5/9/2017 Morning Comments

Good Morning,

 

 

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.

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.

 

 

 

 

5/3/2017 Morning Comments

Good Morning,

 

Outside Markets as of 6:05am: Dollar Index up 0.141% at 99.0900; Euro down 0.160% at 1.09345; Aussie Dollar down 0.797% at 0.74650; S&P’s are down 3.75 at 2382.00; Dow futures are down 19.00 at 20,846.00; 10-yr futures are down 0.04%; Crude Oil is up $0.31 at $47.97; Heating Oil is up $0.0116 at $1.4796; Paris Milling Wheat is down €0.75 at €168.75/MT; Paris Rapeseed is down €1.50 at €367.50/MT; Dalian corn closed down 0.24%, Dalian soybeans up 0.03%, Dalian soy oil up 0.14% and Dalian meal up 0.03%.

More rain in the southern plains this morning with KS/OK/MO all seeing a sizable system move through.  This is likely helping the last remaining snow melt away as are the warmer temperatures.  The current system will finish up today into tomorrow, which will work east and bring more rain to the saturated areas of MO/IL/IN with another 1.25-4.00”.  The Midwest and Plains look to be dry for the remainder of the period into the middle of next week which should be welcomed by almost everyone.  Temps will also be steadily warming through the weekend with the Plains regularly in the 70’s and pushing into the 80’s by Saturday, while the central corn belt makes it into the 60’s and low 70’s.  Warm and dry in the 6-10, while temps begin to cool back toward below normal temps, especially in the ECB, by the 8-14 day.  Above normal precip moves back into the Southern Plains by the 8-14.

 

Easier markets overnight led by the grain room leader of the week, KC wheat.  Following the price surge Monday, markets back-and-filled Tuesday with new highs being set but not able to be held completely as Chicago wheat closed lower on the session.  The euphoria Monday was probably a bit overdone, and exaggerated by the fact parts of the world were on May Day holiday with trade desks a little lighter staffed.  In addition, much of the buying was done on fear of the unknown, which we are no closer to knowing today than we were Monday.  Even the reports from Day 1 of the Wheat Quality Council Tour in Kansas suggest the same with 10-14 days needed to know the full extent of the damage or lack thereof.  Further, some of the surge in buying in row crops was done on flooding, replant and planting pace fears.  With the next round of rain, some of those fears could be realized, but progress Monday was not as bad as feared and extended maps look as though they are going to provide farmers with a chance to return to fields in relatively short order.  The managed fund short had gotten a bit leveraged, and some covering was warranted.  The more telling price action will be here forward.

Day 1 of the WQC HRW tour left Manhattan, KS yesterday, making 222 stops between 18 cars.  The tour found an average yield of 43bpa which was down from 47.1bpa over the same area last year.  It should be noted, however, this same area went on to produce an average yield by harvest of 57bpa.  Wheat can be inherently difficult to judge yield on, especially when as much late season moisture fell as did in 2016 or what looks to fall in 2017.  As the cars made their way west, disease pressure and freeze damage became more evident.  Of the wheat the scouts saw, 50% was in the boot stage and 39% was headed vs. the USDA’s latest estimate of 44% being headed statewide.  The tour will move from Colby to Wichita and back to Manhattan by tomorrow.  A full statewide estimate of the KS wheat crop should be available Friday.

Seguing into market activity from yesterday, the short-covering in KC wheat finally showed up with total open interest dropping 11,126 contracts.  A 4.2% drop in one-day is pretty meaningful, and now has total open interest at the lowest since March 29th.  Volume has trended steadily higher in KC since mid-March, but the surge in volume to a new record Monday was certainly indicative of an exhaustion type move.  Chicago wheat open interest fell another 12,434 contracts, dropping it to the lowest level since March 10th, and pushing the total decline to 91,729 contracts since May 20th.  Like KC, volume has trended higher in Chicago, but was not sharply higher yesterday on the higher high but lower close, which might not suggest it was a “blow-off” style top.  Corn open interest was up 4,557 contracts, while soybean open interest was up just 759 contracts on the round-trip as ownership changed hands.

Deliverable stocks reports were released yesterday, showing another solid draw of 1.149mbu, bringing total deliverable supplies of hard red spring wheat to 22.838mbu in Duluth/Minneapolis.  This compares with 22.078mbu a year ago, and should follow the seasonal trend of declines into July/August.  The night before last, there were another 104 warehouse receipts canceled in Minneapolis.  In Chicago, total wheat stocks declined by 1.009mbu in seasonal fashion to 67.952mbu which compares with 49.367mbu a year ago.  HRW stocks in Chicago fell 202,000 bushels to 5.106mbu which is still sharply above a year ago at 383,000 bushels.  Non-deliverable grades were up 1.324mbu.  HRW stocks in KC were pretty much unchanged on the week at 99.852mbu vs. 99.873mbu last week and 71.850mbu a year ago.  Deliverable supplies in KS could be worth watching in the months ahead depending on how crop prospects turn out in Kansas as well as how positioning for the new Variable Storage Rate program goes ahead of its implementation in March 2018.  Total storage capacity of Kansas deliverable warehouses is much higher than the current level of stocks.

Some delivery activity overnight worth noting, although from the looks of the issuers and stoppers, mainly unwanted grain sloshing around.  There were 870 contracts of corn delivered, all re-deliveries, bringing the total month-to-date to 3,636 contracts.  LDC stopped 18 contracts, and Cargill may have stopped 242 contracts, although otherwise mainly weak participants.  242 KC wheat deliveries, all-redeliveries, with no big commercial activity.  194 soybean deliveries with Bunge stopping 147 contracts, and bringing the total month-to-date to 3,083 contracts.  This compares with 4,005 contracts against the March and 2,818 contracts against the Jan.  Just 39 contracts of Chicago wheat delivered overnight which were stopped by Cargill.  MTD deliveries total 1,288 contracts, which is down sharply from March at 4,191 contracts and just under December’s 1,816 contracts.

On Friday, StatsCan will release their version of the March 1 Grain Stocks report, but for grain supplies in Canada as of March 31st.  Average trade estimates hit the wire services yesterday with the average guess for all wheat coming in at 18.3MMT vs. 14.375MMT a year ago.  Durum is seen at 5.2MMT vs. 2.702MMT a year ago.  Canola stocks are seen dwindling to a four year low of 6.7MMT vs. 8.565MMT in 2016.  Oat stocks are seen at 1.6MMT vs. 1.817MMT a year ago, while barley stocks are pegged at 4.4MMT vs. 3.733MMT a year ago.  Canadian wheat exports fell short of expectations in 2016, due in large part to the perceived lack of quality despite a favorable forex position.  1 million acres of canola, wheat and minor crops are still in the field according to government and industry estimates with quality a real wild card.

 

Bottom Line:  Wheat charts have an open gap left from Sunday night’s open, which some will want to see filled before subscribing to another leg up.  The market needs to respond well to any corrective set back attempt with willing buyers showing up on the break.  Importantly, uptrends remain in place for most grain charts, a short-term positive for trend followers.  Continue to follow the WQC HRW tour on Twitter with #wheattour17 as they get further into the most damaged area.

 

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.

 

5/2/2017 Morning Comments

Good Morning,

 

 

Outside Markets as of 5:40am: Dollar Index down 0.050 at 99.0810 Euro up 0.078% at 1.09395; Brazilian Real up 0.758% at 3.2020; S&P’s are down 1.75 at 2385.25; Dow futures are down 14.00 at 20,859.00; 10-yr futures are down 0.06%; Crude Oil is up $0.39 at $49.23; Heating Oil is up $0.0213 at $1.5093; Paris Milling Wheat is up €2.00 at €170.25/MT; Paris Rapeseed is up €3.00 at €371.50/MT; Dalian corn settled up 1.17%, Dalian soybeans up 1.97%, Dalian soy oil up 1.00% and Dalian meal up 2.18%.

