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.
Wednesday, January 23, 2013
Afternoon Recap from CHS Hedging's Tregg Cronin
Outside Markets as of 1:20: Dollar Index up 0.079 at 79.953;
NYMEX-WTI down $1.47 at $95.22; Brent Crude up $0.23 at $112.67; Heating Oil up
$0.0007 at $3.0689; Livestock markets were mixed with cattle firmer and hogs
weaker; Softs are firmer; Gold down $8.20 at $1685.20; Copper down $0.0225 at
$3.6825; Silver up $0.073 at $32.250; S&P’s are down 0.75 at 1488.75, Dow
futures up 25.00 at 13,721.00 and Treasuries are flat.
The highlight of financial markets today was probably the
vote in Congress today on raising the debt ceiling. The latest reports
said it would most likely pass, but the interesting thing was the rider House
Speaker Boehner attached to it. Apparently he added an amendment that
said until Congress passes a budget, there will be no pay for the
legislators. Hopefully it sticks and passes, and has some teeth of
enforcement. Otherwise, the drop in crude oil was probably most
noteworthy as capacity on the Seaway pipeline was reduced and the International
Monetary Fund cut is global growth forecasts. Wholesale gasoline remains
at $2.8300 on the board.
Very choppy trade on a low-volume session which saw prices
two-sided before selling pressure showed up to drop corn to the lowest level in
7-sessions. If one is looking for the news behind the selloff, they
likely won’t find it. Farm movement was limited at best, and not behind
the sell pressure. Calendar spreads were weaker, however, so there did
seem to be some commercial influence behind the sell flow. Others also
cited the expectation for another poor week of ethanol production when that
data is released tomorrow, and probably another slow week of export sales on
Friday. The idea of the US being unable to slow it’s feed demand
won’t be much of an issue if we continue to post ethanol and export numbers
like we did last week until March 1st.
Friday will see the Jan 1 Cattle on Feed report released
after the market close with analysts looking for Jan on-feed at 95.8% of a year
ago. Placements are forecast at 104.1% during December, and marketings
are seen at 93.2%. On its face, it would look like a bearish-cattle,
bullish feed-demand report. No reason to argue with the average trade
estimates, although one well respected analyst is looking for even larger
placements and smaller marketings. The National Weather Service said the
stretch between STL and Cairo will remain navigable through February 20th.
From a pure technical standpoint, March corn ran into its 61.8% retracement of
its 7.67-6.78 sell off at 7.33 and was never really able to penetrate it.
The short-term trend is down with support seen at $7.07.
CIF bids weakened further today with spot barges down 2c to
+52H, Feb down 2c to +55H and Mar steady at +60H. Illinois River basis
continues to weaken with spot now 6.8c below DVE and Feb 1.3c below. Should
continue to apply pressure to the CH/CK as it did today. The CH/CK closed
at -2.00c, down 0.25c. Saw some small commercial elevator bullspreading,
but most elevators are either patient waiting for -3.00c+ or don’t have an
incredible amount of basis length to push to May. The CN/CZ closed down
5.75c to +126.50c. The 6-month RBOB/Ethanol strip closed at $0.58/gln,
providing plenty of incentive to keep blending ethanol if refiners aren’t
opting for Brazilian sugarcane ethanol. PNW corn shuttles stabilized at
+110/112H, but Grp-3 was weaker, down to +10/15H.
