Grain Markets Close Mixed Wednesday Ahead Of Thursday's Net Export Sales Report

Includes: CORN, SOYB, WEAT
by: Andrei Evbuoma

Grains erase most of its gains from early session trading to finish mixed on Wednesday.

Active/stormy weather pattern will continue to cause disruptions to an already slow planting season.

Variables such as the U.S.-China trade war, strong old crop supply, and weak national/international demand bring downside risk to the market.

Investment Thesis

Weather and slow planting will support to the upside. Trade and strong supply are amongst variables that will support to the downside. Expect for rangebound trading to continue.

Agriculture prices pared early trading session gains via profit taking to finish Wednesday; A combination of weather, slow planting, trade, and strong crop supply also in focus

The front-month July U.S. corn futures finished Wednesday lower 0.10% to $3.6862. U.S. May soybean futures finished up 0.48% to $8.3500, while U.S. wheat was finished Tuesday up 0.08% to 4.4838. For the less-volatile, unleveraged Teucrium ETF grain products, the Teucrium Corn ETF (CORN) finished lower 0.06% ($0.00) to $15.18, the Teucrium Soybean Fund (SOYB) was up 0.27% ($0.04) to $14.83, and the Teucrium Wheat Fund (WEAT) was seen down 0.58% ($0.03) to $5.10. 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 wheat over the past 24 hours.


Figure 3 below is a price trend chart of the front-month July futures contract for soybeans over the past 24 hours.


July Chicago Soft Red Winter Wheat (SRW) futures finished unchanged to $4.484, with July Kansas City Hard Red Winter Wheat (HRW) futures finishing down by 6.2 cents to $4.024, resulting in a bearish 46-cent spread of CBOT wheat to KCBT wheat. MGEX's Hard Red Spring Wheat (HRSW) July contract was up $0.08 to $5.152.

Weather will continue to cause disruptions for farmers primarily over the west/northwestern corn and soybean belts, and spring wheat belts.

A large scale weather pattern change is ongoing across the nation that will feature a cool, wet West U.S. associated with strong upper level troughing vs. a warm to hot central/eastern U.S. supported by an upper level ridge. This will usher in appreciable weather for many over the central U.S., from a temperature perspective. Figure 4 is a depiction of the current temperatures nationally. A welcome sight for many with widespread 70s and 80s showing up across the central and southern U.S.

Source: Mesonet

However, from a precipitation standpoint, given this weather scenario, an active storm track will once again set up shop somewhere over the central U.S. Currently, it appears that the northwestern corn/soybean belt and the spring wheat belt will be areas that are the wettest amongst the belts over the next 7 days and possibly longer. The return to a wet pattern will continue to cause planting disruptions across those areas. Temperatures over the next 7 days will have the potential to reach the 80s over the central U.S. Areas that aren't rain-free will see high temperatures limited to the 70s.

Figure 5 is a map showing the seven-day accumulated precipitation forecast across the Lower 48. NOAA's Weather Prediction Center (WPC) is forecasting the heaviest of precipitation to fall over the Western U.S., Northern Rockies, High Plains, and the Upper Midwest.

Source: NOAA

On the trade front, the U.S. Department of Agriculture (USDA) is finalizing a plan for aid to U.S. farmers that could reach $15 billion. The priority will be geared towards hog and soybean farmers, two products most affected by the U.S.-China trade dispute. This will be the second package of aid to U.S. farmers. Last year (2018), aid up to $12 billion was pledged by the USDA to help offset losses to U.S. farmers. To date, $8.52 billion has been paid. The world's two largest economies have been entangled in a 10-month long trade war that has cost billions, causing disruptions in the global supply chain and financial markets. Last Friday, the U.S. hiked tariffs on $200 billion worth of Chinese goods escalating the trade dispute. On Monday, China responded with retaliatory tariffs on $60 billion worth of U.S. goods. Earlier this week, soybean prices fell to their lowest in a decade.

Final Trading Thoughts

Given that we are getting deeper into planting season, weather and planting progress have become more important. Investors should expect for range bound trading to continue with weather, a slow planting season, U.S.-China trade war concerns, weak national/international demand, increased international export competition, and ample crop supply in focus.

Stay Tuned For More Updates!

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.