/   enbhd.com   / English  

2019-10-22 11:16:46

Investment Thesis

The central U.S. will turn colder, but forecast models have trended milder over the weekend across much of the major growing areas within the grain belt. With the major cold having shifted further to the west and overall easing across the grain belt, the risk for widespread, long-durated freezing temperatures across much of the grain belt has decreased. This should limit upside potential to grain prices.

Grain markets finish lower on Monday despite positive inspection data with cold easing some across the grain belt over the next couple of weeks

On Monday, the U.S. December corn futures finished down 0.74% to $3.8712, with the U.S. November soybean futures down 0.07% to $9.3338 and the U.S. December wheat futures finishing lower 1.48% to $5.2412. For the less-volatile, unleveraged Teucrium ETF grain products, the Teucrium Corn ETF (CORN) finished down on Monday 0.53% ($0.08) to $15.22, with the Teucrium Soybean Fund (SOYB) down 0.21% ($0.03) to $15.90 and the Teucrium Wheat Fund (WEAT) down 0.71% ($0.04) to $5.59. Figure 1 below is a price trend chart of the front-month December futures contract for corn over the past week.

Source: Investing.com

Figure 2 below is a price trend chart of the front-month November futures contract for soybeans over the past week.

Source: Investing.com

Figure 3 below is a price trend chart of the front-month December futures contract for wheat over the past week.

Source: Investing.com

On Monday, the December Chicago Soft Red Winter Wheat (SRW) futures were seen down 8 cents to $5.242, with December Kansas City Hard Red Winter Wheat (HRW) futures down 8 cents to $4.256. MGEX's Hard Red Spring Wheat (HRSW) December contract was down $0.066 to $5.376. Further down the strip, the March contract was down $0.070 to $5.512. Figure 4 below is a price trend chart of the front-month December futures contract for spring wheat.

Source: MGEX

Monday's inspection data positive with all grains posting more shipments than last week and in line with expectations; year-over-year corn still down big, while soybeans and wheat are higher

Monday's export inspection report showed corn from the week ending October 17 at 532k metric tonnes. This came in more than last week's mark of 481k metric tonnes, and within traders' expectations of 432k-635k metric tonnes. Year-over-year shipments are down 62%. Mexico (217k) and Colombia (179k) were the main destinations.

Wheat reported 565k metric tonnes, more than last week's 497k metric tonnes and within, albeit the higher end, of traders' expectations of 381k-599k metric tonnes. Wheat inspections included 206k metric tonnes of Hard Red Winter (HRW) and 189k metric tonnes of Hard Red Spring (HRS). Year-over-year shipments are up 22%. The Philippines (187k) was the main destination.

Soybeans came in at 1,296k metric tonnes, more than last week's 955k metric tonnes, and within, albeit the higher end, of traders' range of 898k-1,388k metric tonnes. Year-over-year shipments are up 7%. Egypt (203k), Thailand (170k), The Netherlands (142k), Pakistan (124k), and Mexico (122k) were the main destinations.

Figure 5 below is Monday's grain inspection chart for the week ending October 17, 2019.

Source: USDA

Latest USDA crop progress report shows that 30% of corn has been harvested, while 46% of soybeans harvested; winter wheat planting off to a fast start at 77%, ahead of last year and the 5-year average

On Monday afternoon, the USDA issued its weekly crop progress report. The report showed that as of October 20, corn matured was at 86%. That's behind both last year's 99% and the 5-year average pace of 97%. Corn harvested is at 30%. That's behind both last year's 48% and the 5-year average pace of 47%. Of the corn planted, 56% is in good-to-excellent condition. That compares to 55% a week ago and 68% last year. Figure 6 below is a graph comparing the years (from 1995) of the corn progress in the maturing phase of development.

Source: Andrei Evbuoma

Figure 7 below is a graph comparing the years (from 1995) of the corn progress in the harvesting phase.

Source: Andrei Evbuoma

Spring wheat harvested is at 96%, compared with last year's pace of 100% and the 5-year average of 100%.

