Thursday, February 28, 2013

Overnight Highlights from CHS Hedgings Tregg Cronin 2-28-13

Outside Markets: Dollar Index down 0.015 at 81.589; NYMEX-WTI down $0.08 at $92.68; Brent Crude up $0.42 at $112.29; Heating Oil up $0.0095 at $2.9974; Livestock markets are weaker; Softs are mixed; Gold down $4.40 at $1591.30; Copper up $0.0070 at $3.5740; Silver up $0.070 at $29.060; S&P’s are up 0.75 at 1516.50, Dow futures are up 2.00 at 14,062.00 and Treasuries are firmer.

Sharp rallies in Asia following the US led rally yesterday, and Europe is unchanged to better as tensions ease following the Italian elections.  Equity markets in the US yesterday rallied to within 100 points of the all-time record on the Dow Jones Industrial Average, seemingly paying little attention to tomorrow’s looming “sequestration.”  Strength by the New Zealand Dollar is a feature this morning after weakness the last several days.  Lots of important economic data today including Q4-GDP revisions (+0.5% vs. -0.1% prior), personal consumption (2.3%), jobless claims (360,000), Chicago PMI (54.0 vs. 55.6 prior) and KC Fed (-1 vs. -2 prior).  Obama will meet with Congressional leaders today.  Groupon and JC Penny’s missed earnings estimated badly and are under pressure.

Dry in the central and southern plains, while the central and eastern corn belt picked up another 0.01-0.10” in moisture by way of snow the last 24 hours.  Scattered snows in the East this morning.  Next chance at some moisture in the Midwest comes Sun-Tue when an area from Billings to Nashville could see 0.10-0.30”.  Otherwise, next chances for moisture come for ND/SD/T/MN from March 5th-9th, with more moisture in the 8-14 for the rest of the corn belt.  Above normal precip seen for all, while temps should be below normal and most of the moisture falling as snow.  Dry weather in almost all of South America yesterday, with the next system coming through Friday-Sat with 0.50-1.50” on 85-90% of Argentine growing areas.  On and off showers in Brazil.  Weather is pretty good.

Quite a bit better futures markets overnight led by wheat, and most especially KC wheat.  In fact, with May KC wheat up 1.45% this morning, it is the strongest of any commodity.  This appears in anticipation of improved export sales later this morning.  Estimates on wheat export sales are estimated at 350-900,000MT, but I’ve seen more than one wheat analyst suggest the total could be over 1MMT.  If that proves true, we have likely seen the bottom in wheat prices and will attempt to add more premium.  Having said that, we have enough wheat to put out any fire which pops up, but we are probably due for a bit of a rally to ease the rallying basis.  Soybeans are also firmer this morning on the same ideas, and lack of improvement in Brazilian logistics.

Overnight, South Korea’s Flour Mills bought 21,800MT of Canadian wheat at $336.50/MT FOB from Mitsui for May 1-15.  Bangladesh bought 50,000MT of optional-origin wheat at $328.16/MT C&F.  The Russian Ag Minister said overnight that the country won’t restrict grain exports no matter what the size of the next crop.  The crop estimate at current is 95MMT, up 34% y/y.  Grain exports are seen at 15MMT.  Several media outlets have commented on the shambles Egypt’s finances are in, and how this is probably affecting their ability to source grain.  Egypt’s ability to provide food and fuel is central to preventing social unrest.  The Egyptian Pound has depreciated 5.6% this year, making it one of the 10 worst-performing currencies.  Export house Toepfer said bean vessels at the Brazilian port of Santos may wait up to 6-weeks for loading. said Chinese crushers may need to continue buying high-prices US beans due to disruptions from Brazil.  Brazil loaded 1.5-1.8MMT of soybeans for China in February, down from 2.0-2.5MMT last year.  There are also many analysts making note of the almost unrealistic slowing to the pace of crush in the US which needs to happen in order to prevent the carryout from dropping below 100mbu.  The SN/SX should continue rallying.

There were 119 Chicago wheat deliveries overnight, 0 KC wheat, 296 Minneapolis wheat, 0 corn, 0 beans, 0 meal and 2,932 soy oil.  The Minneapolis deliveries were a bit surprising, but the bulk of the deliveries came from Term, which looks like the certs Louis Dreyfus stopped against the December and are simply re-delivering so as to not pay to get their certificates upgraded with the new Vomi specs.  The biggest stopped was a Newedge account which is most likely Gavilon.  It certainly makes sense to stop spring wheat and load it out against to-arrive bids at +120K.  No surprise on corn or soybeans.  Basis at the Gulf, and at the processor, firmed yesterday, keeping Illinois River basis on both well above delivery equivalence.  Talk of Mexico in for corn business last night so watch 8:00am.

Open interest changes yesterday included wheat down 6,270 contracts, corn down 18,930, beans up 3,280, meal down 3,340 contracts, soy oil up 1,480.  March corn saw an open interest drop of 41,100 contracts.  Chinese markets were mixed overnight with beans down 0.25c,  meal up $2.20, soyoil down 4c, corn up 0.75c, palm down 31c and wheat up 0.25c.  Dalian soybean oil fell to the lowest level overnight since September 2010.  Malaysian Palm Oil was also weak, down 13 ringgit at 2,397, or 0.54%.  In the last 7-sessions, Palm is down 7.2% on slower exports and heavier stocks.  Paris Milling Wheat is up 0.51%, Rapeseed down 0.21%, UK feed wheat up 0.44%, Paris corn up 0.22% and Canola is up 0.26%.

Call things better with an eye on export sales at 7:30am.  Looking at estimates, it looks like we have a decent chance to beat expectations based on what’s been reported by the daily reporting system as well as what’s been rumored to have been sold the last week.  Farm gate movement hasn’t been strong enough to quench basis thirst, so a futures rally seems likely.  Wheat basis has the potential to get sloppy if wheat moves, however, as there is plenty left in the northern plains.

Trade as of 7:05
Corn up 1-3
Soy up 1-6
Wheat up 7-11

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

Wednesday, February 27, 2013

Closing Comments 2-27-2013

Below are closing comments and a wheat chart

First off is a KC MAY wheat chart.

This shows that we have had a small bounce the last couple days.  Yesterday actually leaving a bullish reversal; as we traded to the lowest level since June and closed higher.  We also have had a very oversold market as noted by the STOCH; one that looks like it is trying to turn positive.  If we could get another 20-30 cents we would then see some that recently shorted wheat be in the red and that might spill over to a little short covering.   Overall the market has been one of those “catch a falling knife” type of markets; but at least today yesterday’s low provide us a possible support area.

When things closed out today we seen corn close unchanged on the May futures, up 4-5 on the March futures, and Down 2-3 on the Dec futures.  Soybeans closed up 8-10 cents, KC wheat was up 2, MPLS wheat was down 2, CBOT wheat was up a penny, the stock markets had a strong bounce with the DOW up 175 points, and the US dollar was down about 300 at 81.53 on the cash index.

Overall not a bad day for the grain markets; but wheat is still failing to show any real strong signs that it is going to bounce.  Charts look a little better as noted above; but we are not getting ran over with demand and that old saying the trend is the friend sticks out in wheat.  The trend is down and has been down for some time; we really need a catalyst for that to change.  The last major catalyst that we had was snow in the Kansas and some of the other HRW growing areas and moisture that helps out the prospects for a crop is not a catalyst for higher prices. 

