Blogging by the Bushel
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Market Report

Tuesday May 29th, 2018

July corn closed down 6 at $4.00 and December closed down 6 at $4.19. July soybeans closed down 11 at $10.30 ½ and November closed down 11 at $10.42 ½. July wheat closed down 6 ½ at $5.36 ½ and September closed down 6 ¼ at $5.53 ½. Crude oil closed down $1.16 at $66.62.

Another “start higher, end lower” trade in the corn market, though this time, the markets did both with a little more gusto than normal. Call it an “early welcome” to summer markets, and the increased volatility that comes with them. Corn traded as much as $.04 higher Monday night, saw those gains fade into the dawn, and then slowly sold off throughout the day. Futures would close $.06 lower in a wide $.12 intraday range. Managed Money types were active today, selling 25,000 contracts, which would pare their net length in the market back to 190,000 combined futures and options.

Crop Progress data after the close was a little eye-opening.  The first national corn condition report of the year found the best start for the crop since 1996. Good-Excellent ratings were pegged at 79%, which compares to 65% last year. Poor-Very Poor was just 3% versus 7% last year. The only states with condition ratings behind this time last year were mostly “fringe” states – Texas, Tennessee, Pennsylvania, North Carolina, and Michigan.  Conditions almost always start “good” and conditions are usually all downhill from here. The USDA also pegged corn planting progress at 92%, advancing 11% wk/wk, and is now slightly ahead of average. The data implies roughly 7 million acres left to plant, including 810,000 in Michigan and 732,000 in Wisconsin.  Next week will capture the data past “Final Planting Dates” in the northern states, and will likely be used to get some idea of any potential lost corn acres.

Ideas for a fast start to the condition ratings discussed above, a little extra rain in the midday forecast maps, and China trade jitters, all conspired to turn the corn trade bearish. On the latter point, the Trump administration apparently decided to slap $50 billion worth of tariffs on China, after appearing to back off that very same move just last week. No doubt markets with length ended up paying the price with traders looking to lighten up those positions. US Dollar traded to new recent highs today.

The soybean market failed to sustain overnight strength and reversed lower including a key reversal on the November chart. There were some open farm selling orders filled at $10.60. Rally strength the previous week had been fueled by optimism for the resumption of Chinese imports of US beans. That business has not materialized and today the White House ratcheted up the intensity of negotiations by announcing plans to enact a 25% tariff on certain technologies totaling $50 billion and other tech restrictions aimed at investments, export controls and intellectual property. Additional details will be released by June 15th and the tariff enacted shortly after. Just like that, trade uncertainty was back on the table and the market responded as you would expect.

Trade wasn’t the only factor that weighed on prices today.  Global currencies continue to restructure their values with the dollar into new highs and the Brazilian real revisiting its lows. Thus making US values less competitive relative to Brazil.  There seemed to be a macro component tied to the selling as a result. A favorable weather outlook factored in with most of the Corn Belt set to get a nice drink this week and crops expected to start off in good shape in this afternoon’s report. Crop progress report showed soybean planting is 77% complete vs. 56% a week ago and 62% avg, the crop is 47% emerged vs. 26% last week.

Today was another session that saw wheat volume reach well over 250,000 contracts. Keep in mind, since a week ago Friday, open interest in Chicago wheat futures has increased around 79,000 contracts, and despite today’s poor close, that number may go up again tomorrow. As has been the case over the past couple of weeks, trade received a boost after the European markets opened, eventually reaching double digits higher before the rally stalled. However, in the 30 to 45 minutes leading up to the morning break the entire grain complex reversed, and wheat was not immune to that selling.

The sell-off leading up to the morning pause coincided with the Trump administration announcing that it had laid out a timeline for imposing tariffs on $50 billion in imports from China. A final list will be released on June 15th, and the tariffs will be imposed “shortly thereafter.” The proposed investment restrictions and enhanced export controls will be announced by June 30, with implementation soon after. This was not behind the midday collapse, but by then it sure seemed to turn into a risk off day for all commodities, with a lot of red on the screen across the board. Hopefully this does not turn into a three-day fund selling marathon culminating with month end on Thursday.

State by state wheat condition ratings will only add fuel to that thinking. Overall expectations were for winter wheat conditions to be unchanged week over week, but they improved 2% and it could have been more. Winter wheat conditions came in at 38% G&E and 34% P&VP vs last week when they were 36% G&E and 35% P&VP.

Anna Kaverman

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