May 26, 2017 CORN
May 26, 2017
CORN ENCOURAGING WEEK July corn was strong right out of the gate Monday as the market responded to some weather complications across the Corn Belt. Soybeans came under pressure late in the week, but could not influence the corn market as July futures added 1’6 cents to settle at $3.74’2. The gains aren’t large, but that does make 2 consecutive weeks of higher closes as we transition to the US growing season. Farmer engagement surfaced Monday as cash corn was moving into the pipeline at the upper end of the charts. Basis remains highly sensitive to CBOT action as old crop supplies remain plentiful both on the farm and in the commercial July Corn Futures system. Overall, enough question marks are sitting out there to keep the corn market supported and the bulls optimistic that some seasonal strength can still develop. PLANTING PROGRESS Corn planting progress reached 84% complete as of last Sunday night, which is the same as a year ago and just 1 point behind the average pace. States showing the largest progress week to week were off to the east, with MI (+37), OH (+24), IN (+20), and WI (+17) leading the way in terms of progress. Monday’s report does not offer any indication on replant acres, which, according to the private industry, there will be some pockets of intense replat acreage in the ECB. Corn emergence was listed at 54% for the US vs 58% a year ago and 55% on average.
Planting Progress Nebraska Kansas Illinois Minnesota Iowa US Total
May 21, 2017
87% 70% 89% 94% 92% 84%
May 21, 2016 88% 89% 88% 97% 95% 84%
5-Year Average 91% 86% 90% 86% 90% 85%
CROP CONDITION RATINGS The first round of crop condition ratings will be released this coming week with many anticipating lower than normal ratings. Wet and cold conditions have created some early season complications across the Belt, which should be reflected in the numbers. Looking at historical data, the University of Illinois concluded that the correlation between early season crop condition ratings and final yield was weak. Not until July does the correlation improve, making condition ratings a good proxy for final yields. Bottomline, poor condition ratings early in the season don’t translate to final yield, so keep that in mind as you think about market potential in the early going. For a full look at U of I’s work, visit the website at farmdocdaily.illinois.edu ETHANOL Weekly ethanol production fell to 1,010k barrels/day for the week ending 5/19/17 and compares to the previous week total of 1,027k barrels/day. Over the past 2 months, ethanol production has been
running +6% higher than a year ago. Given cumulative totals for the marketing year, ethanol production actually needs to slow down relative to a year ago if the USDA’s 5,450 mbu target is to be reached. Since this isn’t happening, a bump to ethanol demand is expected in the June S&D report. EXPORTS Corn export sales were a little disappointing this week with 18.0 mbu reported. That total brings cumulative sales to 2,097 mbu, now up 27% from the year ago. Corn sales will need to average 13.6 mbu each week from now through the end of August in order to hit the 2,225 mbu export target. Corn shipments this week were within the range of expectations with 45.1 mbu reported. COMMITMENT OF TRADERS Friday’s COT report showed some short covering by the spec funds through trading this past Tuesday. July corn topped out at $3.77’4 on Monday as the spec community covered some positions with commercials taking the other side in the form of farmer selling. Price action late this week suggests the funds continued to cover some of their position heading into the 3-day weekend. Through trading on Tuesday, the spec funds had trimmed their net short position to 190k contracts. With the growing season in front of us, the funds likely wanted to trim their positions some until we see what this crop looks like. Should they head for the exits in a quick manner, the markets have the potential to pop. The US farmer will take the other side of the transaction if that occurs, which will be reflected in weak cash markets (basis). NEW CROP December corn had a good week, adding 2’2 cents and settling at $3.92’4. Monday’s price action saw Dec futures return to the $3.95’0 mark before quiet trade resumed for much of the week. Short covering by the funds into a 3 day weekend helped corn close on a strong note Friday, an encouraging sign considering soybeans were down by double digits. You certainly get the feeling from the corn market that there are some concerns out there and that things remain very well supported. Next week ushers in the first crop ratings of the season with many expecting some problem Dec Corn Futures areas to be validated in the ratings. The story above by the University of Illinois suggests that the market shouldn’t get bent out of shape should the ratings highlight some issues. Even so, enough uncertainty exists that the funds have started to trim their short positions. Producers needing to make new crop sales should be ready to execute if some opportunities develop during the month of June. What will you do if December futures clear $4.00? How much will you sell? What contract type/strategy will you use if/when we get there? How much do you want to have sold before harvest? All of these questions are important to have your arms around as we prepare for the next 6 weeks. Our ProEdge team serves as a great resource for you as you work through these questions. Get in touch with your ProEdge rep today to talk about sales targets and strategies for those “what-if” scenarios! BASIS Corn basis was weaker this past week as corn starting moving following a period of planting progress and wet weather. Flat price action didn’t step outside of its recent range, but basis values were firm enough to encourage some movement. Strength in the CBOT will keep basis defensive.