On the positive side we have seen wheat basis continue to firm; but part of that is due to slow moving rail roads and the balance is simply due to a lack of producer selling.  The strong basis we are seeing has little demand behind it; at least not export demand.  Which is really were we need to see some demand at.  We export too big of percentage of our wheat to have a bullish wheat market without solid export demand.  Some of the headlines recently indicate we are getting some exports sold and I expect good export numbers tomorrow; but we really are not getting the swing hard red winter wheat export business that we need to be.  We have recently got some feed wheat export business but as I have said for months we need to get HRW export business before we can get bulled up.  Doesn’t matter if we are these levels, a buck higher, or a buck lower; we need export business or we will simply have too much wheat no matter how ugly or small our wheat crop ends up being.  Plus we have to remember that many areas have seen the prospects for the wheat crop stabilize.  Much of the market is trading like the crop still has a chance to be an average crop; which I don’t think is the case.  But if the funds want to trade weather patterns or rain then how much the rain or snow will actually help our poor condition crop won’t matter in the short run.

Ethanol production numbers were out this a.m. and they saw a bounce of 1.9 percent from last week which puts us right about at the level needed on a per week basis to meet current USDA projections.  More positive I thought was the fact that we only lagged last year by 8-10 percent; which is the first time in several months that we have only behind 10% less than a year ago.  Keep in mind that the USDA has been forecasting a 10% drop from 5 billion bushels to 4.5 billion bushels and for months we have been between 12-18% less than last year at this time.

Corn basis also continues to be firm; but we are also finding some markets that have coverage.  I know of three different ethanol plants that a covered past April.  The strong interest is really for the deferred slots; but those are also the slots were the margins are a little more unknown.

We did sell some sunflowers to the crush yesterday.  Typically this time of the year sunflowers don’t go to the crush; but these did.  We sold them with no oil premium or discount and at par to a 75 cent premium over some of the lower birdseed bids that are out there.  I view that as a good sign; I prefer to see much more go to the crush before I get bullish.  But if the crush can take some product out of the pipeline right now; perhaps that means that later on when producers get busy that the birdseed industry has to pay a little more of a premium.  Right now as things sit today we simply have way more supply then we do demand.

Don’t forget we are still offering free delayed price for corn, winter wheat, spring wheat, and sunflowers.  But also keep in mind that we do have rather strong basis levels.  I think we see lots of wheat move on any bounce at all especially from the farmer down south that got some snow in Kansas.  So perhaps one might want to be looking at locking in basis; after all we are on the historically high side of things; and more than likely a basis contract will work great if we see the board decide to rally.  I would have similar thoughts on corn; but keep in mind that corn has much more of a marketing left then wheat does.

Please give us a call if there is anything we can do for you.

Afternoon recap from CHS Hedging's Tregg Cronin 2-27-2013

Outside Markets as of 2:00: Dollar Index down 0.256 at 81.607; NYMEX-WTI up $0.16 at $92.79;  Brent Crude down $0.81 at $111.90; Heating Oil down $0.0388 at $2.9929; Livestock markets are mixed with cattle up and hogs down; Softs are firmer led by Cotton which is up 3.35%; Gold down $22.60 at $1592.90; Copper down $0.0085 at $3.5745; Silver down $0.445 at $28.875; S&P’s are up 24.75 at 1516.75, Dow futures are up 200.00 at 14,060.00 and Treasuries are weaker.

Taught classes this morning, and in meetings this afternoon, so just a few comments on cash and spreads with some articles below worth a look through.

Markets continuing their rallies today on lack of farm gate movement, still firm cash markets, export business, rebounding ethanol production and most likely some light profit taking in the wheat pits.  The close wasn’t incredibly strong, and May corn failed to close above the vaunted $7.00 level.  $7.01 kick starts technical buying. Ethanol production continues to see a rebound in weekly production, poking back above 800,000bbls/day for the first time in seven weeks.  Stocks declined slightly, but remain rather large.  The improvement in margins has gotten plants back open, and the basis reflects their desire to get corn bought.  Still lots of ethanol plants in IL/IA paying +50K or more for trains, but the demand seems to be for AMJJ.  Truck corn might be a bit weaker at some.  Wheat’s discount to corn is starting to perk up the interest of a lot of feed lots both in the US and abroad.  Japan was in for SRW as feed wheat, the first time in quite a while.  KS/CO feed lots interested in HRW.  SRW working into southeast markets.  Isn’t whacking corn basis severely yet, but likely isn’t far off.

PNW spring wheat basis firming up with cash guys calling it up 20c vs. two weeks ago.  Doesn’t appear to be the guys who sold the Chinese business two weeks ago, so hard to tell if it is covering business already on the books, or if this is fresh demand.  To-arrive bids over Chicago not showing much life this afternoon, so would assume we have plenty of wheat to put out any fire.  A basis selling opportunity seems to be right around the corner on wheat.  Lots of wheat left on farm.  MWH/MWK rallied late, closing up 0.75c to -9.00c, but traded all the way into -7.50c as guys bought the spread instead of pumping up basis any further.

Dr. Michael Cordonnier said he expects Brazilian yields to fall as harvest progresses, not rise.  Deutsche Bank was in the news putting the Brazilian soy crop at 79-80MMT, by far the lowest in print and well under the USDA’s 83.5MMT.  Two cargoes to China for 12/13 and two cargoes to unknown for 13/14.  Fits with the business bantered about late last week.  The export pace we’re on is unsustainable.  Brazilian basis levels continue to fall, but this seems to be tied to importers refusing to pay up because they won’t get beans no matter what they pay, so why bid it?  Lineups on soy grow every day as you can see below.  Total soy and products lineup is 9.467MMT vs. 8.643MMT last week.  Corn lineup is 1.194MMT vs. 1.464MMT last week.

Shouldn’t be any deliveries against March corn or soybeans, but there are 1,882 March Chicago Wheat delivery certificates on the street, and these could see deliveries potentially.  Wouldn’t think there would be any spring or winter deliveries considering the basis is firm enough and works by 15-20c to load wheat out.

Deutsche Bank Says Brazil Soybean Crop May Be 79-80 Million Tons
2013-02-27 07:23:31.183 GMT

By Claudia Carpenter
     Feb. 27 (Bloomberg) -- Brazil’s soybean crop for 2012-13
may be 79 million to 80 million metric tons and corn 70 million
to 71 million tons, below the U.S. Department of Agriculture
estimates, Deutsche Bank AG said.
     Competition for soybeans to export in Brazil is “fierce”
as crushers and hog and chicken industries also want supplies,
Christina McGlone, an analyst at the bank in New York, said in a
report dated yesterday. The USDA’s estimates are 72.5 million
for corn and 83.5 million tons for soybeans.
     Supply is limited at ports because of delayed plantings,
late harvesting due to wet weather, new trucking regulations,
unrest with port workers and vessel line-ups, she said. That may
spur demand for U.S. supplies for now, she said.

China Buys U.S. Corn as Mold to Hit Local Supply, Yigu Says (1)
2013-02-27 07:32:25.332 GMT

     (Updates price in fifth paragraph.)

