Grain Markets Finish Higher After Thursday's Positive Export Report; Farm Aid And Weather Also In Focus

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Includes: CORN, SOYB, WEAT
by: Andrei Evbuoma
Summary

Wheat finishes Thursday up over 4%, corn over 2% after an in-line to bullish export report.

Soybeans finish positive with farm aid and additional stormy weather likely to continue disrupting a slow planting season.

Weather outlook to turn stormier over the next couple of weeks with the heart of the rainfall being located over the western corn/soybean belts.

Investment Thesis

If you haven't already, this is a good time to get into the agriculture market with a proposed farm aid plan, weather, and slow planting supporting upside potential. Expect for prices to remain rangebound in the near term.

The U.S. July corn futures finished Thursday's trading session up 2.67% to $3.7988, with the U.S. July soybean futures up 0.54% to $8.4050 and the U.S. wheat futures higher 4.23% to $4.6800. For the less-volatile, unleveraged Teucrium ETF grain products, the Teucrium Corn ETF (CORN) finished up 1.93% ($0.29) to $15.44, the Teucrium Soybean Fund (SOYB) finished higher 0.40% ($0.06) to $14.90 and the Teucrium Wheat Fund (WEAT) also finished up 3.13% ($0.16) to $5.26. Figure 1 below is a price trend chart of the front-month July futures contract for corn over the past 24 hours.

Source: Investing.com

Figure 2 below is a price trend chart of the front-month July futures contract for wheat over the past 24 hours.

Source: Investing.com

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

Source: Investing.com

July Chicago Soft Red Winter Wheat (SRW) futures were seen up 19.2 cents to $4.680, with July Kansas City Hard Red Winter Wheat (HRW) futures up 17 cents to $4.190, resulting in a bearish 49-cent premium of CBOT wheat to KCBT wheat. MGEX's Hard Red Spring Wheat (HRSW) July contract was up $0.114 to $5.266. Figure 4 below is a price trend chart of the front-month July futures contract for spring wheat.

Source: Barchart

The United States Department of Agriculture (USDA) released its weekly net export sales report for the week ending May 9 Thursday morning. For the 2018/19 old crops, wheat and soybeans fell in line with trader expectations. Meanwhile, the corn 2018/19 old crop export beat trader expectations. For the 2019/20 new crops, wheat beat trader expectations, soybeans fell in line with trader expectations, while corn fell below trader expectations.

The 2018/19 wheat export sales for the week ending May 2, 2019, of 114,500 metric tons exported came in line with traders' expectation range of 0-250,000 metric tons. That's up 26% from the prior week and down 52% from the prior 4-week average. Main buyers of the old wheat crop last week were Indonesia, Iraq, and Philippines. For the 2019/20 new wheat crop, net export sales for the week ending May 9, 2019, of 419,400 metric tons beat traders' range of 150,000-350,000 metric tons. Main buyers of the new wheat crop last week were South Korea and Nigeria.

The 2018/19 corn export sales for the week ending May 9, 2019, of 553,300 metric tons exported beating traders' expectation range of 200,000-500,000 metric tons. The 553,300 is up 92% from the prior week and down 15% from the prior 4-week average. The main buyer of the old corn crop last week was Columbia. For the 2019/20 new corn crop, net export sales for the week ending May 9, 2019, of 80,800 metric tons fell below traders' range of 100,000-400,000 metric tons. The main buyers of the new corn crop last week were Panama and Guatemala.

The 2018/19 soybeans export sales for the week ending May 9, 2019, of 370,900 metric tons exported fell in line with traders' expectation range of 100,000-400,000 metric tons. The main buyers of the old corn crop last week were Germany and Indonesia. For the 2019/20 new soybean crop, net export sales for the week ending May 9, 2019 of 303,400 metric tons fell in line with traders' range of 200,000-600,000 metric tons. The main buyer of the new soybean crop last week were from unknown destinations.

Despite a warmer pattern, crosshairs are over the western corn belt with a return to stormier conditions that will continue to impact planting; To a lesser degree, spring wheat planting will also be impacted with cooler and wetter conditions

We are in the midst of a large scale weather pattern change. By late this week and over the weekend, broad upper cyclonic flow (upper level troughing) will develop over the western U.S. with downstream upper anticyclonic (upper level ridging) developing over the eastern half of the nation. These two features will bring cool, unsettled (wet) weather across the western U.S., and warmer, more humid conditions to the eastern half of the nation. Because we're still under the influence of a persistent, high latitude blocking pattern highlighted by a -NAO, the Northeast U.S. will be cut off from the very warm and humid weather. This will likely set up a sharp demarcation between the cooler air over the Northeast U.S. and the warm/humid air mass from the Mid-Atlantic and points south. In the middle of this two upper level weather features, will be an active storm track that will develop over the central U.S. This will bring numerous rounds of showers and thunderstorms across the central U.S. with the heaviest precipitation focused over the western corn/soybean belts. So while temperatures warm up across the central U.S., the weather pattern will turn stormy once again giving farmers and producers more headaches with planting.

Figure 5 is a map showing the seven-day accumulated precipitation forecast across the Lower 48. NOAA's Weather Prediction Center is forecasting the heaviest of precipitation to fall over the Central U.S/Western Corn and Soybean Belts.

Source: NOAA

Figure 6 below is NOAA's 6-10 day outlook depicting a wet bias over the spring wheat, and western corn/soybean belts.

Source: NOAA

Figure 7 below is NOAA's 8-14 day outlook depicting a wet bias over the western corn/soybean belts.

Source: NOAA

Final Trading Thoughts

With a new trade aid program coming to U.S. farmers to compensate the losses, a weather pattern turning wetter, and a slow planting season, prices have support to the upside. Other variables such as strong crop supply and uncertainties surrounding the U.S.-China trade war brings downside risk. That said, expect prices to remain rangebound.

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.