout of 523mbu vs. 553mbu in 17/18.  Our carryout forecast is assuming new record demand by 4.0% over 2016/17’s record, with crush eclipsing 2.0bbu for the first time ever.  If acreage moves to 90.0 million, carryout rises to 572mbu, while 91.0 million acres would give us 621mbu of carryout.  The chart below shows these various ending stocks/stocks-use scenarios based on different planted acreage ideas.  One has to take an objective look at current conditions in the US, price ratios and farmer attitudes to decide what a more likely planted acreage mix is.  If we increase soybean planted acres, supplies would appear to be plentiful.  The focus has shifted from South America to the US, and one has to ask how bullish that is?

 

 

Bottom Line: All of our markets are feeling a bit tired at the moment, although until producers can hit the fields, believe selling pressure will remain muted.  Forecasts do not look good for getting the crop in at a normal pace, but the US farmer has shown time and again how quickly he can plant if given the opportunity.  Depending on what one is using for planted acres, there isn’t a lot of margin for error in the corn balance sheet, while soybeans have some built in buffer.  Export sales will be of interest this morning, although shipment pace continues to be the real focus.

 

 

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.

4/10/2018 Morning Comments

Good Morning,

 

Emerging market currencies have our attention this morning, namely the Russian Ruble and the Brazilian Real, especially given their influence on Ag commodities.  The Russian Ruble is under attack this morning, sliding another 4.5% today after yesterday’s 3.6% plunge, the weakest trade since December 9th, 2016.  The Ruble is under intense selling pressure after the latest round of US-led sanctions hit some of Russia’s wealthiest oligarchs.  The Brazilian Real fell to 3.4458 yesterday, the weakest trade since December 16th, 2016.  Weakening of these currencies bring can often be an impetus to sell physical grain by that country’s farmers.  The Russian Ruble hit all-time record lows against the USD in January of 2016 around 85:1 against the USD, while the Real hit all-time record lows in September of 2015 around 4.28:1 against the USD.

A blank Midwest radar with warmer temps forecast for the next 3-days before another round of winter weather hits the upper-Midwest.  Farmers and traders alike are watching model runs closely for the next system which is expected to bring rain and heavy snow to E-MT/S-ND/SD/MN/IA/WI/MI/IL/IN/OH beginning Thursday and lasting through Saturday.  As of this morning, a broad swath of 0.75-2.50” of water-equivalent moisture is expected to fall by Sunday in the aforementioned areas.  A lot depends on what the temperature turns out to be as the moisture is falling.  Most areas north of I-80 will be at freezing or below, which should produce heavy, wet snow, but rain could precede the snow creating life-threatening conditions for cattle, especially as winds gust to 30-40mph.  Expect rail logistics to be impacted further.  Extended maps keep below normal temps in place through the 8-14 for areas of NE/IA/N-IL and North.  Precip is briefly below normal in the 6-10, but right back to above normal in the 8-14 day.  The Northern Plains need drying weather and it doesn’t look like any is present out to April 23rd at least.

 

Mixed markets this morning with weaker grain markets, but a firmer soybean market.  Soybean traders were watching China’s President Xi speak last night at an Asian economic forum to see if he dropped any clues about the recent trade spat with President Trump.  Mr. Xi did not offer much in the way of concessions, keeping the trade-war flames fueled.  After solid gains across the board yesterday, led by the hard wheat contracts, some consolidation is probably warranted.  Minneapolis wheat led the charge to some degree, boosted by a complete lack of planting progress across the Northern Plains, and ideas acreage for HRS could drop in a year which needs to see supplies rebuilt after last summer’s drought.  Minneapolis spring wheat swiftly traded through the 50 and 100-day moving averages with the 200-day just overhead at $6.48.  KC wheat was also strong, trading to the highest spot price since March 15th, and just 20c from the March highs.  Forecasts remain troublesome for the Southern Plains as do conditions for seeding the Argentine and Australian crops in a month or so.  Europe is cold and delayed, and the Russian spring is off to a slow start.  Plenty of balls in the air at the moment.  Corn open interest was up 14,689 contracts yesterday, while soybeans were up just 1,373 contracts, meal up 7,247, oil up 2,276, SRW wheat down 18,580 contracts and KC wheat down 4,995 contracts.