The Federal Open Market Committee begins its two-day policy meeting today, although the federal funds futures market is putting low odds of another interest rate hike this month after the conclusion tomorrow.  Current odds of a futures hike are 13% according to the market, although odds for an interest rate hike at next month’s meeting in June are  much higher at 70%.  The market is still anticipating two more interest rate hikes during 2017, and then three more each in 2018 and 2019 which would put the federal funds rate at 3.00% by the end of 2019.  Between the weaker than expected Q1-GDP rate in the US at +0.7%, and the second round of French presidential elections this Sunday, more than enough reason to hold fire this month.  Worth noting, however, the Atlanta Fed GDPNow came out Monday with its first forecast for Q2-GDP at +4.3%, but this is based solely on expectations as opposed to data.

Weather is certainly the hot-button topic in Ag markets at the moment, although this morning the radar is relatively quiet.  Rainfall and snow over the last week is shown in the map below, totaling as much as 10”+ in S-MO/S-IL while much of the Plains, Mid-South and Corn Belt received 2.0-4.00”.  Flooding is expected on several river segments of the MS-River in coming days, especially once the next round of rains start.  Rains start again today in KS and work east tomorrow and Thursday into MO/IL/IN/OH/S-MI.  Totals as of this morning look to be in that 1.25-3.50” for MO/IL.  The Plains will warm to above normal in the 6-10 and 8-14 day outlooks, while the corn belt has mainly below normal temps which will be a hindrance to drying low lands and spurring germination.  KS/OK/TX should be melting snow today and tomorrow with widespread 70’s witnessed by Thursday from ND to TX.

 

Firmer markets overnight led by wheat once again as the Staff of Life attempts to add to its near-limit up performance from yesterday.  Market commentators have been making note of the swelling managed fund short positions in Ags for weeks with Friday’s data showing an all-time record combined short in the grain room as well as in Chicago wheat specifically.  Combine that kindling with one of the worst late-season storms in the southern plains ever, at the same time the Wheat Quality Council tour heads to the fields to assess the crop and you’ve got a recipe for a rally.  Lots of conjecture flying around about how much damage has been done to the crop, and how many bushels to shave off at this point.  No one knows, and we aren’t likely to really know until harvest to be perfectly honest.  We don’t know how much stem-breakage occurred, how much wheat will stand back up and how many producers will opt to harvest the crop for hay or replant to another crop.  All questions which need to be answered, and part of the reason the wheat market is acting so anxiously.  What is certain is the rally yesterday and overnight has put the market on much better technical footing for continued price gains.

The weekly crop progress report was released yesterday, but it is of little use for the wheat portion considering the storm occurred Saturday and Sunday.  Winter wheat conditions were called unchanged at 54% G/E vs. 61% last year, but those should take a marked drop next week.  SD, NE, KS, MT, ID, MO and AR all saw 2-7% declines, while OK and TX were up 2-3pts.  The most telling statistic was probably the heading progress going into the frost/freeze and snow with TX at 78% headed vs. 65% average, OK at 76% vs. 68% average and KS at 44% headed vs. 33% average.  We knew the crop was 2-weeks ahead of schedule, and this could make the damage worse.  Going into the weather event, is seemed consensus on the HRW crop was somewhere between 770-790.  Estimates on damage range anywhere from 25-150mbu, although at this stage have to believe the crop is still 700mbu until the Wheat Tour gives us an estimate Thursday.  With a 700mbu crop number, and unchanged demand estimates from the USDA in April, carryout for 17/18 would be around 393mbu vs. the 5-yr average of 380mbu and the 10-yr average of 338mbu.  Still plenty of HRW, but much different than the supply situation of 16/17.

Spring wheat planting progress has also been a cause for some concern given the slow pace to date.  National spring wheat progress was estimated at 31% planted vs. 22% last week and 46% average.  All states continue to struggle relative to average except for SD which is 84% seeded vs. 68% average thanks to dry/warm conditions in late-March/early-April.  ND, who produces around 45% of the nation’s spring wheat crop is just 18% planted vs. 33% average, while the largest laggards are in the PNW at 49% complete for both ID and WA vs. 82% average.  WA and ID run into final insurance planting dates around May 15th, while ND, MT and much of MN are May 31st-June 5th.  The current pace is not all that slow relative to history considering at week #17 in 2014 we were 18% planted, 2013 we were 12% planted and in 2011 we were 10% planted.  The slowest pace on record for week #17 nationally was 1997 at just 5% planted.  Looking at ND specifically, in 2014 the state was just 3% planted and 5% the following week, in 2013 we were just 2% planted followed by 7% in week #18 and in 2011 we were just 1% planted as of 5/1/11 followed by 7% in week #18.  Lots of time to catch up with a good string of weather, but could come down to financial incentive to switch to other crops if we get much further into May.  A wheat rally over the next week could keep some of those acres in spring wheat which were on the fence for switching.

The other crop progress notes of interest was obviously corn planting at 34% complete vs. 31% expected, 17% last week, 43% last year and 34% average.  Producers made substantial progress in the week leading up to the heavy rainfall with IL 63% planted vs. 47% average, IN at 45% planted vs. 26% average and OH at 42% planted vs. 21% average.  IA is still a bit behind schedule at 28% planted vs. 35% average as are most WCB states.  Farmers in IA and much of the central corn belt will need the better part of a week to let things dry up enough to get back into the field without any more rain.  Progress vs. average on next week’s report could be a bit more reflective.  Also the issue of drown-out and flooding, but too early to make an educated guess at that.  Soybean planting progress was estimated at 10% complete vs. 6% last week and 7% average.

Lots of interest on yesterday’s open interest and volume statistics from the CME Group today given the sharp rallies yesterday.  Chicago wheat open interest declined 14,303 contracts on volume of 212,262 contracts.  The volume number wasn’t overly impressive, but the open interest decline was meaningful and definitely indicates short-covering by the managed funds.  The more interesting data was from KC wheat which saw open interest drop only 1,696 contracts despite price being up 28c.  One could read that a couple of different ways, but considering the large spec position on the most recent COT data was around -23,000 contracts, it could mean commercials were buying right alongside the funds.  That would be a positive for price action and market structure as it would suggest this buying isn’t just funds hitting the eject button.  Volume was also huge at 105,708 contracts which if confirmed later this morning would be the largest volume on record.  Rather impressive considering this wasn’t a report day or index roll.  Corn open interest declined 13,108 contracts while soybean open interest was up 3,850 contracts.

Inter-market wheat spreads obviously reacted sharply yesterday with KWN/MWN rallying 20.50c yesterday alone while KWN/WN was up 4.75c.  KWN/WN is adding to gains again this morning, and is probably headed for +18.00c, the level which stopped price action in January and March.  KC has been trading at little to no premium to Chicago, or even a discount, for much of the last year given the huge supplies of HRW and the relatively low quality of those bushels.  Normally, KC trades at a meaningful premium, and if we are shaving bushels off this crop, that relationship could go back to normal.  KW/C has rallied right back to +90.00c, an area which has also seen decent selling since this time a year ago.  Not sure we are at the point yet to discourage wheat feeding in the southern plains, so would believe wheat will drag corn along in the near-term until things are better sorted.

 

Bottom Line: The funds built record spec short positions in wheat and then the worst late-season storm in memory hit the southern plains.  We are still in the discovering phase of what actually happened and what it will mean for crop prospects.  Some of the wheat has been lost.  Some of it will stand back up and make grain.  Some of it will be just fine and welcome the moisture.  Just have to wait and see, but that is something the funds might not be inclined to do over the next week to ten days.  Do not believe we have a problem in corn or soybean acres at this juncture, and there will still be plenty of willing sellers just above the market.

