Grain Market Trades Lower On Friday Amid More Favorable Planting Conditions

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

Weather pattern turning drier than previous weeks should assist in planting progress.

Wheat and soybeans report good; weekly net sales report coming either in line with expectations or exceeding. Corn not so good; falling short of expectations.

Prices edge lower on Friday amid improved planting weather conditions.

Investment Thesis

With weather conditions improving in terms of drier conditions, investors should expect prices to be rangebound, but with more downside movement applied.

Grain market edges lower on Friday with weather and trade in focus

The U.S. July corn futures finished Friday's trading session down 0.81% to $4.1562, with the U.S. July soybean futures down 1.44% to $8.5550 and the U.S. wheat futures lower 1.32% to $5.0325. For the less volatile, unleveraged Teucrium ETF grain products, the Teucrium Corn ETF (CORN) finished down 0.97% ($0.16) to $16.40, the Teucrium Soybean Fund (SOYB) finished lower 1.11% ($0.17) to $15.15, and the Teucrium Wheat Fund (WEAT) also finished down 1.05% ($0.06) to $5.63. 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

Source: Investing.com

Source: Investing.com

July Chicago Soft Red Winter Wheat (SRW) futures were seen down 6.4 cents to $5.034, with July Kansas City Hard Red Winter Wheat (HRW) futures down 6.4 cents to $4.486, resulting in a bearish 55-cent premium of CBOT wheat to KCBT wheat. MGEX's Hard Red Spring Wheat (HRSW) July contract was up $0.034 to $5.684. Figure 4 below is a price trend chart of the front-month July futures contract for spring wheat.

Weekly net export sales report mostly good for the grains outside of corn

The United States Department of Agriculture (USDA) released its weekly net export sales report for the week ending May 30 Thursday morning. For the 2018/19 old crops, wheat fell in line with trader expectations, while corn fell below expectations and soybeans above 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 30, 2019, of 26,000 metric tons exported came in line with traders' expectation range of 10,000-200,000 metric tons. That's noticeably higher from the prior week and from the prior four-week average. Main buyer of the old wheat crop last week was from Congo. For the 2019/20 new wheat crop, net export sales for the week ending May 30, 2019, of 501,900 metric tons beat traders' range of 100,000-400,000 metric tons. Main buyers of the new wheat crop last week were Taiwan and Panama.

The 2018/19 corn export sales for the week ending May 30, 2019, of 8,800 metric tons exported falling well below traders' expectation range of 500,000-800,000 metric tons. Main buyers of the old corn crop last week were New Zealand, Japan, and Mexico. For the 2019/20 new corn crop, net export sales for the week ending May 30, 2019, of 23,500 metric tons fell below traders' range of 50,000-250,000 metric tons. The main buyers of the new corn crop last week were Mexico and Canada.

The 2018/19 soybeans export sales for the week ending May 30, 2019, of 510,000 metric tons exported fell above traders' expectation range of 200,000-500,000 metric tons. The 510,000 is up 26% from the prior week and 86% from the prior four-week average. The main buyers of the old corn crop last week were from unknown destinations, China, and Germany. For the 2019/20 new soybean crop, net export sales for the week ending May 30, 2019, of 73,700 metric tons fell in line with traders' range of 50,000-250,000 metric tons. The main buyers of the new soybean crop last week were from Bangladesh.

Planting progress should improve with more favorable weather

The weather pattern over the next two weeks will be more favorable for planting. From a temperature standpoint, cooler weather will move over the central and eventually eastern U.S. next week as the pattern changes from the current split-flow to a more amplified Rex block/dipole pattern with a warm to hot west U.S. and a cool central/eastern U.S. After about June 15, forecast models indicate the jet stream becoming more zonal (east-west flow) with temperatures being warmer but not hot.

Precipitation wise, planting progress should improve across the Midwest and northern Plains as the pattern over the next week or so turns drier than in previous weeks. Areas that are well behind in the planting season (e.g. Illinois, Indiana, Ohio, Michigan, and South Dakota) should see improvements in the planting progress in the coming weeks. Precipitation will be lighter and more of the scattered variety over the next week or so. The southeast U.S. into the East Coast will be the focal areas that experience the most precipitation as a slow moving area of low pressure system interacts with deep tropical moisture to produce widespread moderate to heavy rains. The more favorable weather pattern is one of the variables that's been driving prices lower recently.

Source: NOAA

Final Trading Thoughts

The weather pattern is trending more towards a less wetter pattern compared to prior weeks favorable for corn/soybean planting and winter wheat harvesting. This combined with uncertainties surrounding trade should keep prices rangebound, but with more downside risk than upside potential.

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.