The first crop progress report showing national spring wheat and corn planting progress was looked to with anticipation yesterday, although is showed largely what traders had feared.  National corn planting progress was 2% complete vs. 2% expected, 3% last year and 2% average.  No progress has been made in the corn belt with KS and MO the furthest north states to post any progress.  The Delta is largely in-line with average, but the national progress should not change this week in any material way.  We are looking at a slow-start to the corn belt, but nothing to be alarmed about yet.  Spring wheat planting was reported at 2% complete nationally vs. 6% average with South Dakota, North Dakota, Minnesota and Montana all posting 0% planted.  The only reason national progress registered at all is Washington at 27% planted vs. 33% average and ID at 11% vs. 32% average.  National progress at 2% planted is the slowest since 2002, although 2009-2011 and 2013-2014 hadn’t posted progress as of week #14.  South Dakota is obviously the concern given it is 0% planted vs. 23% last year and 16% average.  For years which had posted progress as of week #14, 2018 is the slowest on record, however, 2009-2011 and 2013-2014 had not posted as of week #14.  All years registered progress as of week #15, so next week should be a better comparison.  With regards to the acreage discussion, some will state farmers will plant right up until the May 15th Prevent Plant date in South Dakota and the May 31st PP date in North Dakota.  In most years, I would say that is accurate, however, the price incentive this year, combined with results showing better soybean yields the earlier they go in the ground, leads me to believe farmers will not wait until the PP date to switch acreage.  If producers are going to make acreage changes, I believe they will do so as soon as they can get in the field, which could be another 1-2 weeks.  Acreage is very much a moving target, and all signs point to a meaningful shift away from hard red spring wheat.

Winter wheat conditions were also released with national ratings falling 2pts to 30% G/E vs. 53% a year ago.  In general, HRW conditions mainly improved while SRW conditions fell and SWW conditions were lower to sharply lower in the case of Idaho.  HRW conditions improved, led by NE which was up 7pts G/E, although the improvements are coming from some fairly low levels.  The national conditions score also fell to 285 from 295 last week and would be the lowest score for week #14 since 1996.  Conditions in 2013 and 2002 were just a point or two above 2018.  We remain reluctant to run regression analysis for conditions vs. final yields given the incredibly poor track record for 2017.  As the crop gets a bit more mature, we will take a look at those charts.

Other data yesterday included weekly export inspections which were solid for corn and light for everything else.  Wheat inspections totaled 15.8mbu vs. the 20.0mbu needed weekly to hit the USDA target.  Total inspections are now at 748.4mbu vs. 826.5mbu last year, a 9.4% deficit vs. the USDA calling for a 12.3% reduction.  Corn inspections were massive at 76.3mbu vs. the 51.2mbu needed weekly, the largest of the marketing year and also the second largest inspections in 23-years.  This was a positive, but absolutely needed if we are to hit the USDA’s export target.  Total inspections of 1.042bbu compare with 1.360bbu a year ago, a 23.4% deficit.  Soybean inspections were light at 13.7mbu vs. the 22.2mbu needed weekly.  Total inspections of 1.539bbu are down 12.4% from a year ago, a bit more than the 5.0% reduction the USDA is calling for.  Shipments, shipments, shipments.

Big news today will be the April WASDE report, but as important to us will be the CONAB numbers released earlier this morning.  Private estimates continue to increase the Brazilian soybean crop but cut the Brazilian corn crop.  The USDA remains sharply above these estimates on corn, but a bit light on the soybeans.  Some fairly large cuts are also due for the Argentine corn and soybean crops.  The March 29th Stocks report data will also be incorporated today, and most of those changes should be negative as feed/residual numbers are reduced.  However, we believe the market is not all that concerned with slightly higher 2017/18 carryouts given the much larger implications for 2018/19 acreage and yield.  South American changes on today’s WASDE and the evolving weather pattern for the upper-Midwest should be the largest drivers in the next couple of weeks.

