Sunday, March 31, 2013

Corn charts after open Sunday Night - Gap Down under support....ouch

here are a couple corn charts after the open Sunday night..........not the best looking charts.......but long time before we close.......

Blow off bottom soon?????

USDA Report Game Changer - Sticker Shock

Last week Thursday the USDA threw a big curve ball for all of the bulls out there.  With March 1 stock numbers well above trade estimates for both corn and soybeans.  I am sure everyone has seen the numbers so I won't dwell on that.

Rather what does it mean for prices going forward and what are some possible theories on the USDA logic?  First off prices going forward should stay under pressure or really show us the small crop long trail theory.  Most balance sheet estimates that I have seen for corn are now between 800-1.0 billion bushels.  After all the USDA found nearly 400 million bushels more in the stocks then the trade estimates.  Before this last report the old crop corn carryout was pegged at 632 million bushels and if most of the estimates had that pegged as an ending carryout number or close to that as an ending carryout number then now naturally some estimates might be up to the billion bushel mark.

Is it possible that the USDA doesn't increase our carryout by the trade estimate miss.........yes and history has shown us where the USDA sometimes has some logic; but typically this has been on the September stocks report and the logic was the use of new crop harvested bushels.

First logical thing that comes to mind is that the USDA just under estimated the crop size.  But here is a long shot for the bulls out there.  Keep in mind that even though our number this last week was 400 million bushels above estimates it was also 600 million bushels below last year.  What happened in last year's 3rd and 4th quarter for usage?  It wasn't exactly helped out by the strong basis and then it wasn't helped out further by the run up to nearly 8.50 either.

Was there end users that last year in June-August that shut down and really didn't start up because of the drought?  Ethanol or feed guys that couldn't make it work with the negative margins and strong basis that got handed a drought card on top of it that really slowed down usage and allowed us to keep a carryout near a billion bushels?

What could be different about this year or what could be a reason for the USDA not to be nearly as aggressive on carryout cuts as most area already pricing in?  First off perhaps some of the demand that we curbed 8-12 months ago was the weak demand; perhaps that guys left out there buying are strong hands?  Secondly as it stands today we have more demand coming back in via a bigger crop then last year's drought yield shorten crop.

So now we have a stage that we have a major price break on old crop and ideas of a huge new crop supply.  If end users can buy old crop profitably and new crop with even more profits what have we done for our demand?  In theory we haven't hurt it and perhaps just perhaps we have stages set that tell every end user out there to hang on.  If that is the case is it possible that the USDA doesn't increase our carryout nearly as much as estimates have???

Bottom line is the stocks number was a major surprise to the trade but would it have been a surprise to the USDA?  That my friends we really don't know.

We do know that if the carryout numbers increase like the trade has estimated that longer term we now have to find a lot of demand especially given the planting intentions.  Last year we had to curb more demand then ever; but it is now very possible that we will have to find more demand then ever; perhaps more then we even curbed.

I thought after the USDA's March Supply and Demand Crop Report that perhaps the reason the USDA increased feed/residual demand was the fact that things are so tight that they couldn't afford a massive price drop that would increase any demand.  That might also be another reason for us to not see the huge carryout numbers on the USDA's April Supply and Demand Crop Report despite the worst miss ever on the stock's report.

Overall don't take the above comments as super bullish; more balanced.  As overall the headlines have turned negative and the most likely outcome isn't for a balance sheet to stay super tight; but rather a balance sheet that isn't nearly as tight as it has been.  The above reasons or possible theories might be a reason to cover up short call options or holding a small amount of grain for the home run.  But odd's for anything other then a balance sheet with a huge carryout increase are not good.  Possible that the USDA has another theory; but nothing to exactly make a big wager on.

As for what to do as we go forward; first is to realize that if the report was really a game changer that most all rallies should be rewarded with some sales.  Most will say that since September one should have been selling the rallies and looking back that is more then true; but that might also mean that  could see a near term bottom sooner then later.  This report basically has everyone bearish right now.

Last time corn seen a move like this was the June 2011 stocks report when the July contract which had no limits traded down 69 cents; very close to the type of move the synthetics indicated the move was on Thursday...........It's important to note that was the lows for that move.  Does that mean that this thing could make it's lows Sunday night or Monday?  No it doesn't mean it will shake out that way but it could.

Tuesday, March 26, 2013

Closing Comments 3-26-2013

Markets closed mixed today behind pre-report trading, firm outside markets, and some weather concerns.

Corn was down 3 cents a bushel, soybeans were up 11 cents a bushel, KC wheat was up a dime, MPLS wheat was up a nickel, CBOT wheat was up 4, the equity market bounced with the DOW up 112 points (looks like the bull market is back on), the US dollar was near unchanged with the cash US Dollar index at 82.858, and crude was up 1.40 a barrel.

Not a bad day for the grains; with a lot of strength for wheat seen in the finally 5-10 minutes of trading.  Corn even though it didn’t manage to close positive did close a nickel off of its lows; all in all not a bad day; but technically a day that seemed to help markets consolidate ahead of a report.  I view the consolidation happening at some areas that should allow for a big move one way or another; i.e. right up near resistance on the wheat/corn charts; so Thursday’s report will either help the charts look like a clear breakout should the report be bullish or a nice head fake or failure at resistance.  It is nice how charts and fundamentals seem to tie up together; it’s just too bad that we don’t also have clear direction whether we will fail at resistance or break threw and make another leg higher.

A couple news items out today besides the pre-report talk included freeze talk with some possible damage done to some of the HRW wheat in areas that have it jointing such as parts of OK; overall it doesn’t appear that a lot of major damage was done; but it is one of those things that really might not be known until the combines hit.  Temps are expected to warm up next week; but that doesn’t mean we won’t have another freeze scare at some point in the future.

Talk that Egypt is very low on wheat inventory has also been around; but it also sounds like they won’t be in the market buying for a couple of months.

Basis is weaker or at least feels weaker for corn and winter wheat.  I had a train out today that was bid 10 cents less then it was a weak ago despite very similar quality.  Also still not finding much for corn bids and the bids that I have seen are rather soft on basis.

The birdseed market felt a little better today with a little more interest; but still overall on the slow side.

