Macro Markets
Some foreign countries and US States are opening back up for business. I guess we will find out if Flattening the Curve worked and if economies can now reopen. The US economy will not open soon enough to save June Crude Oil from prices in the teens and probably single digits. Keep in mind July Crude Oil comes off the board June 22. July WTI could also be in the teens and single digits as we go into the last month of trading. Right now it looks like August Crude has the best change of stabilizing and eventually stay in range in the $20s.
Hopefully by June all the Stay At Home orders will have been lifted but we will still see a lot of social distancing. Crude Oil cuts in production will stay in place but demand for energy should start to rebound this summer. Any improvements in COVID-10 treatment will help to relieve the need for social distancing. An effective vaccine will go a long way to getting things back to normal.
As long as we don’t have setbacks with coronavirus with respect to the states and nations opening back up, I think the stock market has put in a low. We have a busy week of companies reporting earnings but they are expected to be bad and the market has priced them in for the most part. The markets are forward thinking and reopening economies in a limited way will be perceived as bullish overall.
Reuters | Some Countries Prise Open Lockdowns
Reuters | US States from Minnesota to Mississippi to Reopen Economies
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Emini S&P 500 (Red line 20 Day SMA, Green Line 200 Day SMA)
Grains & Oilseeds
We expect corn to be weak right into First Notice Day. We are keeping all new crop hedges. If you are short the old crop you can stay short until tomorrow or Wednesday. I do want to get long July Corn on Wednesday or Thursday (May FND).
The reason we like being short into FND is cash and storage contracts for May need to be finalized by Wednesday. These contracts either need to be priced, delivered, or storage needs to be rolled. If stocks are adequate to abundant (and they are right now) then FND has a negative price influence on the front month. I think the selling goes too far and that is why I like to by the next month right around FND during these situation.
We will be looking to buy July Corn on Wednesday or Thursday. We are keeping our new crop hedges. I am only looking for a short term pop in July and we probably will want to be out by the May WASDE.
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July Corn
Energy
I want to pass along a quick thought on Energy. June Crude Oil is selling off as the market realizes things are not going to be better by the end of May for energy demand. We still have demand issues as refineries don’t need crude for gasoline or heating oil. The world is still producing more crude than the global economy needs. Those two factors keeps crude in the $20s. What gets the front months into the teens and single digits is the industry is running out of storage. Moral of the story is we expect the deferred months to stay in the $20s. We think the front months will be sub $20 until we see real demand outstrip supply OR the market comes up with a storage solution for excess crude oil.
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What I’m Doing At Home
IL Governor Pritzker extended the Stay At Home order until the end of May so I am not expecting to go to be back in the Chicago office until Monday, June 1. That means five (5) more weeks working from the home office. IL schools have also cancelled on campus classes for the rest of the academic year, which means the kids are finishing school this year with a mix of online learning and home schooling. These are some of the things I’ve been up to for the past week
Painting My House | The weather did not cooperate much this week. It was cold, cloudy, with a little rain each day. We got one nice day (yesterday) so I was able to complete most of the prep work. Over the past week or two we’ve been able to replace a few boards on the house, scrape, power wash, repair some boards and sand. As soon as we get a stretch of days of reasonable weather I am going to prime, tape, and paint. It looks like I’ll be able to get a lot done at the end of the week after work and next weekend.
Fairy Garden | My seven year old daughter has built a fairy garden under a tree in my front yard for the whole neighborhood to enjoy. It has fairy houses, a pathway from the fairy village to our sidewalk, and now my neighbors are getting involved.
The Last Dance | ESPN is running a 10 part mini series on the 1997-1998 Chicago Bulls season. This was the year the Bulls won their 6th and final championship. It is really good. Some of the language is not family friendly but if you watch the series on ESPN2 they have a TV-14 edited version. Episodes 3 & 4 were last night. You can catch reruns on ESPN and their app. Episodes 5 & 6 will on Sunday night.
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Craig Turner – Commodity Futures Broker
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