Mixed Trade on Heightened Mid East Tensions

MORNING AG OUTLOOK

Mixed trade across the Ag Space overnight as heightened tensions in the Middle East led to a rebound in energy prices.  Over the weekend the US Navy seized an Iranian vessel in the Gulf of Oman while Iran fired on commercial vessels attempting to pass thru the Straits of Hormuz.  Iran states that the US blockade of Iranian ports is a violation of the ceasefire agreement and led to them pulling out of expected negotiations today in Pakistan.  Meanwhile Pres. Trump has again threatened to target Iran’s energy infrastructure if they do not agree to the US peace proposal.  June-26 WTI crude oil is up $4.50 per barrel at $87.10.  Spot RBOB is up $.08 per gallon while HO is up $.17.  Weekend temperatures dipped into the mid 20’s in NW Kansas while mid-teens were common in the N. Plains.  Further damage to the US winter wheat crop already impacted by drought is expected.  Rain this week will favor the central Midwest.  Continued dry in the SE and SW plains.  Above normal temperatures this week across the nation’s midsection will help corn and soybean plantings stay above their historical averages.  Rain in Argentina will slow harvest activities while mostly favorable conditions for Brazil.  The US $$ index is slightly higher with US equity markets lower.

Corn: 

July-26 and Dec-26 are both $.00 ½ lower at $4.57 and $4.76 ½ respectively.  Both experienced 2-sided trade while spreads are little changed.  Friday’s CFTC report showed speculative traders were big sellers as the MM long position was cut by 59k contracts to 159k.  Thru Friday would now estimate it’s down to 144k.  Cattle on feed as of April 1^st at 11.576 mil. head was down .5% YOY vs. expectations of down .3%.  Placements were down 7.3% slightly below expectations while marketing were down 5.5% slightly less than expected.

Soybeans: 

July-26 beans are down $.00 ½ at $11.82 ½ while Nov-26 is unchanged at $11.56 ½.  July-26 meal is down $2.50 at $325.70 while July-26 oil is up 60 points at 68.47.  Spot board crush margins backed up $.18 on Friday to $3.12 ½ bu. after reaching a fresh 3 ½ year high earlier in the week.  Bean oil PV slipped to 50.7%.  Money managers were net sellers of just over 14k contracts of soybeans, 2k contracts of bean oil while buyers of over 42k contracts of meal.  The aggressive buying in meal stretched their net long position in the soybean complex to a record large 459k contracts.  The markets attention will gradually shift to Pres. Trump’s meeting in Beijing with Chinese leader Xi next month. We remain hopeful they stay committed to buying 25 mmt over the next 3 MY’s.  This will likely require their 10% tariff on US imports to be dropped.  The 5-year average US planting pace for the 19^th is only 5%, a level already surpassed last week.

Wheat: 

Prices range from $.03-$.08 higher.  CGO July-26 is up $.05 ¾ at $6.05 while KC July-26 is $.07 ½ higher at $6.57 ½.  KC premium over CGO traded to a new high overnight at $.54.  KC July-26 stalled just below LW’s 13 month high at $6.63.   Look for spring wheat plantings to have advanced to 15% complete, vs. 16% YA and the 5-year average of 12%.

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