 

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.

4/28/2017 Morning Comments

Good Morning,

 

Outside Markets as of 5:50am: Dollar Index down 0.410% at 98.7450; Euro is up 0.559% at 1.09695; Russian Ruble is up 0.516% at 57.3230; S&P’s are up 2.00 at 2388.00; Dow futures are up 4.00 at 20,902.00; 10-yr futures are down 0.05%; Crude Oil is up $0.44 at $49.40; Heating Oil is up $0.0115 at $1.5231; Paris Milling Wheat is up €0.50 at €168.25/MT; Paris Rapeseed is up €0.75 at €368.50/MT; Dalian corn closed up 0.19%, Dalian soybeans closed up 0.62%, Dalian soy oil closed down 0.95% and Dalian meal finished down 1.15%.

The USD is weaker for the third session of the weak, hovering just above the lowest level since November.  This corresponds with equities resting just below recent highs as the sense of complacency moves back into financial markets after the release of the Trump Tax plan and the French presidential elections went the way markets were hoping.  The Volatility Index on the CBOE dropped to 10.36% yesterday, just a hair above the 9.97% hit in February which was the lowest level since 2014.  Despite the lack of fear, economic growth data from Europe overnight was weaker than expected.  French GDP growth in Q1 slowed to +0.3%, down from +0.5% in Q4-2016 and below the +0.4% expectation.  UK growth slowed in Q1-2017 to +0.3% from the +0.7% in Q1-2016.  Year over year growth was +2.1%, up from +1.9% last quarter, but just shy of the +2.2% growth expected.

More rain and snow/mix moving up the Plains this morning with even more moisture on tap for the weekend in the corn belt.  Rains will fall in the Plains, Mid-South and Corn Belt over the next 72-hours to varying degrees, but by the middle of next week totals in the heaviest areas will push to 7-8” in AR/MO/IL.    The entire state of KS is expected to receive 2.00” of rain by Wednesday.  Lots of rain will be falling in SRW areas as well with totals between 2.0-5.00” expected along the Mississippi and Ohio rivers, a major SRW production zone.  Temperatures will remain below normal in the 6-10 day, but slowly warm to above normal by the 8-14 in the Plains.  Precip looks to shift to below normal in both the 6-10 and 8-14 day time frames, which should allow a resumption of corn planting in the majority of the belt.

 

Mixed markets as we get set to close another trading week with corn up 4.0c, Chicago wheat up 10.5c and soybeans down 3.0c.  The short-covering party continued yesterday with Chicago wheat open interest dropping 12,887 contracts yesterday and 45,836 contracts on the week.  This large of an open interest drop isn’t likely to be reflected in the managed fund short position released later this afternoon on the COT data, as those positions only reflect change through Tuesday.  Not to be outdone, corn open interest fell yesterday by 54,571 contracts, and is down 118,373 on the week.  Soybean open interest fell 5,002 contracts yesterday, and is down 64,781 contracts on the week.  Unfortunately, other than KC wheat, none of our markets were able to use the short-covering to push to new highs.  Without a close to new highs, charts might look somewhat mundane to the managed fund community which have been covering positions so furiously this week.

While the rain event in the corn belt is grabbing most of the attention this week, several rounds of frost/freeze in the Plains this week and weekend is making traders and farmers nervous.  Temperatures in KS Wednesday night/Thursday morning dropped below freezing for all but the farthest southeast counties.  A large swath of counties in KS saw freezing temperatures for 3-7 hours with the lowest temps recorded in NC-KS down 25*.  Where the temperatures were most severe, wheat on average is in the flag lead emergence to boot stage while some was in the boot or flowering.  This put a decent share of wheat at high-risk for damage.  Unfortunately, this won’t be the last round of low temps with patchy frost occurring overnight and again this evening, but the real concern is Saturday night into Sunday morning with low temps shown on the map below.  Temps in E-CO will drop down to 25-26* in some spots, while temps as low as 27* could be seen in the panhandle of OK and TX.  The other map below shows winter wheat production broke out by % of national production in each state and heavier areas the darker shade of green.  We will definitely be putting some high production areas at risk.  While the freeze from Wednesday night only put overall crop losses of around 0.5% of the entire HRW crop, Commodity Weather Group estimates as much as 20% of the wheat crop at risk of damage this weekend.  The Wheat Quality Council Tour begins Monday and will be there in time to assess freeze damage.

Export sales were strong for row crops yesterday, but rather poor for wheat as we wind down the marketing year.  Wheat sales totaled 2.3mbu of old crop sales, right at the 2.2mbu level needed to hit the USDA mark.  Total commitments stand at 1.018bbu, up 39% from a year ago vs. the USDA looking for a 32% y/y gain.  Worth noting, new crop wheat sales of 11.2mbu were respectable.  Corn sales totaled 38.9mbu vs. the 15.3mbu needed weekly to hit the USDA forecast.  Corn sales of 2.009bbu are up 38% from a year ago, and currently account for 90.2% of the entire marketing year forecast with four months remaining.  Soybean sales totaled a strong 29.7mbu vs. the 0.3mbu needed weekly to hit the current objective.  Total sales of 2.073bbu are up 24% from a year ago and already account for 102.3% of the entire marketing year objective.  The USDA will be raising their export forecast on the May WASDE.

While NAFTA has been the main headline driver this week as the US looked set to completely pull out of the trade association before stating we were willing to renegotiate with Mexico and Canada, it is now Brazil making waves once again on the topic of ethanol.  Agriculture Minister Blario Maggi has asked Brazil’s foreign trade council to impose tariffs on ethanol imports following a surge in shipments in 2016, according to Reuters.  The rise in ethanol imports was in direct response to the elevated price of sugar in the South American country as more of the commodity was diverted towards food production as opposed to fuel.  Industry groups are currently pressing for a 16% import duty on ethanol, but sources said the wider trade ramifications were still being studied.  If Brazil slaps an import duty on imported ethanol following China allowing their preferential import status of ethanol to lapse in 2017 and revert back to the 30% import duty, ethanol exports could suffer greatly.  Ethanol stocks of 23.269 million gallons are still near all-time record highs and could impact production run rates as we move into summer driving season.

Other tidbits worth passing on, MGEX showed another 100 lots of hard red spring wheat canceled out of Duluth/Superior last night.  Despite this, still saw 230 fresh deliveries last night for first notice day by Wells Fargo Seg.  No real strong stoppers, although ADM House got in front of 69 contracts, while CHS House stopped 22 contracts.  Actually a lot of delivery activity at the CBOT with 1100 contracts of May corn delivered while most thought there would be few to none.  Cargill for sure delivered 220 contracts, while a Wells Fargo account delivered the other 880.  Again, no real strong commercial stoppers to speak of.  LDC delivered 207 contracts of SRW overnight as part of a combined 447 deliveries on FND.  There were also 400 lots of HRW delivered, 1,015 contracts of soybeans, 303 contracts of soymeal and 1,442 contracts of soybean oil.  Have to call deliveries of everything more than expected with the exception of maybe SRW and HRW as most believed all of the registrations would come out again as the last chance before July becomes top step and we shift to new crop.

 

Bottom Line: Planting progress and weather forecasts will guide Sunday evening trade depending on what rain gauges tell us by then.  Corn planting progress is typically around half done somewhere around May 7th-9th vs. the 17% complete this past Monday.  Anecdotal reports suggest huge progress was being made in IA and IL ahead of the rains, so the real risk might be heavier than expected rain on recently planted crop.  The market will also be preoccupied by the weekend freeze potential in the south and the delays to planting HRS in the north.  Have a great weekend.

 

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.