 

Bottom Line: The USDA numbers will be what newswires focus on today, but we think changes will have minimal impact in the grand scheme of things.  South American corn production numbers, and the resulting influence on the 2018/19 US corn balance sheet are the largest implications from today, in our opinion.  We need a pattern change in a big hurry for the Northern Plains or the acreage mix is set to change in a big way.  Back-to-back years of sub-200mbu carryouts in hard red spring wheat would add premium to the Minneapolis board.  Keep an eye on US and Brazilian FOB offers as well as the currency influence has put corn and soybeans priced in Brazilian Reais at the highest levels since December of 2016.

 

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.

4/9/2018 Morning Comments

Good Morning,

 

Snow across the central corn belt, showers in the western HRW belt and more snow across the Northern Plains this weekend.  Another 3-7” fell across the Dakotas, S-MN and N-IA this weekend, adding to the unprecedented snow pack for this late in spring.  A brief warm up will occur for the Northern Plains Tue-Fri, but temps drop right back to the upper-30’s for highs by the weekend which will prevent the necessary drying from taking place.  Moisture moves back into the upper-Midwest Thur-Sat with 0.50-1.25” of water-equivalent moisture falling.  Depending on how it falls, this could be up to another 5-7” of heavy, wet snow.  6-10 and 8-14 day maps keep above normal precip and below normal temperatures in place through April 22nd which will stoke late-planting fears.  Acreage shift and prevent plant in the Northern Plains could be unprecedented this year.

 

Sharply higher out of the gate last night with gaps left on many charts as trade fears calmed, forecasts remain troublesome and Chinese markets rallied strongly after their 3-day weekend.  After volatility settled a bit from the mid-week trade fears which sent soybeans down 55c, traders began to see cash markets explode to end the week as the Chinese bid for Brazilian beans made commercial shorts panic, and competing destinations showed up to the US market to take advantage of the discount to soybeans and meal.  As we discussed last week, Brazil cannot supply China on its own, and the crush margin improvement is keeping a bid under the market in the US, Brazil, Argentina, China and Europe.  Add in a cold weekend across Kansas and Oklahoma with no meaningful change to the forecast, and almost every portion of the CBOT has some supportive news to rally on.  The US corn balance sheet doesn’t have much margin for error in 18/19, and the trade is definitely more concerned with that than a bump in carryout on tomorrow’s WASDE report.  Dalian soybeans rallied 2.51% overnight, while meal was up 4.54% and soybean oil was up 2.12%.

We updated our upper-Midwest snow cover spreadsheet this morning to account for the additional snow which fell in the Dakotas and Minnesota yesterday.  For the area comprising SD/N-IA/W-WI/MN/ND/MT/N-WY, 91.3% is covered in snow with an average depth of 7.7”.  These levels of snow coverage is absolutely unprecedented for the 14-years in which NOAA has data back to 2004.  The closest year for April 9th would be 2013 which had 41.50% of its area covered with an average depth of 5.9”, while 2007 had 56.70% of the area covered but only an average depth of 1.6”.  The chart below helps illustrate this data even better.  This is obviously producing trepidation for spring wheat farmers which are usually sticking wheat in the ground by now.  This afternoon will see the first national spring wheat and corn progress reports with 0% expected for the former and little to nothing for the latter.  If South Dakota cannot get seeding in any meaningful way before the 20th of April, we could be talking about serious acreage declines from the USDA’s already inflated expectations.  Minneapolis spring wheat traded through the 50-day moving average overnight at 6.11, and is well above the $6.05 corrective highs from 3/26.  The 100-day moving average is just above at $6.20 with charts looking good for continued gains.  Funds were carrying a decent net short position as of the last COT report as we discuss below.

COT data from Friday once again did not include the big volatility days to close the week, but worth discussing nonetheless.  Funds in corn bought 54,989 contracts to put their net long at +178,435 contracts which is back above the 6-week average of +157,827 contracts.  Noteworthy the gross commercial short jumped by 56,705 contracts, while end users trimmed their position.  Second largest position for that group since 2011.  Funds in soybeans bought 16,627 contracts to leave their net long at +143,951 contracts vs. the 6-week average of +124,284 contracts.  Big selling by the GCS in beans as well with that position up 33,236 contracts to 602,198 contracts.  Largest position for that group since June 14th, 2016.  Little change to KC or Chicago wheat positions.  In Minneapolis wheat, managed funds sold their net short back to -2,769 contracts, which is the largest net short going back to August 9th, 2016.  This is meaningful given funds helped push flat price back to the lowest levels since last June while re-building this net short.  Now, basis has been firming, weather forecasts look terrible for the Northern Plains and confidence is slipping about acres swiftly.