Report is out on Thursday; I will be out of the office the next couple of days but Jordan, Dan, and Kevin or your local station managers will be around if anyone is looking to take a little risk off the table ahead of the report.  My bias is a little negative corn and friendly wheat; mainly because of the fact everyone seems to be bullish corn and I think wheat has had decent demand as of late.  I also think that perhaps we used a little more wheat for feed and thus less corn; but I guess only time will tell. 

After the report it really feels like old crop corn will go to trading demand as will old crop soybeans.  Wheat should really become a weather market as should new crop corn/beans.  How important weather will be will depend on how many acres we get; the more acres the less important weather will be and vice versa.  The other thing we will need to watch will be money flow and the funds. 

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


Afternoon Recap from CHS Hedging's Tregg Cronin 3-26-2013

Outside Markets as of 1:30: Dollar Index up 0.082 at 82.911; NYMEX-WTI up $1.32 at $96.17; Brent Crude up $0.72 at $108.88; Heating Oil up $0.0003 at $2.8775; Livestock were mixed with cattle down and hogs up; Gold down $7.70 at $1596.80; Copper up $0.0090 at $3.4540; Silver down $0.095 at $28.72; S&P’s up 8.00 at 1555.00, Dow futures are up 82.00 at 14,467.00 and Treasuries are a tad firmer.

Shaky economic data today to bring the focus back on the US instead of Cyprus and Europe.  The headline number for Durable goods orders was better than expected up 5.7% vs. the forecast of 3.9%, but much of the gain was due to in large part to a 95.3% m/m rebound in commercial aircraft orders, reversing a 24% slump in January.  Ex transportation, durable goods orders actually fell by 0.5% m/m.  Consumer confidence dipped sharply to 59.7 in march from 68.0, and could be a delayed reaction to the rally in gasoline prices during most of the survey period.  Gasoline prices are on their way back down, however.


Mixed day with a nice rally at the close for beans and wheat.  Hard to separate pre-report positioning and genuine price action given the proximity to the March reports.  The features today were definitely the cold weather overnight in the southern plains, chatter about Brazilian soybean sales rolling back up to the US (limited), margin induced corn selling and talk of more Argentine maize trading into the US-SE.  I sent around maps of the cold temps overnight as well as the progress of the HRW crop earlier, so I will assume that subject has been well discussed.  Believe that is the cause behind the late rally led by HRW.  Still very split opinions out there on what amount of damage the cold is actually doing at this juncture.

Chatter this morning about some limited soybean business rolling back up to the US this week.  Given the fact the vessel lineups keep building in Brazil (see below), not too surprising.  Argentina has cheaper beans than the US, but Argentina is only 5-10% harvested and won’t have supplies in a shippable position until mid-April.  At 223 vessels and 13.169MMT, lineups are still easily an all-time record.  Caution thinking basis is going to get supercharged at the PNW and Gulf, however, as exporters are only going to pay what is absolutely necessary to get the current boat covered.  Few are willing to be short a ton of bean basis given the well discussed supply tightness in both the upper-Midwest and corn belt.  Either way, will put Thursday’s March 1 Stocks even more in focus.  The SK/SN price action certainly fits with more business being done as it rallied 1.50c to +21.25c today on good volume.

I sent around the margin increase information earlier this morning.  Margins were increased for new crop corn, new crop corn spreads and old/new crop spreads.  Could be part of the reason for the July led pressure this week as well as the CN/CZ correction we’ve seen.  In addition, plenty more chatter in the trade about Argentina approving additional export licenses on corn following the 2MMT of licenses approved last week.  A couple implications: 1) likely have more confidence their corn crop is above 25MMT. 2) raises odds for more Argy maize to trade into the US.  There was talk a handymax or panamax vessel, 40-60,000MT, traded into US-SE last week.  Talk of more trading in today.  Argy FOB basis levels are said to be around -45/-50K for May delivery which is a $269/MT FOB price.  Using panamax freight of $27/MT or handymax freight of $36/MT, would lay into Brunswick/Wilmington/Mobile somewhere between $296-$305/MT C&F.  This would be somewhere around +21/44K vs. US-CIF bids at +52/56K for May.  Despite this, CK/CN rallied +0.75c to +18.75c which certainly runs contrary to the aforementioned.  Tonnages may not be enough at this point to tank the US market, but should mean our export business remains subdued at the very least.  Cheap barge freight and May close to delivery equivalence is probably limiting the amount of imports some are willing to extend at this point.
And while somewhat of a tangent, worth noting the chart below which shows the aggregate gross commercial long position (end users) of Live Cattle, Feeder Cattle and Lean Hogs which is at a new all-time record high going back to 1/3/2006.  Compare this with the aggregate net spec position which is near the lowest levels since October 2009.  While specs have been right up this point, the people who actually use the meat are toting record long positions while the people who buy and sell paper are net short this market.  Anytime you get such a sharp divergence between these two groups, I think bears watching.

Brazil Daily Soy Shipments From Major Ports: Summary (Table)
2013-03-26 17:36:03.38 GMT

By Daniel Grillo
     March 26 (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:
                   March 26  March 25  March 22  March 21  March 20  March 19
                       2013      2013      2013      2013      2013      2013
                  -------------------------# of Ships------------------------
Soy total               223       209       212       207       206       201
Soybeans               175       167       171       165       165       165
Soy meal pellets        32        29        29        28        28        27
Soybean meal            16        13        12        14        13         9
Soybean oil              0         0         0         0         0         0
                  ---------------------Metric Tons (000’s)-------------------
Soy total          13,169.1  12,412.2  12,553.8  12,387.0  12,280.8  12,030.6
Soybeans          10,699.9  10,194.3  10,421.3  10,071.4  10,025.2  10,042.8
Soy meal pellets  17,184.6  15,729.6  15,729.6  15,329.6  15,329.6  14,869.6
Soybean meal         750.7     644.9     559.5     782.6     722.6     500.7
                   March 26  March 25  March 22  March 21  March 20  March 19
                       2013      2013      2013      2013      2013      2013
Soybean oil            0.0       0.0       0.0       0.0       0.0       0.0