By Bloomberg News
     Feb. 27 (Bloomberg) -- Feed mills in China, the second-
biggest corn consumer, will probably order more U.S. grain on
concern that domestic supply won’t meet demand before the fall
harvest, researcher Yigu Information Consulting Ltd. said.
     Snow and rain in northern China have increased moisture in
farmers’ unsold grain, making it more vulnerable to mold and
less suitable as animal feed, said Feng Lichen, the general
manager of Yigu, which runs China’s biggest corn information
portal. Some mills are securing shipments from the U.S., the
biggest exporter, for deliveries later this year using newly
issued import permits from the government, as the cost of U.S.
corn has dropped, he said.
     China’s purchases may help stem an 18 percent decline in
Chicago prices from a record in August. The U.S. crop will be an
all-time high following the worst drought in seven decades, the
U.S. Department of Agriculture said on Feb. 22. Chinese mills
bought at least 120,000 metric tons from the U.S. last week, the
first purchases this year, two executives with direct knowledge
of the matter said on Feb. 22. U.S. corn exporters sold 127,000
tons to unknown buyers last week, the USDA said.
     “China’s corn shortage this year may widen to 5 million
tons from a previous projection of 2 million tons,” Feng said
by phone on Feb. 25 from Dalian in northeastern China, the port
city in the country’s biggest corn-growing region. “The crops
are just too wet, so as soon as the weather warms up next month,
mold will grow,” he said.

                          China Harvest

     The most-active contract on the Chicago Board of Trade has
lost 6.9 percent this month and was at $6.93 a bushel at 3:37
p.m. in Beijing.
     Traders are quoting prices between 2,220 yuan ($356) and
2,250 yuan a ton for September shipments of U.S. corn, including
freight costs, Zhang said. Futures for September delivery closed
at 2,433 yuan a ton on the Dalian Commodity Exchange.
     The USDA had said on Feb. 9 that China’s harvest in the
marketing season from Oct. 1 rose to a record 208 million tons,
cutting possible imports to 2.5 million tons from last year’s
5.23 million tons.
     Purchases by feed mills may have totaled more than 200,000
tons since last week, Cherry Zhang, an analyst at Shanghai JC
Intelligence Co., said Feb. 25. Buyers will proceed cautiously
on concern that U.S. prices may drop more, she said.

COFCO Gets $4.8 Billion Funding to Expand China Grain Processing
2013-02-27 05:10:27.984 GMT

By Bloomberg News
     Feb. 27 (Bloomberg) -- COFCO Corp., China’s largest grains
trader, said it will receive 30 billion yuan ($4.8 billion)
financing from China Development Bank Corp. to boost processing
and shipping of grains and oilseeds.
     The state-owned company will receive the money over the
next five years and use it to ensure the supply and safety of
grain and cooking oil, and for rural financing ventures to
promote development in farming areas, the Beijing-based company
said in an emailed statement today.
     COFCO is the parent of Hong Kong-listed China Agri-
Industries Holdings Ltd., the country’s second-biggest soybean
processor, and China Foods Ltd., the second-largest cooking oil

Egyptian Wheat Stockpiles Will Satisfy 123 Days of Consumption
2013-02-27 11:28:12.198 GMT

By Abdel Latif Wahba
     Feb. 27 (Bloomberg) -- Egypt has 3 million metric tons of
domestic and imported wheat in stockpiles, enough to meet
consumption for 123 days, the cabinet said.
     Inventories of domestic and imported sugar are about
290,000 tons, sufficient to satisfy 71 days of local demand, the
cabinet said today in an e-mailed statement. The government has
142,000 tons of domestic and imported food oil on hand, enough
to meet consumption through the middle of May, it said.

Russia Grain Stockpiles to Fall to Record Low by July 1: SovEco
2013-02-27 09:42:13.246 GMT

By Marina Sysoyeva
     Feb. 27 (Bloomberg) -- Russian state grain stockpiles may
fall to 600,000-700,000t by July 1, SovEcon General Director
Andrey Sizov says at Grain Producers’ Union in Moscow.
  * Russian winter crop losses seen at 12%, Sizov says
  * Russian grain, legumes exports reach 14.3mt so far in season
    from July 1, Sizov say
  * Russian grain, legumes exports seen at 500,000 tons in Feb.
  * NOTE: 6.5% of winter crops failed to sprout or were weak at
    the end of February 2011; harvest was 94.2mt that yr, Sizov

China Soybean Inventory May Decline to 4m Tons, Grain.Gov Says
2013-02-27 02:11:32.122 GMT

By Bloomberg News
     Feb. 27 (Bloomberg) -- China’s inventory of soybeans may
fall to 4m metric tons by end-March from 5.2m tons as of last
week, said in an e-mailed report.
  * Arrival shipments may be about 7m tons in Feb.-Mar., lower
    than 8.66m tons a year ago, it says
  * Shipments may rise starting from April as supplies from
    South America increase, it says.

U.S. Corn Export Sales Seen Declining in Week Ended Feb. 21
2013-02-27 18:49:24.476 GMT

By Jeff Wilson
     Feb. 27 (Bloomberg) -- U.S. export sales of corn probably
fell in the week ended Feb. 21 from a year earlier, while
soybean-meal and soybean-oil sales rose, based on a survey of
five analysts by Bloomberg News. Estimates for sales of wheat
and soybeans ranged from below to above a year earlier.
     The U.S. Department of Agriculture is scheduled to release
its sales report at 8:30 a.m. tomorrow in Washington.

                        U.S. Export Sales
              Estimate Range        Feb. 14, 2013  Feb. 23, 2012
Corn         125,000-400,000           361,826       689,959
Soybeans     300,000-700,000          (119,526)      549,108
Soybean Meal 125,000-300,000           236,132        40,016
Soybean Oil   10,000-30,000             28,872         4,769
Wheat        350,000-900,000           699,257       414,070

U.S. Exporters Sell Soybeans to China, Unknown Destinations
2013-02-27 14:00:00.2 GMT

By Patrick McKiernan
     Feb. 27 (Bloomberg) -- The sale of 120,000 metric tons to
China is for delivery in the 12 months starting Sept. 1, and the
sale of 120,000 tons to unknown destinations is for delivery
before Aug. 31, the U.S. Department of Agriculture said today in
a statement.

