Friday, January 4, 2013

Overnight Highlights from CHS Hedging's Tregg Cronin

Outside Markets: Dollar Index up 0.417 at 80.796; NYMEX-WTI down $0.88 at $92.03; Brent Crude down $1.25 at $110.89; Heating Oil down $0.0297 at $2.9954; Livestock prices are mostly firmer; Gold down $39.90 at $1634.60; Copper down $0.0410 at $3.6760; Silver down $1.245 at $29.465; S&P futures are down 0.25 at 1453.25, Dow futures down 7.00 a 13,312.00 and Treasuries are weaker.    

Quietly lower equity markets in Europe and the US overnight, but Asia put on another rally with the NIKKEI rising 2.82% to the highest level since March 1, 2011 after being closed much of the week.  The Shanghai Composite was also firmer, leveling off at the highest level since June 20th.  The main focus today is the monthly employment report which is expected to show 152,000 jobs added to US payrolls during December.  Private payrolls are seen up 150,000.  The unemployment rate is expected to remain flat at 7.7%.  Later this morning we will also get factory orders which are seen at 0.40%, down from last month’s 0.80% result.  The ISM Non-mfg. composite is seen at 54 vs. 54.7 last month.  Gold is headed for its worst weekly losing streak in 8-years on concerns over the budget deficit.

The last 24-hours saw no measureable precip fall anywhere outside of W-TX.  Much of TX is seeing precip in the form of rain or snow or both.  The 5-day forecasted precip map is putting some measureable precip in the ECB to the tune of 0.10-0.40”, but the heaviest moisture will be in TX where parts of E-TX will see 1.9” in total.  Sections of SE-OK will also see moisture, but the bulk of the HRW belt will remain dry.  NOAA’s 6-10 day maps seem to put more moisture in the extended maps each day with above normal precip forecast.  Temps are seen mostly normal to above.  8-14 looks normal/above on precip, while temps should move to below normal with the epicenter of the cold over the Rockies.  On average, the pattern for wheat areas seems to be “normalizing” a bit more.  SAM weather attached.

Quietly mixed trade overnight with wheat remaining inside 5c ranges, corn inside 4c ranges and beans inside 10c ranges.  Been a while since we’ve traded in such tight ranges, but definitely indicative of the lack of news flow and traders wanting to get to the Jan 11 reports.  The focus of today could be outside markets with employment numbers due at 7:30 CDT.  While the famous last words of many traders have been “we seem to be holding support,” it does appear as though corn has found a near-term bottom in the mid-680’s, and wheat bounced off its May highs.  Appears as though the worst of the damage could be done until data tables are refreshed.  Export sales this morning will be scrutinized closely to see if wheat is doing business on a consistent basis.  Soy charts still weak.

Overnight headlines included some tender business with South Korea’s NOFI buying 69,000MT of optional origin corn at $308.66/MT C&F for June arrival.  This was out of a tender for 195,000MT, and is probably still SAM origin based on current US FOB prices in the $296.54-316.22/MT vs. Argy at $291.72/MT and Braz at $277.25/MT.  NOFI also bought 60,000MT of SAM feed wheat at $331/MT C&F from Glencore for April 1 arrival.  This looked like Argentine origin.  White wheat off the PNW is around $308.65/MT FOB.  On a buying spree, NOFI also bought 20,000MT of Indian soymeal at $537.80/MT C&F for Apr 10 delivery.  They also bought 55,000MT of SAM meal at $468.88/MT C&F for June 20 arrival.  On the whole, would have to characterize the tender business as US grain getting close to being competitive on feed grains, but maybe not quite there.  Prices may not have to change much, however, as SAM will be gut slot harvest in another 30-45 days.  Also worth noting, the US Army Corps of Engineers said the river may remain open until Jan 26 as rock continues to be removed.  Those comments, along with barge lines more freely publishing freight quotes, it isn’t much wonder why corn and soybean spreads have traded firmer and continued to do so overnight.  The CH/CK is up 0.25c to -1.50 overnight.

Open interest changes yesterday include wheat up 2,930 contracts, corn down 430, beans down 4,150, meal up 1,390 and soy oil down 4,770.  There were 9 soy meal re-deliveries overnight as these continue to be re-circulated.  1,499 soy oil were re-delivered and 73 ethanol.  Chinese markets were open for the first time in several days with beans down 5.25c, meal off $9.70, soy oil up 31c, corn up 3.25c, palm up 10c and wheat up 2.50c.  Honestly surprised their markets were able to trade as well as they did considering the drubbing most of our markets have taken this week.  Malaysian Palm Oil was down 7 ringgit to 2,467.  Paris Milling Wheat is up 0.61%, Rapeseed is up 0.78%, Corn up 0.84%, UK Feed wheat up 0.24% and Canola is down 0.14%.

Export sales should decide early direction, but it feels like markets could recover a bit more into the weekend.  Friday’s are trend days and the trends are down, but spreads are starting to grab, basis perked up in several areas this week and farm movement has been notably absent.  Ethanol production will also be out later today at 10:00 CDT so keep an eye on that.  We need to start doing some export business down here to justify even the reduced prices.

Trade as of 7:00
Corn up 1/2c
Soy up 1-3
Wheat +/- 1-2c

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

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