Tuesday's positive finish looks to be as a result of short-covering. Downside risk looks to continue in the grain markets with trade tensions between the two largest economies increasing, the weather pattern becoming more favorable in the 6-14 day time period for planting, and a lackluster demand combined with large old supply of corn and wheat.
Despite short-covering on Tuesday, sentiment remains bearish with trade tensions leading the way; weather shows some improvements for farmers and producers in the 6-14 day time period
The front-month July U.S. corn futures finished Tuesday up 0.93% to $3.6738. U.S. May soybean futures finished up 0.12% to $8.3100, while U.S. wheat was seen up 1.06% to 4.4062. For the less-volatile, unleveraged Teucrium ETF grain products, the Teucrium Corn ETF (CORN) finished up 0.86% ($0.13) to $15.23, the Teucrium Soybean Fund (SOYB) was unchanged 0% ($0.00) to $14.76, and the Teucrium Wheat Fund (WEAT) was seen up 0.60% ($0.03) to $5.04. Figure 1 below is a price trend chart of the front-month July futures contract for corn over the past 24 hours.
Figure 2 below is a price trend chart of the front-month July futures contract for soybeans over the past 24 hours.
Figure 3 below is a price trend chart of the front-month July futures contract for wheat over the past 24 hours.
July Chicago Soft Red Winter Wheat (SRW) futures finished higher 3.2 cents to $4.404, with July Kansas City Hard Red Winter Wheat (HRW) futures finishing up by 1.6 cents to $4.046, resulting in a bearish 36-cent spread of CBOT wheat to KCBT wheat. MGEX's Hard Red Spring Wheat (HRSW) July contract was up $0.074 to $5.216.
USDA crop progress report revealed continued slow corn, soybean, and spring wheat planting
Monday afternoon, the USDA issued its weekly crop progress report. The report showed that as of May 5, 23% of this year's corn has been planted. That's behind last year's pace of 36%, is ahead of last week's 15%, but lags well behind the 5-year average of 46%. It's the southern states that continue leading the way so far, including North Carolina (73%), Texas (70%), and Tennessee (65%). Tennessee and North Carolina made the largest week/week percentage jumps of +24 and +20, respectively.
Spring wheat planting indicated 22% of acres across the top six production states having reported. This is behind last year's 27%, ahead of last week's 13%, and well behind the 5-year average of 49%. States leading the way so far are across the Pacific Northwest, including Idaho (72%) and Washington (72%), both reporting more than half of their crops planted. Meanwhile, Minnesota (7%), North Dakota (13%), and South Dakota (19%) are well behind their average of 51%, 37%, and 76%, respectively.
Soybean planting is just starting, with only 6% planted. That's behind last year's 5% and the 5-year average of 6%. Louisiana (46%) is leading the way in early soybean planting.
Meanwhile, the winter wheat crop continues to impress, with 64% reporting in good-to-excellent condition, which is unchanged from 64% last week and better than 34% last year.
Other crops of note from Monday's report include:
- Oats - 50% planted (up from 7% the prior week)
- Rice - 48% planted (up from 10% the prior week)
- Sorghum - 22% planted (up from 2% the prior week)
- Sugarbeets - 31% planted (up from 6% the prior week)
- Cotton - 18% planted (up from 7% the prior week)
Here is the link to this week's USDA Crop Progress Report.
The weather pattern over the next two weeks will gradually turn favorable for farmers across the corn and soybean belts. Wet and cool conditions across much of the belt this week will transition to drier, but still chilly conditions across the grain belts next week. Next week's weather setup will help to speed up the planting progress, which has been crawling so far this season compared to average. That said, the balance between improved weather conditions and fieldwork conditions will determine exactly how much progress will be made. Weather conditions have and will continue to improve across the spring wheat belt.
Logistics on area river systems will remain an issue, as high waters on the Missouri, Mississippi, and Illinois rivers have resulted in several locks and dams being shut down. This has slowed the amount of grains exported. Figure 4 is a map showing the seven-day accumulated precipitation forecast across the Lower 48.
Figure 5 is a map from the 06z GFS ensemble depicting a normal to wetter-than-normal (in green) precipitation pattern over much of the corn, wheat, and soybean production centers over the next seven days.
(Source: Tropical Tidbits)
Figure 6 is a map from the 06z GFS ensemble depicting drier-than-normal (in yellow) precipitation over much of the corn, wheat, and soybean production centers in the 6-12 day outlook.
(Source: Tropical Tidbits)
The large-scale weather pattern features a split-flow regime, which explains why much of the corn belt next week will turn drier. The southern branch jet stream will keep the southern U.S. wet and active with several rounds of showers and thunderstorms. These impulses will be associated with upper-level troughs ejecting eastward out of the Southwest U.S. undercutting a strong ridge over the Northwestern U.S.
On the trade front, escalation between the U.S. and China have roiled the global equity markets. As of Tuesday afternoon, all three major indices were seen down more than at least 1.75%. Crude and Brent Oil were down over 1%. Natural gas and grain prices were the only few areas in positive territory on Tuesday. Grain prices trading higher on Tuesday could be as a result of short-covering.
Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.