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Closing Comments Corn followed the lead of beans by gapping to a new high (4.24 ¾) before settling close to even, + ¾ (Dec). Corn could see benefits from a constructive relationship with China in future years, as they may have a need for more corn imports, as they plan to shift more of their domestic acres to beans. Also, they have big plans to increase ethanol usage in their gasoline blends, to help reduce air pollution, which will have demand ramifications. The COT Report on Friday showed corn is still heavily net long among managed funds, although there was a reduction in their position of around 20,000 contracts. USDA weekly export inspections had corn right in line with expectations of 1,550,000 MT at 1,527,994 MT. Crop progress this afternoon is expected to show corn planting in the neighborhood of 85% complete. In Brazil, concerns are continuing to mount regarding the safrinha corn, as Safras reduced their forecast to 49 MMT, which would imply that Brazil’s overall crop will be down from 97 MMT last year to 80 MMT this year. Soybeans gapped higher in the overnight and the positive action continued throughout the session, +25 ½ (Nov). Fueling the rally was news from U.S. and China trade talks indicating that the trade war has been put on hold until further details can be worked out. China proposed they may increase agricultural imports from the U.S. by 35-40% going forward, which is great news for soybeans. Will there be a large purchase of beans by the PRC to follow this week? This morning offered no new daily sales announcements. Weekly inspection numbers reported by the USDA this morning pegged beans at 893,680 MT, well above estimates of 550,000 MT. Planting conditions will be released later today, and it is expected that beans will have progressed to 55% planted from 35% last week. Wheat began the overnight session with gains off the back of beans’ positive reaction to trade news. However, this quickly turned to a substantial setback across the both winter and spring wheat. Chicago SRW -11, Kansas City HRW -12 ¼ (July) and Minneapolis HRS -4 ¾ (Sept). Wheat weekly loadings were on the light side, as inspections were pegged at 341,299 MT for the week ending May 17th, compared to expectations of 450,000 MT. Regarding crop conditions to be reported later this afternoon, soft wheat is expected to show some improvement while the hard winter should be unchanged to slightly worse. Spring wheat planting is expected to 80%+ complete. The strong Dollar does not help rallies here stateside, but this does help provide strength to the European market, as their gains help provide support. World weather is very influential, as dry areas in the Black Sea Region, Australia and Canada are being closely monitored. Live Cattle also got a boost from positive trade vibes, +2.525 (June). This week will offer some important announcements, with the Cold Storage report tomorrow, Livestock Slaughter on Thursday and Cattle on Feed on Friday. Look for Placements to decline by 10%. According to AgResource, it appears a seasonal correction has already been priced into the market, as there has been a price decline of 21% from 2nd quarter highs to 3rd quarter lows, well below the 10-year average of 12%. Hogs pushed lower, unfazed by friendly news from trade talks, -.700 (June). This would be considered a bearish development, as large supplies continue to outweigh other positive factors. In Other News, Congress failed to pass a Republican version of the 2018 Farm Bill, with 30 Republicans defecting and no Democrats voting for it. Farmers have seen a 50% reduction in net farm income, and the “no-vote” is seen as a setback. In Brazil, truckers are setting up a huge protest in reaction to a hike in diesel prices by 25-30%. It is hard to estimate the impact – but if it drags out, will surely have an effect on the movement of grains to ports. |
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All opinions expressed in this commentary are solely those of Water Street Advisory. This data and these comments are provided for information purposes only and are not intended to be used for specific trading strategies. Although all information is believed to be reliable, we cannot guarantee its accuracy or completeness. There is significant risk of loss involved in commodity futures and options trading and may not be suitable for all investors. |
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