The Grains Complex, II,IIII

Stocks largely recovered from big losses early in the day to close mixed. June E-mini S&P 500 futures traded as low as 2591.25 but were trading around 2625 near the cash close while the Dow Jones futures traded in a nearly 500 point range. Implied volatility, which had spiked during the morning price decline, fell back to near yesterday’s levels in late afternoon trading.

Heading into tomorrow’s release of the April employment report, we’ll take a look at the activity in the 10-Year Treasury options from a couple different perspectives. First, prices in the 10-year rose today, signaling lower yields at the long end of the interest rate curve. Next, implied volatility, which sometimes can be heightened heading into an economic release such as the jobs report, actually declined slightly today and remains near historically low levels.

Weather :

The updated Drought Monitor shows 57.24% of the CONUS was drought free on May 1, vs. 85.69% last year at this time. The drought in the norther Plains had not yet become a concern last year. The Southern Plains drought is still getting worse, with 8.89% of the CONUS in D3-D4 drought vs. 0.13% a year ago. The area is seeing some rain this week, but not enough to break the drought.

Corn

Corn futures are UNCH to fractionally lower this morning. They ended the Wednesday session steady to a penny lower. Analysts are expecting USDA to show 0.7-1 MMT in weekly old crop corn export sales this morning, with new crop at a net reduction of 50,000 to 150,000 MT in sales. EIA showed ethanol production for the week of April 27 averaging 1.032 million barrels per day. That was 47,000 bpd above the previous week. Ethanol stocks totaled 22.142 million barrels, 441,000 more than the week prior, with the Midwest the only region to show a reduction. INTL FCStone estimates the Brazil corn crop at 83.9 MMT, 2.6 MMT below their previous estimate and well below the USDA’s 92 MMT. During the month of April, Brazil exported 114,889 MT of corn, well below March and 25.76% lower than last year.

Corn futures closed the Thursday session with gains of 1 to 3 1/2 cents. Old crop corn export sales during the week of 4/26 exceeded most expectations at 1.02 MMT. That was a 46.31% jump from the previous week and 3.23% larger than this time last year. Mexico was the lead buyer @ 310,100 MT, with Columbia buying 148,200 MT. New crop sales totaled 49,331 MT. Shipments during that week totaled 1.474 MMT, down 13.3% from last week but 7.28% above a year ago. US corn exports during March totaled 6.49 MMT, down 4% from a year ago but the second largest March total. China sold 3.313 MMT of corn from state reserves on Thursday, totaling 83.77% of the offered amount.

May 18 Corn closed at $3.99 1/2, up 3 1/2 cents,

Jul 18 Corn closed at $4.08, up 3 cents,

Sep 18 Corn closed at $4.15 1/2, up 2 3/4 cents

Dec 18 Corn closed at $4.22 1/4, up 2 1/2 cents

Chart Points: The weekly continuation chart took out the 2017 high at $3.945. Round number resistance at $4 is the next concern for the bulls. We are also operating under a triangle breakout to the upside, with counts in the $4.20’s. These apply to May futures until expiration. July contract has a Gann 1×4 resistance line at $4.05 3⁄4. If we can clear that area, the Fibonacci expansion count is up around $4.18. Bollinger midline support is $3.95 1/4. RSI is overbought. December futures have rising regression channel support at $4.0575. The quants would be expected to sell it in the $4.23’s if given the opportunity. MACD is still bullish at the longer 9-12-26 setting. See this December chart snippet:

Soybeans

Soybean futures are currently steady to 1 ½ cents higher after seeing losses of 9 to 10 1/4 cents on Wednesday. Soy meal was down $3/ton, with front month soy oil up 29 points. The average trade guess for US old crop soybean export sales for the week of 4/26 is 300,000-600,000 MT, with new crop expected at 150,000-350,000 MT. Sales of soy meal are seen at 150,000-350,000, as 8,000-25,000 MT is projected for soybean oil. Brazilian soybean production is expected to hit 117 MMT for 17/18 according to estimates from INTL FCStone, up 1.1 MMT from their April projection. Soybean exports by Brazil during April totaled 10.259 MMT, 16.4% larger than March but 1.64% lower than April 2017.

Soybean futures rallied in the last half hour of trading to settle 8 to 10 1/2 cents higher. Soy meal was down $1.60/ton, with front month soy oil 21 points in the green. This morning’s USDA Export sales report indicated 416,259 MT in old crop soybean export sales. That was within estimates, as it was up 12.1% from last week but down 43.2% from a year ago. New crop sales exceeded expectations at 469,900 MT. Exports during the week of 4/26 totaled 691,239 MT, 55% larger than last week. Sales of soy meal totaled 246,006 MT for 17/18 and 61,200 MT for 18/19, with soybean oil tallied at 44,499 MT. Official shipments of soybeans during March were shown at 3.24 MMT by US Census, 4% larger than last year. Of the total 1.045 MMT was exported to China.