Oklahoma Freeze Threatening Crop Damage to Wheat Hurt by Drought
2013-03-26 15:10:55.920 GMT

By Tony C. Dreibus
     March 26 (Bloomberg) -- Freezing weather in Oklahoma may
have damaged wheat plants that already were hurt by the worst
drought since the 1930s.
     Temperatures overnight dropped to 15 degrees Fahrenheit
(minus 9 Celsius) near Guymon, in the Oklahoma panhandle,
National Weather Service data show. The freeze may have hurt
wheat tillers, which are stems that emerge from the root of the
plant and produce grain, Telvent DTN said in a report.
     Plants were susceptible to damage because there was little
or no snow cover to protect against freezing weather, said
Darrell Holaday, the president of Advanced Market Concepts.
     “They had moisture a month ago, but the last two or three
weeks, it’s been dry,” Holaday said by telephone from Wamego,
Kansas. “And their crops were further along. I think you
probably had some damage.”
     Growers of hard-red winter wheat, used to make bread and
grown mostly in the southern Great Plains, may leave almost 24
percent of their crop unharvested this year because of the
drought, Futures International LLC said in an e-mail yesterday.
Farmers seeded 29.1 million acres with hard-red winter varieties
from September through November, Department of Agriculture data
show. Oklahoma is the second-biggest grower behind Kansas.
     About 26 percent of the crop in Oklahoma was in good or
excellent condition as of March 24, up from 24 percent a week
earlier, according to the USDA. In Kansas, 29 percent of plants
earned top ratings, unchanged from a week earlier, the
government said in a report yesterday.

Sequestration begins to Bite US Agriculture
2013-03-26 14:28:23.86 GMT

The $85 billion in federal budget cuts to federal spending that began on March
1, 2013, better known as the sequester, promises to reach broadly and deeply
into agriculture spending, all the way to the cotton farm.  After already
announcing plans to suspend several reports due to sequestration cuts, the USDA
is going one step further, announcing a series of steep cuts in direct payments
to US farmers across a range of commodities.  The USDA Farm Service Agency (FSA)
recently notified Congress of its intention to capture the required sequester
savings by reducing payments made through the direct payment program account by
up to 8.5%.  The agency said the exact final percentage reduction in direct
payments won't be known until closer to the end of the current fiscal year on
Sept. 30th, since direct payments are to be made in October.  Already, groups
representing US cotton, rice, and wheat producers have been notified of the
looming cuts.  The Department advised Congress of the plan and will wait 30 days
(until April 20) before implementing the reductions.

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 3-26-2013

Outside Markets: Dollar Index up 0.0780 at 82.908; NYMEX-WTI up 0.48 at $95.29; Brent Crude down $0.12 at $108.05; Heating Oil down $0.0032 at $2.8740; Livestock markets are mixed/better led by hogs; Softs are rallying this morning; Gold is down $6.70 at $1597.70; Copper up $0.0135 at $3.4585; Silver down $0.060 at $28.755; S&P’s are up 2.00 at 1549.00, Dow futures are up 17.00 at 14,403.00 and Treasuries are weaker.   

A relative calm over the financial world this morning as investors continue to digest the recent Cyprus bailout and the implications it could have for Italy, Spain and Portugal.  An executive board member on the European Central Bank said overnight the ECB will do everything it can to preserve the common currency which is giving support to the euro.  The EURUSD is +0.155% and the EURJPY is up +0.412%.  A fair amount of economic data this morning with durable goods forecast up 3.9%.  The S&P/Cash Shiller 20 City housing index for January is forecast up 0.75%.  Consumer Confidence for March is seen at 67.2, down from 69.6 in February.  New home sales are forecast at 420,000, down 3.9% from last month.  Argentine 5-yr Credit Default Swaps are up 437.22bp to 3,634bp this morning.

A little additional moisture in the last 24 hours, but mostly east of the MS-River.  Dry everywhere west of there.  Light snow falling in the east this morning.  Dry in the Midwest until Friday at which time another 0.10-0.50” is forecast in AR/MO/SE-KS/OK.  This starts the system, and then Friday through Sunday brings a total of 0.50-1.75” to the same border area of the aforementioned states.  Early next week sees more moisture fall west of that area covering more of N-TX and OK.  KS should see a general 0.25” of water moisture.  Northern Plains is mainly dry.  Wet and cold persists in the 6-10 and 8-14 according to NOAA last night.  The above normal precip is mainly focused in the mid-south and south.  Little snowpack melt seen for MN/ND/SD.

***Note Attachment from the CME Group related to margin changes***

Despite the CME Group raising margins on swaps, new crop corn futures and old/new spreads, margin induced selling pressure didn’t take hold last night and markets chopped inside very tight ranges.  As of this writing, the corn overnight range is 2.5c, beans is 6c and wheat at 4c.  This shouldn’t surprise given one of the four biggest USDA reports of the year is two days away.  As noted yesterday, don’t try and read too much into the pre-report chop.  More chatter about spring planting and the acreage pie overnight, but nothing substantive.  Cash markets were quiet yesterday, mostly unchanged from Friday although corn looked a tad firmer.  Row crop spreads remain in general uptrends.  We should all go home and come back Thursday at 11:00…

Overnight news was sparse.  Reuters carried articles about Egypt’s dire wheat stock piles and their inability to source additional supplies.  Due to the economic and political turmoil of the last two years, Egypt’s hard currency reserves have eroded by about $1 billion a month, raising questions about its ability to pay cash at open tenders.  Sources say they have enough wheat to get to new crop in June, but Egypt will remain the largest wheat importer in the world with the inability to pay.  NASS released updated wheat condition ratings with KS and TX showing slight declines while OK improved.  KS saw its G/E unchanged at 29%, but it’s weighted index declined from 292 to 284.  See table below.  There were articles out overnight also talking about the level of abandonment rising to >20% this year.  This has been talked about in the trade before, but few have probably thought about the full implications.  Also below is a table showing southern corn planting progress.  As one can see, three of the four states are ahead of the 5-yr average for this week.

