4/9/18

Morning Bullet Points - 04/09/2018

GOOD MORNING—

MARKET HIGHLIGHTS

  • Markets trading higher overnight at tariff concerns for soybeans ease and cold/dry HRW areas support the wheat.
  • Tomorrow is the theme of today!  Tomorrow we have Chinese President Xi speaking, CONAB numbers circa 6:45am and then the USDA report at 11am CST.
  • Friday’s CFTC report showed managed funds as net buyers of 23,000 contracts of corn to push the net long to 140,000, net sellers of 2,000 soybeans to reduce the net long to 181,000, and net buyers of 4,000 wheat to reduce the net short 73,000.  Those numbers included the day of the acre report when corn and beans both traded sharply higher, but did not include either day last week when tariff fears pushed beans sharply lower on record trade volume.
  • April USDA numbers tomorrow will focus on South American production, which is expected to show lower Argentine soybean production, higher Brazil soybean production, and both Argentine and Brazil corn production lower.
  • On the US balance sheets, the US bean ending stocks may go higher following the quarterly stocks report, but a lot has changed in the past weeks with US ending stocks likely headed lower on account of better crush demand to replace the short Argentine bean crop.
  • Overall, the US balance sheets will not be a focus until we get the first 2018/19 numbers in May.
  • Cash markets surged in Brazil last week following the tariff news, which led to a sharp increase in new interest in cheaper priced US beans.
  • Corn technically is consolidating near the recent highs, which the longer we hold in this area, the more likely we are to push through to the upside.  The trend is higher.
  • Soybeans technically are approaching their recent highs in the Nov. contract.  The trend is higher with resistance in May at 10.80 and support 10.30.
  • Wheat technically is resuming its up-trend with somewhat of an island bottom potentially forming overnight.  Support at 4.70 and resistance at 4.80.
  • USDA reported 232,500 MT of soybeans sold to unknown for 2017/18.

WEATHER         

  • Cold weather over the weekend likely caused some damage over the weekend to HRW, but nothing too widespread.
  • KS remains dry until chances show up in the 11-15 period.
  • Argentina is catching rains now that they are trying to harvest their drought decimated crop.
  • The US outlook for planting has rains across the N. Midwest over the next couple weeks, while the central and southern Midwest turns wet in the 11-15 period.  Fieldwork will be slow to start, but it’s too early to be too worried.

OUTLOOK

  • The markets appear to have shaken the tariff concerns that led to extreme volatility last week.
  • The outlook remains bullish for corn until we can get closer to the 50% planted mark, which will probably be mid-May at the earliest.  The table is set for a bull market, so look for pullbacks to be bought for now.
  • Beans have recovered all the losses that we saw last week.  With the Argentine crop failure and lower US acres on the March report, the outlook is significantly better for beans than we thought a month ago.  The USDA may throw out some numbers that are perceived as bearish tomorrow, but with the planting intention numbers, the May report will get more attention and should be quite supportive.  If there is a bearish reaction tomorrow, it probably should be viewed as a buying opportunity.
  • Wheat is climbing back toward its recent highs as the funds are scrambling to exit shorts.  There will probably be some good resistance at recent highs, which is near 5.30 in KC and 5.00 in Chicago.  Both markets should have another 15-20 cents upside in the near term.

Fun Fact of the Day:  A caboose is a manned North American rail transport vehicle coupled at the end of a freight train. Cabooses provided shelter for the crew at the end of a train, who were required for switching and shunting, and to keep a lookout for load shifting, damage to equipment and cargo, or overheating axles (hot boxes).

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