May Beans started the year at 1010 – rallied 80 cents (1010-1090) off perceived S/A weather issues & then broke $1.50 (1080-930) as the Argentine & especially Brazilian Bean Crops continued to grow. Then exhausting the down was the USDA 3/31 acreage report calling for a record 89.48 MA- 6 MA over 2016!
FACTORS IMPACTING THE MKT
- EXPORTS – Mon Inspections were 430,879 (400-600) & Thur sales were 865,000 (400-600)
- PLANTING PROGRESS – it’s early but corn planting is behind at 6% (LY – 12, Avg – 9) – & less corn would imply more beans
- USDA SAYS THERE’S A LOT MORE – the Mar 9 S & D, the Mar 31 ACREAGE & THE APL S & D all point to a record Brazilian Bean crop, record World Stocks & record US Bean Acres! That’s a lot of supply – but How much is already factored in?
- US DOLLAR DOWN – President Trump said the dollar was too high – Then the ongoing Korean crisis – as both pushed the mkt lower
- WEATHER PREMIUM – the mkt has been so focused on how good things Are – it isn’t even considering if things don’t go well for the US crop – Currently going in the ground
And now the moment of truth has arrived – will producers really plant an additional 6 million acres – will exports continue at a current robust pace? Our take is that a lot of supply is already dialed in & it won’t take much to ignite a weather rally.
Amidst all the doom & gloom surrounding the Bean mkt – weighed down by a record Brazilian crop & record US acreage planned –is a corn mkt that may have fundamentals turning positive. The mkt action to date suggests that – May corn is higher on the year while May Beans are down 62 cents & May Wht is down 11 cents.
- US acres are projected to be down 4 MA
- The mkt is hovering just over 10 year lows
- The exports remain robust – normally over 1 MMT – every Mon & Thur
- If the wet weather continues, corn acres will go to beans
Any weather issues will definitely jump corn prices!
The crop ratings for winter wheat issued Monday at 3pm went up 1% to 54% & the mkt took its cue from that – eventually making new lows for the year at 410 – down 20 cents for the wk & 10 cents for the year!
- Of course, improving crop ratings suggest a better WW crop For this summer harvest
- The Bean mkt’s bearish supply fundamentals added to wheat’s woes
- $4.00 is a 10 year low but the mkt has been unable to rally From this level
- Whereas US Wht is more competitive on the world mkt – Right now, the exports aren’t really flowing
The perennial weak sister has become the weakest sister!
Starting on Wed 4/5/17, June Cat has closed up 10 consecutive days – moving from 109 to 117 – what gives?
- June Cat’s huge discount to cash has kept the corrections shallow
- Burgeoning barbeque & restaurant-go-out demand is supporting the mkt
- Cash is strong & packer margins are wide
- The Friday COF is projected to see Mar placements at 105.6% of 2016
- Open interest is at a record high
The mkt has a strong fundamentals but its massively overbought & focusing on a April Cattle-on-Feed – tomorrow at 2pm!
In stark contrast to June Cat, June Hogs have languished during the month of April – losing almost $4.00 already.
- Hefty short-term supply has acted like an anchor around the mkt
- June Hogs are at a normal 11.00 point premium to cash for this Time of the year
- Pork values are firming up & pork margins are strong
- The mkt is very oversold & probing for a low
- Exports are expected to increase on the current break
Cattle & hogs can’t continue to go in divergent directions for too much longer!!
Questions? Ask Bill Moore today at 312-264-4337
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