Basis was stronger out of the Gulf and PNW last week for both corn and soybeans.  Off the PNW, spot corn shuttles went home bid +119K vs. offers up as high as +125/135K.  This compares with +116/120K a week earlier, while LH-Apr trains were called +116/130K vs. +107K last week.  CIF values were stronger with corn barges going home at +57K vs. +41/46K 10-days before.  CIF beans were called +62/65K compared with +30/38K a week and half earlier.  Brazilian FOB offers were sharply higher on both soybeans and meal with offers pouring in from China.  Things softened Friday, but were up as high as +175K on Thursday before closing the week around +145/155K.  These compare with +90/100K 10-days ago.  Meal basis is up $4-7/ton over the same time frame.

Indian wheat production ideas continued to slip last week with most grouping around 90-93MMT.  All things equal, India should be looking at 3-6MMT of imports to keep satisfy their demand estimates.  With Australia coming off of a short-crop, this should make the SE-Asia wheat S&D all the more interesting.  Having said that, maps this week indicating what could be a huge change to the Australian forecast.  Heavy rain ideas for the East Coast in the 2-week outlook.  Elsewhere, Russian wheat production ideas being floated out there around 70-75MMT vs. 85MMT this past year.  Have had several folks describe last year’s crop as all the stars lining up perfectly and being very difficult to replicate.  Russia should have ample old crop stocks to export and meet demand needs with a desire to hit $200/MT FOB bids willingly according to cash sources.

 

Bottom Line: All about weather in the Midwest/Northern Plains and FOB offers out of Brazil and the United States.  China played their soybean tariff card, and the market is calling their bluff.  Soybeans could be buying a ton of acres in the Northern Plains thanks to the weather as anecdotal reports suggest North Dakota farmers are stepping up soybean seed purchases.  We are probably back to trading soybean acres at 91.5-92.0 million compared with the USDA intentions below 90.0.  The 18/19 balance sheet probably looks to burdensome with that many acres, but difficult to extract premium until somebody actually gets in the field north of Tennessee.

 

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.

4/6/2018 Morning Comments

Good Morning,

The biggest financial news this morning is obviously the latest round of tariffs President Trump has instructed the United States Trade Representative to enact on China.  Yesterday evening, President Trump ordered another $100 billion in punitive trade measures against China, although specifics were not listed.  This would put total trade tariffs against China at $150 billion, with China having recently announced $50 billion in tariffs against the US which included soybeans.  China’s markets are closed for holiday today, reopening Sunday night, so an immediate reaction is not available.  The Whitehouse notice issued last night stated the Administration will be working with the Cabinet to implement a plant to “protect our farmers and agriculture interests” against retaliatory efforts from China.  The Whitehouse has to be sensitive to the fact the trade war could disproportionately affect the Midwest, a region which helped usher in the Trump administration.

A blast of cold air is hitting the upper-Midwest again this morning with single digit air temperatures and wind chill values well below zero.  This will precede another round of moisture this weekend for SD/ND/MN/IA which is expected to bring heavy snow to portions of the Dakotas, S-MN and N-IA.  Temps will warm mid-week next week with the Northern Plains seeing temps into the 50’s and 60’s, but the warm up will be brief before below normal temps move back in.  Below normal temps and above normal precip are the feature in the 6-10 and 8-14 day for the entire Midwest.  The Southern Plains will stay below normal on precip and above normal on temps with daily highs next week hitting the 80’s and even 90’s in N-TX.  We are approaching the point of no return in N-TX and parts of OK, although KS and NE are delayed enough additional moisture would still help greatly.

