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.
Corn
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
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
800-328-6530
651-355-6538
651-355-3723 fax
Market Analyst
800-328-6530
651-355-6538
651-355-3723 fax
CHS Hedging, Inc.
The Right Decisions for the Right Reasons
The Right Decisions for the Right Reasons
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