5/9/18

Morning Bullet Points - 05/09/2018

GOOD MORNING—

 

MARKET HIGHLIGHTS

  • Markets trading mostly lower on the eve of the May crop report.
  • Lots of confusion in the ethanol market after yesterday’s announcement that E15 could be sold year round, but there were also changes in the way that RINs would be applied to ethanol exports.  I would say this is near-term neutral and long term bullish to prices but a lot of moving pieces to navigate.
  • South American currencies under pressure with the Real at a recent low while the Argentine Peso is at all-time lows.
  • Corn technically posted a lower high and lower low on the charts yesterday in spite of the higher close.  The market is in correction mode.
  • Soybeans technically are trading at the low-end of their recent range with support for July near 10.00 and resistance 10.30.
  • Wheat technically remains in correction mode as well with moving average support near 5.00.

 

WEATHER         

  • The northern Midwest is still dealing with slow planting due to wet weather with spotty rains over the next couple weeks, although there will be some windows.
  • Southern Brazil is catching some rain the next few days to help their dryness issues.
  • Argentina is expected to dry out to allow their harvest to pick up.

 

OUTLOOK

  • We have a big report out tomorrow, which it is hard for me to come up with a scenario to lead to significant downside in corn.  The March acres were low, and stocks are set to be forecast to drop significantly with a trend yield.  Planting progress is running close enough to normal where it will not be a bullish input, but there is still plenty of growing season risk left.
  • Soybeans have pulled back significantly over the last few days, and are trading in the bottom portion of their recent range.  Potential for lower Chinese demand on the report tomorrow has some of the bulls running for the exits.  Similar to corn, I struggle to come up with a scenario tomorrow to push beans significantly lower at this time of the year.  The March acres combined with trend yield will give us adequate supplies, but not burdensome.  I think the current pullback in beans can be used to re-own previous sales.
  • Wheat did a good job of pushing out the speculative short interest and is now pulling back.  USDA reports are always bearish wheat, but pre-trade estimates have US ending stocks declining considerably year over year.  We had low acres last year, but strong HRW yields to keep US stocks high.  If we reduce HRW yields as ratings would suggest and apply them to lower HRW acres, the US balance sheets can change a lot from a year ago.  Use a further pullback today in the wheat to exit shorts and look to get long near 5.00.

 

Fun Fact of the Day:  The Natural Color of Rubber is White.  Rubber is made black by adding various chemicals, such as carbon black.  This isn't just for cosmetic reasons, but because adding chemicals like carbon black to the rubber drastically increases desirable qualities of the rubber.

 

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