July corn is up 1 cent per bushel, July soybeans are down 2 1/4 cents, and July K.C. wheat is up 1 cent.CME Globex Recap:
Another day, another report the U.S. and China are "close" to striking a deal to end the trade war. Reports Wednesday suggested the two sides would "immediately" remove a 10% tariff on a portion of the $200 billion worth of Chinese imports when a deal is signed which is expected to be late next week. A 25% tariff on roughly $50 billion in Chinese goods would stay in place until after the 2020 election, however. Our markets have learned their lesson with getting too optimistic in the past, so it is likely traders will remain reserved until more details are released. Higher grains and weaker soybeans Thursday morning as markets grapple with the wet forecast but ample farmer grain supplies which have a closing window to move in an orderly fashion.OUTSIDE MARKETS:
Previous closes on Wednesday showed the Dow Jones Industrial Average down 162.77 at 26,430.14 and the S&P 500 down 22.10 at 2,945.83 while the 10-Year Treasury yield ended at 2.511%. Early Thursday, the June DJIA futures are up 62 points. Asian markets are closed. European markets are higher with London's FTSE 100 up 7.97 points (0.11%), Germany's DAX up 52.45 points (0.42%) and France's CAC 40 down 14.78 points (-0.26%). The June Euro is up 0.001 at 1.120 and the June U.S. dollar index is down 0.085 at 97.325. The June 30-Year T-Bond is down 5/32nds, while June gold is down $12.10 at $1,272.10 and June crude oil is down $0.87 at $62.73. The Dalian Exchange was closed for holiday.
|1)||U.S. HRW FOB offers are $19-26 per metric ton (mt) below competing offers through June with only Russian offers trading a discount for July.||1)||The Kansas City Wheat/Chicago corn spread traded down to 29.25 cents premium wheat Wednesday, the lowest since December 2016.|
|2)||Latest GFS model runs indicate moderate to heavy rainfall over the central and southern Midwest the next 7-days, delaying planting further.||2)||Weekly ethanol production missed the level needed to hit the USDA forecast for the 15th week in a row and 17 of the last 18.|
|3)||Weekly ethanol stocks fell 52,000 barrels last week to 22.695 million, the lowest since November, and should continue dropping through summer.||3)||November '19 soybeans traded almost 90 cents below the February crop insurance price and are at the lowest new crop levels as of May 1 since 2007.|
CORN Corn is higher again Thursday morning, poised to close higher for the sixth session in a row which would be the longest winning streak since early January. It would seem the wet, cool weather across the Corn Belt is starting to resonate with the record fund short position. Corn planting progress as of Monday was 15% complete nationally and we aren't likely to see much more than 10% advancement by next Monday. Should that hold true, planting progress for week 18 would be the slowest since 2013 and second slowest since 1993. In 2013, we saw a 1.8 million acre "loss" from the March Prospective Plantings report to the final report in January. In addition, the national average yield was roughly four bushels below trend. It is far too early to have strong conviction about either, but the forecast does not look conducive for making strong gains in the next 7-10 days. If we lost 1.5 million acres from the March report figure, most would still be penciling in a 2.0 billion bushel (bb) carryout or more. If we have both a 1.5 million acre decline in planted acreage along with a four bushel below trend yield, then carryout comes in between 1.6-1.7 bb. We are miles away from adjusting yield, however, and economics still tell the U.S. farmer to plant as much corn as possible. Weekly ethanol production fell 24,000 barrels last week to 1.024 million barrels which was 6.4% above year ago levels, but still around 60,000 barrels/day below the needed level to hit the USDA forecast.
SOYBEANS Soybeans are lower Thursday morning but still up from Wednesday's contract lows which saw July beans slide below $8.50 briefly. Since the news the Trump Administration was readying another $12 billion in farm assistance should the trade war drag on, the market has seemed ready to discount another aid package as it did during the first round. If the U.S. government is going to try and support U.S. farmers with artificially high incomes, odds are strong the futures market will try its hardest to extract enough premium out of prices to have the same net effect to supply and demand. Encouraging, or at least not penalizing, the production of a crop the market does not want will only kick the can down the road until a market-clearing price is reached. USDA released industry-wide crush Wednesday afternoon, showing March crush at 179.4 million bushels (mb) vs. 179.9 mb expected and 182.2 mb a year ago. This was the second month in a row showing a reduction from the previous marketing year. April-August crush needs to be essentially unchanged from a year ago to meet the USDA's current 2.100 bb figure which could be a tall ask as the last two months post slowdowns. Many technical indicators are giving off extreme pessimism readings which might suggest we are closer to a bottom than price action would lead one to believe.
WHEAT Wheat markets are higher Thursday morning, attempting to follow through on their positive session Wednesday. The rally came in the face of better than expected results from day two of the Wheat Quality Council (WQC) tour, which could suggest much of the larger crop ideas have already been priced in. Also supporting futures were multiple reports of HRW trading into southern plains feedlots to replace corn. Quantities are still said to be limited, but a commodity with a demand problem needs all the help it can get. In addition, FOB offers of U.S. HRW are easily the cheapest in the world for the next 60-days and could even steal some European demand into July and August. Day two of the WQC tour found an average yield of 47.6 bushels per acre (bpa) which is the highest since 2016 and the second highest of the last nine years. Day three rarely alters the overall narrative, so the final tour yield should express very strong production prospects, even though the crop is around 4-6 weeks behind average development. Many Kansas City wheat calendar spreads are attempting to price in the large HRW crop with KWU/KWZ, the KWZ/KWH and the KWH/KWK all trading in excess of 100% of full financial carry. Variable Storage Rates will likely increase once the harvest is brought in, incentivizing farmers and commercials alike to store grain instead of market it.
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