The Grains Complex: Hogs,Wheat, & The Week Ahead.

Global markets have come through an eventful week with a mildly positive tone. US long- term yields continued to rise, with 10-year rates reaching their highest level in nearly seven years. While there were lukewarm readings on retail sales and housing starts, a one-year high was reached in the Philly Fed survey, as well as a multi- decade low in ongoing jobless claims. Recent Fed commentary has strengthened the case for a June rate hike, but whether there are three or four hikes this year will probably come down to US inflation readings. Mixed signals have been coming from the US/China trade talks, but there is some optimism that they will achieve some benefit for the US.

The dollar has reached its highest level since late last year, and it remains especially strong against emerging market currencies, which could be negative for commodity markets. US sanctions on Iran have given a boost to energy prices, with Brent crude climbing back above $80 per barrel for the first time since late 2014.

Comments by Saudi officials that they will ensure that the world has adequate supplies, coupled with the prospect of US crude production climbing above 11 million barrels per day has helped soothe concerns over negative long term impacts. With some weather concerns for the wheat market and the global corn situation showing one of the tightest in 45 years, it will not take much in the way of a weather issue to spark a major rally in corn. The short-term focus is on trade.

Over the weekend, there were positive comments from US officials on progress with US/Chinese trade negotiations which have boosted global risk sentiment.

The Asian session will feature an April reading on the Japanese trade balance.

The European session will be fairly quiet due to several nations observing the Whit Monday holiday.

The North American session will be highlighted by the Chicago Fed’s April national activity index that is expected to see a moderate increase from March’s 0.10 reading. Atlanta Fed President Bostic, Philadelphia Fed President Harker and Minneapolis Fed President Kashkari will speak during afternoon US trading house. Earnings announcements will include TJX Companies before the Wall Street opening while Intuit reports after the close.

Economic Events

May 21

– Chicago Fed National Index

May 23

– Euro Zone “Flash” PMI’s – UK CPI/PPI

– New Home Sales

– FOMC Meeting Minutes

May 24

– Jobless Claims

– Existing Home Sales

– KC Fed Manufacturing Index

May 25

– German IFO Survey

– UK GDP

– Durable Goods

– Consumer Sentiment



Corn

Corn futures ended the Friday session with 6 to 7 1/2 cent gains in the front months, as nearby July was up 6 cents on the week. That followed a report that China has dropped their Anti-dumping investigation into US sorghum and removed the 178.6% deposit requirement. Payments made into that fund will be rebated.

Managed money was reported to trim their CFTC net long position in corn futures and options by 20,220 contracts in the week that ended May 15. Their net position stood at 191,672 contracts on that day. China sold 3.28 MMT of corn from state reserves on Friday, totaling 52.7% of the total amount offered.

Jul 18 Corn closed at $4.02 1/2, up 7 1/4 cents,

Sep 18 Corn closed at $4.11, up 7 1/2 cents,

Dec 18 Corn closed at $4.20 1/4, up 7 1/4 cents

Mar 19 Corn closed at $4.28 1/4, up 6 1/2 cents


Soybeans

Soybean futures got a little help from the rest of the commodity complex to hold out for 3 to 4 cent gains on Friday. Soy meal was up $1.20/ton, with front month soy oil 4 points higher. The USDA reported export sales cancelations of 829,000 MT for old crop soybeans and 120,000 MT for new crop. They also reported 56,000 MT in sales for 17/18 and 112,000 MT for 18/19 all for unknown destinationss through their daily reporting system. Spill over from corn and wheat helped to offset that news.

Friday’s CFTC report showed spec funds in soybean futures and options backing off their net long position by 18,981 contracts. Their net position on Tuesday was 108,061 contracts. Palm oil prices hit a 5 week high on Friday, helping to support soy oil and vice versa.

Jul 18 Soybeans closed at $9.98 1/2, up 3 1/2 cents,

Aug 18 Soybeans closed at $10.02 1/2, up 3 3/4 cents,

Sep 18 Soybeans closed at $10.04 1/2, up 3 1/2 cents,

Jan 19 Soybeans closed at $10.12 1/4, up 3 3/4 cents.