RECOMMENDATIONS Similar to a week ago, producers should be looking at old crop inventories and assessing their basis risk. Everyone and their neighbor’s dog is waiting for a market rally, and Monday’s price strength again showed us that it doesn’t take much to get cash corn moving into the system. Should a rally develop, the cash market will adjust to compensate for the futures move. Producers looking to make new crop sales have some nice opportunities hanging out there even at current prices. Producers need to be prepared to make some decisions in the coming weeks as June is typically a good time to be on your toes. Sales anywhere between current levels and $4.00 make a lot of sense if you haven’t gotten started yet. March ’18 futures closed at $4.02 Friday, so even at that you are better off than what we’ve experienced for most of this year. As always, your ProEdge rep is a great resource as you put your plans together. Thank you for your business!
SOYBEANS BREAKOUT July soybean futures broke out of the developing bear flag a week ago Thursday with this week’s price action confirming the chart pattern. The spec funds are building their short position in the soybean market as they transition some positions away from corn. The trigger that was the Brazilian corruption allegation was enough to start the leg lower. Projections for the move would put July soybeans in the mid $8 range if the bear flag proves true. Of course, the fundamentals don’t argue as soybean acreage appears to be getting larger with the wet weather and flooding July Soybean Futures that has occurred across portions of the Belt. On the week, July soybeans lost 26’4 cents to settle at $9.26’4. US PLANTING PROGRESS Soybean planting progress advanced 21% for the week ending 5/21/17 to 53% complete. This compares to 53% a year ago and 52% on average. Week over week progress was most advanced to the east with MI (+26), IL (+25), MN (+25), IN (+24), and OH (+24) making the largest jumps. Soybean emergence was in line with previous years also, reported at 19% vs 20% a year ago and 21% on average. Reports of wet conditions to the east have many wondering if soybean acreage will increase should corn planting get too late. With slight losses to corn acreage and some gains to soybeans, it’s conceivable that soybean acreage will be larger than corn when the Acreage Report gets released at the end of June.
EXPORTS Soybean export sales were a 4-week high with 17.4 mbu reported. This accurately reflects some of the export strength seen in recent weeks. The total brings cumulative sales to 2,125 mbu, above the USDA’s current estimate of 2,050 mbu. With some cancellations expected, the total is still large enough to expect a bump to the export number in the June S&D report. COMMITMENT OF TRADERS The spec community transitioned some of their massive corn short to the soybean market in the last week. The net short in corn was trimmed some while soybeans grew to over 100k contracts for the week ending last Tuesday. Late week price performance suggests the funds grew this position in a considerable way as July soybeans broke through support and made new lows for the move. It isn’t normal for the spec community to be short soybeans during the growing season, but with the massive expansion of soybean acreage observed in the past 3 years and the swelling domestic carryout, they are betting in the right direction. NEW CROP November soybeans lost 22’4 cents this week to settle at $9’29’2, the lowest close since last September. The fundamentals don’t disagree with the price action as the market operates on a “trend yield until proven different” mentality and the expectation that acres will be all or more than what we got from the USDA at the end of March. The “flow of the dough” is certainly to the downside and is likely to continue for a few weeks. Some weather complications will need to develop this growing season to give soybeans a chance. Without any major threats, a trendline yield will cap the Nov Soybean Futures potential of this market, as demand projections are already robust – the rallies will need to be rooted in supply side issues. Producers looking to make new crop sales don’t have much choice but to wait for this market to uncover some support and for some crop issues to develop. Retracement efforts should present opportunities for sales targets and CVA’s Triplex contract may be a good outlet when those opportunities surface. Receive a premium above the current market with this strategy to boost your sales average! Visit with your ProEdge rep today to discuss sales targets once we uncover some support. BASIS Soybean basis was steady to firmer across the region this past week as futures prices moved lower. Farmer selling is naturally disengaged with the lower price action which is leading to slow soybean movement. Last week’s Brazilian scandal created enough of a shift in global soybean values that Brazilian beans are looking more attractive. Basis values through the export channels were a shade weaker as a result. RECOMMENDATIONS Producers with old crop supplies on-farm can be looking for any basis opportunities that pop up with the lower futures market. Export demand has softened in the last week with the political issues in Brazil, which will have an impact on basis values locally. Producers looking to make sales are going to have to wait for a period of time for this market to find support. Weather issues will need to develop to jar the funds loose and get them running in the other direction.