 

4/26/2017 Morning Comments

Good Morning,

 

Outside Markets as of 6:10am: Dollar Index up 0.222% at 99.0500; Euro down 0.415% at 1.09225; Aussie Dollar down 0.531% at 0.74890; Russian Ruble off 0.737% at 57.1428; S&P’s are down 1.25 at 2384.00; Dow futures are up 25.00 at 20,970.00; 10-yr futures are up 0.01%; Crude Oil is down $0.31 at $49.24; Heating Oil is down $0.0094 at $1.5404; Paris Milling Wheat is up €1.50 at €166.00/MT; Paris Rapeseed is up €0.75 at €398.75/MT; Dalian corn closed up 0.19%, Dalian soybeans up 0.50%, Dalian soy oil down 0.28% and Dalian meal off 0.58%.

China released import and export data for the month of March last night with mostly positive import data observed.  On the energy side, crude oil imports during the month of March totaled 38.9MMT, up 19.47% from last year while Jan-Mar imports totaled 104.7MMT, up 14.97% from a year ago.  Coal imports slowed to 15.2MMT, up just 0.76% from a year ago, although Jan-Mar imports of 45.7MMT are still up 27.39% from 2016.  Grain imports were mixed with wheat imports totaling 502,117MT, up 140% from a year ago while Jan-Mar imports of 1.069MMT are up 92.2%.  Australia was the largest origin at 234,601MT.  Barley imports totaled 708,616MT, up 119% from a year ago with Jan-Mar imports up 130%.  Corn imports were down 99% to just 5,258MT while Jan-Mar imports of 306,688MT are down 52.5%.  Soybean imports were solid, but not all that unexpected at 6.326MMT, up 3.73% from a year ago.  Jan-Mar soybean imports totaled 19.520MMT which are up 20.0% from 2016.  The US is the largest destination year-to-date at 15.325MMT, up 17% from a year ago, while Brazil was second at 2.689MMT, up 25%.

Rain showers in the south, snow showers in the north and a mix in between on the radar this morning.  The southern plains continues to see beneficial rainfall as the wheat crop pushes closer to maturity.  Over the last two weeks, only pockets in SW-KS, the panhandle of OK and N-TX haven’t received above normal rainfall.  Those areas of dryness should be eliminated by early next week if the forecasted rainfall verifies.  The entire state of KS looks to receive 1.25-2.70”.  The heaviest rainfall, however, continues to be put over AR/S-MO/IL where anywhere from 5.00-12.00” is being forecast to fall by early next week.  Extended maps from the Climate Prediction Center are drying things out a bit in the Plains, but the ECB remains in above normal precip through May 9th.  Temperatures will be below normal for the entire Midwest, especially the central corn belt during the 6-10 which will slow dry down.

 

A surge in trading volume to accompany the surge in grain futures yesterday as speculative short positions appear to have gotten a bit over their skis.  Corn trading volume jumped to 670,472 contracts, the highest single session volume since June 21st, 2016.  That’s pretty impressive considering we blew past both the January WASDE and March Prospective Planting report volume totals.  Open interest saw the corresponding decline with corn down 23,892 contracts, soybeans down 16,441 contracts and Chicago wheat down 17,053 contracts.  Soybean open interest has witnessed the largest declines as of late with total open interest down 108,263 contracts since April 13th.  Soybeans have had the most stable/higher price action over the last two weeks, implying the fund position of -73,949 contracts they had acquired by 4/18 is probably a good deal smaller by now.  Still, if funds have decided to reduce short positions in a meaningful way, they should have plenty left to go.  As of April 18th, funds were short a combined -494,666 contracts of corn, soybeans, CGO wheat, KC wheat, MPLS wheat, soy meal and soy oil.  Corn has pushed past its 50-day MA while wheat has that indicator just above at $4.3450.

As if the wheat market needed any more negative headlines, cash prices in central KS on Monday evening closed below $3.00/bu once again before rallying yesterday to reclaim that level.  Basis levels at many KS elevators remain wider than -$1.00/bu with -$1.10/bu present at many locations.  These wide basis levels have persisted since the 2016 harvest was completed, regardless of delivery cycle or changes in demand flows.  This dynamic has prompted the CME-Group to implement their Variable Storage Rate system to Kansas City HRW futures beginning with the March 2018 contract.  Storage rates will start at 5.91c/bu per month with spreads trading below 50% of full financial carry required to drop storage rates to 4.95c/bu per month, or spreads trading at wider than 80% of full financial carry to increase storage rates to 7.95c/bu.  If spreads continue to trade wider than 80% of full financial carry in subsequent calculation periods, storage rates will increase by 10/100’s of one cent per day, or around 3c/mo.  Traders are almost universally opposed to the changes, especially considering many events including low quality and lack of storage for other crops including corn and sorghum also contributing to the persistently wide spreads and persistently poor basis levels.  However, if the southern plains experience another low protein crop this coming year, adding to the quality woes already being experienced, the problem wasn’t likely to fix itself.  However, other alternatives are available, including changing delivery specifications to limit the ability of commercials filling up on lower quality wheat than the market is demanding for consumption.  Yet, until delivery receipts are utilized instead of warehouse receipts, the problem of loadout cadence will still be an issue for anyone trying to participate in delivery.

Deliverable stocks reports were released yesterday with seasonal declines being witnessed at all three exchanges.  Total wheat stocks in Chicago fell a net 591,000 bushels to 68.961mbu which compares with 50.263mbu a year ago.  Non-deliverable supplies fell 1.647mbu while deliverable grades rose by 1.056mbu.  HRW stocks in Chicago and STL rose by a combined 613,000 bushels.  Kansas City HRW stocks fell 322,000 bushels to 99.873mbu vs. 71.569mbu a year ago.  Minneapolis wheat stocks resumed their seasonal decline after several builds during the months of February and March.  HRS stocks in both Duluth and Minneapolis fell by a combined 1.068mbu to 23.987mbu which compares with 23.830mbu a year ago.

 

Bottom Line: Forecasts look a bit better next week, although the heat which the entire corn belt needs won’t show up for another 10-14 days.  There isn’t a great deal of farmer selling coming from either hemisphere right now thanks to currency considerations in South America and farmers not liking the price in the North.  Combined with a lack of progress in the corn belt, the funds don’t have the natural seller engaged right now to help maintain downward pressure on price.  Air pockets of buying like that witnessed yesterday are prone to happen with this situation occurs.  Keep watching weather.

 

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.

 

 

 

 

 

4/25/2017 Morning Comments

Good Morning,

 

Outside Markets as of 6:00am: Dollar Index up 0.003% at 99.0430; Euro up 0.188% at 1.09070; Canadian Dollar down 0.419% at 0.73750; S&P’s are up 4.50 at 2374.50; Dow futures are up 66.00 at 20,763.00; 10-yr futures are down 0.19%; Crude Oil is up $0.15 at $49.38; Heating Oil is up $0.0028 at $1.5506; Paris Milling Wheat is up €1.00 at €163.75/MT; Paris Rapeseed is down €1.75 at €397.75/MT; Dalian corn closed down 0.37%, Dalian soybeans settled down 0.61%, Dalian oil down 0.49% and Dalian soy meal up 0.07%.

The big news hitting financial markets overnight was the Trump Administration decision to impose tariffs averaging 20% on five Canadian lumber exporters.  The Canadian companies included are Canfor, J.D. Irving, Resolute FP Canada, Tolko Marketing and Sales and West Fraser Mills.  The duties will be retroactively applied – 90 days from yesterday – because the companies were on notice and failed to change their dumping practices.  The duties stem from the charge by the US that Canada is subsidizing softwood lumber exports because the Canadian provinces which own the forests where the wood is sourced is subsidizing logging.  All told, the US Commerce Dept. said there are around $5 billion worth of Canadian softwood exports which enter the United States.  Lumber futures are up 22% YTD on ideas the tariffs were coming and are expected to open sharply higher later this morning.

