COMMENTARY 4/4/18

Several big items occurred today! Freight weakened today (finally) and nearby basis levels responded to today’s board drops. The Gulf still needs more time to work through the dysfunction caused by winter, high water, low water, ice, lock closures and tow size limitations.  There are still a month’s worth of loaded barges waiting in the Gulf to be off loaded and there IS an similar amount of vessels waiting there to be loaded. (barges can’t make the fleets money if they are sitting loaded)

With the passage of the omnibus spending bill, the 199A “Grain Glitch” was approved by Senate and signed by Pres Trump.  Producers can retroactively sell grain to private companies without a 20% reward to cooperatives.  THANKS for your support and positive attitudes as our elected officials sorted through the discourse!  

CORN

DOWN 7

Lots of politics in energy and trade!  A 17 cent range widened by China’s drastic announcement of tariffs on beans (and other items as well). Funds were also seen selling some of their large long position too.  It may mean more producers plant more beans as SA should run out of beans by the time our new crop are ready in Oct.  Trade negotiations will likely take some time.  Planting corn might appear less risky, but then that all depends on what sort of weather we have this spring.  Also today, the EPA issued waivers to some small ethanol refineries (less than 75kbl/day) which would reduce eth production by 1.5 bil gallons and and reduce demand for yc by 500 mill bu per Growth Energy.  Volatility is still relatively low at 23% vs 31% normally for this time of year.  THIS would be a GREAT time to buy calls for those who recently sold all that $4.00 corn!  Thursday’s Export Sales are expected to be 39-51 mill bu with 17.2 needed per week.

 

BEANS              

DOWN 23

Shocka!  The second round of retaliatory tariff threats came in from China overnight.  It included an additional 25% tariff on US beans and shook the market up with a nrealy 60 cent trade range.  It was a big volume day too!  May fut saw over 372k contracts traded today, a history making level for nearby beans. Among the new items to be taxed were aslo corn, wheat, cotton, tobacco, but the focus is on industrial products, air planes, and automobiles.  Bean exports to China alone account for almost a third of total usage on our US balance sheet. China is a big exporter of pork and meal/beans must be fed to said hogs.  Many traders feel much of this is political and the tariffs will never actually come into being.  At minimum, it should help the US level the field of world trade and protect US companies from having surrender proprietary technology to the Chinese gov.  That  being said, there WAS also an announcement this am of 129K MT sold to China for 18/19 and 325K MT of 17/18 and 18/19 sold to Unknown.  -Just when we thought China said they were mad.  Export Sales tomorrow are expected to be 22 -33 mill bu.

 

Wheat

DOWN 2

Held in good today vs beans and supported by cold/dry conditions in the US Plains.  China normally makes up less than 5% of US wheat exports. The 6-10 and 8-14-day forecasts still look below normal for precip.  The Chic wheat/corn spread DID widen more with today’s activity. It was as wide as 85 cents today while just two days ago was as narrow as 68 cents.  Export Sales tomorrow are expected to be 7 -18 mill with 9.9 needed per week.