May 18 Soybeans closed at $10.43 1/4, up 10 1/2 cents,

Jul 18 Soybeans closed at $10.53 1/4, up 10 1/4 cents,

Aug 18 Soybeans closed at $10.56 1/4, up 10 1/2 cents,

Nov 18 Soybeans closed at $10.49 1/2, up 8 3/4 cents,

May 18 Soybean Meal closed at $398.40, down $1.60,

May 18 Soybean Oil closed at $30.58, up $0.21

Chart Points: Downtrend resistance is at $10.65 on the weekly continuation chart. The Bollinger midline support is $10.17 1/4. These numbers still apply to May futures. Weekly stochastics are neutral. The 100-day moving average support on the July chart is $10.27. Overhead trendline resistance is the upper Bollinger Band at $10.70 3⁄4. Stochastics are neutral. The November contract has lateral resistance at $10.60. Regression channel support is $10.28 3/4. The upper Bollinger Band resistance held the market on Monday and is resistance today @ $10.56.

Soy Meal: Spot meal futures traded at the highest price since July 2016 on Tuesday. July contract stochastics are bullish. Prices set a new life of contract high overnight and are attempting a triangle breakout. The measured move would be $38/ton if the breakout is sustained, i.e. to $423! The jury is still out on the breakout. Uptrend support is $377.80. MACD is bullish.

Wheat

Wheat futures are trading 4 to5 cents lower in all three markets this morning. They were 2 to 4 cents higher in most KC and MPLS contracts on Wednesday. CBT SRW was 1 to 4 cents lower in the front months, with deferred contracts higher. The USDA Export Sales report will be released this morning at 7:30 AM CDT, with most analysts expecting to see 0-300,000 MT in old crop wheat sales. That is within range of last week, as new crop sales are seen at 100,000-300,000 MT. The second day HRW wheat quality tour average was 35.2 bpa, below 46.2 last year. The tour was into the driest areas today before bending back toward Manhattan for the finale on Thursday. Russian FOB prices on April 27 hit $213/ton, up $5 in the previous 3 weeks. Dryness in Australia and the Black Sea region is supportive to global wheat prices at the moment.

Wheat futures ended the day with 10 to 14 3/4 cent gains in the HRW and SRW contracts, with HRS steady to 6 cents higher. The USDA reported all wheat old crop sales of 234,789 MT in the week that ended April 26. That was 21% lower than the week prior and down 9.1% from a year ago. New crop sales were 210,344 MT, a little shy of last week’s MY high. Mexico was the lead buyer of new and old crop. Export shipments of wheat totaled just 283,163 MT, well below last week and this time last year. The HRW wheat quality tour wrapped up with an expected KS yield at 37 bpa vs. 46.1 last year and the 41 average. That would put the KS production number at 243 mbu. Saudi Arabia tendered to purchase 540,000 MT of wheat, with the tender to close on Friday.

May 18 CBOT Wheat closed at $5.40 1/2, up 14 3/4 cents,

May 18 KCBT Wheat closed at $5.47 1/2, up 11 3/4 cents,

May 18 MGEX Wheat closed at $6.31 1/4, up 1/2 cent

KCBT HRW WHEAT Chart Points: Downtrend resistance on the weekly continuation chart is at $5.255. Bollinger midline support is $4.77 3/4. These apply to May futures. May futures broke Bollinger midline resistance to the upside. There is a trendline at $5.30 as resistance. They were above it overnight. Stochastics are bullish for July futures. The upper Bollinger Band resistance is $5.60 1/4. The March high was $5.65. Stochastics are overbought and looking for an excuse to sell off. Rising ADX says to pay more attention to MACD. The trend is your friend.

CBT SRW WHEAT Chart Points: The weekly continuation chart has lateral resistance at $5.06 1⁄2. Moving average support this week is $4.60 3/4 and applies to May futures. The May daily chart rallied past the 2018 high at $5.185 and posted the highest price since August. July futures picked off stops above their March high. Lateral resistance is now $5.34 1/2. They left behind a long legged doji or spinning top candlestick.

MGE Chart Points: The weekly chart shows a bounce from the 100-week moving average support at $5.80 and a gap above the 40-week moving average resistance at $6.205. That still applies to the vapor thin May contract. September futures bounced nicely from the 78.6% Fib retracement support @ $6.00 3/4. The 40-day average at $6.195 was broken to the upside. RSI is bull friendly. Stochastics are in overbought territory. The main overhead resistance line is at $6.43.

Cattle

Live cattle futures ended Wednesday with losses of 10 to 97.5 cents in the nearby contracts, with back months higher. Feeder cattle futures were up 72.5 cents to $1.125 today. The CME feeder cattle index was down 14 cents on May 1 at $139.13, with futures at a modest discount to cash. Wholesale boxed beef values were higher on Wednesday afternoon. Choice boxes were up 87 cents at $227.30, with Select boxes 79 cents higher at $207.88. Estimated weekly FI cattle slaughter through Wednesday was 353,000 head, down 2,000 head from last week but 16,000 larger than the same week in 2017. The weekly FCE online auction saw sales on 413 of the 2,982 head offered, at an average price of $122.40.

