Tuesday, January 29, 2013

Afternoon Recap from CHS Hedging's Tregg Cronin 1-29-2013

Outside Markets as of 1:20: Dollar Index down 0.177 at 79.571; NYMEX-WTI up $1.03 at $97.48; Brent Crude up $0.76 at $114.24; Heating Oil up $0.0383 at $3.0999; Livestock markets are weaker led by feeders; Softs are mixed with Sugar down 2.03%; Gold up $9.10 at $1662.10; Copper up $0.0280 at $3.6900; Silver up $0.585 at $31.370; S&P’s up 5.00 at 1502.00, Dow futures up 57.00 at 13,890.00 and Treasuries are being offered.

Limited time to get a write up together again today due to meetings this afternoon.  Main themes today were definitely South American weather maps as the overnight run was drier, but midday maps wanted to put more moisture into the equation for the 10-15 day.  If there is any unity to these models, it seems that the nearby forecast continues to have amounts reduced as it draws closer, and the promise of better moisture is always in the extended maps.  By the time that extended map becomes the nearby forecast, moisture is taken out for Argentina and S-Brazil.  Sounds an awful lot like the US in July.  No extreme heat is seen in either location, although Argentina is going on its 6th week of dryness.  This seemed to be behind the soy complex strength, along with the building vessel lineups in Brazil.  When the 3.0MMT soybean lineup is combined with corn and meal, it totals close to 7.5MMT which would be a record for this date.

Egypt  continues to make headlines, but mainly for the wrong reasons.  The Egyptian defense chief warned that political unrest could bring about the “collapse” of the state after a week of street battles which has left dozens of Egyptians dead.  The effect on the wheat market is such that it may make it more difficult for the world’s largest importer to secure financing and acquire stem.  On top of that, recent comments suggest Egypt has enough stocks to get to June which is when they harvest new crop.  Highly unlikely considering the last time they bought wheat was for LP-Feb.

The oil cleanup from two barges hitting a railroad bridge near Vicksburg, MS continued today and in the process backed up almost 800 barges on either side.  Traffic has basically been halted, and this is probably seen supporting up front bean barges.  Caution thinking it’s nearby demand, as the PNW continues to soften today on bean shuttles with most bids +145H at best.  If one offered a train, that bid might not be there.  Call those bids down 10-15c w/w.

Another big headline today was White Energy, Inc, an ethanol producer in Plainview, TX is planning to idle operations due to high corn prices.  The Plainview plant was said to have name plate capacity of 120 million gallons a year, and their Hereford TX plant which has capacity of 45 million gallons, is also said to be running at reduced capacity.  This plant follows a long list of closures which will keep ethanol production on a weekly basis under pressure and at risk of not meeting the 4.500 billion bushel corn grind forecast.  Spot margins were said to be improving with some of the recent plant closures, but 2013 RIN values were said to be changing hands between 31c and 33c this afternoon which wouldn’t suggest production is ready to roar back open again.  Means plants would rather buy a RIN at 31c/gallon than produce the actual gallon of ethanol.  Tomorrow’s weekly ethanol production figure should be interesting.

State wheat conditions from KS/NE/OK/SD were well reported this morning and during the day session so won’t rehash them.  They’re poor.  We knew that at the end of December, and they haven’t improved.  Still hard to trade the current conditions or possible drought on January 29th.

Crush plant basis for soybeans looks firmer in the WCB going home today, but CIF bids admittedly losing steam along with their PNW counter-parts.  CIF corn bids were unchanged with spot Illinois River basis at 2.3c under gross delivery equivalence, February is at DVE and March is 3.4c above DVE.  Probably part of the reason the CH/CK traded an inverse most of yesterday.  The Rogers Roll, or pre-GSCI roll, looks like it got underway late today with overt pressure witnessed in the CH/CK and SH/SK.  SH/SK took it in the throat today, down 2.25c to +12.00c.  SN/SX was up 4.0c to +116.75c.

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

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