Corn Spread Surges on Tight Pre-Harvest Supply: Chart of the Day
2013-02-27 00:00:00.5 GMT

By Jeff Wilson
     Feb. 27 (Bloomberg) -- Tightening U.S. corn inventories
will triple the spread between May and July futures in Chicago
as buyers scramble for pre-harvest supplies, according to Water
Street Solutions Inc., a researcher and farm-marketing adviser.
     The CHART OF THE DAY shows futures for May delivery on the
Chicago Board of Trade will surge to a premium of 45 cents a
bushel over the July contract, compared with 15.75 cents
yesterday, based on a forecast by Arlan Suderman, the senior
market analyst at Peoria, Illinois-based Water Street Solutions.
The spread would match the peak between the contracts last year,
when the worst drought since the 1930s sent prices to a record.
     While the government said Feb. 22 that U.S. farmers will
boost output by 35 percent this year as yields return to normal,
that grain won’t reach buyers for another six months.
Inventories before the harvest will be the lowest relative to
demand since 1974, U.S. Department of Agriculture data show.
     “U.S. corn supplies are forecast tighter than they were a
year ago,” Suderman said in a telephone interview yesterday
from Wichita, Kansas. “It’s all about rationing the reduced
supply from last year.”
     Demand for corn used as livestock feed and to make ethanol
has probably accelerated after prices tumbled to a seven-week
low of $6.8075 on Feb. 25, Suderman said. The USDA said last
week that domestic pork and poultry output in 2013 will rise 0.7
percent. A government mandate calls for refiners to use 13.8
billion gallons of ethanol this year, up from 13.2 billion last
year. Corn prices have tumbled 18 percent since reaching a
record $8.49 on Aug. 10 as output rose in South America and
prospects improved for a rebound in U.S. production this year.
     “There is a real concern among consumers that the U.S.
won’t have many bushels left before the harvest,” Suderman
said. “The spread will widen now to slow demand and maintain
adequate inventories before the harvest.”

Brazil Daily Soy Shipments From Major Ports: Summary (Table)
2013-02-27 15:26:16.581 GMT

By Dominic Carey
     Feb. 27 (Bloomberg) -- Following is a table detailing scheduled soybean
shipments for vessels berthed, arrived or expected at major ports in Brazil,
according to SA Commodities in Santos, Brazil:
                    Feb. 27   Feb. 26   Feb. 25   Feb. 22   Feb. 21   Feb. 20
                       2013      2013      2013      2013      2013      2013
                   ------------------------# of Ships-------------------------
Soy total               164       162       156       157       150       149
Soybeans               124       123       116       116       108       109
Soybean oil              1         1         1         0         0         0
Soybean meal            12        12        12        13        15        14
Soy meal pellets        27        26        27        28        27        26
                  ------------------------Metric Tons-------------------------
Soy total         9,467,669 9,298,669 9,067,308 9,250,123 8,785,072 8,643,572
Soybeans         7,459,979 7,358,979 7,068,068 7,099,068 6,676,518 6,643,018
Soybean oil          5,000     5,000     5,000         0         0         0
Soybean meal       533,989   533,989   533,989   633,804   651,303   603,303
                    Feb. 27   Feb. 26   Feb. 25   Feb. 22   Feb. 21   Feb. 20
                       2013      2013      2013      2013      2013      2013
Soy meal pellets 1,468,701 1,400,701 1,460,251 1,517,251 1,457,251 1,397,251

Brazil Daily Corn Shipments From Major Ports: Summary (Table)
2013-02-27 15:26:06.668 GMT

By Dominic Carey
     Feb. 27 (Bloomberg) -- Following is a table detailing scheduled corn
shipments for vessels berthed, arrived or expected at major ports in Brazil,
according to SA Commodities in Santos, Brazil:
                  Feb. 27   Feb. 26   Feb. 25   Feb. 22   Feb. 21   Feb. 20
                     2013      2013      2013      2013      2013      2013
Ships scheduled        24        27        28        27        26        32
Metric tons     1,194,631 1,337,631 1,372,631 1,308,923 1,248,923 1,464,903

Egyptian Wheat Stockpiles Will Satisfy 123 Days of Consumption
2013-02-27 11:28:12.198 GMT

By Abdel Latif Wahba
     Feb. 27 (Bloomberg) -- Egypt has 3 million metric tons of
domestic and imported wheat in stockpiles, enough to meet
consumption for 123 days, the cabinet said.
     Inventories of domestic and imported sugar are about
290,000 tons, sufficient to satisfy 71 days of local demand, the
cabinet said today in an e-mailed statement. The government has
142,000 tons of domestic and imported food oil on hand, enough
to meet consumption through the middle of May, it said.

Ethanol Rin Credits Jump to Record 51 Cents, Blue Ocean Says
2013-02-27 19:23:28.99 GMT

By Mario Parker
     Feb. 27 (Bloomberg) -- The value of Renewable
Identification Numbers, or RINs, for corn-based ethanol in the
U.S. rose to a record 51 cents, according to Blue Ocean
Brokerage LLC in New York.

Grain Terminal Cites Sabotage, Declares Lockout
2013-02-27 19:40:18.596 GMT

     Portland, Ore. (AP) -- A Pacific Northwest grain terminal
owner imposed a lockout on longshoremen Wednesday after saying
an "independent former FBI investigator" determined a union
leader sabotaged company equipment at the height of contentious
labor problems in December.
     United Grain Corp., part of the Japanese conglomerate
Mitsui & Co., said nonunion replacement workers will operate its
Vancouver, Wash., export terminal for "indefinite" period. The
company said it fired the union leader, whom it described as a
member of the bargaining team of Local 4 of the International
Longshore and Warehouse Union but did not name.
     "Deliberate attempts by an ILWU leader to damage equipment,
disrupt operations and put co-workers at risk cannot be
tolerated," United Grain CEO Gary Schuld said Wednesday.
     The union called the company's allegations unfounded, and
locked-out longshoremen immediately picketed outside the
     "United Grain and its Japanese owners at Mitsui have failed
to negotiate in good faith with the men and women of the ILWU
for months, and instead chose to aggressively prepare for a
lockout, spending enormous resources on an out-of-state security
firm," ILWU spokeswoman Jennifer Sargent said in a statement.
"Mitsui-United Grain has fabricated a story as an excuse to do
what they've wanted to do all along, which is to lock workers
out instead of reach a fair agreement with them."
     Late last year, the company was among Northwest terminal
owners who declared an impasse on labor negotiations and imposed
a contract that included new, management-friendly workplace
     Columbia Grain said the sabotage occurred Dec. 22, days
before the impasse was declared. In one case, someone shoved a 2
-foot-long metal pipe into a conveyor, causing it to shut down,
the company said. In another, a vandal damaged a gear box with a
mixture of sand and water.
     The company, in a letter sent to the union, said an
"impartial and independent" former FBI investigator determined
the union leader was the culprit following an investigation that
included interviews, surveillance tapes and other evidence.
     No charges have been filed, but Schuld said the
investigator's report will be turned over to law enforcement
     More than a quarter of all U.S. grain exports move through
nine grain terminals on the Willamette River and Puget Sound.
The contract dispute initially involved six of those terminals
that operate under a single collective bargaining agreement with
the ILWU: United Grain, based in Vancouver; Columbia Grain,
based in Portland; Louis Dreyfus Commodities, which has grain
elevators in Portland and Seattle; and Temco, which has
elevators in Portland and Tacoma, Wash.
     United Grain has the largest storage capacity of any West
Coast grain export facility with more than 7 million bushels of
storage, according to the company's website.
     The U.S.-owned Temco broke away from the alliance in early
December and negotiated separately with the union. They
announced a five-year agreement Wednesday.
     "It's no coincidence that Mitsui-United Grain has chosen to
throw out unfounded charges by an unnamed 'investigator' just
days after the union membership ratified an agreement with
Mistui-United Grain's American competitors," Sargent said.
     The pro-management terms implemented in December eliminate
some employee perks and grievance procedures while giving
employers more discretion in hiring and staffing decisions.
Management, for example, can expand shifts to 12 hours, if
needed, and use elevator employees to help load ships.

