Friday, March 1, 2013

Overnight Highlights from CHS Hedging's Tregg Cronin

CHS Hedging: The Right Decisions for the Right Reasons
Outside Markets: Dollar Index up 0.328 at 82.285; NYMEX-WTI down $1.23 at $90.81; Brent Crude down $0.88 at $110.48; Heating Oil down $0.0225 at $2.9378; Livestock markets are firmer; Softs are weaker; Gold down $6.50 at $1571.60; Copper down $0.0630 at $3.4845; Silver down $0.257 at $28.175; S&P’s are down 8.00 at 1505.50, Dow futures are down 58.00 at 13,980.00 and Treasuries are firmer.  

Markets are in somewhat of a meltdown mode this morning on weaker than expected economic data as well as the Sequestration which is slated to go into effect later today when the President signs the order to slash spending.  Asian shares were mixed, but Europe is lower with the FTSE MIB -1.62%, the IBEX -0.93% and the Euro Stoxx -1.15%.  China’s manufacturing PMI fell to 50.1 in February from 50.4 in January and lower than estimates.  A separate gauge also fell.  In addition, unemployment rose in the Eurozone to 11.9% from 11.8% in December.  The Eurozone PMI held at 47.9 in February, but the UK PMI fell to 47.9 from 50.5 in January, highlighting the fact the global economy is still in very rough shape.  UK 10-yr treasuries are off 7.5bp @ 1.897% as investors fly to safety.  Currencies are also in risk-off mode with the GBPUSD -0.958%, JPYUSD +0.597%, EURGBP +0.623%.  As noted in the email earlier, Argentina is also in focus.  Lots of economic data today including personal income, the US-PMI and the University of Michigan Confidence.

Standard and Poor’s downgraded the Canadian Wheat Board to BBB- from AA yesterday, a seven level cut.  They said the downgrade reflects the loss of monopoly status, the subsequent weakening of CWB’s business risk profile, diminished federal government support and intermediate financial risk profile.

No precip for the Midwest in the last 24 hours.  Next chance of precip looks like Monday, for ND with most of the state looking at 0.25-0.88” of moisture shown.  Otherwise fairly quiet through March 8th.  Extended maps from NOAA look wet during the 6-10 and 8-14 with almost the entire Midwest seeing above normal precip.  Temperatures are also expected to be below normal throughout, so should be another sizable blizzard.  Pattern is certainly much more favorable this year than last.  Dry weather in SAM yesterday, while the forecast is still calling for 0.50-1.50” in Argentina on 85-90% of their growing regions.  They should then be quiet until the end of next weekend.  Brazil will see rains of 0.50-1.00” Sunday/Monday.  Hard to argue with current weather.  The port of Santos was hit by a landslide due to rains over the weekend, temporarily suspending rail service and loading.  Both are said to have resumed today, however.

Mostly weaker trade overnight, led by soybeans and meal after sizable rallies the past two sessions.  Despite their solid effort, soybeans are currently down 6c on the week.  A big anchor around the neck of the complex has been the plunge in World Veg Oil prices, thanks in large part to Malaysian Palm Oil which closed down for a eighth straight session this morning, the longest since March of 2006.  It is down 8.3% since 2/20.  Their exports have slowed, and stockpiles remain near records as importers want protein meal, not vegetable oil.  Otherwise, we did see some grain move this week, and cash is a bit weaker on corn and soybeans because of it.  Lastly, soy crush margins have been under big pressure this week thanks to weak bean oil, and this has pressure basis.

In addition to the weak veg oils, China said overnight they would release 100,000MT of rapeseed from state reserves on March 8th  as part of plans to auction 1MMT ahead of harvest.  This looks routine in nature, but will accompany 1.285MMT of wheat to be released as well.  Trying to keep domestic prices down until Brazilian supplies arrive.  Buenos Aries Grain Exchange became the latest Argentine estimate to dip below 50MMT yesterday, dropping to 48.5MMT on their soy crop number.  It seemed with the upturn in rainfall, crop estimates would stabilize near 50MMT, but it looks like estimates need to be angled a bit lower.  Still a big jump in production y/y.  Sounds like Russia’s cut on its grain import duty won’t take effect for at least another month, but officials are calling it insignificant anyway.  The UK’s winter crop planting is said to be 20% below a year ago according to the Ag & Horticulture Development Board.  “Slug infestations and saturated soils are also problems.”  Brazil is preparing tax breaks to channel more sugar cane into ethanol.

Deliveries overnight included 1,437 soybean oil, 471 wheat and 2 oats.  Louis Dreyfus is said to be stopping Chicago Wheat futures in Toledo with the intention of loading them out via the Lakes for European feeding programs.  Overnight they stopped 58.  There were no deliveries in corn, beans or KC wheat.  Minneapolis saw 296 redeliveries and 22 fresh deliveries.  JP Morgan was the biggest stopped which should be Cargill.  MWH/MWK hanging near even money.

Open interest changes yesterday included corn down 10,020 contracts, wheat up 3,220, beans down 1,470, meal up 5,070 and soyoil down 490 contracts.  There are 22,651 left in the March corn, 14,971 in March beans, 3,400 Chicago Wheat, 5,143 HRW and 1,548 Minneapolis Wheat.  Could still be some fireworks in Minneapolis.  Chinese markets were mixed/weaker overnight with beans up 0.75c, meal up $2.70, soyoil down 44c, corn down 0.25c, palm down 48c and wheat down 3c.  Malaysian Palm Oil closed down 29 ringgit at 2,368, 1.21%.  Paris Milling Wheat is down 0.10%, Rapeseed down 0.53%, Corn up 0.22%, UK feed wheat up 0.40% and Canola is down 0.25%.

Looks like things should be weaker today, but it doesn’t look like it’s all on the grains today.  The Dollar Index strength, equity selloff and constant barrage of “Sequestration” talk should keep things under pressure today.  Cash markets were a bit weaker going home overnight, but feels like we need more movement yet.  Charts on corn look like we’ve got another 15-20c up before we run into significant resistance.

Trade as of 7:05
Corn down 2-3
Soy down 6-12
Wheat down 1-3

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

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