Other articles included IMEA reducing its forecast for Mato Grosso soybean production to 23.6MMT from 24.1MMT due to the dry spell earlier this year.  The state’s harvest is estimated at 92.6% vs. 85.2% a week ago and 94.4% a year ago.  China’s state owned researcher Grain.Gov.Cn said China’s major ports had 1.25MMT of palm oil stocks, down 30,000MT from a week earlier, but up from 850,000MT a year ago.  Inventories remain high, pressuring crush margins. South Korea’s NOFI is tendering to buy 140,000MT of corn for August delivery and 70,000MT of wheat for August 25th.  United Arab Emirates purchased 40,000MT of corn from South America.

Open interest changes yesterday included wheat up 860 contracts, corn up 1,670, beans down 1,120, meal up 730 and soyoil down 500.  The string of huge open interest increases in corn looks like it is finally over, but over 100,000 contracts has been added since March 1, at the same time as funds were adding close to 100,000 contracts of net length over the same time.  Chinese markets were quiet with beans unchanged, meal up $1.60, oil down 15c, corn down 0.75c, palm down 51c and wheat down 2.25c.  Paris Milling Wheat is up 0.31%, Rapeseed up 0.42%, UK feed wheat up 0.30%, Corn up 0.44% and Canola is up 0.65%.

Call things mixed to get started, but it might be worth noting how the pit likes the margin increases at 9:30.  Locals are the ones really affected by margin changes.  Otherwise expect more chop and slop ahead of Thursday with no major reports or data sets due out until tomorrow.  Corn is holding recent gains well, but the strength has been mainly about specs adding length while the farmer sold physical.  End users seem well supplied unless the perception about stocks changes Thursday.

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

Monday, March 25, 2013

Closing Comments 3-25-2013 - USDA Report Preview

Mixed day for the grain markets today.

Corn closed up 7 with much of that strength coming from fund buying near the close, soybeans closed down 3, KC wheat was down 3, MPLS wheat was down 1, CBOT wheat was down 3, equities closed weaker with the DOW off 64 points, crude was up about a buck, and the US dollar was sharply higher.

An ok day for the grains; but one that also left me feeling a little cautious.  First off the strong close by corn seemed to come from the funds and idea’s that this week’s report will be bullish.  The only bearish forecasts I have seen for the report are those worried about the fact that everyone seems to be bullish on it and I land in that camp.  That we have had a nice rally since the last USDA report; but we also seem to have too many looking for bullish numbers which opens the door will they be bullish enough.  What if they are not bullish but actually bearish.  No one is talking about it; but this report doesn’t have a history of always limit up; there have been numerous times when it has been limit down.  I do feel that the report happening when the markets are open will take a little of the extreme out of the report; but also add to the volatility. 

What I mean by the extreme out of the report is the fact that we won’t have everyone waiting for the open to and getting more bulled up or bearish.  I guess I have a theory that the longer the info is out without pricing itself into the market the more extreme the movement when the market opens.  I.E. in the past the markets had always been closed when the USDA released it’s stocks or S & D reports.  The past few the market has been open and the market seems to trade both sides in rather choppy volatile trading action when the report is released.  Before if we had a bullish report; we wouldn’t see the market trade both sides; it would simply trade higher off of the open or lower off of the open if we had a bearish report.  Before by the time we had the report out everyone had already jumped on the buy or sell bandwagon; now with the markets open the price discovery happens for a little longer period of time in my opinion. 

Back to my point; it just feels to me that we have some risk on old crop corn in particular that everyone is looking for a bullish report.  It might take something super bullish to have follow through buying.  Also a little concerning is the local fact that I can’t find much if any homes for nearby corn.  End users completely plugged and having no interest for a few months is not bullish; but that might just be a local thing as some areas still need corn hence we still have a decent inverse on the board.

The other thing that made me a little nervous today was the price action on the outside markets.  A very strong US dollar doesn’t help us get additional exports and an overall risk off type of attitude won’t promote money flowing into investments such as commodities.  I didn’t like the DOW price action today; perhaps it was just another small correction in what has been a big bull market since 2009; but trades like today were we put in new all time highs and trade lower than the previous day’s lows are yellow flags to me and technically made give some a decent risk reward spot to go short.  Plus we have all seen the arguments on the actually strength of our economy; so I won’t go down that road; but some of the things going on in Europe and with Cyprus should make us nervous.  That isn’t all bad either because it means that at least some are playing the market from the short side which means we have a little balance.  When everyone gets supper bullish or supper bearish and we don’t have that balance that is when typical blow off tops or bottoms tend to be made.

Else were today basis felt a little weaker for corn.  As mentioned above a lack of homes; or at least homes at values that are being posted.  There is always a price that will trigger buyers; but right now that price is much lower than most of the posted bids.  The positive for corn is that most end users especially in our area have little to zero coverage for June-July-August-September corn and I know of a couple plants that use 4-5 million bushels a month.  That’s a lot of corn that they need to buy at some point?

Wheat basis felt a little weaker today as well; seen a small increase in producer selling with some moisture hitting parts of the southern growing regions.  (Heard of a foot in parts of Kansas for snow in the last event.)  We also still really lack hard red winter exports; we haven’t had any of the wheat in our area go to the export market.  While years of some bull markets we seen wheat in our area go that direction.  Right now those markets are still 30 cents or so away from our domestic market for winter wheat.  Spring wheat is close; but part of that is due to the fact that spring wheat in our area can trade a small discount to the ND spring wheat due to quality and  spreads going west.

The sunflower market is slow; bids and offers seem to be getting a little wider.  But orders have been decent and the crush is competitive with the birdseed.

Seen a rumor that some more Argentina corn has been booked into SE US Feeder markets.  That would be a both bullish and bearish thing.  Shows us how expensive our corn is versus some other places in the world; but also friendly because we don’t have enough corn to meet our demand.

We did get some cars into most of our locations over the weekend and we are offering free delayed price on most of the grains.  With the cars most of our locations have room for almost any grain………….call if you have questions.


Friday, March 22, 2013

Overnight Highlights from CHS Hedging's Tregg Cronin 3-22-2013

Outside Markets: Dollar Index down 0.146 at 82.593; NYMEX-WTI up $0.45 at $92.91; Brent Crude up $0.10 at $107.57; Heating Oil down $0.0034 at $2.8929; Livestock markets are mixed/weaker; Gold down $6.20 at $1607.60; Copper up $0.0280 at $3.4630; S&P’s are up 3.25 at 1542.25, Dow futures are up 33.00 at 14,381.00 and Treasuries are firmer.  