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

Overnight Highlights from CHS Hedging's Tregg Cronin

Outside Markets: Dollar Index down 0.246 at 81.624; NYMEX-WTI up $0.07 at $92.71; Brent Crude up $0.19 at $112.90; Heating Oil up $0.0113 at $3.0430; Livestock markets are mixed; Softs are mixed/better; Gold is down $9.00 at $1606.30; Copper down $0.0085 at $3.5580; Silver down $0.220 at $29.040; S&P’s are up 3.50 at 1496.25, Dow futures are up 30.00 at 13,889.00 and Treasuries are firmer.  

After the Italian flush yesterday tied to the hung elections, a sense of normalcy is taking over this morning.  While the NIKKEI was down 1.35% overnight, the Shanghai Composite was up 0.87%, the FTSE MIB is up 0.29%, the IBEX-35 is up 0.53% and the CAC 40 is up 0.62%.  The Euro is also continuing its recovery from yesterday with the EURUSD up 0.46%.  The Aussie and New Zealand Dollars are getting pounded this morning with the EURAUD +0.732% and the EURNZD +0.544%.  Part of the strength this morning was tied to an Italian bond auction this morning which saw 4 billion euros worth of 10-yr bonds sold at 4.83% vs. 4.17% last month.  MBA Mortgage Applications were down 3.6%.  Durable Goods (-4.7%), Capital Goods (+0.2%) and DOE inventories due up today.

The southern plains storm moved east the last 24 hours, bringing heavy moisture to C-IL/IN/OH and the Carolinas.  Totals in IN look better than 1.0” in a large swath of the state.  As our Indy office has stated, they are 100% replenished.  Still snow falling in IA/MO/WI/IL/MI this morning.  The 5 & 7-day forecasted precip maps are dry until some moisture begins toward the 5th and 6th of March in the ECB.  NOAA’s extended maps are putting above normal precip in SD/NE/IA in the 6-10, and that would certainly be welcome.  8-14 puts above normal precip for the entire Midwest and southern plains.  Below normal temps during the 6-15.  Dry weather in SAM yesterday.  The forecast sees another front to bring rains of 0.50-1.50” to 85-90% of Argentine growing regions by Friday and over the weekend.  S-Brazil sees 0.50-1.00” for Sunday.  Temps remain non-threatening.  Soybean quality is said to be improving in the north as the rains subside while harvest advances.

Mostly better trade overnight as futures try to continue the moves seen late in the session yesterday.  Overnight news flow would suggest demand is improving at this lower price echelon, thanks in part to the tightening wheat/corn spreads, spurring feedlot demand for the milling component.  In addition, it doesn’t seem as though any progress has been made in easing Brazilian logistical woes, raising the possibility of more Mar/Apr soybean business.  Still, news from China would suggest they are more interested in releasing state reserves of oilseeds (2.0-2.5MMT of soybeans from ‘09 & ‘10) to bridge the gap to Brazilian supplies, than reach for a ton of nearby stem.  Cash meal markets in the US were very weak yesterday as the board crush slips to the lowest levels since October at 50c/bu.

Bulls continue to discount the Paraguayan soybeans trading into the US.  Analysts note they have bought paper as a hedge against US beans, but no basis or freight has been established, leaving open the possibility of it not being executed.  In tender news, South Korea’s KFS bought 60,000MT of optional origin feed wheat at $312.84/MT C&F for June 30 which looks like Indian.  India continues to auction wheat from state reserves.  Japan bought 18,340MT of feed wheat and 51,660MT of feed barley, their first feed purchase in five weeks, a strong signal we have found a bottom.  Japan will be tendering for 320,000MT of feed wheat and barley on March 6 for shipment by July 30.  Egypt said it has 3MMT of domestic and imported wheat in stockpiles, enough to meet consumption for 123 days.  SovEcon said Russian grain stockpiles may fall to 600-700TMT by July 1 which would be a record low.  Winter crop losses are seen at 12%, but production should still rebound.  Grain Union officials there said prices should remain high in 13/14 on tight supplies.

Also a fair amount of Chinese news on the wire overnight including the Ministry of Ag saying several provinces received below normal rainfall, and others were hit by freeze, damaging the rapeseed crop.  Research firm Yigu Information Consulting said feed mills in China will probably order more US grain on concern the domestic supply won’t meet demand as well as a higher vulnerability to mold due to recent moisture in Northern China.  They said China’s corn shortfall may reach 5MMT this year from 2MMT last year.  Traders noted US Corn delivered China at $356/MT C&F in Sept. vs. Dalian futures for September delivery at $390.50/MT.  COFCO, China’s largest state grain trader, is slated for $4.8 billion to boost processing and shipping capabilities this year.  China’s inventory of soybeans may fall to 4MMT by the end of March from 5.2MMT as of last week according to  Arrival shipments may be 7MMT in Feb-Mar, lower than the 8.66MMT a year ago.

Open interest changes yesterday included wheat down 6,940 contracts, corn down 5,310, soybeans down 10,380 contracts, meal down 4,780 and soy oil down 1,960.  Partially some long liquidation in the soy complex as well as traders exiting positions ahead of FND Friday.  Chinese markets were weak with beans down 20c, meal down $1.90, soy oil down 48c, corn unchanged, palm down 38c and wheat down 5.75c.  Malaysian Palm Oil was down 9 ringgit at 2,410.  Paris Milling Wheat is up 1.24%, Rapeseed is up 0.21%, UK Feed wheat is up 0.37%, Corn is up 1.11% and Canola is down 0.40%.

Worth noting, wheat traded below corn yesterday for the first time since May.  Lots of anecdotal reports of feedlots in KS and CO reaching for HRW instead of corn.  In addition, corn basis remains very firm with +145N PNW being shown  for June/July delivery vs. some of the strongest trades of the year last year around +160N.  Group-3 rail also remains very firm with +30’s being posted commonly.  Lastly, remember funds in Chicago wheat are short more wheat than the commercials are, the only time in history this has happened, just as US-SRW starts hitting global feed channels, milling channels and US feed lots. 

Call things better today with an eye towards ethanol production and stocks at 9:30am.  It feels as though the news flow is turning much more positive down at these levels, and according to basis and spreads, so is demand at least for grains.  Would be stress-testing any short wheat/long corn positions one has on given wheat’s competitive position relative to corn.   Also, it feels as though we’ve discounted the winter storms for now, or at least until more moisture comes.  The market needs the US farmer’s corn.

Trade as of 6:55
Corn up 1-2
Soy up 6-8
Wheat up 2-6

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

Friday, February 22, 2013

a couple soybean charts

Here are three soybean charts; reversal potentially going up against resistance

Overnight Highlights from CHS Hedgings Tregg Cronin 2-22-2013

Outside Markets: Dollar Index down 0.080 at 81.381; NYMEX-WTI up $0.33 at $93.17; Brent Crude up $0.96 at $114.49; Heating Oil up $0.0182 at $3.1139; Livestock markets are lightly mixed; Softs are all firmer; Gold up $0.60 at $1579.20; Copper up $0.0015 at $3.5545; Silver up $0.051 at $28.75; S&P’s are up 7.75 at 1508.75, Dow futures are up 66.00 at 13,938.00 and Treasuries are mixed.

