Overnight Highlights from CHS Hedging Tregg Cronin

Outside Markets: Dollar Index up 0.076 at 81.154; NYMEX-WTI up $0.65 at $86.09; Brent Crude up $0.79 at $108.82; Heating Oil up $0.0157 at $2.9892; Livestock are quiet; Gold down $6.40 at $1706.90; Copper is down $0.0235 at $3.4455; Currencies are mixed; Softs are mixed, but Cocoa is down near 1.0%; S&P’s are up 2.25 at 1353.50, Dow futures are up 4.00 at 12,526.00 and Treasuries are near unchanged.     

Not much for economic news overnight, but the main feature in the US will be Congressional leaders heading to the Whitehouse to meet with President Obama for talks on taxes and the fiscal cliff.  One thing is for certain, markets won’t like anything that comes out of the talks and equities are likely to take it on the chin.  The only real piece of economic data on today’s docket is industrial production, so the focus will be on the Whitehouse.

Dry in the Midwest the last 24 hours, and expected dry the next 5-days aside from some precip in the PNW over the weekend.  No change to  extended maps from NOAA with above normal temps seen the next 6-15 days, and below normal precip as well.  The southern plains will enter dormancy without any follow up moisture which will keep conditions under pressure.  Forecasts in South America are dry the next 5-days, but rains move back into Argentina during the 6-10.  There will be wetness concerns in Argy, but Brazil should be in good shape.  There isn’t much confidence in the 11-15 at this point, but maps are showing pretty widespread moisture across Brazil.  The only threat at this point seems to be wetness in certain areas of Argentina.

The feature from the overnight has been continued liquidation in the soybean complex as prices trended steadily lower overnight until a last burst of selling around 3:30am sent things through support and to new lows for the move.  Soybean prices are now at the lowest level since June 22^nd.  The main rumor from the overnight according to Reuters is China canceled 600,000MT of US soybeans due to poor crush margins.  It wouldn’t appear this is the case based on CIF and PNW basis considering the sharp advances we’ve seen in those values this week.  Still, crush margins have been thought to be rather negative, and with the large break in the futures board, almost every soybean purchase any importer has made since June is now more expensive than it is today.

Other headlines last night included word South Korean feed mill KFA had begun to buy new crop South American soy meal for arrival by late-April.  Prices were said to be around $507/MT C&F.  MFG was said to have bought meal for $505.36/MT C&F for arrival by Apr 25^th.  Another article from Bloomberg quoting analysts in Germany also said China had “scrapped deliveries that were supposed to be dispatched in Dec and Jan that just a few weeks ago had been agreed at significantly higher prices… It is likely these shipments will be renegotiated at lower prices.”  Other headlines included articles talking about Egypt moving on US wheat in its next tender with that rumored to be this weekend.  A trader with Venus said they expect the next tender to be about 50/50 French-US.  Also worth noting, India has continued to sell what from state reserves for use in the global export market.  Headlines said they may tender to export another 500,000MT of wheat for December, and this would continue to displace Australia and the US.

Open interest changes yesterday included wheat up 1,620 contracts, corn down 1,810, beans up 5,160, meal down 880 and soy oil up 3,180.  Soybeans now appear to be adding fresh shorts, although the shorts would seem to be managed money as opposed to commercials considering the lack of farmer movement and the firm cash levels being paid.  Malaysian Palm Oil was down 38 ringgit to 2,396 overnight, but was up 80 on the week.  Chinese markets were relatively steady, so not the cause for selling in our market.  Soybeans were down 0.25c, meal down $6.50, soy oil down 74c, corn up 0.75c, palm down 51c and wheat down 3c.  Paris Milling Wheat is up 0.19%, Rapeseed down 0.74%, Corn down 0.39%, UK feed wheat down 0.38% and Canola down 1.11%.

Export sales this morning which should show big product sales, decent bean sales, and continued slow exports on corn and wheat.  Possibly stabilizes things near the lows, but I wouldn’t count on anything with support almost non-existent in this soybean market.  Corn basis did firm at several ethanol plants in the upper-Midwest, at feed lots in Hereford and off the PNW.  It would seem most of our basis strength, on everything, is lack of farmer movement for the time being, but demand should be being bought down here.

Trade as of 7:15

Corn down 2-5

Soy down 9-16

Wheat down 1-4

Tregg Cronin
Market Analyst
800-328-6530
651-355-6538
651-355-3723 fax

www.chshedging.com

CHS Hedging, Inc.
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