Monday, July 23, 2012

Overnight Highlight's from Country Hedging's Tregg Cronin 7-23-2012

Below is from Country Hedging's Tregg Cronin

Outside Markets: Dollar Index up 0.176 at 83.654; NYMEX-WTI down $2.61 at $89.20; Brent Crude down $2.90 at $103.93; Heating Oil down $0.0676 at $2.8567; Gold down $10.80 at $1571.70; Copper down $0.0915 at $3.3570; The Yen is firmer, but all other major currencies are weaker; Most all of the softs are weaker; S&P’s are down 15.50 at 1343.00, Dow futures are down 151.00 at 12,622.00 and Treasuries are firmer.

Financial markets are getting rocked this morning as investors grow weary of Spain’s worsening economic picture and as their borrowing costs push to new Eurozone records over 7.50% on the 10-year.  Six more Spanish banks are said to be getting ready to tap bailout facilities in coming days.  RBC Capital Markets said in a statement they have advocated staying away from Spanish and Italian markets and they see no reason to change this view.  This will push borrowing costs higher and increase the likelihood of an emergency EU-Summit and further bailout funding.  Energy markets are responding in kind as well, slashing off significant premium following the strong runs they had last week.  The CRB-Index should trade sharply lower today after hitting the highest levels since May.

Rain totals over the weekend were heaviest in SD/MN/MT and more rain fell south east of the Ohio river.  Totals were heaviest in S-SD where the southern part of the state saw localized totals up to 2.5”.  This rain was needed very badly, especially ahead of the extreme heat the next 3-days.  More rain is falling across SD this morning.  5-day forecasted precip maps show much of the northern corn belt to receive a good soaker the next 1-3 days.  Heaviest totals should be in MN/WI/N-IL/N-IN/MI/OH.  Temps the next 3-days will be over 100* for almost everyone south of I-80.  6-10 days maps show chances of scattered precip around, but no soaking event.  The 11-15 has some rain in the WCB and in WI, but again no concentrated event.  Temps are expected to remain normal/above, but nothing extreme like this week.  90’s will be common place in the WCB.  The 11-15 sees some additional ridging to occur bringing average rains to MT, the Dakotas and north of I-80, but dry to the south.  Less than ideal, but the rains this week should help stabilize things.

Some pretty heavy profit taking hitting our space overnight, thanks in large part to the outside markets and a general sell mentality, but the maps taking on a bit more favorable tone is probably also contributing.  As many have said, rains cans till help the soybeans at this point and the corn in the west, but the temps the next 3-days will do their best to push things backwards further.  Condition ratings are expected to drop another 3-5% on both corn and beans.  The constant talk of demand destruction already taking place isn’t making anyone happy either.  These crops are still in the discovering phase, however, and until we discover how small this crop is, it will be difficult to take prices considerably lower to where end users are willing to step up.  Big ranges last night: corn 33c, beans 56c, wheat 37c.

In headlines, JP Morgan said July rain has improved yield prospects across eastern Australian canola and wheat areas.  JP is estimating total winter crop production in the three eastern states is now estimated at 19.7MMT vs. ABARES latest guess at 18.4MMT.  Western Australia is equally as important, however, as the majority of the exporting facilities are located on the west side of the island.  The Chinese Customers Administration said June soybean imports were up 31% y/y to 5.62MMT.  June corn imports were 528,647MT and wheat imports were 216,742MT.  Jordan finally bought the 100,000MT of wheat they retendered for twice at $343/MT from Ukraine for Aug/Sept delivery.  Also, Ukraine was reported to have harvested 15.86MMT of grain as of July 20th, about 72% of the total are seeded.  Yields were 2.22MT/ha.  This compares with 19.33MMT last year and a yield of 2.89MT/ha.  Spring planted acres were up 17.1%.  The Financial Times carried a story about US meat companies importing Brazilian maize due to its competitiveness.  Link below.

Open interest changes during Friday’s session included an increase of 4,400 wheat, corn up 9,780, beans up 680, meal up 180, and soy oil down 5,260.  Chinese markets were mixed with beans up 9.25c, meal down $3.80, soy oil down 122c, corn up 0.25c and wheat down 11c.  Malaysian palm oil was down 52 ringgits, Paris Milling wheat is currently down 19c, Rapeseed down 16c and UK feed wheat is off 19.0c.  There was some heavy length added by the speculative funds in corn and wheat last week, and I’ll have a better breakdown in tonight’s comments.  Also worth noting spec funds are now long natural gas, something which hasn’t been the case since 2007.

Things are likely to be weaker the majority of today, and then we’ll get a look at crop conditions after the close and see if this crop is still slipping.  There are some very good looking fields in the upper corn belt, and the weekend’s rains as well as those forecasted should go a long way to stabilizing some of those.  The more confidence a guy has in his crop, the more aggressive he should be taking advantage of these record prices.  The market is not going to pay you to store the crop this year, so keep that in mind.

Tregg Cronin
Market Analyst
651-355-3723 fax
Country Hedging, Inc.
The Right Decisions for the Right Reasons

No comments:

Post a Comment