Not much for economic and financial news overnight with most equity indices higher.  European indices are mostly over 1.0%, and Asia had a mixed close.  The European Commission released their updated growth forecast for the Eurozone in 2013, seeing a -0.3% contraction, weaker than expected.  Little for economic data in the US today, with few notable companies reporting earnings.  Italians go to the elections polls Sunday and Monday.  Gird your loins for the sequestration fight next week ahead of the March 1 deadline.  Only notable currency moves are a sharp rally in the Aussie Dollar and Kiwi, after the RBA’s governor said he’s not interested in intervening in currency markets at this time.

More snow in the Midwest overnight with the water equivalent moisture table for the last three days below.  Additional snowfall is falling in IA/SD/MN/WI/MI this morning with 2-5” expected in those states today.  Hutchinson, KS received 14” of snow.  While not wishing to incite a fight over drought, will simply say this is a definitely a step in the right direction.  Forecasted precip maps show additional moisture hitting the central and eastern corn belt by next Monday and continuing through Wednesday.  Totals look like 0.40-1.12” of water equivalent.  Extended maps turn notably drier in the 6-10 for almost all of the Midwest and southern plains.  Temps will generally be normal/below with the cold focused in the southeast.  8-14 is similar.  Some light rains in Argentina overnight but should be dry until tomorrow night.  Forecast calls for 0.50-1.00” on nearly 100% of their growing areas.  More rain later next week.  Brazil still in good shape, although probably a little wetter than preferred in the north.

Sharply better overnight led by the soy complex as front month March was finally able to push through $15.00, something it hasn’t been able to do since October in any meaningful fashion.  News of additional soybean business, and continued bottlenecks in South America are behind the buying, and it is likely we see additional sales to China either today or early next week.  As much as 7MMT of beans are waiting to be loaded in Brazil, and the port strike today and Tuesday won’t aid logistics.  The strike is said to include containers only, not bulk grain, but will likely affect all loadings.  There is also a stranded ship at an Argentine port.  The pickup in sales won’t show up on this morning’s weekly export sales report, so don’t be surprised at a low number today.  Fortunately, prices in China are confirming the SAM problems with beans and meal rallying sharply there overnight as demand pull becomes more serious.  Chinese analyst JC Intelligence Co said China may have bought 400-500,000MT of soybeans from the US this week alone.

In addition to the soybean business, Bloomberg reported this morning China’s feed mills bought at least 120,000MT of corn from the US for Sept/Oct delivery at $290-300/MT.  This would be the first purchases of corn by China from the US in quite some time.  Their market is in a huge carry while ours is in a large inverse.  Aside from the grain buying, comments from the Ag Minister of China were also supportive.  “China has a structural shortage” of its grain supply because demand continues to rise.  “Chines faces a very difficult task balancing its grain demand and supply.”  Japan was in for some wheat last night, buying 37,773MT of food wheat, 24,026MT of food barley and 5,000MT of malting barley.  The food wheat came from Australia and Canada.  The USDA is on the tape this morning with their full Outlook Conference balance sheets, but I’ll just send out an update later.  Markets aren’t paying attention to them anyway, and justifiably so.  Canada has left its 13/14 wheat production estimate unchanged at 28.5MMT, up 4.8% from a year ago.

Open interest changes during yesterday’s session included wheat down 6,960 contracts, corn down 4,030, beans down 5,850, meal up 100 and soyoil down 1,290.  March option expiration today, and it looks like we’ll put some squeeze on the $15.00 calls and puts.  I still won’t rule out a tangle with the $7.00 strike in corn at some point.  Chinese markets were sharply better last night with soybeans up 30.50c, meal up $12.70, soyoil up 34c, corn up 4c, palm up 20c and wheat up 0.75c.  Malaysian Palm Oil was down 2 ringgit at 2,534.  Paris Milling Wheat is up 0.10%, Rapeseed up 0.53%, Corn up 0.56%, Canola up 0.44% and UK Feed wheat up 0.15%.

Soybean basis firmed off the PNW and in the Gulf last night, but remains very thin.  Posted numbers on shuttles for spot trains are +165H or better, while CIF bids are back above +80H for beans.  Corn basis also continues to firm at both export terminals as well as domestic locations such as ethanol and feedlots.  Any wheat basis strength is about poor logistics and the CP being 2 weeks late on want dates.  Cars simply aren’t moving.

Call things firmer today as beans continue to do export business we really can’t afford to do.  Corn and wheat should trade higher in sympathy, but need to see the kind of export demand beans are seeing to really get excited.  Corn needs a rally to fill the domestic pipeline, but traders are focused on weather right now.  Until futures pop, farmers aren’t going to be willing sellers of corn.  Wheat might not have a choice.  Export sales at 7:30.

Trade as of  7:10
Corn lightly mixed
Beans up 15-17
Wheat up 1-2

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

Thursday, February 21, 2013

Afternoon Recap from CHS Hedging's Tregg Cronin 2-21-13


Outside Markets as of 2:15: Dollar Index up 0.371 at 81.438; NYMEX-WTI down $2.28 at $92.93; Brent Crude down $1.88 at $113.72; Heating Oil down $0.0546 at $3.1015; Livestock markets are all sharply lower; Softs mixed; Gold down $2.10 at $1575.90; Copper down $0.0535 at $3.5545; Silver is up $0.027 at $28.595; S&P’s are down 4.00 at 1503.00, Dow futures are down 15.00 at 13,875.00 and Treasuries are firmer.

Ran out of time to get a full writeup together, so just a few comments and some articles.

Corn and wheat led downside pressure, due in large part to the better than expected moisture moving through the Plains and WCB.  Most areas in KS saw 8-15” of snow in places which were only forecast to see 2-5” a couple days ago.  Many wanted to point towards the USDA Outlook Conference and the acreage/yield numbers being released, but this didn’t seem to be it.  Acreage of 96.5 million is probably a little lighter than most thought anyway.  What was “bearish” was the part in USDA Chief Economist Joe Glaubner’s speech talking about next year’s ethanol demand for corn at 4.675bbu.  This is up 175mbu from this year, but well below the 5.100bbu estimate in the USDA baseline numbers from last week and lower than the 5.00bbu estimate being used in the trade.  He cited lower gasoline demand undermining ethanol demand, even with better supplies and lower prices.  With an ethanol number like that, carryout easily climbs above 2.0bbu with 95-97 million acres and normal yields.

Weekly ethanol production was supportive as it climbed 8,000bbls/day to 797,000bbls/day, but remain around 10,000bbls/day smaller than the level needed to hit the USDA’s projections.  Stocks also remain stubbornly high at 19.495 million barrels, down just 5,000 on the week.  Desperately need to get stocks down before margins will improve on a consistent basis.  Other trade chatter today said China bought 120,000-240,000MT of US corn for Sept/Oct/Nov 2013 shipment today.  Treating it as unconfirmed, but the $5.25-5.50 level on December corn is though to work into Chinese private coffers.  The IGC raised their world wheat and corn crops.  Sanderson Farms said the Sequestration cuts next month would close its operations as they are prohibited by law from operating poultry processing plants without the presense of federal inspectors.  Buenos Aires Grain Exchange left their corn production estimate for Argentina unchanged at 25MMT, while the USDA is at 27MMT.  Price of RINs jumped 38% to 41c/gal today.

