Written Commentary
MORNING AG OUTLOOK
Corn:
A disappointing start for corn this morning with prices slightly weaker although crude is more than $3 higher. The weakness is likely coming from better chances of rain in week 2 across most of the Midwest growing region and the likelihood of strong early crop conditions in this afternoon’s 1st crop progress report of the season. Also, harvest in Brazil has begun and Mato Grosso is just under 2% complete, up from 1% a year ago and production for the state is expected to be 5% lower than a year ago. Funds were heavy sellers on Friday as July prices hit their lowest level since mid-February. COT data showed Managed Money significantly reduced their net long position by nearly 30%, standing now at 205,500. USDA’s crush report this afternoon is expected to show corn used for ethanol in March up 6.2% year-over-year to 449.5 million bushels. French conditions dropped 2% last week and southern and western France will continue to see only light precipitation over the next 2 weeks, which is likely to result in further crop stress. Technical action in corn has been weak over the last 2 weeks, but prices are moving down into a longer-term value zone, in our opinion. Demand fundamentals should be supportive if the market weakens much further.
Soybean Complex:
A higher start to the new month across the soy complex with another new contract high in bean oil overnight. July beans remain inside the recent range and November inside its pennant formation and technically, the recent consolidation looks to be more of a continuation pattern than a top. COT data showed Managed Money pared down their net long positions across the complex as of mid-last week. Hostilities continue in the Middle East and President sent the cease-fire proposal back to Iranian officials and the 2 sides seem to be further apart this morning than they were on Friday. This may keep a bid under the market today if crude oil holds its gains. Scattered rains over the Plains and southeast occurred over the weekend with the eastern belt and Great Lakes region mostly dry. The same areas will see rain chances this week in the western belt and southeast, while the eastern belt has the fewest chances. Temperatures will be trending above normal across the entire Midwest over the next 2 weeks. The forecast overall does not look overly threatening to crops at this time. USDA/NASS April crush will be released this afternoon and the pre-report estimate is 214.7 million bushels, which would be the lowest in 7 months and bean oil stocks are anticipated at a 4-month low of 2.365 billion pounds. The EIA reported bean oil used for biofuels in March expanded 21.2% and renewable fuel credits hit a record high. Strong crush margins and bullish biofuel ideas have been one of the major price drivers recently, offsetting demand uncertainty from China, and that is likely to continue. A move back above Friday’s highs, especially in November beans, would give the bulls the clear technical edge.
Wheat:
A slightly higher start for wheat this morning but prices closed lower in 8 of the last 11 sessions. COT data showed Managed Money extended their net short position to just over 18,700 contracts in Chicago and reduced their net long modestly in Kansas City. Technical weakness was a significant bearish factor last week with lower highs and lower lows on the daily chart since May 19. India and US officials are meeting early this week to try and finalize a trade agreement. French conditions dropped 3% last week on hot weather and western and southern France continue to see stressful conditions with only light precipitation expected. Recent market pressure is coming from bearish seasonals as HRW harvest continues to move north but uncompetitive US export values have been another major problem keeping sellers active on rallies. Weekly export sales last week were once again on the low-end of guesses. But we see longer-term production and yield pressure around the globe which is likely to be supportive for the market once the current pullback runs its course. For now, the bears have the edge but speculators can look for a sign of a technical bottom to end the current downside correction.
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