Outside Markets as of 6:00am: Dollar Index up 0.0960 at 80.5080; Euro is down 0.00240 at 1.36230; S&P’s are down 1.75 at 1947.50; Dow futures are down 8.00 at 16924.00; 10-yr futures are off 0.16%; The Nikkei closed up 0.31% at 15,124.00; The DAX is up 0.07% at 9,993.98; The Russian MICEX is up 0.34% at 1,490.05; Gold is up $3.40 at $1255.90; Copper is down $2.15 at $302.95; Crude Oil is up $0.57 at $103.22; Heating Oil is up $0.0016 at $2.8728; Paris Milling Wheat is unchanged at €193.00/MT.
Quietly mixed global equity markets after solid job growth figures Friday in the US and last evening in Japan. Japan’s government reported the economy grew at an annualized rate of 6.7% in the Jan-Mar quarter, up from earlier estimates of 5.9%. Friday, the May employment report showed employers adding 217,000 jobs and the unemployment rate eased to 6.3%, bolstering ideas of an expanding US economy. Based on futures trade this morning, the S&P 500 could trade to new record highs again this morning.
Two separate bands of moisture this morning with one moving across NE/S-SD and another working across TX/OK/AR. 3-day rainfall totals over the weekend shows heaviest amounts in W-NE where as much as 6.0-8.0” fell locally. Otherwise nice rains fell across N-TX/OK/W-KS and several central corn belt states. Not sure whether the moisture is adding benefit to TX/OK where combines are trying to roll, but it is definitely helping recharge soils which is the chief concern. Fair amount of rain around the next 5-days with KS to see widespread rainfall as well as E-TX/MO/IL/IN/MN/ND. Crop progress reports this afternoon will clue us in about remaining acreage, but at this point I think most of the areas will welcome the moisture. Nothing overly threatening in the 6-10 or 8-14 day forecasts.
Mostly weaker overnight trade as major growing regions received healthy rainfall over the weekend, and more is forecast the coming 7-days. Crops which are planted are developing in nearly ideal conditions, and crop progress reports this evening should reflect the same. Each passing day marks one day closer to what looks like robust corn and soybean crops, provided weather remains non-threatening. That’s a big if, which is why new crop prices can’t head for “0” straightaway. Farmer selling has been very muted as the board prices aren’t enticing, and the calendar doesn’t say July 9th or August 9th. Unfortunately, however, the managed money funds have been leaving our space in healthy numbers, and that money flow is enough to keep prices under pressure without a catalyst.
Friday’s Commitments of Traders Report showed the largest sell pressure in soybeans in which funds dumped 23,508 contracts to bring their net long to 60,914, the smallest since November 5th. Their selling has actually slowed down in corn in which they only sold 2,799 contracts to put their net long at 116,166 contracts, still the smallest since March. An interesting tidbit in soybeans, the small spec has now amassed a net short of -68,934 contracts, the largest on record going back to 1/2/2007. The small spec in corn is net short -173,597 contracts which would be the largest net short since July 2010.
A couple spreads worth watching this week will be the SN/SX, the CN/CU and the KC spreads The SN/SX is getting perilously close to violating some chart support, and even though I think there is fundamental merit in owning this spread during the month of June, the weakness during the fund roll is taking its toll. The GSCI index roll will continue through Thursday, but this weakness could be a buying opportunity as a play for continued tightness in soybeans. The CN/CU has also been pressured thanks to the various index product rolling length forward. Given the strength in basis and the continued lack of farmer movement, another run towards the high single digits wouldn’t be surprising. The KC spreads have been showing a lot of strength lately despite the index roll and expanding harvest in the southern plains. Haven’t seen anything untoward on basis to prompt the move, so watching closely to see the impetus. This strength in the wheat spreads could be signaling a near-term bottom in futures, but more confirmation is going to be needed.
Bottom Line: expect a weaker open on ideal growing conditions, but futures have shaved off a lot of premium in a short amount of time and some consolidation wouldn’t be unwarranted. We are still a ways from key pollination weather, let alone putting a crop in the bin. Yet, prices can still drift sideways to lower. This week will see an updated WASDE report which could put some of the focus back on old crop and provide some stabilization. We need a production problem somewhere in the world, and right now we’re still searching for it.
Good Luck Today.
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.