The Grains Complex: K.I.T.D-F.O.D.S

Today was certainly filled with interesting conversations with the people that Turkey know what a hard days work is all about. As I mentioned on Twitter today, I visited the fine folks at ASR Grain and Co. here in Shelby, North Carolina to learn more about the operations behind bringing grains to market. It made wish I had joined the FAA ( Future Farmers of America ) when I was younger.

Nevertheless, as the title of the piece indicated I know nothing about the grains business other than being able to quote the most recent bid & asks spreads. So I made a call and set-up a Banyan Capital Management, LLC field trip to learn more about this “late-cycle” asset class. I’ll spare the nuanced details for another time but suffice it to say I learned a lot and want to thank ASR Grain and Co. for their hospitality.

Righto, onto markets.

OUTSIDE MARKETS:

Global markets had a relatively quiet start to the week, but were able to build onto a positive risk tone during Monday’s trading session. While there were no major economic numbers of note in either Europe or North American, comments from the ECB’s Villeroy on the ECB pulling back from asset purchases and the Fed’s Mester on how she supported a gradual increase in US rates provided a boost to risk appetites.

Although there were positive vibes with US/Chinese trade negotiations, reports that there were no new meetings scheduled with NAFTA negotiations before a Thursday congressional deadline may have kept further gains in check. US equities held their ground in positive territory for much of the day as all 3 major indices reached new 7-week highs before ending the day with modest gains. Treasuries finished the day with moderate losses, while the Dollar was able to bounce back from an early 1 1/2 week low to finish with a modest gain.

The Asian session will be highlighted by two critical Chinese economic numbers. April Chinese industrial production is expected to see a modest uptick from March’s 6.0% year-over-year gain. April Chinese retail sales are forecast to have a minimal downtick from March’s 10.1% year-over-year reading.

The European session will start out with a first quarter reading on German GDP that is expected to have a moderate downtick from the previous 2.3% year-over-year reading. Following French CPI and Swiss PPI, the latest look at UK unemployment is forecast to hold steady at a 4.2% rate. The May ZEW survey of German economic sentiment is expected to have a modest decline from April’s 87.9 reading. First quarter Euro zone GDP is forecast to hold steady at a 2.5% year-over-year rate. March Euro zone industrial production is expected to see a moderate uptick from February’s -0.8% reading.

The North American session will begin with April retail sales that are forecast to have a modest downtick from March’s 0.6% reading. The New York Fed’s May Empire State survey of manufacturing activity is expected to have a modest decline from April’s 15.8 reading. March business inventories are forecast to have a moderate decline from February’s 0.6% reading. The May NAHB housing market index is expected to hold steady with April’s 69 reading. Later on, the latest Treasury International Capital (TIC) report will be released and will be scrutinized for the net flow of US Treasury securities. Dallas Fed President Kaplan will speak during morning US trading hours while San Francisco Fed President Williams will speak during the afternoon. Earnings announcements will include Home Depot before the Wall Street opening.

WEATHER: There are some disagreements on coverage and amounts between the European and American models, but they agree that there will be some interruptions to field work this week in the Red River Valley and in the Atlantic coastal states. That said, planting delays nationally are significant only for spring wheat, with corn and beans likely to be behind the 5 year averages by a few percentage points in tonight’s report. is firmer vs. the JY, but weaker against the euro this morning. Crude oil is $70.83, up 13 cents per barrel. The US is tightening restrictions on European firms doing business with Iran following the US abandonment of the nuclear accord. Venezuelan oil exports continue to decline as the dictatorship collapses.

Corn

Corn futures settled the Monday session with most contracts steady to fractionally lower. May expired at $3.89. NASS reported on Monday afternoon that most producers were busy in the fields last week as planting progress was just below the average at 62% complete. That was a 22% jump from the previous week and on the high end of expectations. The crop was reported at 28% emerged, 1% above the normal pace. Monday morning’s Export Inspections report indicated that 61.198 mbu of corn was shipped during the week of 5/10. That was down 19.24% from last week but 9.45% larger than this week last year. Corn export inspections YTD are now 14.78% behind last year.

May 18 Corn closed at $3.89, down 3/4 cent,

Jul 18 Corn closed at $3.96 1/2, unch,

Sep 18 Corn closed at $4.04 3/4, down 1/4 cent

Dec 18 Corn closed at $4.14 1/4, down 1/4 cent

Soybeans

Soybean futures took back most of Friday’s losses, closing 9 to 14 1/2 cents higher. Front month May expired at $10.13. Soy meal was up $7.10/ton, with front month soy oil down 5 points. Soybean export inspections in the week that ended May 10 were 25.287 mbu. That is a 28.58% jump from the week prior and 141.5% larger than this week in 2017. YTD shipments are now 198.9 mbu behind this time last year.

