Tuesday, September 25, 2012

Overnight Highlight's - from Country Hedging's Tregg Cronin 9-25-12

From Country Hedging's Tregg Cronin

Outside Markets: Dollar Index down 0.046 at 79.479; NYMEX-WTI up $0.93 at $92.86; Brent Crude up $1.11 at $110.92; Heating Oil up $0.0206 at $3.1193; Livestock markets are all firmer; Gold up $4.50 at $1766.70; Copper up $0.0300 at $3.7755; The Euro and Loonie are weaker, but all other major currencies are firmer; The softs are better; S&P’s are up 2.00 at 1453.50, Dow futures are up 25.00 at 13,514.00 and Treasuries are up 0.32%.      

World equity markets are very lightly mixed today ahead of a fair amount of data in the US.  The FTSE 100 is up +0.07%, the CAC 40 -0.20% and the IBEX 35 +0.10%.  The NIKKEI was up 0.25%.  It was interesting to note in a Bloomberg article this morning the ECB’s bond market intervention is essentially making it cheaper for investors to de-risk out of Spanish debt and into safer, German bonds.  By buying up Spanish debt, it’s making German debt cheaper to own, and if Spain does end up requesting a bailout, it will fall on German shoulders which will inevitably raise their borrowing costs.  German 10-yr yields are currently at 1.532%.  Economic data in the US data includes the Case-Shiller 20-city home price index, expected up 0.75% m/m.  We also get consumer confidence and the Richmond Fed.

The last 24 hours saw rain in N-MO and W-IL to the tune of 0.10-0.50” with localized totals up to 3.0”.  The system is now perched atop IL/S-IN and should bring decent rainfall totals there to the tune of 0.75-1.00”.  The next 3-day rainfall totals are expected to bring heavy rains to the southern plains and Midwest with OK/KS/MO/IL/IN/KY/OH all seeing a general 0.50-1.00” with the heaviest amounts in E-KS at 3.40”.  These couldn’t be timed better, although the N-TX plain might be a little short changed.  NOAA maps keep the northern plains dry and mostly above normal on temps in the 6-10, while the 8-14 looks closer to normal on both.  A patch of below normal temps are excepted to run north to south from MN-LA and east to MI and south to GA.  In S.A., the forecast sees an active pattern to produce average to above average rainfall in much of the growing regions the next 10-days.  They are sitting in good shape looking at % of average precip Sept 1-22.  Australia is still waiting on rains to begin Friday-Saturday as heading starts on the wheat.

Markets are letting loose a bit of relief bounce on a “turnaround-Tuesday,” although all three of the major Ag’s remain firmly entrenched in recent ranges or downtrends.  Crop conditions yesterday afternoon were unchanged on corn at 24% G/E, but harvest continued to chug along at 39% vs. 26% last week and 13% average.  Most were expecting 40-45%, but it’s still fast.  Soybean conditions up-ticked 2 points to 35% vs. 53% last year.  Soybean harvest was estimated at 22% vs. 10% last week and 8% average.  This was in-line to slightly faster than estimates.  ND leads harvest progress with 56% complete, followed by SD at 47% and MN at 45%.  Winter wheat plantings were seen at 25% vs. 11% last week and 27% average.  SD has just 37% planted vs. 52% average.

Wires overnight showed Iraq issuing a tender for at least 50,000MT of wheat from all origins with a bidding deadline of Oct 1.   Last week, Iraq bought 150,000MT of Russian wheat at $412-413.89/MT C&F.  It will be interesting to see if US wheat comes anywhere close to being competitive.  If Russia doesn’t win, it should likely be EU wheat.  The EU’s crop monitoring service cut the bloc’s corn yields again to 6.05MT/ha from 6.28 last month.  Temperatures and lack of rainfall were cited.  South Korea also bought 120,000MT of corn for February delivery at $308.45-308.85/MT C&F from Bunge on an optional origin purchase.  Should be Brazilian corn at that price with US-FOB offers at $316/MT.  From IKAR we saw that Russian wheat for export hit the highest price since the collapse of the Soviet Union last week at $340/MT.  While an incredibly important development, our markets need to be careful as the latest COT report from Friday showed managed funds amassing some huge net long positions in both KC-HRW and MPLS-HRS.  It’s that boat getting tipped thing.

Open interest changes yesterday included wheat down 280, corn down 400, soybeans down 2,720, meal down 3,670 and soy oil down 5,540.  Soy oil got taken to the woodshed as Palm Oil prices hit the lowest level in two years as supplies are estimated to grow considerably this year.  Funds were loaded up on longs there.  Based on the latest COT report, it looks like the lack of change in O/I on wheat is length being transferred from the commercials to the managed money, which is a concern.  Corn looks the opposite with funds dumping length to the end users.  Chinese markets rallied sharply with beans up 35.75c, meal up $8.70, oil up 17c, corn unchanged and wheat down 5.50c.  Paris Wheat is up 0.67%, Rapeseed up 0.81%, Corn up 0.10%, UK feed wheat up 0.22% and Canola up 0.75%.

Looks for a bit of recovery today, but it doesn’t look like markets are going anywhere.  We’ve got month end, quarter end and big USDA reports all on Friday.  The propensity for managed money will be to “de-risk” and take money off the table, not add to positions.  We still have 60-80% of harvest to bring in, farmers are selling a lot of grain off the combine and quality is a concern in the central belt.  Yield reports remain better than expected on soybeans and more mixed on corn.

Trade as of 7:15
Corn flat/up 1/2c
Soy up 11-15
Wheat 1-2

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

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