July corn is up 1/2 cent per bushel, July soybeans are up 1 3/4 cents, and July K.C. wheat is up 1 3/4 cents.CME Globex Recap:
Upbeat European economic data as well as expectations for another strong employment report in the U.S. have equity markets trading higher to close the week. The market consensus for today's April payroll report is to show an increase of 190,000 which would be slightly below March at 196,000 and just slightly below the 12-month trend average of 211,000. Grain markets are higher across the board Friday morning with more moisture falling in the Northern Plains and Eastern Corn Belt. Additional moisture is on the way for the heart of the Corn Belt late this weekend and early next week which will keep planting progress at a standstill. By the end of next week, we should have a handle on whether a U.S.-China trade deal is going to happen or not.OUTSIDE MARKETS:
Previous closes on Thursday showed the Dow Jones Industrial Average down 122.35 at 26,307.79 and the S&P 500 down 6.21 at 2,923.73 while the 10-Year Treasury yield ended at 2.552%. Early Friday, the June DJIA futures are up 78 points. Asian markets are closed. European markets are higher with London's FTSE 100 up 51.11 points (0.7%), Germany's DAX up 49.04 points (0.4%) and France's CAC 40 up 19.16 points (0.35%). The June Euro is down 0.002 at 1.120 and the June U.S. dollar index is up 0.124 at 97.710. The June 30-Year T-Bond is down 3/32nds, while June gold is down $1.30 at $1,270.70 and June crude oil is down $0.33 at $61.48. China's Dalian Exchange is closed.
|1)||As of Thursday morning, soil temperatures in Iowa, Minnesota, Nebraska, northern Illinois and the Dakotas were below the 50-degree threshold for germinating corn.||1)||With just five weeks left in the marketing year, wheat export shipments stand at 80.2% of the USDA's forecast, which should result in another cut.|
|2)||Corn export shipments at 59.7% of USDA's forecast is the second highest since 2013.||2)||The CME Group declared a condition of force majeure at corn and soybean shipping locations on the Illinois and Mississippi Rivers due to flooding and the impossibility of load-out.|
|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)||The Bloomberg Commodity Index traded to the lowest level on Thursday since February 14 as crude oil prices headed for their 200-day moving average.|
CORN As it's done all week, July corn is trading higher Friday morning, attempting to close higher for the seventh session in a row. Should July corn close higher on Friday, it would mark the longest winning streak since February of 2018. The size of the managed fund short combined with the threat of prevent plant and acreage switching is enough to provide some short-covering. University articles were making the rounds Thursday touting the potential for yield reductions due to the late planting, which is sure to take place. As we've discussed, we are not ready to make yield cuts when the majority of the crop is still to be planted and the Midwest is sitting on 90-99% soil moisture profiles. Around 88,000 contracts of the non-commercial short position was put on at $3.70 and below basis July futures which makes current price levels especially interesting for managed funds. The entire gross short position held by the managed funds has a weighted-average price of $3.78 basis July futures going back to early February. Export sales totaled 23.0 million bushels (mb) last week which were a hair better than the 22.0 mb needed each week to hit the USDA forecast. Commitments at 78.7% of the USDA's export forecast are below the 5-yr average of 84.99%. The CME declaring a condition of force-majeure will not aid in achieving the USDA's export forecast.
SOYBEANS Soybeans futures are higher Friday morning, trying to avoid the sixth lower close in a row, the longest losing streak in the life of the July contract. The inverse relationship between corn and soybeans this week has been undeniable as concern over late planting would appear to be manifesting itself with ideas of higher soybean acreage. In addition, the subterfuge surrounding the trade talks has become nauseating with optimism replaced by qualifiers about trade terms every hour. While the negotiators could surprise us all, the goodwill created with ideas of gigantic purchases of U.S. farm goods seems to have fallen by the way side. Export sales last week of 11.5 mb were slow and below the roughly 12.0 mb needed weekly to achieve the USDA forecast. Commitments as a percentage of the USDA forecast at 88.45% would be the lowest for this week since 2006 while shipments at 63.22% of the USDA forecast is the lowest on record. To bring the commitments as a percentage of the USDA forecast in-line with the 5-yr average, the forecast would need to drop 125 mb. We do not believe USDA will make that size of a cut on next week's WASDE, but another cut does seem inevitable. The October lows around $8.37 and the September lows around $8.12 look next up for July soybeans.
WHEAT Wheat futures are higher Friday morning as many contracts try to close higher for the third session in a row. After dropping below the 4-handle mark earlier in the week, July Kansas City wheat has pushed back to $4.07 Friday morning. July Kansas City wheat is actually at the lowest level for early May since 2005 which is pretty remarkable to consider. Additional reports of HRW working into feedlots in the southern plains at 93-95% of the weight-adjusted price of corn is offering some support. Plenty of concern about this year's above trend HRW crop being low protein, resulting in higher feeding and larger inter-market spreads against Minneapolis. Speaking of the HRW crop, the Wheat Quality Council (WQC) tour found a Kansas wheat crop of 306.2 mb with an average yield of 47.2 bushels per acre (bpa). This is the highest yield since 2016 and the second highest since 2012. As the tour participants noted, this crop is behind schedule, so late season rains, or lack thereof, could have a meaningful impact on the size of this crop. Calendar spreads continue to work wider, incentivizing the storage of this year's winter wheat crop. The spread from July 2019 HRW futures to July 2020 is now 81 cents per bushel which is yielding a 2.94% return above and beyond storage and interest costs. These spreads are likely to get wider before harvest is complete. Heavy rains in SRW country are worth keeping an eye on in the coming week.
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Tregg Cronin can be reached at firstname.lastname@example.org
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