March 20 | Follow us @TradeADMIS
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May soybeans settled at 1028 ¼ up 5 ¾ cents on the day recovering some of yesterday’s steep losses. May soybean meal settled at $361.70 up $3.10 on the day with soybean oil settling down .32 points at 31.74. A noted crop scout has estimated US soybean acreage at 91-92 million acres this year. They also lowered their Argentine soybean production to 42.0 million tonnes from 43.0 previously while raising their Brazilian production estimate to 115.0 million tonnes from 114.0 million. Radiant Solutions has estimated the Argentine soybean production at 40.2 million tonnes. Beneficial rains forecast in Argentina from March 23-25 should cover about one third of the growing region, favoring the north. Areas that will see moisture are northern Santa Fe, Entre Rios and eastern Buenos Aires. The southern two thirds will continue to miss out on moisture. Brazil will continue to see persistent rains, with the heaviest in the Rio Grande du Sol state from March 26 through April 1st slowing the soybean harvest. Excess rains in Mato Grosso, Goias and Tocantins should slow harvest activity as well. The size of the Argentine crop has taken a back seat to the fear of trade wars with China. China is expected to import 97.0 million tonnes of soybeans in 2017-18, which may eventually be as high as 100.0 million. Brazil and the US are expected to export 70.5 and 56.2 million tonnes respectively, which is 84% of the total soybean export market. China could continue to favor Brazilian soybeans over the next few months, but Argentina's crop will most likely be 14.0 to 17.0 million tonnes below last year's 57.8 million tonne crop. Argentina will import soybeans from Brazil and Paraguay to keep crush capacity going. The open interest in soybean went down 2,211 contracts on Monday with soybean meal down 3,388 and soybean oil up 3,852 contracts.
May corn settled at 374 ½ down ½ cent on the day. The market did trade down and tested the 50 day moving average at 373 ¼ early in the session. US exporters announced the sale of 110,000 tonnes of corn to Peru this morning. May corn gapped lower yesterday just below trend-line support at 382 and a gap remains above from 382 to 382 ½. Monday’s trade was a classic risk-off type trade with the market seeing long liquidation tied to trade concerns from trading partners worldwide in retaliation to recent tariffs on steel and aluminum imports. A noted crop scout has estimated their US corn acreage at 88-89 million acres compared to the last USDA estimate at 90.0 million. They see farmers preferring cotton to corn in the southern belt due to high cotton prices. Using 88.5 million acres and a trend line 174 bushel per acre yield and using the USDA demand estimates would see a decline to 1.676 billion bushels of ending stocks for 2018-19. The same crop analyst left their Argentine crop unchanged at 34.0 million tonnes and left Brazil’s corn production at 86.0 million tonnes. They commented that they have a lower bias for Argentina production and a slightly higher bias for Brazil’s at this stage. Radiant Solutions has lowered their Argentine corn production to 32.1 million tonnes from 35.7 million previously. The open interest on corn went down 4,965 contracts on Monday.
Chicago May wheat settled at 453 up 2 ¼ cents on the day. Kansas City May settled at 470 down ¼ cent on the day. The KC/Chicago July intra-market spread has lost 1 ½ cents and settled at 18 ¾ after trading to a low of 16 early in the session. Liquidation continues in Kansas City wheat futures as rainfall in Texas, southwest Oklahoma and Kansas over the last few days has the bull camp exiting. The open interest went down 11,713 contracts in Chicago on Monday with Kansas City down 14,389 contracts. The longer term National Weather Service 6-10 and 11-15 day outlooks also have above normal precipitation for the southern Plains from March 25th to April 2nd. The state weekly crop conditions went down slightly in Kansas and Texas and improved slightly in Oklahoma, but the trade is discounting this after the recent rains. Kansas good/excellent (G/EX) went down 1% to 11% and the poor/very-poor (P/VP) went up 2% to 55%. Texas G/EX went down 3% to 10%, P/VP up 7% to 60%, Oklahoma G/EX down 2% to 5%, P/VP down 6% to 66%. Heavy rain and cold weather in France in December and January has caused some water logging in the northern areas according to a report from the EU's MARS unit. French yields are expected to be slightly below trend according to the report. The report said that the German wheat crop fared better than expected during the cold snap due to protective snow cover. Russian wheat exports are exceeded to reach 38.0 million tonnes versus the previous estimate of 36.8 million according to SovEcon.
Mar 22 Download Report
STOCK INDEX FUTURES
Stock index futures rallied sharply when yesterday’s Federal Open Market Committee statement was considered to be slightly less hawkish than many analysts had expected. The Fed indicated there would likely be a total of only three interest rate hikes this year and not four that many analysts were anticipating.
We did get the rally after the Fed meeting that I expected but, it didn’t last very long. Prices quickly reversed and closed lower as traders focused again on escalating trade tensions with China.
There is follow through pressure today as the Trump administration later today is set to announce tariffs designed to punish China for intellectual property theft.
Initial jobless claims, rose a seasonally adjusted 3,000 to 229,000 in the week ended March 17. Economists had expected 225,000 claims.
The 8:45 central time March PMI Composite Flash is expected to be 55.2 and the 9:00 February leading indicators report is anticipated to be up .3%.
The Kansas City Federal Reserve manufacturing index will be released at 10:00. Last month the index was 17. CURRENCY FUTURES
The U.S. dollar index fell hard and the euro currency sharply advanced yesterday afternoon due to the slightly less hawkish than expected FOMC statement.
Longer term the currency of the euro zone should be supported by the belief that the European Central Bank could hike interest rates in the first quarter of 2019.
I continue to anticipate the double top resistance at the 1.26500 - 1.26580 area in the June euro currency to be taken out, although it may take a while.
The Bank of England’s Monetary Policy Committee voted 7-2 to hold its benchmark interest rate unchanged at 50 basis points, as expected. The minority wanted a rate hike. A rate increase appears more likely at the BoE’s May 10 meeting. INTEREST RATE MARKET FUTURES
Futures advanced yesterday afternoon due to the slightly less hawkish than expected FOMC statement with follow through gains today.
The Federal Open Market Committee voted to increase its benchmark interest rate by 25 basis points to a range of between 1.50% and 1.75%, as expected. The vote was unanimous.
The probability of a fed funds rate increase at the May 2 meeting is 4%.
I have been and still am on board for three rate increases this year.
Futures are likely to work higher in advance a statement later today from the Trump administration concerning tariffs with China. However, lower prices for futures are likely after the statement.
Longer term the main trend for the entire interest rate futures complex is lower, especially for the 30 year Treasury bonds.
This special monthly report recaps the financial, energy, metal, currency, grain and livestock market trends exclusively by the ADMIS Research Team. March Edition February Edition
US FEB UNEMPLOYMENT (released Mar 9)
USDA CROP REPORT (released Mar 8)
US Q4 GDP (released Feb 28)
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