Live cattle futures finished Thursday $1 to $1.675 higher supported by strong cash action. Feeder cattle futures were up $1.475 to $2.175. The CME feeder cattle index was down $1.02 on May 2 at $138.11. Wholesale boxed beef values were higher on Thursday afternoon. Choice boxes were up 26 cents at $227.56, with Select boxes $1.29 higher at $209.17. Estimated weekly FI cattle slaughter through Thursday was 472,000 head, down 2,000 head from last week but 18,000 larger than the same week in 2017. Cash trade was reported at $126 in the South today, with a few reports of $128 and 200 in the North. Beef sales for export in the week of 4/26 were tallied at 16,210 MT, just shy of this time last year but down 12.6% from the previous week. Nearly half of that (8,700 MT) was sold to Japan.

Jun 18 Cattle closed at $106.525, up $1.675,

Aug 18 Cattle closed at $105.525, up $1.550,

Oct 18 Cattle closed at $108.975, up $1.175,

May 18 Feeder Cattle closed at $140.800, up $2.175

Aug 18 Feeder Cattle closed at $146.575, up $2.125

Sep 18 Feeder Cattle closed at $147.050, up $1.675

Cattle Chart Points: Weekly chart support is now $103.82 with June the lead month. A back adjusted weekly continuation chart (067) puts the 18-week moving average resistance at $109.80. The June daily chart is in a rising regression channel, with support near $104.15 and 50% retracement resistance at $107.92. August futures resistance is the 40-day moving average at $105.22. Stochastics and RSI are neutral, with ADX declining. Regression channel support is at $103.22.

FEEDER CATTLE: Higher back month cattle futures and a pause in the grain rally allowed feeders to rebound $.72 to $1.17 on Wednesday. The CME feeder cattle index was down 14 cents on May 1 at $139.13, with futures at a modest discount to cash.

Lean Hogs

Lean hog futures were mostly steady to 55 cents in the red on Wednesday. The CME Lean Hog Index was up 25 cents from the previous day to $62.45 on April 30. The USDA pork carcass cutout value was up $1.09 at $70.25 on Wednesday afternoon, with just the picnic and ham reported lower. The national base hog weighted average price was 18 cents higher at $59.06. The USDA estimated weekly FI hog slaughter at 1.389 million head through Wednesday. That is 6,000 fewer than last week but well above this week last year.

Lean hog futures were mixed on Thursday, with nearby May up 17.5 cents and back months steady to 32.5 cents lower. The CME Lean Hog Index was up 21 cents from the previous day to $62.66 on May 1. The USDA pork carcass cutout value was down 86 cents at $69.39 this afternoon. The national base hog weighted average price was 13 cents lower at $58.89. The USDA estimated weekly FI hog slaughter at 1.853 million head through Thursday. That is 6,000 fewer than last week but well above this week last year. Export sales of pork were reported at 17,437 MT this morning, down 33.9% from last week but 26.7% larger than this week last year.

May 18 Hogs closed at $67.075, up $0.175,

Jun 18 Hogs closed at $73.500, unch,

Jul 18 Hogs closed at $75.675, down $0.225

Chart Points: The back adjusted and liquidity following weekly chart (067) shows support at $70.25. This applies to June futures. Weekly stochastics are neutral. June futures have 78.6% Fib retracement support @ $72.15. RSI and stochastics are oversold and trying to turn higher. The BB midline resistance would be $75.62. The 61.8% Fib retracement support for July futures is $75.55. Stochastics are trying to give us a buy signal.

Cotton

Cotton futures are trading 6 to 34 points higher this morning. They finished the Wednesday session with most contracts 10 to 63 cents higher. The Federal Reserve left interest rates UNCH as expected, with expectations that they will adjust short term rates higher in June. The weekly USDA Export Sales report will be out shortly, with analysts estimating 175,000-350,000 RB in old crop sales. The Cotlook A index was down 70 points from the previous day on May 1 to 93 cents/lb. The Adjusted World Price is currently at 74.25 cents/lb, and will be updated later today.

Cotton futures settled the day with front months 18 to 56 points lower and back months mostly higher. The weekly USDA Export Sales report showed upland cotton old crop sales at 189,870 RB in the week of 4/26. That was well short of the week prior but 24.56% above this week last year. New crop sales at 299,127 RB were a marketing year (MY) high. Vietnam was the lead buyer, purchasing 82,900 RB of 17/18 upland cotton and 86,300 MT of the 18/19 crop. Exports during that week outperformed the previous week by 2.64% and this time last year by 21.08% at 432,550 RB. The Cotlook A index was up 25 points from the previous day on May 2 to 93.25 cents/lb. The Adjusted

World Price was updated to 74.99 cents/lb earlier today, 74 points above the previous week.

May 18 Cotton closed at 84.450, down 56 points,

Jul 18 Cotton closed at 84.500, down 18 points

Oct 18 Cotton closed at 81.300, up 8 points

Source:

Brugler Marketing & Management,LLC

USDA

NOAA

CFTC

CME Group

-R.W.N II

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