CORN
July corn was trading slightly lower late in the overnight session. Outside market forces looked very negative today with a strong US dollar and weakness in metal, equity and energy markets overnight. There were no deliveries this morning. Aggressive long liquidation selling has hit old crop corn for the past three sessions and outside market forces look negative again today. Even news of simulative action by the China government has failed to support commodity markets over the weekend. Traders see warmer and mostly drier weather for the next two weeks and areas of the southern half of the Midwest and northern delta may remain quite dry. Only scattered light rains are expected for the northern Midwest for the next two weeks. While today's planting update may show normal to below normal progress for the week, the coming week looks to bring aggressive plantings. The weather outlook is also favorable to see the crop off to an excellent start. South Korea seeks up to 210,000 tonnes of corn and near 70,000 tonnes of feedwheat. July corn saw a late-day bounce Friday but still closed 6 1/2 cents lower on the session and down 39 1/4 cents for the week. Funds were noted as active sellers for the third day in a row. December corn pushed to 499 and the lowest level since December 17th of 2010 before closing at 505 1/4. Fund selling drove the market down to the lowest level since mid-March. December corn is down to the lowest level since December of 2010. Private exporters reported a sale of 300,000 tonnes of US corn to unknown destination split between the 2011/12 season and the 2012/13 season. The sharp break in soybeans helped to pressure for much of the day but talk of the oversold condition of the market and ideas that China is still an interested buyer on breaks helped to support. The Commitments of Traders reports as of May 8th showed Non-Commercial traders were net long 164,768 contracts, an increase of 4,257 contracts for the week. Non-Commercial and Nonreportable combined traders held a net long of 28,410 contracts, down 190. Commodity Index traders held a net long of 416,070 contracts, up 5,008 for the week and the buying trend of the fund traders is seen as a short-term positive force. Funds were noted sellers since Tuesday and trend-following fund traders held a net long of just 66,673 contracts. Some traders noted that funds sold near 45,000 contracts since Tuesday.
WHEAT
July wheat was trading 2 3/4 cents lower late in the overnight session and the market matched Friday's contract low. Outside market forces look bearish again today with lower equity, energy and metals trade overnight and a bounce in the US dollar. There was 1 delivery this morning against the May wheat with the total for the month at 411. The market has seen aggressive selling from fund traders in the last three sessions and the COT report showed that funds already held a hefty net short position. The USDA reports did not have much in the way of bullish news and showed ample world and US ending stocks. However, stocks were tightening at both levels, traders remain nervous over the FSU production and the US weather was not as bearish as expected. Parts of the western plains missed out on rains this past week which will leave crop conditions showing a slight deterioration for this afternoon and likely for the week ahead. The outlook calls for near excellent weather to get the spring wheat crop planted. FSU total production is expected at 97.76 million tonnes for the 2012/13 season as compared with 114.4 million this past season. As a result, traders are a bit more optimistic over US exports. Wheat is also cheap relative to corn which could help boost feed usage. July wheat closed 4 1/4 cents lower on the session Friday and down 12 1/2 cents on the week. The market pushed to a new contract low and a new contract low close as the steep sell-off in the other grains, especially soybeans, helped to pressure. Excellent weather for advancing the winter wheat crop to maturity and an excellent start to the spring wheat crop helped to pressure the market. July KC wheat pushed to new lows for the move and closed 7 1/2 lower and right near the lows. July Minneapolis wheat closed lower for the ninth session in a row and also pushed to a new low for the move. Ethiopia is tendering to buy 35,000 tonnes of milling wheat. The Commitments of Traders reports as of May 8th showed Non-Commercial traders were net short 45,005 contracts, an increase of 17,058 contracts for the week and the selling trend is seen as a short-term negative force. However, the net short is near a historic high so the market is considered oversold. Non-Commercial and Nonreportable combined traders held a net short of 71,833 contracts, up 19,833 for the week. Commodity Index traders held a net long of 215,341, up 219.
