Monday, October 29, 2012

Overnight Highlights from Country Hedging's Tregg Cronin

Outside Markets: Dollar Index up 0.151 at 80.229; NYMEX-WTI down $0.73 at $85.55; Brent Crude down $0.38 at $109.17; Gold down $1.90 at $1709.00; Copper is down $0.0480 at $3.5020; The Yen is firmer, but all other major currencies are firmer; Cotton and Cocoa are firmer, but the other softs are weaker; S&P’s are down 9.50 at 1398.00, Dow futures are down 91.00 at 12,963.00 and Treasuries are firmer.   

Hard to say there is any news more pressing than Hurricane Sandy and the standstill it is causing along the East Coast.  Floor trading at the NYSE and the NYMEX has been canceled today, although electronic trading will occur as normal.  Analysts are already forecasting as much as $15 billion in damages, although $8 billion was thought to be insured losses.  In other market news, Italy’s borrowing costs dropped as the country sold $10.3 billion in 6-month T-bills at an average yield of 1.347%, down from 1.503% in September and the lowest since March 28th.  Economic data in the US today will include Personal Income (+0.4%), Personal Spending (+0.6%) and the PCE Deflator (+0.4%).  The USDA crop progress report is being delayed until tomorrow due to the Hurricane.

The Midwest was quiet over the weekend in terms of moisture, although there was a band stretching from E-TX to OH which dumped over an 1.0” in most of OH.  The next 5-days will see a dry, cool Midwest, although the 48-hour forecasted precip map below shows the coverage along the East Coast as Sandy makes landfall.  The below normal precip should continue in the 6-15 for the Midwest, but temps do look to warm up to above normal from the current normal/below.  The next 48-hours in South America should see decent rains in the central and southern growing areas.  Northern areas along the coast have decent chances of 0.25-0.50”.  But the 3-7 day outlook has below average rainfall forecasted.  The 6-10 and 11-15 day forecast maps are below for South America.

Mixed trade overnight as the soy complex falls and grains stabilize and move higher.  Malaysia’s Palm Oil resumed trading after a holiday Friday, and that combined with weak Chinese markets seem to be the onus behind the selling pressure.  Several analysts are also making note of the favorable conditions in South America.  Going home Friday, there were some interesting basis moves, especially when considered week over week.  St. Louis saw heavy weakness over the last week in both corn and soybeans with spot bids dropping from  -5Z to -22Z and beans from -1X to -12X.  The majority of the weakness was escalating barge freight between St. Louis and Cairo.  Peoria, IL was also down quite hard on bean basis, but Council Bluffs, NE was firmer.  Corn and Soy spreads firmer overnight.

Japan bought a little food wheat and barley in an SBS tender overnight.  Russian wheat prices continue to inch higher according to SovEcon.  Third grade milling wheat was up 0.8% w/w, and feed wheat is up 1.1%.  Russia’s grain intervention sales will be expanded to all regions of the country on November 6th.  Interfax said the price of wheat bread in Russia is up 9.5% since the start of the year.  Russia has exported 9.322MMT of grain since July 1 vs. 11.247MMT last year.  Commentary overnight made note of palm oil exports from Indonesia, the largest producer, dropped 2.1% in September to the lowest level in 3-months.  This continues to stoke rising stockpile flames and fears.  Weighs on the world veg oil market.  There was a story on Bloomberg overnight about Australia’s Parliament working to abolish wheat export levies which amount to about 22c/tonne.  Funds were sizable buyers in the week ended Tuesday of CGO wheat, KC wheat and corn.  Funds also bought beans and meal, and sold more soy oil.  More detailed comments tonight.

Open interest changes during Friday’s session included wheat down 1,650, corn up 6,370, beans down 10,200, meal up 3,680 and soy oil down 1,510.  The big drop in open interest on beans was more than likely tied to November option expiration.  The decent jump in corn with the lower close looks a bit ominous.  As noted above, Chinese markets were soft with beans down 11.25c, meal down $5.90, soy oil down 70c, corn down 2.5c, palm down 60c and wheat down 1.75c.  Malaysian Palm Oil was down 63 ringgits at 2,540.  Paris Milling wheat is up 0.09%, Rapeseed is down 0.36%, corn up 0.50%, UK feed wheat down 0.19% and Canola is down 0.23%.

Call things mixed to start, but expect volume to be incredibly thin as most of New York gets the day off to prepare for the storm.  With little in the way of marketing moving news, a disengaged farmer at current prices and what appears to be patient end users of corn and wheat, this week could be a slow one.  We get private crop estimates from Stone and Informa this week ahead of the USDA’s next update November 9th.  Basis levels are historically high and will continue to have to shoulder a lot of weight in the rationing process.

Trade as of 7:05
Corn up 2-5
Soy down 11-16
Wheat up 2-5

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

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