Despite the latest spate of headlines from Europe, global financial markets actually exhibiting a fair amount of calm and order.  While the NIKKEI fell 2.35% overnight, Europe is flat this morning and the FTSE MIB is actually up 0.35%.  Bond yields across Europe are easier this morning, and the Euro is rallying against all of its major trading partners.  The EURUSD +0.462%, EURJPY +0.266% and EURGBP +0.299%.  The latest headlines in the Cyprus Crisis is European officials rejecting an alternative plan from the Cyprus gov to save its banking sector and remain in the Eurozone.  Cyprus needs to raise €5.8 billion to avert crisis and secure bailout financing by Monday.  Expect a weekend chocked full of headlines heading into the Monday deadline.  No economic data today.

The last 24 hours saw precip in AR/S-MO, and some snow fell in NE/SD with more still falling this morning.  More precip will move into towards the weekend for the southern plains with all of KS expected to see 0.50-0.60” Sat/Sun.  This will push into MO as well where amounts will be slightly heavier.  OK sees moisture as well.  This system moves into IL/IN/KY/OH by Monday with S-IL seeing as much as 0.94”.  Following Sunday’s system, the Midwest will be quiet Monday through Friday.  NOAA’s maps continue to point cold and dry in the 6-10 with a slight moderation in the temps for the 8-14, but still fairly dry in that period.  Most of the WCB remains in some stage of drought and could use additional moisture as opposed to getting in the field early.

Slightly easier markets overnight as we consolidate recent gains in both grains and the sharp rally in oilseeds yesterday afternoon.  Unfortunately, there is no chatter on the wires this morning as to the reason behind the soybean rally yesterday.  Most traders will be watching the USDA website at 8:00am this morning to see if there were any sales reported to Washington.  The rally was back end led, but CIF traders noted as much as 770,000 bushels of new crop beans changing hands yesterday.  Between the logistical backups in Brazil, and the inability to source Argentine supplies until at least April (let alone their labor issues), it is possible we did some more old crop soybean business.  Corn and wheat seem to be running into soft cash markets following a solid week of movement by farmers.

Bloomberg released several polls ahead of next week’s USDA reports.  Rather than rehash them here, I’ve included them below.  Only blatant observations would be slightly lower corn acreage estimates, slightly higher soybean acreage and the trade clearly anticipating a bullish Mar 1 Stocks number.  With an average trade estimate below 5.00bbu, the trade is basically assuming Q2 corn feed demand didn’t slow to the level the USDA is currently implying.  Just looking at estimates, would appear 5.0-5.1bbu is the range: above 5.1bbu is bearish and below 5.0bbu is bullish.  News out of China overnight said March soybean imports may be 4.29MMT and 4.285MMT according to the Ministry of Commerce.  China needs around 4.8MMT a month for its crushing needs.  The slower pace of imports is thought to be due to logistical complications out SAM as opposed to slowing demand, but it’s too early to tell.  The USDA is currently estimating 12/13 soybean imports for China at 63MMT, although the average analyst estimate according to Bloomberg has slipped to 59MMT.

Japan bought 37,188MT of food wheat in an S-B-S tender overnight from Canada and Australia.  Articles from Russia said the price limit for purchasing milling wheat headed for state reserves in Aug-Sept is RU7,000/MT, or $210/MT ($5.71/bu).  They are clearly banking on a very large crop and declining global prices.  The Russian winter grain losses are being forecast at 1.3-1.6 million hectares vs. earlier estimates for 1.9 million according to the Ag Minister.  Cattle on feed report this afternoon at 2:00.  Estimates look like placements at 92.8%, marketings at 92.3% and Mar 1 on feed at 93.8%.

Overnight maps continue to look very dry for South America, although haven’t heard whether this is an issue or not.  Something to keep track of nonetheless.  Corn basis remains weak.  Wheat basis is steadying.  Everyone seems to be of the opinion wheat basis should get sloppy due to the amount of wheat left on farm.  While I agree with that in principle, it does concern me that logistics remain poor on rail, and that everyone seems to be of the same opinion on basis.  MWK/MWN is reluctant to trade a carry.

Open interest changes yesterday included another 12,640 contracts of corn, wheat down 690, beans up 1,560, meal down 1,310, soy oil down 4,480 contracts.  Corn open interest just keeps on climbing which is a short-term positive if the people doing the buying decide to defend their position.  Chinese markets were firmer with beans up 14c, meal down $0.40, soy oil down 35c, corn up 1.25c, palm down 15c and wheat up 0.25c.  Malaysian Palm Oil was up 47 ringgit at 2,493 (1.51%).  Paris Milling Wheat is up 0.10%, Rapeseed is up 0.16%, corn down 0.22%, UK feed wheat is unchanged and Canola is unchanged.

Call things a little bit weaker to start off with but keep an eye on the wires at 8:00am this morning or Monday morning.  Odds are good we did some export business to China per the rally yesterday.  Otherwise, the low volume chop ahead of the March 28th reports could be setting in.


U.S. Soy Acres May Rise to Record, Survey Shows; Grain Area Up
2013-03-21 21:49:33.99 GMT

By Jeff Wilson
     March 21 (Bloomberg) -- U.S. farmers will plant the most
soybean acres ever, and corn seeding may rise to the highest
since 1936, according to a survey of 32 analysts by Bloomberg
News. Wheat acreage may rise to the highest in four years.
     The U.S. Department of Agriculture is scheduled to release
its estimates, based on a national survey of growers, on March
28 at noon in Washington.
     Below are the estimates of how much land farmers intend to
plant, in millions of acres.