Jul 18 Soybean Meal closed at $376.30, up $1.20.


Jul 18 Soybean Oil closed at $30.98, up $0.04


Wheat

Wheat futures saw sharp 19 to 20 3/4 cent gains in most CBT and KC contracts on Friday, with MPLS 12 to 14 1/4 cents higher. Both nearby KC and MPLS were up 4% on the week, with CBT 3.9% higher. Dryness in other major exporting countries helped, along with strength in corn.

Spec traders in Chicago wheat futures and options flipped their CFTC net position by 9,848 contracts back to the short side at -5,522 contracts. In KC wheat they trimmed 4,440 contracts off their net long position to 44,190 contracts in the week ending May 15. Iraq purchased 100,000 MT of wheat in their recent tender, with 50,000 MT sourced from the US and Australia each. Pakistan is tendering for 500,000 MT of wheat, with late July delivery, through a government export subsidy program.

Jul 18 CBOT Wheat closed at $5.18 1/4, up 20 3/4 cents


Jul 18 KCBT Wheat closed at $5.38 3/4, up 19 3/4 cents


Jul 18 MGEX Wheat closed at $6.29, up 14 1/4 cents


Hogs

Lean hog futures settled with losses of 30 cents to $1.775 on Friday. The CME Lean Hog Index was up 87 cents from the previous day to $67.01 on May 16 and continues to rise seasonally. The USDA pork carcass cutout value was down $1.59 at $73.91 this afternoon. All primals but the butt and belly saw sharp losses. Bellies were up 12% for the week. The national base hog weighted average price was 16 cents lower at $64.89 on Friday afternoon.

The USDA estimated FI hog slaughter at 2.348 million head through the weekend. That is a 35,000 head jump from last week and 84,000 above the same week in 2017. CFTC data showed specs increasing their net short position in lean hog futures and options by 1,239 contracts to -7,858 contracts as of May 15.

Jun 18 Hogs closed at $74.700, down $1.775,

May 21

– Chicago Fed National Index

May 23

– Euro Zone “Flash” PMI’s – UK CPI/PPI

– New Home Sales

– FOMC Meeting Minutes

May 24

– Jobless Claims

– Existing Home Sales

– KC Fed Manufacturing Index

May 25

– German IFO Survey

– UK GDP

– Durable Goods

– Consumer Sentiment

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May 21

– Chicago Fed National Index

May 23

– Euro Zone “Flash” PMI’s – UK CPI/PPI

– New Home Sales

– FOMC Meeting Minutes

May 24

– Jobless Claims

– Existing Home Sales

– KC Fed Manufacturing Index

May 25

– German IFO Survey

– UK GDP

– Durable Goods

– Consumer Sentiment

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Cotton

Cotton futures posted strong 79 to 152 point gains in the front months on Friday. Nearby July was up 2.28% on the week. Bulls are talking up Chinese crop problems. Thursday’s CFTC cotton on call report showed mills trimming their unfixed call sales position for July by 5,442 contracts. That position was still at 49,643 contracts on Friday May 11.

The Commitment of Traders report on Friday showed large spec funds reducing their net long position in cotton futures and options by 8,605 contracts. As of Tuesday their net position stood at 89,260 contracts. The Cotlook A index was up 45 points from the previous day to 92.50 cents/lb on May 17. The USDA Adjusted World Price for this week is 74.09 cents/lb, down 149 points from the previous week.

May 21

– Chicago Fed National Index

May 23

– Euro Zone “Flash” PMI’s – UK CPI/PPI

– New Home Sales

– FOMC Meeting Minutes

May 24

– Jobless Claims

– Existing Home Sales

– KC Fed Manufacturing Index

May 25

– German IFO Survey

– UK GDP

– Durable Goods

– Consumer Sentiment

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-R.W.N II

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