Weekly Market Recap
4/13/2018 4:25:04 PM
The Summit of the Americas is happening this week and some were hoping for a new NAFTA agreement. While the details are not all the way there, the Mexican Economy Minister thinks there is an 80% chance a deal will be reached in May.
Even though China really wants to see corn plantings decline, and has taken away the subsidies, it looks like corn acreage will rise this year and increase production by 3%. President Trump said that his administration may allow the sale of E15 gasoline year round. Currently E15 blends are only allowed in the winter as summer use is said to contribute to smog. Allowing E15 year round should be supportive to the corn market. Corn planting is 2% complete which is right on the 5 year average. The report next Monday should show 15%, with 25% the following week. With all of the wet weather, progress should lag the averages. Only minor changes in latest WASDE report for corn. Feed and FSI was cut by 55 million bushels, which lifted the carryout to 2.182 billion bushels.
Winter wheat crop conditions declined again. In the second full rating of the spring, the good+excellent category fell from 32% to 30%. This is the lowest the rating has been for this week since 1996. The wheat market is more concerned with the forecast for rains then the damage inflicted from dry and cold temps. Upcoming rain events took the wheat market down by 20 cents from the highs set on Tuesday. Only one change for the US wheat balance sheet on the WASDE report and that was a cut of 30 million bushels to the feed/residual category. World stocks were 3 million tons above the average guess, adding to a very bearish world supply scenario.
In a very surprising move, Argentina purchased soybeans from the US. This is a very rare occurrence with only one other purchase happening in 2009. Argentina is worried about having enough supply next year as the crop they are about to harvest is in very bad shape. The Rosario Grain Exchange cut their estimate of Argentinian production to 37 MMT. The USDA is at 40 MMT and last year their production was 57.8 MMT. In response to the threats of tariffs on US beans, Brazil bean values skyrocketed as much as $2 bushel but have since retreated to about 40 cents over US futures. The pop in Brazilian values have allowed to the US to capture some new business as export sales were really good for a second straight week. The WASDE report has just small nickel and dime changes with the end result being a 5 million bushel reduction to ending stocks. The USDA increased Brazilian production by 2 million tons to 115 mmt, and slashed Argentina by 7 million tons to 40 mmt.
Argentina said that they will allow the imports of US pork for the first time in 26 years. Cash cattle traded higher as the week went along. By the end of the week $120 was trading in Kansas. This should be a bullish input for next week as futures are below that at $117 and June futures are well below at $103.65. Packer margins remain pretty solid at $77/head which is up from last week’s $64/head.
The Trump administration is pushing pause button on renewable fuel standards reforms for 3 months according to white house officials. The rfs revisions have become a battleground between big oil and the farm industry. Rising geopolitical tensions in the Middle East, a new target price of $80 crude from Saudi Arabia and strong OPEC production cut compliance were key factors to the biggest weekly advance in WTI since July. According to AAA the national price for a gallon of gas is $2.675 compared to $2.658 last week and $2.402 a year ago.