Weekly Market Recap


Grains

The trade war between the US and China continues to have a major effect on the grain markets. When negotiations are going well the grain markets rally, when talks hit a sticking point the grain markets set back. China has purchased some big chunks of soybeans as good will measures. The markets continue to hope they start buying other commodities as well on a regular basis. Bloomberg is reporting that the US will give China 6 years to fulfil their commitments on additional commodity purchases and allow US companies to own enterprises in China, according to unnamed sources.  Next Tuesday we will get the latest WASDE report. There shouldn’t be any huge surprises in the data and we won’t get a look at next year’s estimates until the May report. A private satellite company called Maxar is estimating that 500,000 acres of land was flooded so far this spring with around half of it in corn acres. DTN is estimating 5-10 million bushels of corn and soybeans were in storage in those flooded areas. The US ag undersecretary toured flood damage in the Midwest.  The USDA has no way to compensate farmers for damaged crops in storage. President Trump is threatening to close the southern border with Mexico and many ag groups are very worried about the disruption with one of our main trading partners.

Corn

Next Monday we get the first corn planting numbers of the season.  The first reading average is roughly 2% planted.  We hit the 50% planted market between May 6th and May 13th.  The first soy reading of the year should come in another 2 weeks. Corn export inspections were excellent with the highest total since November.  Export sales however, were disappointing.  The total was reduced due to cancellations to unknown.

Wheat

The USDA released the first US wheat crop conditions scores of the spring season. The good/excellent category increased by 1% to 56%.  Normally crop conditions from the fall to the spring drop by over 10% so the improvement was a bearish surprise to the market.  Next week we will see the first data on spring wheat planting progress. The May Mpls wheat contract now has a Relative Strength Index of 26.8%, indicating an oversold market. The spring wheat market has been under such pressure that the May Mpls/KC wheat spread is sitting at 92 ¼ cent premium to Mpls. That is the narrowest we have been since February 14th. Wheat export sales were excellent beating expectations.  Combined old and new crop sales were above 1 million tons and the combined total is the highest of the year.

Soybeans

The US ag attaché in China is estimating an increase in imports from 88 million tons this year to 91.5 million tons in 19/20. Production estimates for the soybean crop in Brazil have been trending higher. Late rains are boosting yields and Brazil is now looking to produce their 2nd biggest soybean crop. The consensus range is now between 115 and 118 million tons. This is just a slight reduction from last year’s record of 120.8 million tons. Conditions in Argentina are also very favorable, and they are looking to produce a very large crop as well

Livestock

African Swine Fever continues to spread across China. China’s ag ministry has reported another case of African swine fever in the province of Yunnan as well as the first case in the region of Xinjiang. Getting accurate data on the severity of the problem is the real challenge.  Some estimates are saying the losses are equivalent of the entire US hog supply!  The trade is hoping that China will need to buy substantial amounts of US pork and that has pushed futures prices much higher.  Burger King will start selling the Impossible Burger which is a whopper with a meat substitute patty. Cattle futures shot higher midweek on the possibility of a nasty late winter storm forecasted for next week. Softer cash trade dampened the rally

Energies

WTI is on pace to post a fifth consecutive weekly gain, the longest streak since 2017. A Bloomberg survey of traders reveals the following WTI price sentiment: 55% bullish, 23% bearish, 22% neutral.  Bulls have been fed fresh news with risk-on sentiment ahead of potential tensions in Libya over the weekend.  Additionally, a strong jobs report and optimism for a trade war resolution in the next 4-6 weeks provide short-term support. AAA reports a national average price for gasoline of $2.715, up from $2.685 last week and $2.657 at this time last year.