Cold temps are gripping the upper-Midwest this morning and are expected to hang around for the next 2-3 days.  Highs in the Dakotas and N-MN will struggle to get out of the 30’s while low temps the next two nights will dip below 30* for much of the area.  This should keep soil temps from warming further, and probably limit and planting activity, at least on row crops.  High temps won’t broach the 60* threshold in South Dakota until Monday.  Precip will be hit and miss the next 7-days for the Northern Plains, but heavy shower activity will move into the southern plains, mid-south region and the majority of the corn belt.  By next Tuesday, we could be talking about total accumulation as high as 7-8” in LA/E-OK/AR/MO/IL while several of the surrounding states are looking at totals between 2-4”.  Extended maps keep temps below normal through May 9th, but precip finally slips to normal by the end of the 15-day.

 

Easier markets overnight as crop progress reports showed more planting taking place during the last week than traders were expecting, even if progress should grind to a halt this week as rains move in.  As noted yesterday, the equipment upgrades farmers have made over the last 3-4 years are allowing them to accomplish tasks faster than ever.  Whether that investment in capex is cost effective is another topic for another day, but no planting milestone is safe in 2017.  In the cash markets, we have a real standoff between producers anxious to enter the fields, and in turn not haul grain, vs. commercials who still have decks to fill and sales to get off their books.    Add in a very reluctant seller in the South American grower due to a strong USDBRL, and US stem is now competitive into the summer slots.  For reference, the Brazilian Real is sitting at 3.1357 this morning vs. 3.5549 a year ago.

Yesterday’s crop progress report from NASS showed corn planting progress at 17% complete vs. ideas for 15%, 28% last year and 18% average.  Solid progress was made in IL last week with 28% of the crop being planted last week alone.  This is consistent with anecdotal reports from that area about corn going in the ground left and right.  National progress usually averages 34% next week which we aren’t likely to come anywhere near if the forecasted rains verify.  SD was 3% planted vs. 7% average, ND at 1% vs. 4% and MN was 6% planted vs. 17% average.  Soybean planting progress was estimated at 6% nationally vs. 3% last year and 3% average.  Delta states are sharply ahead of schedule, although nationally, we don’t move past 50% in a normal year until May 21st.

As far as progress vs. average, spring wheat planting is the real concern.  Nationally, we are 22% planted vs. 40% last year and 34% average.  Progress would be even further behind were it not for the great start in SD where 75% of the crop is planted vs. 44% average.  ND is 9% planted vs. 11% average, but is likely to see progress slip given the snow and cold temperatures this week.  MN is 14% planted vs. 25% average, MT at 24% vs. 17% average, ID 48% vs. 55% average and WA at 38% vs. 57% average.  The 22% national progress isn’t all that slow when viewed over the last couple of decades as 2014 saw only 10% progress as of week #16 while 2013 was 7% planted, 2011 was 6% planted and 2009 was 6% planted.  Looking at North Dakota specifically as it is the largest hard red spring producer, there have been roughly 12 years which saw progress fail to eclipse 10% planted in North Dakota by week #16.  One other year, 2006, was right at 10% planted as of week #16.  Yield is made by summer conditions, but thought it might be worthwhile to look at final North Dakota spring wheat yield in years which were slow up to this point.  Of the 12 years in question, four years landed above the 35-yr trend while one year was right at trend and the other seven could be considered below trend.  Although, only three or four of the below trend years could be considered meaningfully below trend with 2009 being the most recent example of that.  There is some discussion that late planting could lend itself to more acreage switches to soybeans this year than in the past given the much higher financial incentive.  As we discussed earlier this spring, a decline in acreage from the year before is not highly correlated with planting progress, although rarely has the financial incentive been as large as this year.

Winter wheat conditions were unchanged this week at 54% G/E vs. ideas for a 1% improvement to 55% G/E.  Most HRW states saw an improvement in conditions, led by SD at +3.  SRW conditions were steady to slightly better while PNW conditions were mixed to weaker.  Winter wheat conditions a year ago were 59% G/E, but conditions this year would still be well above the 10-yr average thanks to short crops in 2011, 2013 and 2014.  Winter wheat heading progress was estimated at 32% nationally vs. 24% last year and 23% average.  Southern Plains HRW states are sharply ahead of average with TX at 67% headed vs. 50% average and OK at 65% headed vs. 47% average.

Export inspections were the other piece of data out yesterday, and were positive around the board.  Wheat inspections totaled 22.5mbu vs. the 18.4mbu needed weekly to hit the USDA forecast.  Total inspections now stand at 874.2mbu which are up 31.8% from a year ago, almost exactly matching the 32% increase forecasted by the USDA.  Features included another 62,700MT of DNS bound for China which averaged 14.1% protein.  Corn shipments totaled 57.2mbu vs. the 34.2mbu needed weekly to hit the USDA forecast.  Total shipments of 1.470bbu are up 62.2% from a year ago.  Soybean shipments were also better than expected to 23.3mbu vs. the 8.4mbu needed weekly.  Total shipments of 1.797bbu are up 14.5% from a year ago and account for 88% of the entire marketing year forecast with four  months remaining in the marketing year.

Multiple wheat/corn spreads hit contract lows yesterday as wheat continues to bear the brunt of the managed fund selling.  Spot month Chicago wheat/corn traded down to the lowest level since December 14th, while KC wheat/corn was down to the lowest level since December 13th.  On the cash side, HRW traded down to 84.90% of the weight adjusted price of corn in Triangle, TX yesterday which is the lowest since late January.  This is also a level where wheat should be competing against corn into feed rations.  Anytime that spread dips below 90%, it is a good time to stress test wheat/corn spread positions.

 

Bottom Line:  The USD is trading near 5-month lows, the corn belt should see serious planting disruptions and farm movement has ground to a halt, yet futures are trading lower this morning.  It would appear the market is in wait-and-see mode regarding the forecasted precip and expected delays, preferring to see actual proof of disruptions before funds become spooked with their short positions.  Still, it is tough to deny the sheer size of the net short position held by managed funds as we enter another growing season.  No reason to hit the eject button, yet.

 

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.

 

4/24/2017 Morning Comments

Good Morning,

 

Outside Markets as of 6:15am: Dollar Index down 0.948% at 99.0290; Euro up 1.497% at 1.08845; Russian Ruble up 1.157% at 56.4493; Brazilian Real up 0.999% at 3.1387; S&P’s are up 26.50 at 2374.00; Dow futures are up 202.00 at 20,705.00; 10-yr futures are down 0.46%; Crude Oil is up $0.42 at $50.04; Heating Oil is up $0.0124 at $1.5718; Paris Wheat is up €1.00 at €163.50/MT; Paris Rapeseed is up €1.25 at €399.50/MT; Dalian corn settled up 0.43%, Dalian soybeans closed up 0.03%, Dalian soy oil up 0.92% and Dalian soymeal up 0.76%.

Equities around the globe are higher this morning, especially in Europe, as investors took solace in the results of the first round of the French presidential election.  Emmanuel Macron took 23.8% of the vote Sunday evening vs. the 21.7% received by Marine Le Pen, pitting the two against each other in a runoff in two weeks’ time.  The results helped the euro surge by as much as two cents against the dollar on ideas France would definitely remain in the European Union should Mr. Macron win.  The far-right Ms. Le Pen has talked about leaving the EU much the way the United Kingdom voted to last year, but most polls for the second round of voting have Macron receiving 62% support vs. 38% for Ms. Le Pen.