WEATHER MOISTURE TO THE EAST The 3-day precipitation outlook shows some moisture through the weekend yet. Some highlights include the east remaining wet, consistent with the theme in recent weeks. Note that the Dakotas appear to miss any significant moisture again – that area has quietly been quite dry over the past 4 weeks, which is raising some concerns over spring wheat potential. Temperature wise, mostly-sunny skies and 70’s look to dominate the next week, which will be a welcome sight for a crop that’s in “ugly duckling” stage. The 6-10 day forecast shows above normal temps creeping into the western 1/3 of the US while it remains cooler than normal in the ECB. Cool conditions combined with sustained moisture is part of the reason behind corn’s late week strength.
3 Day Precip Outlook
Risk Disclosure -The risk of loss in trading commodities can be substantial and past performance is not necessarily indicative of future results. Therefore, you should carefully consider whether such trading is suitable for you or your organization in light of your financial condition. Any examples given are strictly hypothetical and no representation is being made that any person will or is likely to achieve profits or losses similar to those examples. Neither the information, nor any opinion expressed shall be construed as an offer to buy or sell any futures or options on futures contracts.
CORN ENCOURAGING WEEK July corn was strong right out of the gate Monday as the market responded to some weather complications across the Corn Belt. Soybeans came under pressure late in the week, but could not influence the corn market as July futures added 1’6 cents to settle at $3.74’2. The gains aren’t large, but that does make 2 consecutive weeks of higher closes as we transition to the US growing season. Farmer engagement surfaced Monday as cash corn was moving into the pipeline at the upper end of the charts. Basis remains highly sensitive to CBOT action as old crop supplies remain plentiful both on the farm and in the commercial July Corn Futures system. Overall, enough question marks are sitting out there to keep the corn market supported and the bulls optimistic that some seasonal strength can still develop. PLANTING PROGRESS Corn planting progress reached 84% complete as of last Sunday night, which is the same as a year ago and just 1 point behind the average pace. States showing the largest progress week to week were off to the east, with MI (+37), OH (+24), IN (+20), and WI (+17) leading the way in terms of progress. Monday’s report does not offer any indication on replant acres, which, according to the private industry, there will be some pockets of intense replat acreage in the ECB. Corn emergence was listed at 54% for the US vs 58% a year ago and 55% on average.