 

Softer markets this morning led by the soy complex in response to the latest round of trade tariffs announced by Washington last night.  The roller coaster of price swings in reaction to various trade developments is getting intense.  One day we drop 20-30c, followed by 13-15c gains followed by 15-20c losses.  A lot of contracts and ownership have changed hands, but we don’t have a lot to show for it in terms of nominal price change.  Soy products are hanging in much better as traders realize the benefit to US soymeal and soy oil exports as China turns to Brazil for whole bean exports and other origins come to us for products.  Crush margins are very strong at $1.72/bu against the May, and above $1.50/bu through December.  This kind of profitability will keep the US, Argentina, Brazil, China and Europe all crushing at capacity if they can secure the input.  Add in unfavorable weather north of I-80 which is keeping acreage decisions up in the air and we have plenty to pay attention to.  On the rally yesterday, corn open interest was up 7,579 contracts, soybeans were up 9,841 contracts, meal up 1,842, oil down 336 contracts, SRW wheat down 3,562 contracts and HRW down 681.

A lot of data released yesterday including February Census Export data for ethanol and DDGs.  Feb ethanol exports set a new all-time record for any month at 218.6 million gallons, besting the previous record from December of 2011 by 22%.  A truly astonishing total, made possible by gigantic exports to Brazil and the rumored China business finally getting accounted for.  Brazil imported 103.1 million gallons, the largest monthly total for them by 25 million gallons.  Part of the surge is likely related to getting additional ethanol imported before tariffs went into place.  China took 33.0 million gallons, the largest monthly total for them since March 2016.  Normally, Canada is one of the top two destinations, but China and Brazil blew their monthly haul away.  India was also notable at 11.1 million gallons.  The exports were encouraging, but consistency would be even more encouraging.  DDGs exports totaled 835,707MT, down from last month’s 898,940MT and 1.070MMT a year ago.

Export sales were also released yesterday and were sort of a mixed bag.  Wheat sales were awful at 4.0mbu vs. the 7.0mbu needed weekly and were the lowest monthly sales since the first of the calendar year.  Total wheat sales were 842.1mbu, down 15% from a year ago which is a bit more than the 12.3% decline the USDA is calling for.  We are now in jeopardy of seeing the USDA downgrade exports further and carryout bump higher.  Corn sales weakened to 35.4mbu vs. the 16.1mbu needed weekly, but were the lowest since the first week of January.  Total commitments of 1.864bbu are down 2% from a year ago, while the USDA is calling for a 2.9% decline.  Corn commitments account for 83.64% of the USDA’s expected total, which is dead on with a year ago at 83.23% for this week.  All about actual shipments at this point.  Soybean sales totaled an impressive 41.6mbu vs. the 9.0mbu needed weekly and were the largest sales in a month.  Total commitments of 1.891bbu are down 7% from a year ago which is just slightly more than the USDA forecast of a 5.0% decline.  Meal sales were solid at 414,300MT, over four times the amount needed and the third largest weekly sales of the marketing year.  Total commitments are 6% ahead of a year ago for this date.  Soybean oil sales were also strong at 43,500MT vs. the 6,600MT needed weekly.  Total commitments are now down just 10% from a year ago.

The trade tariffs and subsequent soybean discussion has led to a lot of confusion in Ag circles of late with many assuming China reaching for more Brazilian soybeans would be the death of the US soybean farmer.  A closer look at the Brazilian balance sheet reveals this might not be the case.  When we look at Brazil’s balance sheet on a local marketing year basis, we see they are expected to export 66.650MMT in 2017/18 vs. 68.806MMT a year ago.  In addition, they will crush 42.8MMT for a combined demand of 112.950MMT when feed/food/waste is accounted for.  This will leave Brazil with a carryout of 1.325MMT, or just 48.6mbu.  This compares with the US at 554mbu.  Now look at China who is expected to import 97MMT in 2017/18.  It becomes quite obvious Brazil cannot supply China with all of its import needs, even if they dedicated all of their soybeans for China alone.  Argentina would have spare beans to help some of this shortfall as their local marketing year ending stocks are forecast at 13.542MMT.  If they drew stocks down to the lowest level of the last five years, it would provide another 7.207MMT.  However, getting Argentine farmers concerned with inflation to part with their soybean stocks will not be accomplished without higher prices.  Combining the totals, that would be 73.857MMT, still well short of the 97MMT needed, even if some of Argentina’s original 6.6MMT of exports are headed toward China anyway.  This would still leave 24MMT to be supplied by someone, but there aren’t a lot of other alternatives unless that total is to be pieced out to minor suppliers like Canada, Russia, Ukraine, etc.  China doesn’t want to put their needs in the hands of a dozen small suppliers.  This of course all aside from the fact the exports Brazil is dedicating to China would be pulled away from some other origin.  That demand would need to be made up by the United States.  Brazilian and US basis levels this week have illustrated China can’t rely on just Brazilian soybeans, even if they can do without quite so many US beans until this fall.  China’s soybean card was a big one to play, but it is looking more and more like a bluff.  As the great Tim Brewster once said, “if you’re going bear hunting, you better be prepared to get the bear.  You’re not going to slay the bear with a pellet gun.”  So true Coach.