SOYBEANS
July soybeans were trading 25 1/2 cents lower late in the overnight session. China futures closed down 2.3% overnight on Greek concerns. Palm oil futures in Malaysia closed down 3.8% after a 2.2% decline on Friday to push to a 3-month low. Asian equity markets remained weak again last night despite a reserve rate requirement cut by China over the weekend. Apparently investors in Asia are concerned about additional slowing ahead and many press outlooks are now predicting other easing actions from the Chinese government to cushion against further slowing. European equity markets also remained very weak as a political setback in Greece put that country back into the headlines again. An Italian debt auction posted the highest yields since January early this morning but decent demand for the Italian debt today kept the situation in Italy from becoming a more major and sustained anxiety event. Early action in the US equity markets showed notably weak action with the S&P falling down to the lowest level since March 7th. A thin US economic report slate today, could leave the risk off vibe in place and leave the anxiety focus squarely on European affairs. There were 46 deliveries against May soybeans this morning. Oil deliveries were 248 contracts. There were no meal deliveries. July soybeans are already down as much as $1.42 1/2 in just nine trading sessions. July soybeans closed 49 1/4 cents lower on the session Friday and closed down 72 1/4 cents for the week. This occurred during a week of a bullish USDA report with funds holding a near record high net long position. Aggressive long liquidation selling from funds emerged due to a "risk off" attitude from investors and from a lack of follow-through buying after the initial reaction to the report. The market was called higher late Sunday but outside market forces turned more negative overnight. The China commerce ministry believes that China soybean imports in May could reach 5.63 million tonnes, up 15% from April and the highest since November. A bearish tone to outside market forces on Friday and general banking concerns helped to pressure commodity markets and this tone spread to grains. Even with the strong recovery in the stock market and less pressure on energy markets, the soybean market failed to see much of a bounce. Fund trader long liquidation selling appears to be the dominate force for the market. A general sense that the USDA report did not bring in any "new" bullish factors for the longer-term outlook plus an excellent weather outlook for the US planting season helped to pressure. December soybean oil is already down to the lowest level since January 31st. Private exporters reported a sale of 139,500 tonnes of US soybeans to unknown destination for the 2011/12 season. For the NOPA crush report this morning, traders see April crush just under 139 million bushels and soybean oil close to the level of March at 2.363 billion pounds. The Commitments of Traders reports as of May 8th showed Non-Commercial traders were net long 236,722 soybean contracts, a decrease of 23,041 for the week and the selling trend is seen as a short-term negative force. Non-Commercial and Nonreportable combined traders held a net long of 196,631 contracts, down 24,192. Commodity Index traders held a net long of 153,452, down 1,200. For meal, Non-Commercial traders were net long 100,229 contracts, down 257 for the week. Non-Commercial and Nonreportable combined traders held a net long of 119,302 contracts, down 3,446 contracts for the week and the selling trend is seen as a short-term negative force. For oil, Non-Commercial traders were net long 13,185 contracts, a decrease of a whopping 17,097 contracts for the week and the selling trend is bearish. Non-Commercial and Nonreportable combined traders held a net long of 20,546 contracts, down 22,290 for the week. Commodity Index traders held a net long of 96,824 contracts, down 2,367.
CATTLE COMPLEX
June cattle closed 70 lower on the session Friday but managed to close slightly higher for the week as beef market weakness encouraged additional long liquidation by the close. A sharp break in beef prices as well as increased global economic concerns was widely seen as pressuring the market. A strong recovery in the US stock market helped to provide some support but many in the market remain concerned with the sluggish beef market at a time of the year when retailers are typically seeing a jump in consumer demand for beef. Higher slaughter weights and a sluggish beef market are additional factors which might cause additional weakness during the near-term. While China brought foreword fresh easing policies over the weekend, outside market forces are still seen to be negative early this week, with a stronger Dollar and weaker metal and energy markets expected to put additional pressure on cattle prices. Many traders await this week's cash market activity for direction, with bids at $118.00 to $119.00 and offers at $122.00 to $124.00. Boxed beef cutout values were down 99 cents at mid-session Friday and closed 82 cents lower at $189.10. This was down from $190.29 the prior week, and is the lowest beef market since April 23rd. The estimated cattle slaughter came in at 126,000 head Friday and 16,000 head for Saturday. This brought the total for last week to 639,000 head, up from 623,000 head the previous week but down from 650,000 head a year ago
CRUDE OIL
June crude oil prices traded lower throughout the overnight and early morning hours, pressured by a weak outside market tone, speculation that Greece might be leaving the Eurozone, as well as rising borrowing costs in Spain and Italy. China's central bank lowered bank reserve requirements by 50 basis points over the weekend in an attempt to stimulate growth, but that did little to support the crude oil market overnight. Fears of slowing global growth are seen as a factor reducing global oil demand. Some traders pointed to talks between Iran and the International Atomic Energy Agency (IAEA) set to begin today were of interest to the crude oil market. The Commitments of Traders Futures and Options report as of May 8th showed non-commercial traders were net long 249,320 contracts, a decrease of 47,380. Non-commercial and nonreportable traders combined held a net long position of 274,149 contracts, for a large decrease of 47,004 during the report week.
There is substantial risk of loss to futures and options trading. Past performance is not indicative of future results.
By Donna Hughes
Lone Star Portfolio Advisors, Inc. was founded by Donna Hughes. Donna began her career in the industry in 1978 after graduating High School as a member of the Chicago Mercantile Exchange’s Inspection and Delivery Department where she was responsible for scheduling and facilitating the USDA grading and delivery for various Exchange Commodities. After 1 ½ years, she was offered a position working with George Segal, a prominent hedger in the Pork Belly market. It was through this relationship that she was mentored and taught the hedging process by working with Mr. Segal as well as other leaders of the Pork Industry. In 2004, Donna moved to Texas where her skills in the industry were utilized to help individual and corporate producers with their Risk Management Goals. Her Daily Market Commentaries are heard on the AllAgNews.com Radio Network broadcasting throughout Texas. She also contributes to magazines and periodicals including PetroEvents and Ag Monthly.
Donna created Lone Star and implemented strategic relationships with Daniels Trading and R.J. O’Brien leveraging their services to enable Lone Star to Build Lasting Relationships Thru Information, Execution and Research.