Weekend rainfall was heaviest in OK/AR/SE-KS/MO/KY/TN/NC/VA where a band of 1.00-3.00” rains fell.  The Midwest was mainly quiet, allowing some additional fieldwork and planting to get done ahead of this week’s heavy rains.  The next round of rainfall begins Tuesday into Wednesday in the mid-south, and continues to dump rain through next Sunday.  This morning’s model runs put 3.00-6.50” of rain in N-LA/AR/MO/IL/S-WI/E-KS/W-IN and parts of MI by the weekend.  This event could bring localized flooding, and is likely to keep fields unfit for the next 2-weeks.  Plains states will also see rain this week with NE and the rest of KS up around 1.50-2.50”.  Temperatures will be below normal the next 15-days which is going to hinder dry down and farmers getting back to the fields.  There are also frost/freeze concerns in the Plains Tuesday and Wednesday night of this week worth monitoring.

 

Firmer markets out of the gate last night and holding those gains this morning as traders attempt to put a little bit of risk premium for planting delays back in the market this week.  National corn planting progress on this afternoon’s report should be in the 11-12% range vs. 3% last week, 30% last year and 18% average for this week.  Progress for the April 30th report isn’t likely to show much advance, or at least remain below 20%, which would compare with 43% in 2016, 39% in 2015 and 34% on the 5-yr average.  Most believe there is still no reason for outright panic, despite the forecast, but if progress doesn’t move past 50% by the May 7th report, then things could get interesting.  Most producers will be reluctant to switch acres to soybeans until the calendar gets closer to May 15th, especially considering the speed at which farmers can’t plant corn in 2017.  Thanks to Precision Planting’s new Speed Tubes, corn can be safely placed in the seed trench at speeds of 7.5-9.5 mph.  At 7.5mph, a 16-row corn planter can plant 36 acres/hr, while at 9.5mph it can plant 46 acres of corn per hour.  With corn planters are large as 120 ft, things can get done quickly which should keep producers calm for another 7-10 days.

Lots of data released Friday including the latest Cattle-On-Feed report for feedlot numbers as of April 1st.  On-feed came in at 10.904 million head, or 100.5% of year ago levels vs. expectations for 99.7%.  This was the largest April on-feed number since 2012.  Placements numbers totaled 2.102 million head, or 111.1% of a year ago which was sharply higher than the 106.5% expected by the trade.  These were the largest placements for March on record going back to 1996.  Marketings were also strong at 1.914 million head, or 109.6% of a year ago vs. estimates for 109.4%.  These were the largest March marketings since 2011.  The fat cattle market has been a one-way train higher as of late, hitting new contract highs for the June contract last week and pushing open interest to a new all-time record.  The large spec position in live cattle is now long the most contracts since June of 2014.

Sticking with the COT report, lots of selling in the grains by the large spec trader last week as well with the corn short adding 13,159 contracts to put their net short at -165,740 contracts.  In soybeans, funds added 19,357 contracts to their net short which now stands at -73,949 contracts, the largest since 3/1/2016.  The wheat selling took the cake, however, as funds added 14,822 contracts to put their net short at a new record of -172,876 contracts.  The combined grain and oilseed large spec position is now -494,666 contracts, the largest since March of 2016.  While the large spec selling has been impressive, so too has the commercial buying which has been fresh longs being initiated as opposed to just short-covering.  The Gross Commercial Long in soybeans is a new record, while corn is within 20,000 contracts of a new record and Chicago wheat is within 17,000 contracts.  Would appear as though commercials are seeing value at these price levels and adding to futures exposure.  One other quick note, the index fund in Chicago wheat continues to buy, pushing that position to +141,546 contracts, the largest since August 12th, 2014.

StatsCan released their Principal Field Crop Area as of March 31st this past Friday with some of the results a bit surprising relative to trade expectations.  For wheat, farmers are expected to plant 23.2 million acres of all wheat which is relatively unchanged from a year ago vs. ideas closer to 22.0 million.  Alberta is seen increasing area by 10.0%, while Saskatchewan is down 2.7% and Manitoba is down 9.0% from 2016.  Winter wheat and durum saw declines while spring wheat saw a 1.2 million acre increase from a year ago.  Canola acres are seen up 9.9% to 22.4 million, which if realized would be the largest on record.  Strong price incentives since harvest have made this acreage a proverbial slam dunk.  Other notable changes included soybean acres up 27% from a year ago at 7.0 million acres, barley acres down 8.0% to 5.9 million, oat acres up 20% to 3.4 million and lentil acres down 25% to 4.385 million.

 

Bottom Line: The short positions held by the managed fund community are larger than the trade was expecting, and when combined with the current forecasts should help support prices this week.  Producers won’t be in any hurry to sell grain of any kind until they can get back to planting, which could be a week or better.  The US farmer planted 45% of the national corn crop in one week back in 2010, so the ability to catch up is present.  Too much commercial buying and the fund positioning looks eerily similar to last year when they were forced to cover big in June.  Stay nimble.

 

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.

 

4/21/2017 Morning Comments

Good Morning,

 

Outside Markets as of 6:30am: Dollar Index is up 0.092% at 99.9290; Euro is down 0.158% at 1.07330; S&P’s are up 3.00 at 2355.00; Dow futures are up 12.00 at 20,540.00; 10-yr futures are up 0.07%; Crude Oil is down $0.08 at $50.63; Heating oil is down $0.0022 at $1.5835; Paris Wheat is down €0.25 at €163.00/MT; Paris Rapeseed is up €0.75 at €398.25/MT; Dalian Corn settled up 1.19%, Dalian Soybeans closed up 0.11%, Dalian Soy Oil closed up 0.32% and Dalian Meal down 0.03%.

The big event this weekend will be the first round of the French presidential elections with polling data available around 2:00pm EDT and the final results around 6:00pm EDT.  The race is split among 11 different candidates, so there isn’t likely to be a clear majority winner which will prompt a run-off election on May 7th between the two first round winners.  Currently, the Financial Times has 24% support for the Independent candidate Emmanuel Macron, 23% for National Front candidate Marine Le Pen, 19% for both the Republican Francois Fillon and Communist Jean-Luc Melenchon and 8% for Socialist Hamon.  There is fear the far-right candidate Marine Le-Pen will win and continue the shift toward populism and protectionism which ushered in the Brexit vote last June and Donald Trump into office in the United States in November.  In addition, a win for the Far-Right party could spell further trouble for the European Union and members remaining united.  The Euro is likely to be especially volatile Sunday.

Rains in the east part of the southern plains the next 24-hours before a dry weekend takes hold for the Midwest.  The next round of rainfall for the Midwest begins Tuesday/Wednesday and continues toward Friday for much of the Plains and WCB.  In total, most of KS/NE/SD/IA/MO/MN/WI/IL/AR/OK should see between 0.75-1.25” with heavier amounts in SE-KS/NE-OK/MO/NW-AR where over 3.00” could fall by next Friday.  Not clear how much progress on planting will be made this weekend as many areas are still drying out from the mid-week system.  Temperatures will be below normal for the Great Plains during the 6-10 and 8-14 day outlook which will prevent rapid dry down after the forecasted storms.  Doesn’t appear as though corn planting will break wide open in the WCB until at least the first week of May.  Storm track also remains active over IA/MO/MN/W-IL during the extended timeframe.

 

Mixed markets this morning as we get set to close a soft trading week with option expiration later today.  For the week, corn is down 13.50c, soybeans are down 5.50c and Chicago wheat is down 8.50c.  After looking as though wheat was ready to make a push higher, prices have set back to the bottom end of the recent 6-week trading range with momentum indicators having turned down amid rising volume.  If winter wheat yields are able to turn in another impressive performance this year after a record setting yield last year, the market will have an even more difficult time sending the price signals to both the US and Global wheat farmer they are still producing too much.  Despite the lowest wheat acres in over 100-years, without a 5% below trend yield this year, ending stocks in the United States will remain close to 1.0bbu.  Lots of growing season left, but it is those conditions which are keeping a boot on the head of the wheat market.

