Outside Markets as of 6:005m: Dollar Index up 0.234% at 99.3890; Euro down 0.310% at 1.09195; Swiss Franc down 0.406% at 0.73510; S&P’s are up 2.25 at 2397.25; Dow futures are up 31.00 at 20,972.00; 10-yr futures are down 0.07%; Crude Oil is up $0.10 at $46.53; Heating Oil is up $0.0019 at $1.4575; Paris Milling Wheat is up €0.75 at €169.25/MT; Paris Rapeseed is up €0.25 at €373.75/MT; Dalian corn settled down 0.92%, Dalian Soybeans down 0.16%, Dalian Soy Oil down 0.20% and Dalian meal down 0.88%.
A band of showers are moving across IL/IN this morning, otherwise the majority of the Midwest is quiet. The Plains will be active over the next 3-5 days, however, with multiple rain chances for KS/OK/NE and a shot for the Dakotas early next week. If forecasted rains verify, KS could be looking at another 0.75-2.50” on nearly 100% coverage of the state. Additional rain is not needed in KS at this time, and this moisture could lead to further quality and yield losses. The ECB will be looking at a couple rain chances itself during the next 7-days, most of it unwanted at this time as well. 7-day totals look to put another 0.50-1.25” in IL/IN/OH, adding to saturated field conditions there. Temperatures will remain above normal in the Plains the next 15-days, while precip finally switches to above normal for the Northern Plains late in the period.
Lightly mixed markets this morning as grains start off the week in a hole thanks to the Monday performance. Since the peak last Tuesday, Kansas City wheat has given back 30.0c of its 70.0c rally dating back to the lows from 4/20. Volume has trended lower since the peak, and open interest in KC is off about 40,000 contracts while Chicago has witnessed a decline of around 110,000 contracts. With a week under our belt, a little more stock can be taken. Frost/ freeze events are usually dialed in rather quickly, and this one was no exception given the Monday/Tuesday trade last week. The main difference in this situation, however, was the fact 12-17” of snow followed the cold temps and the faucet isn’t turning off anytime soon. Lodged wheat is inherently difficult to estimate yield potential on, and reports of Wheat Streak Mosaic as well as a host of other viral and bacterial issues continue to be reported. From a technical perspective, the gap from 4/28-5/1 has been filled, which should be supportive moving forward. At the very least, we have a very well defined range in our market after price rejected the 4.50-4.60 area (CGO) once again, but has held the 4.12-4.16 area twice going back to January. Tomorrow’s WASDE report isn’t likely to shed any more light on the HRW crop than the Wheat Quality Council Tour did as they were surveying plots and fields close to the same time. The June WASDE should provide a much clearer picture, which should also have harvest reports to boot.
Yesterday afternoon saw the release of the highly anticipated crop progress report which showed better than expected progress on both corn and spring wheat. Corn planting jumped 13pts to 47% complete vs. ideas for 44%, 61% last year and 52% average. The WCB made solid progress as producers took advantage of the relatively open week of weather while the ECB made light progress amid soggy fields and intermittent showers. IA advanced 24%, SD was up 25%, ND was up 20% and MN was up 23%. IL saw only 2% of its acres planted last week, while IN was up 6%, OH up 4% and MI up 5%. Next week, corn planting is usually around 70% complete which could be difficult for the US as a whole to meet, although the WCB should see another solid week of progress amid beneficial planting weather. 15% of the national corn crop is emerged vs. 9% last week and 19% average. Soybean planting progress was rated at 14% complete vs. 10% last week and 17% average. Neither end of the belt made much progress with some modest delays surfacing, especially in MN where only 4% of the crop is planted vs. 24% average, while the Dakotas are around ½ to 1/3 of normal progress. Spring wheat planting progress made up ground last week with 54% of the crop planted vs. 31% last week and 60% average. Top producer North Dakota went from 18% planted to 45% planted which is just behind the 5-year average of 49% complete. MT is 16% behind average, ID is 33% behind average and WA is 19% behind. The threat of additional planting delays has largely been erased, but anecdotal reports suggest HRS acres could still fall as producers are making switches to row crops.
Winter wheat conditions were reported at 53% G/E, down one point from the week before vs. ideas of a 3-4% decline in conditions. Solid declines were witnessed in most HRW states, led by NE which saw conditions fall 14 pts from the week before to just 36% G/E. KS was down 6 pts to 43% G/E vs. 54% a year ago. SRW states like IL, MO and IN also saw declines of 4-12pts, but solid improvements were noted in the PNW where OR saw an 11pt increase in conditions while ID was up 5pts and MT was up 6pts. Oregon’s winter wheat crop is rated at an impressive 96% G/E vs. 64% a year ago. Winter wheat heading progress was rated at 50% vs. 42% last week and 46% average. It remains to be seen if additional condition rating declines will be seen in the southern plains after the severe weather from the week prior. Another round of heavy rains is slated for KS this week which will be unwelcome and could lead to additional quality declines. After a high-yielding, but generally low quality crop last year, commercial elevators are bracing for another low quality crop this year amid excess moisture. Back-to-back low protein crops should ensure a hefty protein spread remains in place for much of 17/18.
Data released last week of note included March export/import data from the US Census Bureau. March ethanol exports were reported at a solid 127 million gallons, which were down from last month’s 137 million gallons but up sharply from March 2016’s total of 95 million gallons. Brazil continues to be a solid importer, taking the top spot yet again this month with 36.5 million gallons. This was their lowest total since September 2016, but was solidly higher than last year’s 21 million gallons. As impressive was India taking 35.9 million gallons, the largest monthly total on record and up nine-fold from a year ago. China took just 1,485 gallons, a mere blip compared with 36.7 million gallons in March 2016. DDGs exports were decent at 1.029MMT which were just below last month’s 1.070MMT, but the second largest month since July and well above last year’s 822,000MT. China took just 47,976MT compared with 121,619MT a year ago as the US continues to see a very diverse set or destinations for the ethanol bi-product.
Friday’s COT data showed solid short-covering in the wheat market as was expected based on the previous week’s price action. Managed funds bought 38,532 contracts which was the third largest week of buying on record in Chicago. Despite that, funds were still short -150,900 contracts as of a week ago, which compares with the 52-week average of -123,803 contracts. Plenty of fuel on the short-side of the market should funds decide to exit, but the realization that funds want to maintain a short position in a market like Chicago with such lucrative roll yields has become apparent. Funds have been able to count of a consistent positive roll-yield in wheat, unlike corn and soybeans which makes jarring them from their coveted short position all the more difficult. In addition, maintaining a short position in wheat as a spread/hedge against directional bets in other Ag commodities has also been common practice. While winter wheat production is still a moving target, the market seems more comfortable this week with projections than last week. While quality could still be a major issue, that is and always will be a cash market function, provided the actual quantity of bushels is still out there.
Bottom Line: If you’re a wheat farmer in the southern plains, or a row crop farmer in the ECB, your concerns are many, but those don’t seem to be resonating with the trade today. While farmers can find plenty of issues in their own backyard, we sometimes forget the larger backdrop of record global supplies of corn, soybeans and wheat as a buffer against the coming season’s production. Tomorrow’s WASDE reports aren’t likely to produce much of anything bullish as yields should be close to trend, demand estimates will be near Outlook Forum estimates and carryouts should be more than adequate.
Good Luck Today.
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