 

Bottom Line: Weaker markets today, and probably closing weaker into the weekend as we shed premium until more is known how China will retaliate to the Trump Administration’s latest round of tariffs.  Risk management is key, but producers would do well not to panic when overnight moves grab attention.  Let’s see where calendar spreads and basis levels are a week from now to really let us know what commercials think of these moves.  If basis this week is any indication, the selloff should not see follow through as importers are clamoring for Brazilian AND US beans.

 

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.

4/6/2018 Morning Comments

Good Morning,

The biggest financial news this morning is obviously the latest round of tariffs President Trump has instructed the United States Trade Representative to enact on China.  Yesterday evening, President Trump ordered another $100 billion in punitive trade measures against China, although specifics were not listed.  This would put total trade tariffs against China at $150 billion, with China having recently announced $50 billion in tariffs against the US which included soybeans.  China’s markets are closed for holiday today, reopening Sunday night, so an immediate reaction is not available.  The Whitehouse notice issued last night stated the Administration will be working with the Cabinet to implement a plant to “protect our farmers and agriculture interests” against retaliatory efforts from China.  The Whitehouse has to be sensitive to the fact the trade war could disproportionately affect the Midwest, a region which helped usher in the Trump administration.

A blast of cold air is hitting the upper-Midwest again this morning with single digit air temperatures and wind chill values well below zero.  This will precede another round of moisture this weekend for SD/ND/MN/IA which is expected to bring heavy snow to portions of the Dakotas, S-MN and N-IA.  Temps will warm mid-week next week with the Northern Plains seeing temps into the 50’s and 60’s, but the warm up will be brief before below normal temps move back in.  Below normal temps and above normal precip are the feature in the 6-10 and 8-14 day for the entire Midwest.  The Southern Plains will stay below normal on precip and above normal on temps with daily highs next week hitting the 80’s and even 90’s in N-TX.  We are approaching the point of no return in N-TX and parts of OK, although KS and NE are delayed enough additional moisture would still help greatly.

 

Softer markets this morning led by the soy complex in response to the latest round of trade tariffs announced by Washington last night.  The roller coaster of price swings in reaction to various trade developments is getting intense.  One day we drop 20-30c, followed by 13-15c gains followed by 15-20c losses.  A lot of contracts and ownership have changed hands, but we don’t have a lot to show for it in terms of nominal price change.  Soy products are hanging in much better as traders realize the benefit to US soymeal and soy oil exports as China turns to Brazil for whole bean exports and other origins come to us for products.  Crush margins are very strong at $1.72/bu against the May, and above $1.50/bu through December.  This kind of profitability will keep the US, Argentina, Brazil, China and Europe all crushing at capacity if they can secure the input.  Add in unfavorable weather north of I-80 which is keeping acreage decisions up in the air and we have plenty to pay attention to.  On the rally yesterday, corn open interest was up 7,579 contracts, soybeans were up 9,841 contracts, meal up 1,842, oil down 336 contracts, SRW wheat down 3,562 contracts and HRW down 681.

A lot of data released yesterday including February Census Export data for ethanol and DDGs.  Feb ethanol exports set a new all-time record for any month at 218.6 million gallons, besting the previous record from December of 2011 by 22%.  A truly astonishing total, made possible by gigantic exports to Brazil and the rumored China business finally getting accounted for.  Brazil imported 103.1 million gallons, the largest monthly total for them by 25 million gallons.  Part of the surge is likely related to getting additional ethanol imported before tariffs went into place.  China took 33.0 million gallons, the largest monthly total for them since March 2016.  Normally, Canada is one of the top two destinations, but China and Brazil blew their monthly haul away.  India was also notable at 11.1 million gallons.  The exports were encouraging, but consistency would be even more encouraging.  DDGs exports totaled 835,707MT, down from last month’s 898,940MT and 1.070MMT a year ago.