Wheat also crushed on better than expected snows.  Daily sales announcement of 120,000MT of SRW sold to unknown destinations seems already priced in. Debate on whether it was linked to Chinese business, or whether it was part of recent Turkey business.  Iraq bought 300,000MT of Australian wheat, and Jordan bought 50,000MT of optional origin wheat although this doesn’t look like US according to US cash traders.  India’s exports expected to rise 23% next marketing year.  Reports from the country say the US wheat farmer isn’t panicking yet, but will be a willing seller of HRW and HRS on rallies.  Going to be very difficult to get back to levels where US farmer turns palms out seller.  We did see some scale in pricing by the exporter as Minneapolis dropped.

Soybeans and meal enjoy loan grain room strength on continued logistical problems in Brazil, spot business off the PNW (and possibly now Gulf) and necessity to keep domestic soybean stocks from dropping to dangerous levels before the end of the marketing year.  At the pace we’re going, it won’t be a question of if we’re importing from Brazil, but how much.  Vessel lineups are approaching 50-days in Paranagua, and is being called the ‘worst ever” by terminal operators there.  The threat of strike continues to hang over the market.  CIF bids perked up on the front end, but remain incredibly thin and tough to nail down.  The Gulf pull isn’t deep.  The Rosario Grain Exchange lowered their estimate of the Argentine production to 49MMT, while Buenos Aires Grain Exchange is 50MMT.  The USDA is 53MMT.

Calendar spreads firmed across the board with the most strength witnessed in wheat on a percentage basis.  While the fundamentals might warrant lower prices, it isn’t moving grain yet, so basis and spreads continue firmer.  Corn basis is very hot in several locations with marketing year highs being paid by ethanol plants.  While I think this trend continues until futures put on a rally to move grain, might want to be stress testing bullspreads on either opportunistic plays or moving short basis positions forward.  Don’t want to be left holding the bag, especially in a market like Minneapolis.

Full USDA Outlook Conference balance sheets released tomorrow morning, so expect some market reaction to that.  Export sales also out tomorrow morning with some grumblings of better than expected sales on wheat.  Might be the spark this market needs.  Otherwise, overall trend of commodities as an asset class is down.  Investors really have no reason for owning commodities right now relative to other asset classes.

Tregg Cronin
Market Analyst
651-355-3723 fax
CHS Hedging, Inc.
The Right Decisions for the Right Reasons
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Wednesday, February 13, 2013

Afternoon Recap from CHS Hedging's Tregg Cronin 2-13-2013

Outside Markets as of 1:00: Dollar Index down 0.025 at 80.081; NYMEX-WTI down $0.24 at $97.27; Brent Crude up $0.08 at $118.74; Heating Oil down $0.0178 at $3.2184; Livestock markets are mostly weaker led by feeders down 1.50%; Softs are pretty mixed; Gold down $7.50 at $1642.10; Copper down $0.0035 at $3.7405; Silver down $0.229 at $30.795; S&P’s are up 1.75 at 1518.00, Dow futures down 17.00 at 13,956.00 and Treasuries are soft.   

Mostly better than expected economic today supported, but equities consolidated near recent levels.  Investor sentiment remains overwhelmingly bullish, and susceptible to correction.  The biggest surprises were several moves in the forex market after Bank of Englad chairman Mervyn King said the Bank would continue to support the economic recovery, even if it meant higher inflation.  This trounced the pound and sent pound/dollar to $1.5538, the lowest level since 8/3/12.  Pound/Krona fell to the lowest levels since 1992 and Pound/Kiwi fell to the lowest level on record.  The Argentine 5-yr Credit Default Swap rallied 304bp to 2,519bp, the highest since November 28th.  Not sure what the recent developments there are, but something to monitor.


Lower with our ninth consecutive lower close which is the longest streak of lower closes since December of 1980.  That’s right, the longest lower streak in 32 years.  In September of 2008, we had 8 lower closes and one unchanged, so this would technically be longer.  New crop managed a higher close for the second day in a row, but we just can’t seem to spark speculative interest in our Ag space right now.  Better weekly ethanol production, lighter ethanol stocks, firmer basis, firm spreads and no movement has yet to spark buying, and index funds are coming out based on their holdings as a percent of total open interest.  The news of Barclays getting out of either hedge fund trading or index fund trading has the market a bit spooked we could see other banks make similar moves…

Weekly ethanol production totaled 789,000bbls/day, up 15,000bbls/day from a week ago, and the highest production total in three weeks.  Stocks fell by 598,000bbls to 19.500 million bbls, which also was a positive signal.  With margins slowly improving, and thought positive by $0.37/bu vs. $0.09/bu a week before, chatter has a couple more ethanol plants coming back on line.  Obviously the ability to source corn, based on the price require to obtain it, has a big say as does the integrated nature of these plants and whether they can extract corn oil.  Imports did rise to 11,000bbls/day from zero the week before, however.  Brazilian corn lineups continue to shrink with current reports putting it at 1.33MMT vs. 2.09MMT a week ago.  Some analysts are still optimistic for better exports Mar-Jun.  Also interesting to note the crude oil/corn ratio and the RBOB Gasoline/Corn ratios are at their highest levels since June thanks to the run up in energy and the selloff in corn.  Board cattle crush for August is at the highest level since November.

CIF corn bids continue to rally with no offers really visible.  There are no trades to report either, so will keep using +65H through FH-Mar and +63H for LH-Mar.  Still puts Illinois River basis 9.7-12.5c above delivery equivalence.  Should continue to promote CH/CK bullspreads up to a dime assuming farmer movement remains slow and economics remain the same.  Rail markets continue to scoot higher as well with +120H widely bid off the PNW, +20H for Group 3 rail and Hereford, TX said to be trading +100/102H.  ADM-Marshall is firm at +5/8H, Decatur is paying  somewhere around +40H and Clinton is +34H for quick ship trucks.  The CH/CK traded all the way to +3.75c before closing at +1.50c, but should retain a firm bias.  CN/CZ fell another 4.0c to +120.00c, the lowest since Jan 11.


Wheat closed higher for the first time since Friday, pumped up on “oversold” technicals, rumors of export business to China, firmer cash markets at the Gulf and a continued lack of movement on all classes of wheat.  Most seem to be expecting a solid week of export sales tomorrow considering the rumors of business to Turkey, Egypt, Europe, Brazil and China.  The fresh one today was some spring wheat connecting to the Orient off the PNW today, although details were sparse and there was no one to definitively say it was US-HRS vs. CWRS.  The market also seemed to absorb the moisture event across OK/TX from the day before, but isn’t quite ready to accept a change in moisture patterns across all of HRW country.  There is business around, just not sure how much we’re doing yet.