In a somewhat surprising reversal, wheat went from lower
overnight to higher during the day session, only to sell off along with corn
and soybeans and close lower. Like yesterday, there wasn’t an
overabundance of news to really drive wheat prices, but newswires wanted to
talk about the better forecasts for this weekend and in the extended outlook
which promise to bring precip to the parched southern plains region. E-KS
has chances this weekend for 0.60”, but not much for the majority of the HRW
belt. Otherwise, there wasn’t any export business to speak of, and the
clock is ticking on the US program. The chatter in the news about Russia
removing the 5% import duty on wheat offered fodder for writer’s, but not much
Demand for spring wheat seed in the United Kingdom has risen
to a record after rains prevented farmers from planting during the
autumn. The wet conditions restricted fall cultivation, and prevented
seed bed prep. Ukraine’s grain stockpiles as of Jan 1 were 8.4MMT,
including 5.8MMT of milling wheat according to the Ag Minister. Corn
stockpiles were 13.8MMT and barley at 5MMT. Ukraine needs 2.6MMT of
milling wheat for domestic consumption before the 2013 harvest starts.
India continues to sell feed and milling varieties and are one of the main
causes for the US program remaining subdued. Wheat has rejected the 38.2%
retracement of the 8.95-7.36 sell off at 7.97 basis Chicago futures.
Short-term trends are down without much in the way the next 20-30c.
Spot floor trades in Minneapolis were up 10-15c with 14.0%
at +75/100H, while 15.0% was seen at +110H. There were 55 cars on the
floor. KCBT protein scales were unchanged with 12.0% at +87/102H.
SRW barges were unchanged at NOLA while HRW slipped 2-7c on the bid side to +117/118H
through May. Calendar spreads could be called uniformly weaker as the
MWH/MWK closed down 0.25c to -12.00c. This spread traded as wide as
-12.25c, but opinions are split on how wide it might go. The general
opinion is with elevators note toting a lot of basis length, and the new vomo
specs/storage rates it works wider. However, the specs appear to be the
only one’s long the spread, so waiting for -14.00/-15.00+ might get lonely.
Big reversal day in soybeans, giving back almost all of the
previous day’s gains and taking out yesterday’s low. Odd was the fact
movement of soybeans yesterday was much heavier than today, prompting some to
question whether yesterday’s buying was fund purchases or export pricing?
The heavy weakness in the calendar spreads today would suggest there was
commercial participation on the sell side. The fact is the bulls
need/want to focus on South American weather which is nearly ideal for Brazil
and a bit drier/warmer than wished for in Argentina. Yet, neither country
has an outright disaster, and until we’re talking about a 4-6MMT reduction
in the forecasts from the USDA, going to be tough to go up every day.
It’s still very early for both bears and bulls.
Midday forecasts kept a light rain chance in for this
weekend, although accumulation isn’t expected to be large. Generally
under 0.30”. The 6-10 is what most are focusing on with chances in the
main growing regions. See 6-10 GFS map below. The Euro 6-10 wasn’t
quite as generous and kept rains farther west. (Also below). Brazil
remains awash with rain throughout, a limited concern. Still plenty of
people concerned about where we’ll be able to buy beans and therefore meal
later this spring and summer. Some analysts already doing the math for
importing beans from Brazil. Basis in some slots in Brazil were firmer;
others weaker. Call it a wash w/w. No real technical damage done
to bean charts today. $14.21 would be a downside trigger for additional
CIF bids were softer again today with spot NOLA barges down
1c to +95H, Feb unchanged at +83H and Mar down 1c to +72H. Surprisingly,
river basis remains well above delivery for spot boats at +35c, but drops below
delivery equivalence by 6.9c for Feb to go back above delivery by 15c for
March. April through July Illinois River basis is 12.8-15.1c above
delivery equivalence which illustrates how tight the bean market is perceived
to be, despite the fact exports should taper off quite rapidly Mar 1 forward.
Many traders looking for the SN/SX to make a run at $2.00 from its current
level of +115.75c. New crop river basis is also pushing above delivery
equivalence for Nov/Dec as cash traders suggest Sinograin is buying on the back
end of the inverse. Nice to know where they see value. SH/SK fell
2.50c to +10.00c thanks to the sloppy front-end on the river. PNW basis
is also said to be a little softer, but elevators just aren’t confident about
dumping what length they do have or even going short in any meaningful
tonnages. Where does the farmer sell?