Winter wheat planted is at 77%. That's slightly ahead of both last year's 71% and the 5-year average's 75%. Winter wheat emerged is at 53%. That's behind both last year's 52% and the 5-year average pace of 53%.

Soybeans dropping leaves is at 94%. That's slightly behind the 5-year average of 97% and last year's pace of 98%. Soybeans harvested is at 46%. That's slightly behind last year's 51% and behind the 5-year average pace of 64%. Of the soybeans planted, 54% is in good-to-excellent condition. That compares to 66% last year and 54% last week.

Other crops of note from Monday's report include:

Peanuts - 67% harvested (up 12% from the prior week)Rice - 93% harvested (up 6% from the prior week)Sugarbeets - 42% harvested (up 12% from the prior week)Sorghum - 49% harvested (up 9% from the prior week; 64% in good-to-excellent condition)Cotton - 40% harvested (up 8% from the prior week; 41% in good-to-excellent condition)Sunflowers - 9% harvested (up 4% from the prior week)

Here is the link to this week's USDA's Crop Progress Report.

Weather pattern to turn colder over the next couple of weeks; precipitation outlook mostly dry as storm systems to come with limited moisture supply

The weather pattern across the nation over the next week will consist of perpetual reinforcing shots of cool air driven by a series of storm systems. Forecast models have warmed a bit over the weekend showing the upcoming cold pattern to be focused over the central and western U.S. as opposed to the central and eastern U.S. The first cool shot is currently moving across the central U.S./major growing areas. A second reinforcing cool shot will come later this week with a third shot of cool air coming right behind the second late next weekend through early next week. Figure 8 below is a map from the 12z GFS ensemble depicting the 1-8 day (October 22-29) temperature pattern.

Source: WeatherBell

In the 7-14 day outlook or from Tuesday, October 29-November 5, the pattern remains cold over much of the country with the core of the cold over the northern and central U.S. It is possible that tropical forcing could force the pattern to turn milder in the wake of whatever cold comes early November. Figure 9 below is a map from the 12z GFS ensemble depicting the 8-15 day (October 29-November 5) temperature pattern.

Source: WeatherBell

In terms of precipitation, the pattern overall will be drier than normal across much of the country including the central U.S./grain belt over the next week to two weeks. Even though there will be storm systems that will be associated with reinforcing cold shots, these storm systems will not come with enough moisture supply and/or warm/moist advection from the south will have a hard time overcoming a deep column of dry air. Because of this, precipitation will run normal to drier than normal across much of the country.

The Gulf Coast states through the Southeast U.S. will receive beneficial rains over the next week as moisture supply is greatest here. Currently, showers and thunderstorms are developing along and ahead of a trailing cold front associated with a powerful Autumn storm system centered over the Upper Midwest. Moisture and instability values will be sufficient enough to support the development of strong to severe thunderstorms across these regions. Another chance for showers and storms exists late this week into the upcoming weekend across parts of the Southeast. Figure 10 below is a map showing the seven-day accumulated precipitation forecast (Monday morning to next Monday morning) across the Lower 48.

Source: NOAA

Figure 11 is a map from the 06z GEFS depicting a drier-than-normal pattern across much of the country/grain belt in the 2-8 day time frame (October 22-29).

Source: Tropical Tidbits

Figure 12 is a map from the 06z GEFS depicting a normal to drier-than-normal pattern across much of the country in the 8-14 day time frame (October 28-November 4).

Source: Tropical Tidbits

Final Trading Thoughts

With spring wheat about done being harvested and with a lack of precipitation over the next week across much of the country, weather will not have impacts on spring wheat or winter wheat planting. Provided that the forecast models shifted the cold further west than initially anticipated, lessens the risk for widespread freeze/cold impacts on the corn and soybean crop. The central U.S./grain belt will get cold over the next couple of weeks, but much of the extreme cold will now be confined to the northern Rockies and Plains. Overall, downside risk will be applied to the agriculture market as weather is not expected to bring widespread severe risk to the late maturing/harvested corn and soybean crops.

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.


seekingalpha.com @
week across over year wheat last grain corn source harvested down tonnes


























User comments