Overnight Highlight's from Country Hedging's Tregg Cronin 6-14-2012 Firm markets to start

Below are the overnight highlight's from Country Hedging's Tregg Cronin

Outside Markets: Dollar Index up 0.035 at 82.093; NYMEX-WTI up $0.12 at $82.74; Brent Crude down $0.21 at $96.92; Heating Oil up $0.0018 at $2.6127; Hogs are firmer and Cattle are mostly weaker; Gold up $1.90 at $1620.00; Copper down $0.0010 at $3.3390; The Yen and Loonie are firmer while all other major currencies are firmer; Cotton is better, but most of the softs are weaker; S&P’s are up 0.75 at 1316.25, Dow futures are up 11.00 at 12,512.00 and Treasuries are a bit weaker.

Headlines on financial websites read something like this today: “Spanish Crisis Deepens.”  Yesterday, Spanish government bonds saw their yields rise to euro-era records during auctions for 10-year debt.  The yield hit 6.96%, dangerously close to levels considered unsustainable, following a report which said Spanish housing prices fell 12.6% in the first quarter.  Moody’s became the latest rating agency to downgrade the country, all of which increases the odds a bailout won’t be far away.  The terrible housing market in Spain is what makes their situation larger and potentially more serious.  Obviously this is in addition to the fact Greece will hold her latest round of elections Sunday which likely aided in the selloff yesterday afternoon.

Rain in the last 24 hours was confined to two areas in the US with ND/SD/MN/MT seeing rains as well as places in TX.  Looking at the rainfall maps, it looks like the two dry areas in ND (SW and SE) should have received some nice 0.25-1.00” rains.  Totals in S-OK and TX looked similar.  The system in the northern plains is moving into N-MN at the moment and is expected to bring severe weather to the Twin Cities tonight and tomorrow.  The 5-day forecasted precip map shows heavy rains on a line from S-NE to the UP of MI with totals across IA and WI as high as 3.8-4.0” while the Dakotas/KS/MO/MN should also see good rains.  N-IL should see some measured precip, but the storms don’t look to get into the driest areas of IN/OH.  NOAA maps are looking a bit less warm and a bit less dry today with normal weather forecast in the 6-10 and 8-14.  Private models generally agree with rainfall amounts and placement in the 6-10, although push moisture into the S-Midwest for the 11-15.  The better chance of rain next week for IL/IN/OH will keep prices under pressure.

Grains are bouncing a bit overnight while the soy complex is fairing about like it did late in the session yesterday.  The impressive cash markets won’t seem to let corn die a slow death into July delivery with the type of premiums being paid along the river, at ethanol plants, off the west coast and in feed lots.  Unfortunately, with World FOB prices being what they are, the hefty basis levels aren’t helping our corn get any more competitive with Brazil, Argentina or Ukraine.  Luckily, domestic demand remains firm enough, and producer selling slow enough to support things.  Weekly ethanol production continues to motor along, beating expectations and grinding more corn than we need to.  The liquidation in the soy complex seems speculative and tied to the shaky outsides.

From China, we see the government sold 17,922MT of soybeans from reserves in an auction of about 600,000MT.  The sales are a bit higher than last week’s, but the demand for these old, poor quality beans is apparent, especially given US and SA beans are price competitive.  India said overnight they will allow 2MMT worth of wheat exports from government reserves, but at no less than $228/MT FOB, or around $6.20 bu.  Also from New Delhi, the Indian government approved increases in the minimum purchase prices for rice, soybeans and corn, a move which is sure to keep food inflation high.  Overnight, Taiwan bought 47,050MT of US-DNS at a price of $333.94/MT FOB as well as some HRW at $301.35/MT FOB.  Japan bought 147,118MT of wheat from the US and Australia, but mostly US.

Open interest changes during yesterday’s session included an increase of 6,441 wheat and 4,025 soybeans.  Corn was down 1,585, meal off 1,038 and oil down 7,482 contracts.  Chicago wheat closed almost unchanged which is interesting given the big O/I increase.  Corn looks like short-covering in the July as people blow out ahead of delivery.  Chinese markets were down sharply with soybeans off 20.50c, meal down $6.40, oil off 107c, but corn was unchanged.  The Reuters commodity wire carried a couple stories worth noting last night.  First, the scramble for US corn has heated up, pushing CIF basis to the highest price in a month.  They also said estimates from 15 analysts polled have dropped the US national corn yield 3% to 161.5bpa vs. the USDA’s current 166bpa.  Argy has slowed soy crush.

The firm cash markets looks like they’ll be enough to propel us higher today, at least in the grain markets.  It should be noted, however, outside markets appear to be easing, and tensions will remain high as we head into the weekend and prepare for Grecian elections.  The speculative length is still in the soy complex, and when they liquidate it will be felt their first.  Specs are near flat or even a bit short corn, and back to being sizable shorts in Chicago wheat.  Weather remains a big driver, and right now it looks more favorable.

Trade as of 7:10

Corn up 7-8

Soy down 2-5

Wheat up 4-7    

Tregg Cronin
Market Analyst
800-328-6530
651-355-6538
651-355-3723 fax
www.countryhedging.com
Country Hedging, Inc.
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