Plunging Energies Weighing Heavily on Ags

MORNING AG OUTLOOK

Plunging energy prices is weighing heavily on the Ag space this AM.  President Trump announced his Administration was pausing “Project Freedom”, the US plan to guide vessels safely through the Straits of Hormuz, stating that the US/Iran have made “Great Progress” toward reaching a complete and final agreement with the representatives of Iran.  WTI June-26 crude oil is down $8.30 a barrel near $94 bouncing off its 50-day MA.  Spot RBOB is down $.18 per gallon while HO is off $.26.  Healthy rains across the Ohio Valley region the past 24 hours while a mix of precipitation in NE CO along with far SW NE and NW Kansas.  Drought relief so far has been minimal however a hard freeze was likely limited to the N. plains.  Rainfall through early next week to favor the Gulf coast and SE regions.  Lighter amounts across the central Midwest while dry in the N. plains.  Scattered rains are expected to return to EC and S. Argentina.  Significant harvest delays aren’t expected.  Rains in Brazil to favor Southern MGDS into the interior south region.  Hot/dry conditions for the northern and WC growing areas causing moderate stress for the developing 2^nd corn crop.  The US $$$ is sharply lower trading to a 2 ½ month low.  US stock indices are sharply higher pointing to new all-time highs in the Nasdaq and S&P 500.

Corn: 

July-26 and Dec-26 are both $.09 lower at $4.71 and $4.91 ½ respectively.  July has MA support at $4.66 while support for Dec is at $4.83 ¼.  EIA data later this AM is expected to show ethanol production rebound to 305 mil. gallons, up from 297 mil the previous week.  If energy prices have indeed peaked, in likelihood, so has corn.  With the US crop getting planted in a timely manner, US drought areas low, higher production in SA combined with a large speculative long position make me think the path of least resistance points lower.

Soybeans: 

July-26 beans are down $.06 at $12.05 ½ while Nov-26 is $.07 lower at $11.82 ½.  July-26 meal is up $1.00 at $321.40 drawing support from product spreading.  July-26 oil is off 1.55 points at 75.40.  July beans have MA support at $11.89 while support for Nov beans is $11.75.  Spot board crush margins backed off $.08 in overnight trade after reaching a modern day high yesterday at $3.76 ½ bu.  On Friday the CFTC will likely print another record large position by MM’s in soybean oil and across the soybean complex.  At yesterday’s close we estimate MM were net long 200k soybeans, 115k meal and 192k oil.  Attention will now shift toward Pres. Trump’s meeting with Chinese leader Xi late next week in Beijing.  Without anymore old crop Chines purchases the USDA soybean export forecast at 1.540 bil bu is likely too large.

Wheat: 

Prices range from $.13 – $.16 lower.  CGO July-26 is down $.15 at $6.13, KC July-26 is $.12 lower at $6.78 while MIAX July-26 is down $.10 at $6.88.  The potential for sub-freezing temperatures the next few mornings in the SW plains is still a risk for the HRW wheat crop.  A crop tour in OK forecasts the state’s wheat production will reach only 47.8 mil bu with an average yield of 23.1 bpa.  The Ave. production in the last 10 years is 94.5 mil bu while last years crop reached 106.4 mil bu.

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