Monday, February 11, 2013

Overnight Highlights from CHS Hedging's Tregg Cronin 2-11-2013

Outside Markets: Dollar Index up 0.055 at 80.252; NYMEX-WTI down $0.12 at $95.61; Brent Crude down $.87 at $118.03; Heating Oil down $0.0094 at $3.2290; Softs are lightly mixed; Gold down $8.80 at $1658.10; Copper down $0.0075 at $3.7520; Silver down $0.231 at $31.210; The Euro is up 0.30%; S&P’s are up 3.75 at 1516.00, Dow futures are up 33.00 at 13,959.00 and Treasuries are slightly weaker.

The biggest breaking headline this morning has to go to Pope Benedict and his decision to “leave the pontificate” at the end of February.  News agencies quoting a statement from the Vatican said Pope Benedict made the decision due to his lack of strength and inability to carry out his papal duties.  The conclave is expected to convene in March.  Otherwise, all is mostly quiet in the financial markets with almost all of Asia closed for “Golden Week,” or the Chinese New Year.  Australian shares were down 0.24%, Spain off 0.50% and Italy down 0.39%.  The Japanese Yen is trading, however, and is getting crushed against the Euro (-1.13%), the USD (-0.870%) and the Swedish Krona (-1.484%).  Little to nothing on the economic docket today.  Gasoline futures are down 1.04%.

Substantial precip over the weekend for the first time in many weeks.  The WCB saw snow fall in most states with E-SD receiving upwards of 1.0-1.5” of moisture.  IL/MN/MO also saw heavy rain/snow as did the Gulf Coast where severe weather moved in yesterday.  Unfortunately, the central and southern plains didn’t see much of any in the core HRW areas.  See map below.  The 5-day forecasted precip map is putting better moisture across all of OK, but that’s really about the extent of it.  The central and WCB will be dry this week.  NOAA’s 6-10 day looks cold and dry for most Midwest growing areas, but the 8-14 see above normal precip for nearly the entire Midwest.  Private maps concur.  Things were quiet across Argentine growing regions for Friday/Saturday with rains under 0.50” developing Sunday on 65-75% coverage.  S-Brazil saw 0.25-0.75” on 85% coverage.  Forecast sees more Argy rains possible late tonight into tomorrow with totals of 0.20-0.60”.  The 1-5 and 6-10 day maps this morning look fairly wet.

Weak start last night and continuing to find willing sellers this morning in the row crops while wheat has been very reluctant to stay in negative territory.  The technical damage from Friday and the wet maps overnight seem to be providing the selling pressure, although cash markets, spreads and demand numbers suggest taking risk premium completely out of the soy complex might be a bit hasty.  NOPA crush will be released later this week, and January soybean exports are expected to be an all-time record.  Moving forward, however, the soybean market may rely more on basis and spreads to move beans than futures.  Corn seems lost, and wheat appears to have the most fundamental support in many weeks when looking at weather maps, spreads, Gulf basis (SRW) and headlines.

ANZ Bank is advocating firmer corn prices on slower Brazilian exports, and to buy Kansas City wheat options on expectations wheat will rally in coming sessions.  ANZ went so far as to say investors should go long corn as technical indicators could rise to at least $8.58-8.60/bu by mid-2013.  Bangladesh bought 50,000MT of optional origin wheat from a reseller in South Korea for $332/MT C&F.  Russia said they will decide on measures to cancel the country’s 5% import duty on grains before April.  Insiders have suggested talk by Russia to remove their import duty has just been posturing to get Kazakhstan to lower their wheat offers as opposed to seriously entertaining the idea of US or European imports.  Goldman lowered their 3-mo corn forecast to $7.50/bu from $8.25, soybeans to $14 from $15.25 and wheat to $7.80.  The Associated Press released a partial list of the ethanol plants closed this year which I’ve included below.  Just glancing at it, there appears to be plants who have been left off the list unless some have been re-started and not reported on.

Open interest changes Friday included a big drop on corn of 16,670 contracts.  Wheat was down 120, beans were up 3,180, meal down 5,690 and soy oil was down 1,600.  Corn volume Friday  totaled 495,808 contracts which was the highest level since July 10th.  Soybean volume of 319,712 contracts was the highest since October 11th.  Large volume and a lower close isn’t particularly positive.  Chinese and Malaysian markets were closed.  Paris wheat is up 0.41%, Rapeseed down 0.48%, Corn down 0.11%, UK feed wheat down 0.26% and Canola is down 0.63%.  IL-River basis has been incredibly firm and is probably supporting the CH/CK and SH/SK despite the Goldman Roll.  Friday, Zone 3 delivery economics put corn 9.4-14.9c above gross DVE.  Soybeans were 13.9-24.1c above.  This means the CH/CK looks cheap at +0.75c.  Any carry now might be a gift on corn unless delivery economics change.  Hard wheat spreads aren’t hinting at any undue rally, but the WH/WK refuses to budge, likely due to the export interest out of the Gulf by Turk/China/Braz/Egypt.

Look for a lower start to begin with as speculators dump the fair amount of longs they’ve acquires the past several weeks.  Through the week ended Tuesday, most had continued their buying spree.  Now that we’ve knocked markets down a bit, spreads and basis are implying the risk-reward “down here” might not be quite as favorable.  Continue to monitor Brazilian logistics, SAM weather, C-Plains weather, cash markets and spreads for clues on direction.  Farm gate movement should shut off notably at these price levels.

Trade at 7:00
Corn down 1-3
Soy down 11-15
Wheat steady/mixed

02/10 11:43 CST Ethanol plants idled since drought began
Ethanol plants idled since drought began
By The Associated Press
Many U.S. ethanol plants have halted production over the past year, mostly
because the drought has made it difficult to get locally produced corn. Most
plan to restart, but it may not be until the 2013 corn crop is harvested in

Below is a list of idled plants and the month they ceased operation:
Midwest Renewable Energy LLC in Sutherland, February 2012.
NEDAK Ethanol, in Atkinson, June.
Valero-Albion in Albion, June.
Aventine in Aurora-East, September.
Abengoa in York, January.
Abengoa in Ravenna, January.
Valero in North Linden, June.
New Energy Corp. in South Bend, November.
Central Minnesota Ethanol Co-op in Little Falls, August.
Biofuel Energy in Fairmont, September.
ADM in Wallhalla, March.
Pinal Energy in Maricopa, July.
East Kansas Agri-Energy in Garnett, August.
Aventine-dry mill in Pekin, September.
Southwest Georgia Ethanol in Camilla, October.
Bunge-Ergon in Vicksburg, November.
Valero in Bloomingburg, December.
POET in Macon, January.
White Energy in Plainview, January.
Aemetis in Keyes, January.
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Tregg Cronin
Market Analyst
651-355-3723 fax
CHS Hedging, Inc.
The Right Decisions for the Right Reasons

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