Export sales yesterday were mostly positive as seasonal declines continued across most all commodities.  Wheat sales totaled 15.2mbu, which was sharply better than the 2.2mbu needed weekly to hit the USDA forecast.  Total commitments now stand at 1.016bbu vs. the USDA forecast of 1.025bbu with six weeks remaining in the marketing year.  Cumulative exports measure 816.4mbu with 199.6mbu outstanding which is the real focus moving forward.  Corn sales totaled 29.8mbu vs. the 16.5mbu needed weekly.  Total commitments now stand at 1.970bbu, up 43% from last year and accounting for 88.5% of the USDA projection with over four months left in the marketing year.  Soybean sales were just 7.8mbu, the smallest in 15-weeks, but still larger than the 1.7mbu needed weekly to hit the USDA forecast.  Total commitments of 2.046bbu are up 23% from a year ago and now account for 101.0% of the USDA export projection.  Meal and soy oil sales were both above needed levels.

The USDA Attache to Ukraine and Russia released his monthly report detailing feed grains yesterday which included balance sheet projections for 17/18.  For Russia, post is using a production figure of 66.0MMT which would be down from 72.529MMT this past season due largely to smaller winter wheat planted area.  Yields are projected at a national average of 2.49MT/ha vs. the record yield of 2.68MT/ha this past season.  Exports are projected at a record tying 28MMT, the same as this past season with ending stocks declining modestly to 11.113MMT, which would still be the second largest since 2010/11.  Post also talked about the continued decline in wheat quality with this past year resulting in the smallest share of Class 3 wheat since at least 2012 while the share of Class 5 (feed) wheat was the largest in 5-years.  In Ukraine, Post is assuming production of 23.870MMT vs. 26.854MMT this past season, also due to smaller fall seedings.  The national average yield is forecast at 3.85MT/ha vs. the record of 4.16MT/ha this past season.  Exports are forecast at 12.9MMT, down from 17.3MMT in 15/16, while ending stocks are seen flat at 2.176MMT.  A drop of 9.5MMT in production between Ukraine and Russia could become much more noticeable should any of the other Northern Hemisphere producers run into an issue this season.

Speaking of wheat, calendar spreads had a particularly ugly day right alongside flat price, which would suggest confirmation of the futures selloff.  The WU/WZ and WZ/WH tied contract lows as did the KWN/KWU, the KWU/KWZ and the KWZ/KWH.  Both the KWN/KWU and KWU/KWZ are trading in excess of 80% of full financial storage, seemingly creating another environment in which commercials will be paid to store wheat, basis will remain wide and non-convergence could become an issue.  Obviously flat price and spreads are reacting to improving production prospects in both the US and Black Sea, two areas which had been of relative concern until the calendar flipped to April.  Despite heavy buying by the commercial community according to the recent COT data, spread activity and relatively mundane basis movement would suggest commercials aren’t willing to fight managed funds in their quest to take wheat to zero at the moment.  Spring wheat has maintained a much more positive technical outlook as well as firmer spread trade as of late.  The balance sheet for spring wheat is much more uncertain for 17/18 than SRW and HRW would appear today.

Corn planting progress is expected to be near 10% complete on Monday’s crop progress report which would be below the 28% posted last year and the 18% on the 5-yr average.  Corn planting progress typically passes the half way point around May 6th or 7th.  The crucial figure is getting close to ¾’s of the crop planted by May 15th as that is the timeframe when late planting begins to effect both yield and possible acreage switching.  As the market has shown this week, however, there would appear to be no concern about late planting from futures.

 

Bottom Line:  StatsCan will be out later this morning with their Principle Crop Acreage data which should help continue the narrative of declining wheat acres around the globe.  Despite the decline in acres, there is really nothing on the table yet to suggest below trend yields are in-store for any of the major exporting countries.  Corn needs some weather adversity to maintain strength, otherwise the elevated old crop stocks are going to continue to weigh on price.

 

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.

4/20/2017 Morning Comments

Good Morning,

 

Outside Markets as of 6:30am: Dollar Index down 0.167% at 99.6370; Euro up 0.214% at 1.07735; Russian Ruble up 0.774% at 56.915; S&P’s are up 6.50 at 2340.25; Dow futures are up 42.00 at 20,377.00; 10-yr futures are down 0.16%; Crude Oil is up $0.50 at $51.35; Heating Oil is up $0.0018 at $1.6010; Paris Milling Wheat is down €0.75 at €163.75/MT; Paris Rapeseed is up €0.75 at €396.00/MT; Dalian corn closed up 0.31%, Dalian soybeans closed up 0.38%, Dalian meal up 0.98%.

The upper-Midwest saw another good round of moisture yesterday in SD/S-ND/S-MN/WI/N-IA with heaviest totals of 1.00”+ in WI/NE-IA/SE-MN/W-SD.  Coverage of 60-75% for 1.0” has been witnessed this week in the Northern Plains, helping erase moisture deficits which have existed since the beginning of March.  The moisture does continue to delay spring wheat planting in ND and MN, which is already behind average.  Soil temperatures are remaining stubborn across the Northern Plains with readings in most of South Dakota reading 42-45* in the northern half of the state, while the south east part of the state is 1-3* from 50.  Most of ND is below 45* while the norther half of the state is at or below 40*.  Sites in S-MN are closing in on 50*, but anything north of the southern 1/3 of the state is still well below 50*.  Extended maps from NOAA show a below normal temperature front moving in for the 6-10 and remaining in place through the 15-day outlook.

 

Better prices this morning as wheat tries to cling to the bottom end of its recent trading range, while soybeans and corn maintain short-term uptrends.  Ideas for trade this week were higher prices on planting delays, but the reaction from futures so far seems to suggest that news is fully priced in.  Planting progress on Monday is expected to be close to 10% which would compare with 18% on the 5-yr average, although conditions in the eastern corn belt do look better late next week.  Countless charts have been posted this week on planting pace as of May 1 vs. final yield and the simply answer is there is relatively no correlation.  Summer weather dictates yields, and this crop will get planted.  Difficult to see acreage shifts until the calendar shows May 15th with significant progress remaining.  Wheat has been weak this week on a relative basis thanks to solid conditions in the US southern plains, improved moisture for the Black Sea and EU wheat remaining competitive despite tightened supplies.

Data yesterday included weekly ethanol production which saw a bounce back week to 993,000bb/day, up 7,000 on the week, and up 5.8% from a year ago.  The uptick in production this week would seem to suggest the seasonal maintenance period has wrapped up, and production levels could return to their lofty levels posted for much of 2017.  Ethanol production needs to run around 3.0% higher than a year ago through August to hit the USDA’s revised ethanol demand forecast of 5.450bbu.  Considering every week since December has been at least 3.0% above a year ago, the USDA could very well need to adjust their target higher by another 25-50mbu.  This would also have implications for the 17/18 balance sheet which the USDA will release the first idea of on the May WASDE.  Ethanol stocks rose this week by 131,000bbls to 23.034 million bbls which remain close to record levels.

While on corn demand, Reuters reported yesterday a shipment of Paraguayan (Brazil) corn was set to arrive in Wilmington, NC on 5/20.  The vessel has a capacity of 61,000MT and would be the largest corn vessel unloaded for import according to Reuters data.  This is obviously a concern considering the US is set to carryout 2.3bbu of corn at the end of August, and yet South American stem is already working into the US-SE in May.  This isn’t likely to be the last import story we hear of as FOB quotes going home last night had CIF NOLA corn at $158.55/MT FOB for May, $159.54/MT for June, $159.54/MT for July and $162.49/MT for August.  This would compare with Argentina at $162.49/$157.38/$153.44/$155.80 while Brazil is only posting quotes for August and September at $157.77/MT.  While the US corn export pace has been impressive as of late, and is expected to continue into the summer, it will be worth paying attention to for a possible downward revision if the imports continue.

