May 17, 2013
Brazil has passed legislation designed to improve ports and related infrastructure that is causing concern to dock worker unions and bringing additional labor issues to the surface this week. Recent short strikes have caused delays at three ports and additional work stoppages may come before the legislation is signed. The concern about shipping has buyers interested in the tight U.S. corn and soybean crops, pushing prices higher again.
Stocks traded higher today, marching on the way to the fourth consecutive weekly gain. After yesterday's disappointing economic news, two major indicators came in today with better than expected results. The Conference Board's Leading Economic Index increased 0.6% for April to 95.0 after slipping -0.2% in March. Following p that news, the University of Michigan/Thomson Reuters index on consumer sentiment rose to 83.7 for May, up from 76.4 in April and well above expectations of 78. The major stock indexes were trading from 0.1% lower to 0.3% higher at the commodity close.
The dollar index picked back up today, moving to levels not seen since July 2010. The strong dollar has done little to dampen energy prices as crude oil moved higher today, bringing heating oil and gasoline futures higher as well.
Corn traded mixed today with old crop prices moving higher and new crop dropping a few cents. Stringer than expected export sales from yesterday, increasing ethanol production, and the story from Brazil have added strength to old crop prices. On the other hand, speculation that more than 40% of the corn crop was planted this week, and the reluctance to trade weather of the weekend has pushed new crop prices lower as the market awaits the new crop progress numbers on Monday. A string of rain showers is moving from Minneapolis to Milwaukee this afternoon as forecasts of heavier rains into the middle of next week have farmers hustling to get as many acres of corn and soybeans planted as possible.
July corn futures were up 11.25 to $6.5275. December corn was down 4.50 on the day to close at $5.195.
Bottom line: Poor planting weather continues to support corn prices along with solid demand for a tight old crop. Ethanol margins remain strong and feed use is going to be there through the summer as the tight supply impacts prices of old crop corn. December 2013 corn futures have remained above the $5 level, keeping profit in this market as seeding continues.
Corn planting is moving at a rapid pace, just how rapid is the million dollar question. Most expect that seeding will be at the 50% or greater level in Monday's crop progress report, but there are a few that believe we planted over 40% of 97.3 million acres this week and the report will come in at 70%. The 5-year average is 81%, so 70% or more planted is not too far behind. Weather through the middle of next week might slow things again, but the chance for large shifts to soybeans may be slipping.
Soybeans traded higher today as concerns about South American shipping and better news from those seeding corn has the market moving. Shipping delays are picking up again in Brazil as short work stoppages and the threat of more strikes has buyers nervous. In the U.S., corn planting is going great guns with word that a large portion of the crop has been planted this week circulating through the news and social media. If very few acres are shifted to soybeans, then the slow pace of soybean seeding takes precedence in the market, adding strength to prices.
July soybeans closed up 21 today at $14.485. The November soybean contract was up 10.75 to close at $12.2825.
Bottom line: Tight supplies and planting issues are playing into soybean prices. New crop soybeans continue to hold above $12, and could strengthen if corn planting progress is near 70% on Monday. Old crop soybeans have held above $14, presenting cash opportunity to move beans above $15 in many locations as basis continues to strengthen.
Wheat markets traded lower today as better weather in the FSU has many believing that the large projected crop from that region has a better chance of realization, putting more competing wheat into the export mix. This prospect of better crops around the world is putting some pressure on wheat prices while we wait for winter wheat harvest to begin and put some truth to yield rumors that have persisted through the winter. Spring wheat prices took smaller losses today as rains have entered the Northern Plains, disrupting seeding. Delays could carry well into next week with a forecast of additional rains over most of the Dakotas and Minnesota into Tuesday.
July wheat on the Chicago board was down 4.50 to close at $6.8325. The July 2014 contract closed the day down 4.75 to finish at $7.34.
July KC wheat was down 6.25 to close at $7.3725. The July 2014 winter wheat contract was down 8.75 to finish at $7.7625.
July Minneapolis wheat was down 0.25 today to close at $8.0375. The September contract was down 1.50 to close at $7.95.
Bottom line: Wheat markets are pricing weather and export sales into the spring as new crop wheat is on the horizon. Pricing new crop winter wheat in the Plains might need to be delayed until better estimates of yields can be completed.
The Former Soviet Union countries are getting some much needed moisture to enhance the possibility of a large crop in the region. USDA has projected a 48.5% increase in the Russian crop over last year, and 39.6% more wheat from the Ukraine. Dry weather earlier this spring had farmers in the FSU concerned about getting these big yields, but the past week has brought rains to much of the area and the next two weeks look to cover most of the remaining dry spots.
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