The Grains Complex III

Day three, tonight the Pittsburgh Penguins came out on top in the first game of the series between the Washington Capitals. Sidney Crosby and Alexander Ovechkin had tallies in a high energy game filled with many chances at Net.

With that said, I’ll turn to the futures market.

Metals

Cooper futures little changed on the day, down 37 bps (-0.50%). Most certainly forming a base. Trading in a sideways, down trending channel for trend duration. That being said, overnight action in copper has formed a base around a few key moving averages (8EMA, 21EMA, 50EMA). These moving averages are moving sideways, thus not giving a boost to Cooper from a technical perspective. The first step for a potential rally would be to see price action forming above the moving averages.

On the fundamental side, news that China is willing to cut tariffs on U.S made automobiles from the current 25% to 15% (possibly 10%), which is a complete one eighty from the original knee-jerk proposal of an additional 25%. Auto stocks responded in turn. Granted there isn’t much Copper in U.S. made cars but what this news does do is push back on the Trade War narrative in terms of global demand shrinking and subsequently Copper demand out of China.

Moving onto the dollar, being down yesterday, resumed its strength to the upside. Having now been up 7 out of the last trading sessions. All else equal, the inverse relationship would have driven copper lower, however, as noted above, Copper has been up four days and down four days resulting in a base being formed.

Bottom line:

Watching Chinese demand for Copper and parsing the economic data for clues of a slowdown in the Chinese economy for a directional view on Copper to the upside or downside.

Grains

Corn market traded both sides of unchanged in the trading session today. Earlier this week there was some negative news on Ethanal production and export sales, but the market only $0.05 away from its recent highs in new crop contracts. Weather across the Corn belt has improved this week and dry for the next few days, thus the planting pace should pick-up.

Late next week, heavy rains will impact the eastern part of the Corn belt but for now the planting pace should improve. We’ll see the results in Monday’s Crop Progress Report from the USDA.

Other than weather being a major factor, there are ancillary issues such as, the RFS. The lobbying battle going on between big oil interests and the ethanol lobby. Additionally, issue on whether or not NAFTA negations will be successful. Lastly, what the Chinese will do in regards to the tariffs on soybeans, which would have an impact on the corn market down the road if followed through on. All of these could result in some volatility within the grains space over the short-term in conjunction with headline risk always present.

Corn

Corn futures saw fractional to penny losses in most contracts on Thursday. The USDA reported a private export sale of 107,600 MT of corn for 17/18 delivery to unknown destinations this morning. The Export Sales report, however, indicated that just 697,073 MT of old crop corn was sold during the week of 4/19, shy of expectations. That was 7.84% lower than this time last year and down 36.15% from a week ago. New crop had a net reduction of 76,592 MT.

Weekly shipments were tallied at 1.701 MMT, 20.78% larger than the same week in 2017. China sold another 2.681 MMT of corn from state reserves, totaling 89.87% of the offered amount. The International Grains Council added 2 MMT to their 18/19 world corn production estimate at 1.054 BMT. Their ending stocks projection was trimmed 3 MMT on larger consumption to 262 MMT.

May 18 Corn closed at $3.86, down 1/2 cent,

Jul 18 Corn closed at $3.95 1/4, down 1/2 cent,

Sep 18 Corn closed at $4.02 1/4, down 3/4 cent

Dec 18 Corn closed at $4.11 1/4, down 1 cent

Soybeans

Soybean futures were unable to hold gains from earlier in the day, with nearby contracts steady to 1/2 cent higher and back months lower. Soy meal was up $3.00/ton, with front month soy oil 2 points in the green. This morning’s USDA Export Sales report showed just 371,303 MT of old crop soybean sales in the week that ended 4/19, short of analysts’ expectations. That was well below the previous week, but nearly 174.6% larger than this week in 2017. Net reductions of 9,800 MT were reported for China, as their buying typically switches to South American at this point in the year. New crop sales were also shy of estimates at 166,500 MT. Soybean exports for that week totaled 446,058 MT, a jump of 10.9% from the week prior and 25.6% larger than last year. Sales of soy meal totaled 264,501 MT, as soy oil was reported at 11,237 MT. The IGC expects 18/19 world soybean production to total 355 MMT, with ending stocks up 1 MMT to 40 MMT.

May 18 Soybeans closed at $10.28, up 1/2 cent,

Jul 18 Soybeans closed at $10.39 1/2, up 1/4 cent,

Aug 18 Soybeans closed at $10.41 1/2, unch,

Nov 18 Soybeans closed at $10.33 1/4, down 1 1/2 cents,

May 18 Soybean Meal closed at $379.20, up $3.00,

May 18 Soybean Oil closed at $30.81, up $0.02

Wheat

Wheat futures closed the Thursday session with losses of 5 to 9 1/2 cents in the CBT and KC winter wheat contracts. MPLS was steady to 4 cents lower. All wheat export sales of old crop were 297,203 MT this morning, outpacing most estimates. That was much better than last week’s net reduction and 4.8 times as large as the sales total for this week last year. New crop sales were a MY high of 280,701 MT, within the range of expectations. Shipments of wheat were at a 29 week high 588,388 MT, but down 4% from this time a year ago. The IGC trimmed their 18/19 world wheat production estimate 2 MMT to 739 MMT. World ending stocks were increased 4 MMT to 257 MMT on larger 17/18 carryover.