This afternoon’s Crop Progress report showed that 35% of the US soybean crop was planted as of Sunday. That is 6% ahead of last year and 9% faster than the average pace. The USDA also reported 10% of the crop emerged, vs. the normal 6%. Ahead of Tuesday’s NOPA crush report, one survey has analysts expecting to see 160.966 mbu of soybeans crushed by NOPA members in April. That would be down from record crush in March but nearly 15.7% larger than April 2017.

May 18 Soybeans closed at $10.13, up 18 1/4 cents,

Jul 18 Soybeans closed at $10.17 3/4, up 14 1/2 cents,

Aug 18 Soybeans closed at $10.21, up 13 3/4 cents,

Nov 18 Soybeans closed at $10.23 1/4, up 9 cents,

May 18 Soybean Meal closed at $389.80, up $7.10,

May 18 Soybean Oil closed at $31.12, down $0.05

Wheat

Wheat futures were mostly 3 to 8 cent lower on Monday, with nearby May expiring today. USDA wheat export inspections for the week of 5/10 were 14.85 mbu by the USDA this morning. That is 21.7% above the previous week but 41.85% behind this time last year. Exports YTD are now lagging last year by 12%, with just 3 more reporting weeks in the marketing year (MY). The winter wheat crop was 45% headed as of Sunday per USDA, 8% below the average. Condition ratings on that date were shown to improve 2% over the week to 36% gd/ex. That put the Bruger500 index at 293, up 5 points wk/wk but down 44 points from this week last year. Spring wheat planting made decent progress over the last week at 58% complete, still lagging the average of 67% for this date. The crop was 14% emerged, 22% below normal. Egypt’s GASC is seeking wheat for mid-June delivery, with the tender due on Tuesday.

May 18 CBOT Wheat closed at $4.80 1/2, down 9 cents,

May 18 KCBT Wheat closed at $4.96 3/4, down 5 cents,

May 18 MGEX Wheat closed at $6.13 1/2, unch,

May 18 CBOT Wheat closed at $4.80 1/2, down 9 cents,

May 18 KCBT Wheat closed at $4.96 3/4, down 5 cents,

May 18 MGEX Wheat closed at $6.13 1/2, unch,

Cattle

Live cattle futures closed the Monday session with sharp losses, and nearby June was limit down. The weak cash cattle trade on Friday got most of the blame. Feeder cattle futures were also sharply lower with most contracts $3.025 to $3.525 in the red. The CME feeder cattle index was down $1.09 on May 11 at $136.12. Wholesale boxed beef values were higher on Monday afternoon, so they weren’t the reason for the sell off. Choice boxes were up $1.15 at $232.12, with Select boxes 43 cents higher at $209.12. FI cattle slaughter was estimated at 117,000 head on Monday. That is down 2,000 head from last week but 1,000 head larger than the same week last year.

Jun 18 Cattle closed at $104.625, down $3.000,

Aug 18 Cattle closed at $101.900, down $2.525,

Oct 18 Cattle closed at $105.275, down $2.200,

May 18 Feeder Cattle closed at $135.400, down $3.025

Aug 18 Feeder Cattle closed at $140.375, down $3.525

Sep 18 Feeder Cattle closed at $140.800, down $3.175

Hogs

Lean hog futures saw $1.05 to $1.75 gains in most contracts on Monday, with May down a nickel expiring at $65.25. The CME Lean Hog Index was up 33 cents from the previous day to $64.06 on May 10. The USDA pork carcass cutout value was up 8 cents at $73.55 on Monday afternoon. The loin and picnic were the only cuts lower, with the rib up a sharp $4.48. The national base hog weighted average price was 86 cents higher at $62.76 on Monday. The USDA estimated FI hog slaughter at 459,000 head on Monday. That is 10,000 head more than last week and 19,000 above the same week in 2017.

May 18 Hogs closed at $65.250, down $0.050,

Jun 18 Hogs closed at $76.150, up $1.050

Jul 18 Hogs closed at $78.725, up $1.750

Cotton

Cotton futures finished Monday with most contracts 18 to 92 points in the red. This afternoon’s Crop Progress report from the USDA showed that 36% of the US cotton crop was planted as of Sunday. That is above the average of 31%, moving 16% in the past week. The Cotlook A index was down 125 points from the previous day to 93.1 cents/lb on May 11. The USDA Adjusted World Price for this week is 75.58 cents/lb, up 59 points from the week prior.

Jul 18 Cotton closed at 83.700, down 92 points,

Oct 18 Cotton closed at 81.200, down 82 points

Dec 18 Cotton closed at 79.860, down 38 points

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