Headlines included Egypt coming out proclaiming they have enough wheat to meet domestic consumption for 133 days.  Total stocks of domestic and imported wheat total 3.28MMT.  This doesn’t mean they won’t import again, and in fact, usually one of these reports is followed by a tender announcement.  Egypt will still buy if the price is right, just announcing they have ample stocks should they need to get by.  French wheat plantings are expected to rise 2% y/y, while Germany is expected up 3% according to FranceAgriMer.  Jordan is tendering for 100,000MT, Iraq bids are due today with validity until Feb 17 on 50,000MT.  British analysts said wheat plantings in that country are expected to be smaller than the November estimate of 1.756 million hectares due to wet conditions.  “The wheat crop in general isn’t in great shape.”  Also why they’re expected to import wheat again in 13/14, the first back to back years since at least the early 90’s.

Spot floor trades were lightly mixed with 14.0% at +100H.  15.0% is +100/110H.  Spot floor report says there were 93 cars including 3 trains which would be heavier than recent days.  To-arrive bids remain around +90/95H for exploders and around 10-15c less on shuttles.  In figuring delivery calculations on spring wheat, it is getting very close to being able to take delivery in Duluth and rail against the Chicago market.  Triple digit to-arrive bids would likely make it work, and therefore would be where the commercials would rather buy the MWH/MWK than pay the country.  In other words, take a look at rolling any basis length and short hedges forward still remaining at current market levels.  Might leave a penny on the table, but better than getting run over by the commercials.  Wheat/corn spreads rallied today, but remain in recent ranges.  SRW/Corn at +40.00c is probably still priced to feed as is HRW/Corn at +84.75c.  Gulf basis was firmer with SRW up 2-3c to +80/83H bid, while HRW as around 1-2c lower but still bid +125/130H.

Ran out of time for soybean commentary.  Make up for it tomorrow.

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

Overnight Highlights from CHS Heding's Tregg Cronin 2-13-2013

Outside Markets: Dollar Index down 0.243 at 79.867; NYMEX-WTI up $0.34 at $97.85; Brent Crude up $0.11 at $118.77; Heating Oil up $0.0008 at $3.2370; Livestock markets are all weaker; Softs are mixed; Gold down $2.70 at $1646.70; Copper up $0.0120 at $3.7560; Silver up $0.006 at $31.025; S&P’s are up 3.00 at 1519.25, Dow futures are up 17.00 at 13,990.00 and Treasuries are weaker.  Euro is up 0.34%, BP -0.54%, AUD +0.29%.

The obvious financial news of note is the President’s State of the Union speech last night, although equities don’t seem to be giving it a second glance this morning.  More importantly seems to be comments from outgoing Bank of England President Mervyn King who responded to the recent “currency wars” talk by saying countries need to allow currency rates to move, and he said they will support their recovery even if it means incurring more inflation.  This was taken to mean a weak British Pound and it is losing dearly to its major counterparts this morning by 1.0-1.8%.  The British Pound/Swedish Krona is at the lowest level since 1992 and the British Pound/New Zeeland Dollar is at the lowest level on record.  At 1.5562, the GBPUSD is at the lowest level since August 3rd.  Otherwise the NIKKEI fell 1.04% last night, the Argentine 5-yr CDS is up 216bp to 2,472.99bp and John Deere beat earnings estimates by returning $1.65/share vs. estimates for $1.40 in Q4.  MBA Mortgage Applications fell 6.4% w/w, and business inventories are due at 9:00am (+0.2%).

After the southern plains system finished up yesterday, there hasn’t been much for precip in the last 12 hours.  There is a rain/snow mix moving across KY/S-IL/S-IN this morning which should continue to support MS-River levels.  STL River gauge looks like it will be in good shape through February.  Dry in the Midwest the next 5-days, but 7-days out sees another major system moving in over the MS-River Valley and on up the OH-River valley.  Totals 100-miles either side of the river should be in the 0.50-1.30” range.  NOAA’s extended maps confirm with above normal precip for the ECB.  Temps should remain below normal during the 6-15.  Some light rains fell in Cordoba, Argentina yesterday in the 0.10-0.60”  range.  Otherwise quiet with all eyes on the system Sat/Sun which is supposed to bring 0.50-1.50” to 85% of growing areas.  S-Brazil is expected to see 0.40-1.00”.  “The rains may not totally end dryness concerns, but if realized, should go a long way towards easing current conditions.” –John Dee.

Lower for most of the night with corn working on its ninth straight lower close which would be the longest such streak without a higher close since September of 2008.  One day in that stretch of 2008 was unchanged.  The meltdown in the Ag space has caught many off guard and searching for answers.  The catalyst seems clear: the pipeline was empty so futures “went to where the offers were.”  Farmers turned palmed out sellers with corn at $7.40-7.50 (futes) and beans at $14.75-14.98.  At the same time, weather began to moderate in South America with better chances of rain the driest areas of their growing regions.  In addition, speculative length bought heavily during a month which is seasonally weak and laden with bearish inputs (USDA baseline numbers, Outlook Conference).  Add on top of the aforementioned the constant barrage about closing ethanol plants, weak exports and better precip in the southern plains and we had ample reason to take price down.  At some point, demand should be uncovered given the lack of farm gate movement.

Japan was in last night tendering for 320,000MT of feed wheat and barley, but canceled the tender due to a lack of “buyers and sellers.”  This is the third consecutive tender to be canceled with the tender rescheduled for February 20th.  After buying 50,000MT at $380/MT the night before last, Jordan is back in tendering for 100,000MT due to prices dropping further.  The 50,000MT was probably Canadian.  Russian analyst IKAR said the recent swoon in domestic wheat prices is temporary, and prices should start rising again in March of April on low inventories.  Currently at $388/MT.  The United Kingdom said they may be a net importer of wheat in 2013/14 for the second year in a row after wet weather prevented fall seeding.  India’s state owned PEC is looking to sell another 245,000MT of wheat from government stockpiles this week.  Palm Oil reserves at the end of January fell 1.9% to 2.58MMT in Malaysia which was above the median estimate of 2.53MMT, causing prices to retreat sharply on their first day of trading since Friday.

Open interest changes yesterday weren’t heartwarming: corn up 11,340 contracts, wheat up 9,440, soybeans down 2,760, meal up 240 and soy oil up 5,340 contracts.  Fresh speculative shorts are being added in corn and wheat which is not positive.  Chinese markets remain closed, but Malaysian Palm Oil fell 55 ringgit to 2,505 (2.15%) on bearish stocks data.  Paris Milling Wheat is down 1.45%, Rapeseed down 0.60%, UK Feed wheat down 0.78%, Corn down 1.78% and Canola is down 0.29%.  Worth mentioning, on the selloff, wheat basis does continue to appreciate.  At the Gulf, HRW is valued at +125/135H which is the highest since 2008.  SRW is seen at +80/85H.  Still, this seems like a lack of supply being offered as opposed to robust demand.  Calendar spreads are holding together overnight.  The Northern Plains farmer also needs to consider the possibility the southern plains might not have a drought this year.  Without that, there is a lot of wheat left in bins north of I-80 which is at risk.

Call things weaker again this morning as speculative selling is far outweighing any desire by end users to step in and price.  Cash is perking up in a lot of areas, and spreads could be called steady/better in corn and SRW, but not so for beans and HRS.  Ethanol production this morning should be a bit better with several plants rumored to be coming back on-line thanks to improving margins.  In fact, most domestic end users of corn have seen margins improve w/w.  

Trade as of 6:50
Corn down 5-9
Soy down 9-11
Wheat down 5-9   

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