Export sales were also released yesterday and were sort of a mixed bag.  Wheat sales were awful at 4.0mbu vs. the 7.0mbu needed weekly and were the lowest monthly sales since the first of the calendar year.  Total wheat sales were 842.1mbu, down 15% from a year ago which is a bit more than the 12.3% decline the USDA is calling for.  We are now in jeopardy of seeing the USDA downgrade exports further and carryout bump higher.  Corn sales weakened to 35.4mbu vs. the 16.1mbu needed weekly, but were the lowest since the first week of January.  Total commitments of 1.864bbu are down 2% from a year ago, while the USDA is calling for a 2.9% decline.  Corn commitments account for 83.64% of the USDA’s expected total, which is dead on with a year ago at 83.23% for this week.  All about actual shipments at this point.  Soybean sales totaled an impressive 41.6mbu vs. the 9.0mbu needed weekly and were the largest sales in a month.  Total commitments of 1.891bbu are down 7% from a year ago which is just slightly more than the USDA forecast of a 5.0% decline.  Meal sales were solid at 414,300MT, over four times the amount needed and the third largest weekly sales of the marketing year.  Total commitments are 6% ahead of a year ago for this date.  Soybean oil sales were also strong at 43,500MT vs. the 6,600MT needed weekly.  Total commitments are now down just 10% from a year ago.

The trade tariffs and subsequent soybean discussion has led to a lot of confusion in Ag circles of late with many assuming China reaching for more Brazilian soybeans would be the death of the US soybean farmer.  A closer look at the Brazilian balance sheet reveals this might not be the case.  When we look at Brazil’s balance sheet on a local marketing year basis, we see they are expected to export 66.650MMT in 2017/18 vs. 68.806MMT a year ago.  In addition, they will crush 42.8MMT for a combined demand of 112.950MMT when feed/food/waste is accounted for.  This will leave Brazil with a carryout of 1.325MMT, or just 48.6mbu.  This compares with the US at 554mbu.  Now look at China who is expected to import 97MMT in 2017/18.  It becomes quite obvious Brazil cannot supply China with all of its import needs, even if they dedicated all of their soybeans for China alone.  Argentina would have spare beans to help some of this shortfall as their local marketing year ending stocks are forecast at 13.542MMT.  If they drew stocks down to the lowest level of the last five years, it would provide another 7.207MMT.  However, getting Argentine farmers concerned with inflation to part with their soybean stocks will not be accomplished without higher prices.  Combining the totals, that would be 73.857MMT, still well short of the 97MMT needed, even if some of Argentina’s original 6.6MMT of exports are headed toward China anyway.  This would still leave 24MMT to be supplied by someone, but there aren’t a lot of other alternatives unless that total is to be pieced out to minor suppliers like Canada, Russia, Ukraine, etc.  China doesn’t want to put their needs in the hands of a dozen small suppliers.  This of course all aside from the fact the exports Brazil is dedicating to China would be pulled away from some other origin.  That demand would need to be made up by the United States.  Brazilian and US basis levels this week have illustrated China can’t rely on just Brazilian soybeans, even if they can do without quite so many US beans until this fall.  China’s soybean card was a big one to play, but it is looking more and more like a bluff.  As the great Tim Brewster once said, “if you’re going bear hunting, you better be prepared to get the bear.  You’re not going to slay the bear with a pellet gun.”  So true Coach.

 

Bottom Line: Weaker markets today, and probably closing weaker into the weekend as we shed premium until more is known how China will retaliate to the Trump Administration’s latest round of tariffs.  Risk management is key, but producers would do well not to panic when overnight moves grab attention.  Let’s see where calendar spreads and basis levels are a week from now to really let us know what commercials think of these moves.  If basis this week is any indication, the selloff should not see follow through as importers are clamoring for Brazilian AND US beans.

 

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.