Planting Progress Nebraska Kansas Illinois Minnesota Iowa US Total
May 21, 2017
87% 70% 89% 94% 92% 84%
May 21, 2016 88% 89% 88% 97% 95% 84%
5-Year Average 91% 86% 90% 86% 90% 85%
CROP CONDITION RATINGS The first round of crop condition ratings will be released this coming week with many anticipating lower than normal ratings. Wet and cold conditions have created some early season complications across the Belt, which should be reflected in the numbers. Looking at historical data, the University of Illinois concluded that the correlation between early season crop condition ratings and final yield was weak. Not until July does the correlation improve, making condition ratings a good proxy for final yields. Bottomline, poor condition ratings early in the season don’t translate to final yield, so keep that in mind as you think about market potential in the early going. For a full look at U of I’s work, visit the website at farmdocdaily.illinois.edu ETHANOL Weekly ethanol production fell to 1,010k barrels/day for the week ending 5/19/17 and compares to the previous week total of 1,027k barrels/day. Over the past 2 months, ethanol production has been
running +6% higher than a year ago. Given cumulative totals for the marketing year, ethanol production actually needs to slow down relative to a year ago if the USDA’s 5,450 mbu target is to be reached. Since this isn’t happening, a bump to ethanol demand is expected in the June S&D report. EXPORTS Corn export sales were a little disappointing this week with 18.0 mbu reported. That total brings cumulative sales to 2,097 mbu, now up 27% from the year ago. Corn sales will need to average 13.6 mbu each week from now through the end of August in order to hit the 2,225 mbu export target. Corn shipments this week were within the range of expectations with 45.1 mbu reported. COMMITMENT OF TRADERS Friday’s COT report showed some short covering by the spec funds through trading this past Tuesday. July corn topped out at $3.77’4 on Monday as the spec community covered some positions with commercials taking the other side in the form of farmer selling. Price action late this week suggests the funds continued to cover some of their position heading into the 3-day weekend. Through trading on Tuesday, the spec funds had trimmed their net short position to 190k contracts. With the growing season in front of us, the funds likely wanted to trim their positions some until we see what this crop looks like. Should they head for the exits in a quick manner, the markets have the potential to pop. The US farmer will take the other side of the transaction if that occurs, which will be reflected in weak cash markets (basis). NEW CROP December corn had a good week, adding 2’2 cents and settling at $3.92’4. Monday’s price action saw Dec futures return to the $3.95’0 mark before quiet trade resumed for much of the week. Short covering by the funds into a 3 day weekend helped corn close on a strong note Friday, an encouraging sign considering soybeans were down by double digits. You certainly get the feeling from the corn market that there are some concerns out there and that things remain very well supported. Next week ushers in the first crop ratings of the season with many expecting some problem Dec Corn Futures areas to be validated in the ratings. The story above by the University of Illinois suggests that the market shouldn’t get bent out of shape should the ratings highlight some issues. Even so, enough uncertainty exists that the funds have started to trim their short positions. Producers needing to make new crop sales should be ready to execute if some opportunities develop during the month of June. What will you do if December futures clear $4.00? How much will you sell? What contract type/strategy will you use if/when we get there? How much do you want to have sold before harvest? All of these questions are important to have your arms around as we prepare for the next 6 weeks. Our ProEdge team serves as a great resource for you as you work through these questions. Get in touch with your ProEdge rep today to talk about sales targets and strategies for those “what-if” scenarios! BASIS Corn basis was weaker this past week as corn starting moving following a period of planting progress and wet weather. Flat price action didn’t step outside of its recent range, but basis values were firm enough to encourage some movement. Strength in the CBOT will keep basis defensive.
RECOMMENDATIONS Similar to a week ago, producers should be looking at old crop inventories and assessing their basis risk. Everyone and their neighbor’s dog is waiting for a market rally, and Monday’s price strength again showed us that it doesn’t take much to get cash corn moving into the system. Should a rally develop, the cash market will adjust to compensate for the futures move. Producers looking to make new crop sales have some nice opportunities hanging out there even at current prices. Producers need to be prepared to make some decisions in the coming weeks as June is typically a good time to be on your toes. Sales anywhere between current levels and $4.00 make a lot of sense if you haven’t gotten started yet. March ’18 futures closed at $4.02 Friday, so even at that you are better off than what we’ve experienced for most of this year. As always, your ProEdge rep is a great resource as you put your plans together. Thank you for your business!