                  Crop Production           USDA Estimates
               Average      Range         2013       2012
Corn             97.339    96.5-98.5      96.5     97.155
Soybeans         78.351    77.0-80.0      77.5     77.198
All Wheat        56.32     55.6-57.3      56.0     55.736
Spring Wheat     12.39    11.91-12.8       n/a     12.289
Durum Wheat       2.13      2.0-2.3        n/a      2.123

Firm Estimates                           All   Spring  Durum
                       Corn   Soybeans  Wheat  Wheat   Wheat


ABN Amro Clearing        98.000  78.000  56.20  12.40  2.00
A/C Trading Inc.         97.500  78.500   n/a    n/a    n/a
ADM Investor Services    97.000  79.500  56.00  12.40  2.00
Advanced Market Concepts 98.500  77.400  56.50  12.80  2.20
AgriVisor LLC            97.000  78.500  57.00  12.80  2.20
Allendale Inc.           96.956  78.342  56.26  12.06  2.18
Alpari                   98.000  78.200    n/a    n/a   n/a
Citigroup Global Markets 96.800  77.600  56.10  12.32  2.19
Commodity Information    97.000  78.200  56.00    n/a   n/a
EFG Group                97.500  78.500  56.50    n/a   n/a
Farm Direction           97.500  78.200  56.20    n/a   n/a
Farm Futures             97.430  79.090  56.12  11.91  2.06
Fintec Group Inc.        98.000  77.000  56.00    n/a   n/a
Grain Service Corp.      98.200  78.000  56.50    n/a   n/a
Global Cmd Analytics     96.900  78.100  57.10    n/a   n/a
Hightower Report         97.500  78.500  56.50  12.50  2.10
Jefferies Bache          96.760  78.500  56.85  12.42  2.24
Kropf & Love             97.500  78.500  56.50  12.70  2.00
Linn Group               96.500  77.500  56.00    n/a   n/a
McKeany Flavell          97.800  77.900  55.60    n/a   n/a
Mcquarie Bank            96.600  79.700  57.30    n/a   n/a
Newedge USA LLC          97.500  78.800  56.80  12.80  2.30
Northstar Commodity      98.200  78.100  55.80  12.35  2.15
PIRA Energy Group        97.000  78.000  56.10    n/a   n/a
Prime Ag Consultants     98.000  80.000    n/a    n/a   n/a
Rice Dairy LLC           97.600  78.500  56.06  12.20  2.05
R.J. O’Brien             97.000  78.500  56.30  12.20  2.10
Risk Management          96.800  78.000    n/a    n/a   n/a
Stewart-Peterson         96.500  78.500  56.20  12.40  2.10
U.S. Commodities Inc.    97.500  77.500    n/a    n/a   n/a
Vantage RM               97.000  78.500  56.00    n/a   n/a
Water Street Solutions   96.800  79.100  56.14  12.05  2.18

U.S. Corn, Soybean Inventories Fell on March 1, Survey Shows
2013-03-21 21:17:43.537 GMT

By Jeff Wilson
     March 21 (Bloomberg) -- U.S. corn inventories on March 1
probably fell to the lowest in 15 years for the date, while
soybean stockpiles dropped to the lowest since 2004, according
to a survey of as many as 31 analysts by Bloomberg News. Wheat
inventories probably fell to a four-year low.
     The U.S. Department of Agriculture is scheduled to update
its reserve estimates with a quarterly report at noon on March
28 in Washington. Figures below are in billions of bushels.
             U.S. March 1 Inventory Forecasts

          Average      Range             Previous USDA
                                  March 1, 2012  Dec. 1, 2012
Corn       4.995    4.743-5.248        6.023        8.030
Soybeans   0.948    0.900-1.059        1.374        1.966
Wheat      1.165    1.010-1.249        1.199        1.660

Analyst Estimates          Corn    Soybeans   Wheat
ABN Amro                   5.080    0.925    1.055
A/C Trading Inc.           4.950    0.940     n/a
ADM Investor Services      5.037    0.940    1.193
Advanced Market Concepts   4.783    1.015    1.125
AgriVisor LLC              4.990    0.955    1.180
Allendale Inc.             5.071    0.912    1.107
Citigroup Global Markets   4.960    0.984    1.211
Commodity Information      4.975    0.948    1.185
CHS Hedging Inc.           4.997    0.934    1.191
Doane Advisory             5.005    0.945    1.185
EFG Group                  5.000    0.960    1.190
Farm Direction             5.050    1.000    1.170
Farm Futures               5.248    0.972    1.125
Fintec Group Inc.          4.743    0.910    1.210
Grain Service Corp.        5.056    0.928    1.166
Hightower Report           5.025    0.955    1.200
Jefferies Bache            4.941    0.936    1.238
Kropf & Love               4.985    0.930    1.197
Linn Group                 5.020    0.912     n/a
Macquarie Bank             5.103    0.913    1.207
McKeany Flavell            5.020    0.900    1.010
Newedge USA LLC            4.948    0.921    1.205
Northstar Commodity        4.885    0.911    1.170
Prime Ag Consulting        5.100    0.940    1.200
Rice Dairy LLC             4.969    0.925    1.249
R.J. O’Brien               5.030    0.928    1.179
Risk Management            5.223    1.059    1.010
Stewart-Peterson           5.020    0.950    1.160
U.S. Commodities Inc.      4.952    0.970     n/a
Vantage RM                 4.750    1.050    1.150
Water Street Solution      4.916    0.926    1.162

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

Thursday, March 21, 2013

Closing Comments 3-21-2013

The grain markets closed mixed today as beans and wheat reversed rolls today.

Wheat was off 7 cents in CBOT wheat, MPLS wheat was down 7 cents a bushel, KC wheat was down 6 cents a bushel, soybeans bounced rather strong today up 29 cents, and corn closed up ½ cent on the May contract while July was unchanged, and new crop December corn was up 1 ½ cents.  Outside markets had some pressure with crude off about a buck and the stock markets under pressure with the DOW closing off 90 points.

More and more estimates are coming out for next week’s USDA report.  Keep in mind that these stock reports have had a history of limit moves.  The one we had this last January was tame; but this is the report were the USDA seems to find or lose 200-300 bushels of corn regularly.  My personal bias on this report is it will be similar to the January report and won’t be a major market moving event.  But just thinking that could be a little dangerous.  As to how it shakes out; right now the market is looking and seems to be pricing in a bullish type report for corn and beans.  So if that trend continues it might take a very bullish report to not be disappointing.

