Information about grain markets and info to help producers to market crops. See how various grain marketing strategies can effect ones average price. We will be posting various potential trade and option strategies along with marketing decisions made on our mock farms.
Tuesday, October 30, 2012
Overnight Highlights from CHS Hedging's Tregg Cronin 10-30-12
Outside Markets: Dollar Index
down 0.250 at 79.982; NYMEX-WTI up $0.39 at $85.93; Brent Crude up $0.16 at
$109.60; Heating Oil down $0.0087 at $3.1065; Cattle are weaker, but hogs
firmer; Gold up $5.80 at $1713.50; Copper is up $0.0345 at $3.5305; Most major
currencies are firmer this AM; Softs are firmer aside from Coffee; S&P’s
are down 1.75 at 1405.75, Dow futures are down 36.00 at 13,018.00 and
Treasuries are lightly mixed.
Financial markets are still
inundated with Hurricane Sandy as most of New York and all US equity futures
will be closed for a second day in a row. Futures are still trading right
now, but will most likely close at 8:15 CDT as they did yesterday. A
sharp selloff of 10+ points occurred in the S&P’s last night, but things
have recovered this morning to trade around unchanged. There were some
noteworthy happenings around the globe, however. First up, the Bank of
Japan decided to expand its asset purchase program for the second time in
two-months, a move seen as a surprise. The Yen is 0.48% weaker.
Also, Italy sold 10-yr bonds with an average yield of 4.92%, the lowest since
May 2011. Switzerland also sold short term bills with a positive yield
for the first time in over a year. Both supportive.
The US radar summary below shows
pretty well the now Tropical Storm Sandy moving inland. On top of the
rain and flooding, West Virginia is expected to see up to 3’ of snow in
mountain areas. I’ll leave the forecasting of that one to somebody
else. The next 5-days will see a dry growing area from TX-ND and WY-IL,
but OH is expected to see decent rainfall this week with the eastern part of
the state receiving as much as 3.0”. This will continue to hamper harvest
efforts. NOAA’s extended maps are bringing above normal temps back into
the picture for areas west of the Mississippi. East of there will be normal/below.
Precip is seen above normal for areas north of I-94. NE/KS/OK are
expected to see below normal precip in the 6-15. The second map below
shows the 6-10 for South America and the red blob over northern Brazil which is
probably the biggest reason for the selloff in the soy complex yesterday.
Rains there will help growing areas get into November in good shape.
Excessive moisture remains a problem in Argentina, slowing planting progress.
Ag markets are bouncing a bit today on a “Turnaround
Tuesday,” but everything is well within recent ranges as the news flow
continues to be slow enough to not warrant a change in trend. There were
a lot of revised crop estimates overnight which could be providing some support
to our markets. First up, a Chinese news agency reported the Chinese Ag
Minister pegging the soybean crop at 9.8MMT which would compare with the USDA
at 12.6MMT. This could mean as much as 3MMT more in imports, pushing them
well over 60MMT. The National Australian Bank was out last night saying
the country’s wheat crop is 20.6MMT vs. the USDA at 23.0MMT. GrainCorp
said Central Queensland is 85% complete. UkrAgroConsult cut Ukraine’s
corn crop to 18.8MMT vs. the USDA at 21.0MMT.
Other new overnight included South Korean poking around for
corn. KFA bought 62,000MT of South American corn from S.A. at $327.93/MT
C&F for March 20 delivery. KOCOPIA bought 55,000MT of optional origin
corn at $334.30/MT C&F for Mar 20 delivery. Would also appear to be
South America, although March performance might be difficult for South
America. Also out last night, Russia sold 53,055MT of grain from state
stockpiles. Since Oct 23rd, 117,690MT of milling wheat has
been sold and 18,350MT of feed wheat. Interfax also reported Russia’s
grain exports have already exceeded the government’s target of 10MMT citing
research group IKAR. Other headlines of note included ADM beating analyst
estimates on earnings with $0.28/share and net income of $182 million, down
from $0.68/share a year earlier. They cited improvements from its soybean-processing
business which should have been robust this year. Argentina also said
Bunge was being excluded from the Cereals Register for failing to pay
taxes. This is a big deal come February.
Open interest changes yesterday included wheat down 3,040,
corn down 1,420, soybeans down 13,540, meal down 2,040 and soy oil down
1,080. Looks like heavy liquidation across all markets, especially the
soybean market. Comforting to know open interest wasn’t unchanged, or
there might have been commercial participation, but spreads and basis hung in
yesterday. Chinese markets were weaker overnight with soybeans down 17c,
meal down $1.70, soy oil down 25c, corn down 2.5c, palm down 65c and wheat down
3.5c. Malaysian Palm Oil was down 39 ringgit at 2,501 (1.5%). Palm
Oil nventory information at the end of October will be very interesting.
Paris Milling Wheat is up 0.29%, Rapeseed is up 0.10%, Paris Corn up 0.20%, UK
feedwheat up 0.48% and Canola is up 0.02%.
One other quick note, in the corn options pit yesterday,
ADM sold 6,000 December 740 calls and 2,000 December 750 calls, receiving
around 12-17c a piece. They did the exact same thing with November
options a couple weeks back. Options pit participants think ADM could be
selling calls to hedge corn purchases as opposed to selling futures. It
proved to be a worthwhile strategy with the Nov as options remained range bound
and they were able to clip a coupon and earn time value. We’ll see if it
works for the Dec.
Call things better as we bounce from the weakness yesterday,
but volumes should remain subdued as long as the East Coast remains a
mess. Ranges feel like they will continue to hold, but firming basis
levels and tightening spreads don’t feel like they are getting the farmer to
move, and the reseller market might not be keeping the pipeline full
enough. More chop today with private crop estimates towards the end of