Tomorrow morning, StatsCan will release their estimates on 2017 planted acreage.  Average analyst estimates expect the report to show 22.4 million acres of all wheat compared with 23.212 million last year.  Durum acreage is seen at 5.0 million acres vs. 6.19 million last year.  Canola acres are seen at 21.3 million vs. 20.36 million last year thanks to the resilient canola prices for much of 2016/17.  Oat acreage is forecast at 3.2 million vs. 2.83 million last year, barley acreage at 6.0 million vs. 6.39 million and soybean acres are seen at 5.9 million vs. 5.46 million last year.  Principle crop acreage for the 10 crops surveyed is seen at 77.53 million vs. 78.787 million last year.

Tomorrow will see May options go off the board with areas of interest in corn at the $3.50 and $3.70 level.  Largest open interest in puts are at the 3.50 strike with 23,776 contracts open, while the 3.70 calls show 23,952 contracts open.  Max pain would occur at the 3.65 level.  In soybeans, the largest area of open interest would be the 10.00 strike with 14,465 open calls and 11,147 open puts.  This area is obviously not in reach barring something crazy happening tomorrow.  The Chicago wheat open interest profile looks like a scatter chart with lots of open interest scattered all over the board.  Largest puts are open at the 4.00 strike with 6,901 contracts, while the largest calls exist at the 4.60 level with 7,798 contracts open.  Max pain would occur at the 4.40 strike, leaving the majority of options expiring worthless.

Estimates for this week’s export sales include wheat at 350-650TMT, corn at 700-1,100TMT, soybeans at 350-750TMT, meal at 100-200TMT and soy oil at 10-20TMT.

 

Bottom Line: The speculative sector is heavily short the Ag space, but this is well known and in the trade.  Serious planting delays need to emerge in order to make those positions nervous, and at this stage they don’t appear to be major.  The threat of South American grain imports will be a constant theme throughout the summer, and something which should keep a check on rallies.  The US producer will need to be disciplined this marketing year given the huge buffer stocks all around the globe.

 

 

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.

 

4/5/2017 Morning Comments

Good Morning,

 

Outside Markets as of 5:50am: Dollar Index up 0.050% at 100.5300; Euro down 0.005% at 1.07050; S&P’s are down 0.25 at 2356.25; Dow futures are up 11.00 at 20,645.00; 10-yr futures are down 0.07%; Crude Oil is up $0.45 at $51.48; Heating Oil is up $0.0155 at $1.6078; Paris Wheat is up €0.50 at €164.50/MT; Paris Rapeseed is up €4.75 at €402.75/MT; Dalian corn closed up 0.50%, Dalian soybeans closed down 0.34%, Dalian Soy Oil was down 1.07% and Dalian Meal was down 1.08%.

February import and export data was released from the US Census Bureau yesterday which included beef and pork exports turning in another strong showing.  Beef exports for the month totaled 90,417MT, which were down from last month’s 96,488MT but above last year’s 83,203MT.  Feb exports were the smallest since April 2016, but on a per day basis  we shipped 3,229MT vs. 3,112MT in January.  Pork exports totaled 197,029MT which were down from last month’s 202,665MT but well above last year’s 171,414MT.  Exports were the smallest since September, but on a per day basis of 7,036MT were larger than January’s 6,537MT.

Rain showers moving across several central corn belt states this morning as part of multiple round of moisture to move through the Midwest the next week.  Over the last 3-5 days, the entire state of MO has received 1.0-1.5” while W-IL and S-IA have also received decent rain.  Through midweek next week, MO/IL/IN/OH/MI should also see decent shots of rain which will prevent conditions from drying down ahead of seeding.  Temperatures will remain above normal the next 15-days, but so too should precip with above normal precip forecast from Canada to Mexico.  The southern plains should be dry the next 7-days after excellent rains in the heart of the HRW belt.

 

Firmer markets across the board this morning following weakness being posted yesterday as wheat and corn relinquished early session gains.  As many suspected following the March 31st report release, there are a lot of farmers eager and willing to sell December corn at $3.95-4.00 which will make that area one of heavy resistance.  Many are already touting big acreage shifts from soybeans to corn, but I can’t believe the change has happened already, especially with wet weather forecast the next 10-days.  To the crowd touting huge acreage shifts yet this spring, it would be good to remember planting decisions for most producers don’t occur in April.  Planting decisions occur from November to Feb/Mar and weather is usually one of the driving forces unless price discrepancies get extremely wide.  In the Northern Plains at least, there could still be more acres ultimately go to corn and soybeans from spring wheat and minor crops, but a ton of switching between corn and soybeans barring major delays seems hard to justify.

As noted above, export data for February was released yesterday with ethanol exports turning in another impressive showing.  Exports for the month totaled 138.0 million gallons, up from 121.7 million last month and 67.0 million gallons last year.  This was the largest single month of exports since December 2011, and the fact it occurred in February is also impressive considering two less days to export.  Largest destinations were Brazil at 50.7 million gallons, Canada at 24.7 million and India at 24.2 million.  The impressive business to Brazil does make the threat of them reinstating an import duty all the more concerning.  Jan-Feb exports are up 69% from this time a year ago.  DDGs exports totaled 1.070MMT, up from 937,628MT last month and were the largest since August.  Exports to China continue to remain low at 64,534MT vs. 210,5559MT a year ago.  Jan-Feb exports of 2.008MMT are up 28% from a year ago.

Spread activity has been quite interesting since the March 31st reports were released, especially in light of the futures direction our markets have taken.  Nearby corn spreads have been mainly range bound for much of the last couple weeks, but the CU/CZ has trended notably lower.  That spread hit -9.50c yesterday, the lowest print since December 21st as expectations for 16/17 ending stocks would appear to be rising.  Even though September futures are technically a new crop contract, they often trade as a proxy for old crop ending stocks as we enter the delivery cycle on August 30th.  Despite sideways to higher prices, wheat spreads have been pretty one-sided to the downside, especially the WU/WZ.  KC spreads have been weak and reflective of improved moisture prospects across KS and the resulting selling by the farmer.  Both the KWN/KWU and KWU/KWZ are sitting at contract lows, while the KWZ/KWH put in contract lows yesterday.  The KWK7/KWZ7 is sitting at -52.5c this morning, just off contract lows and offering almost 7.50c a month to store wheat until the end of the year.  Currently covering around 77% of the cost of carrying that long, which in the mind of a Kansas elevator is a pretty good bet.

The private Brazilian estimates continue to roll in with all headed higher.  Private consultancy Celeres just released their latest estimate of Brazilian soybean production at 113.8MMT which is up 4.15MMT from their March estimate and 5.8MMT from the USDA.  Their corn estimate was unchanged at 97.7MMT vs. the USDA at 91.5MMT.  Brazilian FOB soybean offers continue to decline with spot premiums down 8c over the last week while May was down 2-3c.  Brazilian FOB corn offers have also declined sharply and are well under US and Argentine offers.  At the end of last week, Brazilian FOB offers were reported around $143/MT FOB vs. the US at $160/MT and Argentina at $163/MT.  The US export programs are going to face massive competition in 17/18 which could put upward pressure on carryout estimates next year.  The USDA won’t update US exports for next year on the April 11th WASDE, but the numbers from South America should be big and weigh on prices.

 

Bottom Line: Expect the delayed planting talk to ramp up if forecasts continue to pull rain forward and corn planters aren’t rolling hard by April 15th.  However, important to remember the US farmer can plant around 7-8% of the crop a day and unless we are sitting here on May 1st or even May 10th with little progress it will be tough to get too concerned.  Acreage shifts, however, could become more prominent on acres which still can be switched if delays persist into late April.

 

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.