May 18 CBOT Wheat closed at $4.80 3/4, down 5 1/2 cents,

May 18 KCBT Wheat closed at $5.01 3/4, down 5 1/4 cents,

May 18 MGEX Wheat closed at $5.99 1/2, unch,

Cattle

Live cattle futures ended the day with most contracts lower as April was up 60 cents ahead of Monday’s expiration. Feeder cattle futures were also lower, with April expiring at $140.175. The CME feeder cattle index was up $1.29 on April 25 at $139.49. Wholesale boxed beef values were higher on Thursday afternoon. Choice boxes were up $1.62 at $220.15, with Select boxes $1.33 higher at $204.48. Estimated week to date FI cattle slaughter was 474,000 head. That is 4,000 head above the previous week and up 5,000 head from the same week in 2017. Export sales of beef for the week of 4/19 were reported at 18,539 MT, down 6.9% from a week ago and 12.6% from last year at this time. Shipments of beef were shown at 15,724 MT, up 3.21% from last week and 15% larger than last year.

Apr 18 Cattle closed at $122.525, up $0.600,

Jun 18 Cattle closed at $104.350, down $1.225,

Aug 18 Cattle closed at $104.025, down $1.250,

Apr 18 Feeder Cattle closed at $140.175, up $0.325

May 18 Feeder Cattle closed at $140.300, down $1.050

Aug 18 Feeder Cattle closed at $146.500, down $0.925

Lean Hogs

Lean hog futures posted $1.125 to $1.35 losses in the front months on Thursday. The CME Lean Hog Index was up $1.44 from the previous day to $60.44 on April 24. The USDA pork carcass cutout value was down 64 cents at $67.85 this afternoon. The national base hog weighted average price was 2 cents higher at $58.32. The USDA estimated FI weekly hog slaughter at 1.859 million head through Thursday. That is 1,000 head above last week and 89,000 head above the same week in 2017. Weekly pork export sales were 26,361 MT in the USDA report this morning. That is 14.8% larger than last year and up 47.1% from last week. Pork export shipments were up 54.6% from last week to 24,958 MT.

May 18 Hogs closed at $67.325, down $1.225,

Jun 18 Hogs closed at $74.000, down $1.350

Jul 18 Hogs closed at $77.300, down $1.125

Cotton

Cotton futures finished the Thursday session with nearby contracts 23 points higher and back months lower. This morning’s USDA Export Sales report indicated that 311,973 RB of old crop upland cotton was sold in the week of 4/19. That was a 7.48% jump from last week and is 170% larger than last year. New crop sales were reported at a MY high of 259,335 RB. Shipments of upland were reported at 421,431 RB, 16.43% above last week and 39.37% larger than last year. The Cotlook A index was down 2.50 cents from the previous day on April 25 to 90.70 cents/lb. The Adjusted World Price was updated to 74.25 cents/lb this morning, 9 points above the previous week.

May 18 Cotton closed at 84.990, up 23 points,

Jul 18 Cotton closed at 84.170, up 23 points

Oct 18 Cotton closed at 80.420, down 47 points

Energy

Crude Oil and Natural Gas futures were on the move today after the surprise draw from the EIA Report for Nat Gas. $NG_F finished the day up 1.0%, while $CL_F finished the day essentially unchanged. But what makes Crude Oil “on the move” is the headline new of the Iranian Nuclear Deal. May 12th is the deadline for President Trump to ratify the agreement by stating that Iran has been in compliance or they have not. If President Trump seems the Iranians have not been in compliance, the Iranian Dan actions go back into place, taking 350,000 barrels of crude off of the market. Forbidding most of the United States’ allies and business partners from dealing with Iranian Crude Oil. This would impact the already depleted crude oil supplies further, and could push WTI much higher from its current level.

As noted above, the dollar regained its strength to the upside today and would typically take WTI lower, which it did not today, leading some to believe this could be the specter to the Iranian Nuclear Deal. Moreover, the price action in Brent Crude Oil Futures have begun to strengthen, given that the Brent Oil contact is where the OPEC Oil Contract is actually priced.

Again, as WTI was unchanged we saw Brent trading higher to the time of half a percentage point. Naturally then moving to the Brent/WTI spread, which has been slowly widening over the last few days and today widening again.

Source :

Brugler Marketing & Management, LLC

FINVIZ

NOAA

USDA

-R.W.N II

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