SOYBEANS BREAKOUT July soybean futures broke out of the developing bear flag a week ago Thursday with this week’s price action confirming the chart pattern. The spec funds are building their short position in the soybean market as they transition some positions away from corn. The trigger that was the Brazilian corruption allegation was enough to start the leg lower. Projections for the move would put July soybeans in the mid $8 range if the bear flag proves true. Of course, the fundamentals don’t argue as soybean acreage appears to be getting larger with the wet weather and flooding July Soybean Futures that has occurred across portions of the Belt. On the week, July soybeans lost 26’4 cents to settle at $9.26’4. US PLANTING PROGRESS Soybean planting progress advanced 21% for the week ending 5/21/17 to 53% complete. This compares to 53% a year ago and 52% on average. Week over week progress was most advanced to the east with MI (+26), IL (+25), MN (+25), IN (+24), and OH (+24) making the largest jumps. Soybean emergence was in line with previous years also, reported at 19% vs 20% a year ago and 21% on average. Reports of wet conditions to the east have many wondering if soybean acreage will increase should corn planting get too late. With slight losses to corn acreage and some gains to soybeans, it’s conceivable that soybean acreage will be larger than corn when the Acreage Report gets released at the end of June.
EXPORTS Soybean export sales were a 4-week high with 17.4 mbu reported. This accurately reflects some of the export strength seen in recent weeks. The total brings cumulative sales to 2,125 mbu, above the USDA’s current estimate of 2,050 mbu. With some cancellations expected, the total is still large enough to expect a bump to the export number in the June S&D report. COMMITMENT OF TRADERS The spec community transitioned some of their massive corn short to the soybean market in the last week. The net short in corn was trimmed some while soybeans grew to over 100k contracts for the week ending last Tuesday. Late week price performance suggests the funds grew this position in a considerable way as July soybeans broke through support and made new lows for the move. It isn’t normal for the spec community to be short soybeans during the growing season, but with the massive expansion of soybean acreage observed in the past 3 years and the swelling domestic carryout, they are betting in the right direction. NEW CROP November soybeans lost 22’4 cents this week to settle at $9’29’2, the lowest close since last September. The fundamentals don’t disagree with the price action as the market operates on a “trend yield until proven different” mentality and the expectation that acres will be all or more than what we got from the USDA at the end of March. The “flow of the dough” is certainly to the downside and is likely to continue for a few weeks. Some weather complications will need to develop this growing season to give soybeans a chance. Without any major threats, a trendline yield will cap the Nov Soybean Futures potential of this market, as demand projections are already robust – the rallies will need to be rooted in supply side issues. Producers looking to make new crop sales don’t have much choice but to wait for this market to uncover some support and for some crop issues to develop. Retracement efforts should present opportunities for sales targets and CVA’s Triplex contract may be a good outlet when those opportunities surface. Receive a premium above the current market with this strategy to boost your sales average! Visit with your ProEdge rep today to discuss sales targets once we uncover some support. BASIS Soybean basis was steady to firmer across the region this past week as futures prices moved lower. Farmer selling is naturally disengaged with the lower price action which is leading to slow soybean movement. Last week’s Brazilian scandal created enough of a shift in global soybean values that Brazilian beans are looking more attractive. Basis values through the export channels were a shade weaker as a result. RECOMMENDATIONS Producers with old crop supplies on-farm can be looking for any basis opportunities that pop up with the lower futures market. Export demand has softened in the last week with the political issues in Brazil, which will have an impact on basis values locally. Producers looking to make sales are going to have to wait for a period of time for this market to find support. Weather issues will need to develop to jar the funds loose and get them running in the other direction.
WEATHER MOISTURE TO THE EAST The 3-day precipitation outlook shows some moisture through the weekend yet. Some highlights include the east remaining wet, consistent with the theme in recent weeks. Note that the Dakotas appear to miss any significant moisture again – that area has quietly been quite dry over the past 4 weeks, which is raising some concerns over spring wheat potential. Temperature wise, mostly-sunny skies and 70’s look to dominate the next week, which will be a welcome sight for a crop that’s in “ugly duckling” stage. The 6-10 day forecast shows above normal temps creeping into the western 1/3 of the US while it remains cooler than normal in the ECB. Cool conditions combined with sustained moisture is part of the reason behind corn’s late week strength.
3 Day Precip Outlook
Risk Disclosure -The risk of loss in trading commodities can be substantial and past performance is not necessarily indicative of future results. Therefore, you should carefully consider whether such trading is suitable for you or your organization in light of your financial condition. Any examples given are strictly hypothetical and no representation is being made that any person will or is likely to achieve profits or losses similar to those examples. Neither the information, nor any opinion expressed shall be construed as an offer to buy or sell any futures or options on futures contracts.
