Weekly Market Summary May 11, 2018
Friday, May 11, 2018, 4:05 PM
Submitted by: Landus Cooperative
Good afternoon –
Tough week on our two staple grains with nearby corn losing 9.75c and nearby soybeans dropping 33.5c since last Friday. It’s a bit of a head scratcher given the planting situation north of Hwy 20, but it seems as though the trade is putting more weight behind macro level inputs. We will get a fresh look at planting progress and emergence on Monday at 3:00. With widespread rain events this week across S-MN and N-IA, it’ll be interesting to see how much field work was done.
We got a fresh look at S&D estimates yesterday and the numbers felt neutral/bullish on the surface. The old crop corn carryout was steady at 2.182 bln bu, with no changes made to exports or ethanol use from the April Report. Soybeans saw an increase of 20 mln bu in crush and no changes anywhere else. Carryout dropped 20 mln bu to 530 mln bu. Overall, not many changes to the demand side for the remainder of the current crop year. The new crop projections came within most trade estimates while harboring a bullish sentiment. Our bottom line Ending Stocks number is 500 mln bu lower vs. last year at 1.682 bln bu. This is would be the lowest carryout since crop year ‘13/’14. The new crop soybean projections provided the most fireworks, but weren’t enough to hold off selling pressure. The big surprise is the estimated export total – 2.290 bln bu (225 mln bu higher vs. this year). As trade relationships with China are rocky, it’s tough to see a 10% increase in exports next year while we are struggling to meet our export number this year.
As we look forward, it feels as though concerns over trade tensions with China is on the front of everyone’s minds. Weather is a growing and continual risk, but it’s tough to take substantial long positions on May 11th due to abundant rainfall. Fast forward two weeks and the story could be different. Right now, the market is satisfied with the amount of weather premium built in (or not built in) to the price discovery process.
Perhaps one of the more interesting developments today was the action in futures spreads in both corn and soybeans. Deferred spreads all saw substantial weakness today – more for beans, but also true for corn. This is a bit counter-intuitive given the confirmation of smaller ending stocks numbers for next year’s balance sheet. From a fundamental standpoint, smaller crop sizes give some support to futures spreads. Current delivery economics are sympathetic to weaker spreads, but it’s interesting to see such a substantial selloff on the back-end of the curve. While deferred spreads are much tighter than old crop spreads, the volatility today was considerable. Today, we can probably chalk up the activity to funds selling the front end of the calendar more aggressively than the back end (and lack of liquidity in deferred contract months).
All-in-all, it’s probably best to put this week to rest and move on to next week. Weather will be closely watched. Our developing/evolving relationship with China will also be closely watched. Our next big input is the June Stocks and Acres report.
Last and certainly not least - we want to wish all mom’s a great Mother’s Day and weekend.
Have a great weekend!