** “Boring/drab” best explains Friday’s CBOT trade with corn, soybeans and wheat trading either side of unchanged. Soy futures are slightly lower on the weakness in soymeal and on oil/meal spreading. There was a modest pick up in cash related soy selling from Argentina, but otherwise, Brazilian movement is slow. May CBOT futures expire today and everything is well liquidated. ARC notes that commercials continue to cancel deliverable CBOT soyoil receipts preparing for the enlarged demand that comes from pending US duties against Argentine/ Indonesian Biodiesel. Asian and European markets are closed, and unless there is a big change in the midday GFS weather forecast, ARC bets that CBOT values will go into the weekend mixed, and slightly lower on the week.
** ARC notes that during the past few months, the trade/industry has been very bearish CBOT and world grain/soy valuations. And yet, the corn market has held within a 20 cent range while wheat prices have traded within a 35 cent range. Soybeans endured a sizeable $1.20/Bu break during March due to the confirmation of a sharp rise in Brazilian soybean crop that went from 104 to 112 MMTs, but otherwise, few traders have profited from the back-and-forth trade. Other than the March break in beans/meal, CBOT trading has not been easy in 2017!
** Its premature to gauge why CBOT grains have not declined while the industry has been bearish and funds have increased their net short position? However, values already at decade lows in wheat with scraping against $3.50/Bu in corn. What big gains are there to be made by being over bearish?
** This does not mean that a bullish CBOT grain stance is advised, just that range bound trade is tough to profit from and often occurs in years of oversupply when prices are already compressed. If and when another big US/world harvest is confirmed, then the next downleg can occur, but that’s 6-8 weeks ahead. Until then, its trying to judge the impact of weather and crop production. That will dominate the CBOT discussion into mid June.
** ** CBOT traders estimate that funds have bought 1,000 contracts of wheat, and 3,000 contracts of corn, while selling 3,500 contracts of soybeans. In soy products, funds have bought 3,700 contracts of soyoil and sold 1,900 contracts of soymeal.
** The price focus in the weeks ahead will be the speed of the remaining corn and soy seeding, and condition of the US winter wheat crop. Producer sources are becoming concerned by the Plains wheat conditions with fungal diseases and stem issues noted. Crops look good from the road, but a closer inspection finds a host of HRW issues that could be worsened by wind, rain and humidity. However, producers in the saturated E Midwest will have 6-7 days to seed corn and soybeans. Most producers expect to get back in the fields by Wednesday.
** The midday GFS weather model is similar to the overnight run for the next 7-8 days, and has shifted the heaviest rains northward into the E Plains and the SW Midwest. Heavy rainfall will also drop across the E Dakotas and through the NW Midwest. The E Midwest will be able to dry out, but it will take at least 4-5 days of warm/dry weather to firm soils enough to support large machinery. The 11-15 day forecast is excessively wet with another round of heavy rains across the Plains and through the southern half of the Midwest. Some 1-3.00”of rain are slated in this period which will be important to be pulled forward in the forecasts by Monday. Our concern remains too much, not too little rainfall through mid June.
** AgResource Market Comment: The risks are increasing that wet weather will become a bullish factor for the CBOT looking forward into early June as farmers won’t be able to seed all of the remaining corn/soy seed before heavy rains return starting late next week.
The downside price risk is measured at 5-15 cents in corn and wheat, with July soybeans to uncover support below $9.50. ARC maintains a view of wanting to secure HRW wheat on weakness based on crop woes which are starting to emerge.
