Information about grain markets and info to help producers to market crops. See how various grain marketing strategies can effect ones average price. We will be posting various potential trade and option strategies along with marketing decisions made on our mock farms.
Monday, March 18, 2013
Overnight Highlights from CHS Hedging Tregg Cronin 3-18-2013
Outside Markets: Dollar Index up
0.409 at 82.665; NYMEX-WTI down $0.89 at $92.57; Brent Crude down $1.32 at
$108.51; Heating Oil down $0.0280 at $2.9110; Softs all weaker; Gold up $9.70
at $1602.30; Copper down $0.0775 at $3.4430; Silver down $0.066 at $28.785;
S&P’s are down 12.50 at 1541.00, Dow futures are down 72.00 at 14,361.00
and Treasuries are well bid.
The most important financial market
news today, and arguably any market news today, is the unprecedented bank levy
on Cyprus citizens as part of the agreement from the Eurozone to receive a
bailout. In essence, every citizen in the country of Cyprus who has money
in a bank account will be charged a tax for having that money in a bank account
which will in turn go towards paying off creditors and securing a bailout from
the Eurozone. This has caused markets across the globe to go into a
tailspin, especially those of Spain and Italy as they could possibly be
next. It will almost certainly have the effect of a mini-bank run in
which people run to ATM’s and banks across the country to try and pull money
out ahead of the proposed levy. The IBEX-35 is down 2.20%, the FTSE
-2.00%, the NIKKEI closed off 2.71% and the Shanghai Composite was down
1.68%. Portuguese, Spanish and Italian 10-yr yields were up 8-17bp, and
the Cyprus 5-yr Credit Default Swap is up 44.28bp to 733.46bp, although well
below the 2012 highs of 1,600bp. The Euro is under heavy pressure as well
with the EURJPY -1.227%, the EURUSD -0.948% and the EURGBP is off
-0.988%. Commodities are also getting hammered this morning with Copper
-2.51%, Cotton -2.01%, Palm -1.16%, Gasoline -1.72% and Sugar off 1.75%.
Negative headwinds for grains.
Fair amount of moisture around
over the weekend with rains in MO/S-IL/S-IN/S-OH, while snow is working its way
across the upper-Midwest this morning. Several major highways and
interstates are closed across MN/ND this morning, so expect little grain movement
by the farmer or the railroad, fouling up already poor train logistics.
After the current system moves through, things will quiet down in the corn belt
with most dry weather impacting us the next 5-days. Eastern areas of the
southern plains have chances at another 0.50-1.40” in E-SKS/E-OK/MO/AR.
NOAA’s extended maps turn cooler and drier for much of the Midwest in the
6-10. Below normal precip for all of the southern plains. 8-14 has
a bit better precip for northern growing areas.
Sell pressure from the very get-go last night and
accelerating as we progressed through the evening. Hard to separate what
is specific to the grain markets and what is tied to the pan-commodity and
financial market selloff tied to the European contagion fears. While
Cyprus going bankrupt won’t necessarily affect ethanol and soybean crush
margins in the US, it will continue to rally the Dollar Index as investors
search for a safe-haven, and with our currency already at 7-month highs, it
will have a negative effect on our Ag’s. Aside from that, charts look
ugly this morning, and soybeans look as though we’ll be testing the $14.00 mark
this week, especially with little news until the March 28th
reports. Crush is still at an unsustainable pace, wheat is still being
fed and ethanol plants are starting back up.
News overnight included Valero announcing it was planning
to restart output at its Bloomingburg, OH ethanol plant. It also has
plans to resume operations at its mill in Linden, IN “in the next couple
weeks.” Bloomberg reported investors increased bullish wagers on
commodities by the most in eight months with net long positions up 30% to
528,680 contracts across 18 futures and options markets last week. That
could change this week. Jordan issued two tenders for 100,000MT of
milling wheat and 100,000MT of barley. Palm oil remains in the headlines
as stockpiles remain near record levels in Malaysia and China and the recently
added 4.5% tax on palm oil exports remains in effect, curbing some
demand. While old news now, the NOPA crush report from Friday is mainly
garnering negative headlines like “crush missing estimates.” While the
crush did come in nearly 5mbu under estimates, the pace is still
unsustainable. To hit the USDA’s 1,615mbu marketing year target, we
need to slow Mar-Aug crush 19% from last year. The biggest reduction ever
in y/y Mar-Aug crush? 12%. So we’re going to try and do something we’ve
never been able to do, which will mean more imports of beans and meal from SAM,
bigger inverses, and stronger cash markets.
Open interest changes Friday included wheat down 2,350
contracts, corn up 6,460, beans down 5,140, meal down 3,710 and soyoil up 3,780
contracts. Chinese markets were down sharply with beans off 13.50c, meal
off $12.40, soyoil down 23c, corn up 0.75c, palm down 19c, and wheat down
2.50c. Malaysian Palm Oil was down 34 ringgit at 2,383 (1.16%).
Paris Milling Wheat is down 0.11%, Rapeseed off 0.38%, Corn off 0.55%, UK Feed
wheat down 0.71% and Canola is down 0.59%.
Call things weaker today as a pure “risk-off” day takes
hold, regardless of the underlying fundamentals in the grain markets.
More moisture is falling in the Midwest which is bearish until it impacts
planting progress which isn’t occurring yet. Charts, as I mentioned earlier,
also don’t have a good look to them today. Bullspreads should still work
near-term as the break isn’t likely to move any grain on top of the winter
weather in the upper-plains.