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.

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