Tuesday, October 16, 2012

Overnight Highlights from County Hedging's Tregg Cronin 10-16-12

Outside Markets: Dollar Index down 0.371 at 79.369; NYMEX-WTI up $0.33 at $92.19; Brent Crude up $0.28 at $115.50; Heating Oil up $0.0039 at $3.2130; Livestock are quietly mixed; Gold up $7.60 at $1743.60; Copper up $0.0130 at $3.7245; The Yen and Loonie are getting sold this morning; The softs are bouncing rather sharply this morning with Cotton, Cocoa, Sugar and Coffee all up 1.1-2.8%; S&P’s are up 6.75 at 1442.25, Dow futures are up 59.00 at 13,419.00 and Treasuries are weaker.      

Equity markets are bouncing around the globe this morning, most likely catching up to the strong finish in the US yesterday afternoon.  Most economic data received yesterday was positive, and there seems to a bit better optimism from consumers, at least that’s what the underlying theme of the data seems to suggest.  Today’s data points in the US will include the Consumer Price Index, Industrial Production and the Housing Market Index.  The CPI is expected to show a 0.50% gain m/m, and up 0.2% less food and energy.  This measure, at least, continues to agree with the Federal Reserve’s recent policy initiatives.  Tonight will see the second Presidential debate in New York which will be a town hall format covering both domestic and foreign policy.

Not much for measureable precip in the last 24 hours.  There are some scattered showers over N-MN/N-WI.  The next 48-hours will see more moisture fall from LA to MI with totals expected in the 0.25-1.21” range.  Most The precip will be mostly east of the MS river.  N-MN and up into the Canadian Prairies should also see some solid amounts.  5-day totals should be generous, and the PNW also looks to finally see rain.  Areas along the Pacific in WA/OR could see between 2.0-5.0”.  ID will also see some showers.  Pretty split through the belly of the country on NOAA’s extended maps.  Below normal precip in the southern plains, above in the Great Lakes and far-northern plains for the 6-10.  Similar set up in the 8-14.  No discernible changes to either South America or Australia.

Moderate relief bounce overnight in all of the Ags with soybeans clawing back about half of what the lost and keeping their nostrils above the $15.00 mark.  Nothing in the overnight wires to point to directly, so we’ll attribute the bounce to being “oversold.”  There was talk of China snooping around for 3-5 cargoes of soybeans yesterday, but this is commonplace.  Remember, China imports 60MMT, which is just over 1MMT every week.  Assuming they spread it out evenly, that’s almost 2.5 Panamax vessels every single day of the week, including Sunday.  China shopping for soybeans is no reason to get excited.  Of the three major commodity markets, wheat holding the bottom end of its 12-week range (HRW & HRS) seems to be the most constructive thing about yesterday.

The China National Grains and Oils Information Center released update production forecasts overnight with corn at 201MMT, up from 197MMT last and up 4.26% y/y.  Wheat was seen at 118MMT, unchanged from the last guess and up 0.51% y/y.  Soybean production was estimated at 12.8MMT, down 0.2MMT from last month and -11.63% y/y.  FWIW, very few private estimates have China’s wheat crop anywhere near 118MMT, but are closer to 110MMT.  This on top of the rumored purchase of 300,000MT of Canadian spring wheat yesterday.  Also of note, Japan issued a tender for 128,144MMT from the US and Canada.  All but 28,068MT will come from the US.  A wire story also said Japan bought 250,000MT of corn from Ukraine at $1.10 over the December CBOT board.  The cargoes were said to be for Nov-Dec shipment.  Also from Ukraine, grain stocks as of Oct 1 were 19.4MMT, down 11% y/y.  Ukraine grain exports are up 73% y/y July 1-Oct 15 to 6.64MMT.  The ministry said exports will slow appreciably through the end of the year.

Open interest changes yesterday included corn down 6,124 contracts, wheat down 607, soybeans up 1,213, meal up 1,104, and soy oil up 4,421.  Corn is still seeing long liquidation, somewhat of silver lining, while the soy complex appears to be adding fresh shorts almost daily.  Open interest continues to steadily increase in soy oil which is likely to be noncommercials.  Chinese markets were a bit firmer last night with soybeans up 8.75c, meal down $1.00, soy oil up 75c, corn up 4c, Malaysian palm oil up 2 ringgit at 2,435 (Dec), Paris Milling Wheat is up 0.19%, Rapeseed is up 0.47%, Corn up 0.31%, UK feed wheat up 0.05% and Canola is up 2.20%.  Canola’s demand prospects still look incredibly strong, and after slightly smaller supplies, fits with it putting a growing premium over soybeans..

Not much really stood out about the crop progress report with corn harvest heading down the homestretch at 79% complete.  Notable progress remains in OH at 31%, MI at 36%, PA at 41% and WI at 54%.  On soybeans the stand outs are OH at 38%, KS at 40%, TN at 33%, SC at 7% and KY at 42%.  Much of these are double crop beans, however, and national progress remains 13% ahead of average.  Winter wheat emergence in the northern plains remains a big concern.  SD is at 11%, MT at 25%, ID at 33% and OR at 24%.  Too dry.

Not a surprise to see a decent bounce today consider the Fri/Mon break.  Most fundamentalists continue to scratch their head at the current sell off given the lack of movement from the farm, firm cash markets and firm spreads.  This seems to point toward value at current flat price levels, so would caution against getting overly bearish “down here.”  On the other hand, liquidation events usually last longer than anybody thinks they can, so no need to a hero…

Trade as of 7:10
Corn up 5-7
Soy up 11-13
Wheat up 7-10  

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

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