Tuesday, March 26, 2013

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

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