Besides the stocks report we will also have planting intentions; but I look for that to take a back seat to the stocks.  You can read or listen to hundreds of reasons for both a bullish or bearish report and when things are all said and done and the numbers come out the report should be one that says “we are off to the races because of the tight balance sheet that just got tighter” or the price slide from the summer highs should now continue because we curbed enough demand. 

The bean number might be as important or perhaps even more important than the corn number; but it is also much more known because we report exports and crush on a regular basis.  While the corn usage for ethanol and exports is known; the wild card and reasons for the swings in recent years has been the feed usage or other usage.  Bottom line is in my opinion the bean number could be very tight but I don’t think the number will set the stages for bean prices over the next several months.  I think what China does or doesn’t due will influence beans and I think the tightness in beans will show up in basis. 

For corn old crop prices direction could easily follow the report direction for a couple months; as the report will really be the only big headline for old crop other than new black swan events.  We will have the regular ethanol updates and export updates; and we will see what margins are doing but we won’t know until the June report if the market did it’s job finding additional demand or curbing demand.

For new crop the acres take a back seat because it really comes down to weather.  Now acres can be important and if we have an extreme above or below estimates it will affect the markets but the bigger effect will come from what weather does to yield.  Bottom line on new crop is it might be very hard to sustain a major rally if the acres are any place between 95-100 million acres of corn planted; because anything close to trend line yield produces a crop between 13.5-15 billion bushels or so.  This year we will use only about 11 billion bushels; so to find 2.5 to 4 billion bushels of demand will be very tough.  That’s not to say that say that higher prices can’t happen; but it won’t be easy without a repeat of last year’s bad weather.

One thing heard today that I found interesting was that some 72% of producers thought new crop cash corn wouldn’t go back below $5.00.  I find it interesting because most advisors are liking the idea of making sales and it seems to me that we have too much unsold new crop grain.  I think we have a huge longer term risk in prices should we have a good growing year.  Does it mean guys should be making sales here?  I am not sure; I think we should on a small bounce; but more than anything we need to realize the huge possible risk we have out there.  So no I don’t want to be making tons of sales right here; but I want to realize that every day that goes by getting us closer to new crop my prices objectives probably should come down and premium will eventually fade out of the market. 

As for other news out there today.  We had export sales out; which were horrible for corn and beans.  While the wheat number was good; but just in line with estimates.  Not enough to help wheat turn around the weakness that it had starting last night.

Basis is still under a little pressure; the recent bounce on the board just has a little more supply then demand for corn and wheat both.  We are very close to really widening out nearby corn bid because we can’t find any homes.  I think the coverage for later on slots is smaller than ever.  I have basically zero corn sold for June-September typically I already have a decent deck on.  So end users are basically hand to mouth; which is good and bad; but very volatile.  When they get covered nearby like they are presently bids just start to drop.  Buyers or elevators then look for the next slot; which in this case is also covered.  Then they look at June or July as example; but most producers and elevators don’t have interest selling June at a discount to the nearby bid; especially with as tight as corn is suppose to be.  So you just into a stalemate or waiting game.  Elevators and producers get long upfront hoping for basis to appreciate at sometime; which likely happens if the board goes under pressure or supply stops.  But as long as the supply or selling continues basis stays under pressure and if it continues to happen for an extended period of time guys will obtain too much length and be force to sell it thus push the basis weakness out even further.  The other very interesting basis thing happening is where the final corn product is ending up.   I would say only about ¼ to ½ of our corn over the past several months has went to the same end users that bought it the past 3-4 years.  Part of that is bigger crops around our traditional end users; but part is the lack of crops in other areas.  This might mean that later on our area gets tight and basis has to do some work to keep or get the grain coming in.

Bottom line is look for basis to be very choppy and very volatile.

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

Jeremey Frost
Grain Merchandiser
Midwest Cooperatives
605-295-3100 (cell)
605-258-2166 (fax)

Overnight Highlights from CHS Hedging's Tregg Cronin

Outside Markets: Dollar Index down 0.008 at 82.771; NYMEX-WTI down $0.28 at $93.22; Brent Crude down $0.48 at $108.24; Heating Oil down $0.0053 at $2.8868; Livestock markets are mixed; Softs are better; Gold up $0.30 at $1608.00; Copper up $0.0100 at $3.4565; Silver up $0.103 at $28.920; S&P’s are up 0.50 at 1549.50, Dow futures are up 17.00 at 14,425.00 and Treasuries are weaker.

Mixed equity markets overnight with the NIKKEI +1.34%, but the CAC 40 -1.00% and the FTSE 100 -0.74%.  More poor European economic data overnight along with more drama in Cyprus is keeping things under pressure.  The Euro-area PMI fell to 46.5 from 47.9 in February, below the forecasted 48.2, and below the 50.0 contraction/expansion level.  The European recession is not bottoming, and could in fact be getting worse.  As troubling is the fact France’s manufacturing PMI of 43.9 is only slightly better than Greece’s 43.0.  I don’t think we’re prepared for France slipping into recession.  In Cyprus, The ECB said it will cut Cypriot banks off from emergency funds after March 25th unless the country comes up with a plan to post collateral for a bailout.  The country’s banks are remaining closed as ATM’s run out of cash across the island.  5-yr Credit Default Swaps for Cyprus are up 55bp to 1,002bp, while Argentine 5-yr’s re up 165bp @ 3,261.  Have to point out the huge moves going on in the Forex market this morning with the New Zealand Dollar up over 1.0% against all trading partners, and the Yen is up sharply as well with the JPYEUR +1.094%, JPYCHF +1.006% and JPYUSD +0.869%.  The EURUSD -0.139%.  Jobless claims and existing home sales are on deck in the US today.

Quiet Midwest overnight and only a skiff in the central plains this morning.  The precip event begins tomorrow in the southern plains with 0.25-0.85” falling in the far eastern reaches of HRW country.  This pushes East over Dixieland Saturday with similar totals.  Sunday will bring more moisture to KS with the entire state looking at 0.75”.  Surrounding states could pick up 0.25”.  Monday and Tuesday will see moisture in the ECB impact mainly OH with totals around 0.25-0.50”.  Things then get cold and dry in the 6-10 with the epicenter of the cold over KY/TN/IL/IN/OH but extending all the way to E-NE/E-KS.  The dryness will be centered over MN/IA/WI.  Similar readings in the 8-14.  The 6-10 below normal cold readings are the deepest purple I can remember seeing on these maps.

Mixed trade overnight with weaker grains but firmer oilseeds as soybeans put together a two-day winning streak for the first time since the beginning of the month.  Overnight wires suggest the oilseed strength is tied to continued Brazilian shipping delays, and the belief that the cancelation talk earlier in the week was actually origin or slot switching, not outright cancelations.  See article below.  The weakness in grains seems tied to easier cash markets thanks to heavy far movement of corn and spring wheat earlier this week.  Spreads have been on the defensive, and cash basis on corn is weak across almost every demand center.  Still, the technical picture is much improved for both corn and wheat, implying further upside to come, and the continued rise in open interest signals trend followers getting onboard.

Actually a fair amount of news overnight so check the bottom of the email for more articles.  China released Feb import data overnight with wheat at 222,519MT, down 40.2% y/y, although the US did ship 57,750MT which was up sharply from a year ago.  Corn imports were 394,090MT, down 24.31% y/y, and all of it coming from the US.  Soybeans imports were 2.898MMT, down 24.33% y/y with all of it coming from the US.  Jan-Feb imports of beans were down 8.97% at 7.681MMT.  The soybean shipments could be due in part to the Chinese New Year, or the willingness to “de-stock” inventories ahead of South American harvests which as we’re seeing now was a risky proposition thanks to logistics.  Japan bought their 132,777MT of milling wheat with 76,000MT coming from the US.

Vessel lineups at Brazilian ports continue to rise with 206 boats waiting to load beans, meal and pellets totaling 12.280MMT.  Algeria bought 350,000MT of optional-origin milling wheat at $330/MT C&F, Libya bought 50,000MT of Hungarian wheat and an Oman flour mill bought 10,000MT of Indian-origin milling wheat.  A Bloomberg article, see below, quoted an official at the second largest feed mill in China who said China may have a 20-30MMT annual shortage in feed grains within 2-3 years.  He said China’s meat consumption could expand 25% within 5-years.  He also said China would import 10MMT of corn per year now if there were no policies restricting imports.  Investment bank Credit Suisse cut their 12-month corn price forecast to $6.00/bu.  Wheat to $6.90 and beans to $13.50.

Open interest changes yesterday included corn up another 14,200 contracts, wheat up 1,940, beans down 400, meal down 3,550 and oil up 2,160.  Since the price low on March 7th, corn open interest is up 97,828 contracts signaling a piling on of trend type following funds, and giving this rally some legitimacy.  Chinese markets were firmer overnight with soybeans up 11.75c, meal up $6.20, oil up 56c, corn unchanged, palm up 72c and wheat down 0.75c.  Malaysian Palm Oil up 15 ringgit at 2,456.  Paris Milling Wheat is currently down 0.51%, Rapeseed up 0.27%, UK Feed wheat down 0.75% and corn up 0.76%.

Call things mixed to start with an eye on export sales in 10 minutes.  Corn sales are expected at 0-300,000MT, beans at 150-700,000MT and wheat at 300-825,000MT.  Another big wheat number (700+) would go a long ways to giving legitimacy to the current rally.  We are running into producer selling and most basis levels are on the retreat.  Keep this in mind as we climb higher towards more marketing objectives.  Funds still short a pile of wheat.  Hog board crush spreads are hitting fresh contract lows.

China Has No Reason to Cancel Soybean Orders, CHS’s Liu Says
2013-03-21 10:05:10.898 GMT

By Bloomberg News
     March 21 (Bloomberg) -- Chinese crushers have “no ability
or real intention” to cancel soybean orders, Liu Guoqiang,
general manager of CHS (Shanghai) Trading Co., said at a forum
in Kunming. CHS is a U.S.-owned grain trader.
     Liu’s response came after Shandong Chenxi Group, a Chinese
soybean crusher and trader, said this week that it plans to
cancel orders for almost 2 million metric tons of Brazilian
cargoes on shipment delays.
     “Soybeans are needed in China and supplies are hard enough
to buy from March to May,” Liu said. “The comments to media by
some Chinese crusher wanting to cancel 2 million tons of
soybeans may have other motivations.”
     Only one cargo of soybeans was resold by a crusher, and
there are no cancelations and won’t likely be any in the
“near” future, according to Liu.

China May Have 20m Tons Shortage of Coarse Grain, Feed Mill: Yi
2013-03-21 07:10:09.204 GMT

By Bloomberg News
     March 21 (Bloomberg) -- China may have 20-30m tons of
annual shortage in feed grain supply in 2-3 years, boosting
needs for imports, Yi Ganfeng, vice president of Beijing
Dabeinong Technology Group Co., the country’s second-biggest
feed miller, said on the sideline of the JCI grain conference in
  * As China’s livestock industry matures, feed mills will
    prefer to use bulk-commodity grain, including corn and dried
    distillers’ grains, in place of traditional materials such
    as oilseed meal, used by smaller farms now, Yi says
  * China’s meat demand may expand about 25% from current level
    in about 5 years, spurring consumption of feed grain, Yi
  * China may import 10m tons of corn a year now if there were
    no policies restricting imports, Yi says

Oil Companies Using RINs to Remove Ethanol Law, Growth CEO Says
2013-03-20 13:24:30.99 GMT

By Mario Parker
     March 20 (Bloomberg) -- Oil companies are manipulating the
value of Renewable Identification Numbers, or RINs,used to help
the government track biofuel use, in an effort to eliminate the
country’s ethanol mandate, Growth Energy Chief Executive Officer
Tom Buis said today on a conference call.
  * Growth Energy is Washington-based ethanol trade group

Mexico Corn Production Will Rise in 2013, USDA Unit Says
2013-03-20 19:06:01.573 GMT

By Steve Stroth
     March 20 (Bloomberg) -- Output in the year starting Oct 1
will rise to 22mt from 21.5mt a year earlier, the U.S.
Department of Agriculture’s Foreign Agricultural Service said in
a report posted today on its website.
  * Sorghum production will be 6.8mt, compared with 6.9mt a yr

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