Wednesday, March 13, 2013

Overnight Highlights from CHS Hedgings Tregg Cronin 3-13-2013

Outside Markets: Dollar Index up 0.020 at 82.606; NYMEX-WTI up $0.18 at $92.72; Brent Crude down $0.41 at $109.24; Heating Oil down $0.0029 at $2.9455; Livestock markets are firm again this morning, one more day and we can call it a winning streak; softs are mixed; Gold up $3.50 at $1595.20; Copper down $0.0035 at $3.5510; Silver down $0.031 at $29.140; S&P’s are down 2.50 at 1544.25, Dow futures are down 22.00 at 14,364.00 and Treasuries are firmer.

Black smoke, no Pope.  Otherwise, equities fell around the globe last night with the Shanghai Composite down 0.99%, and the FTSE MIB pacing Europe, down 1.61%.  Italy’s equity and bond markets are under pressure after a poor debt auction there.  Their 10-yr yield jumped 9.6bp to 4.690%.  The Japanese Yen is showing quite a bit of strength this morning with the USDJPY -0.365%, EURJPY -0.610%.  Pound up strong as the GBPEUR +0.630%.  Ireland plans to return to the long-term debt market with a 10-yr bond sale worth $15.6 billion, their first 10-yr issue since 2010.  Retail sales due up later today.

Nothing doing for precip the last 24 hours, and nothing but some flurries on the radar this morning.  5-day forecasted precip map still showing the best chances for moisture in the ECB late in the period with 0.50-1.00” amounts falling in IL/IN/OH/PA.  Favorable extended maps as well with above normal precip over much of the corn belt and northern plains.  Southern plains is expected to be normal to below, while temperatures for most of the continent will be below normal.  8-14 looks similar.  SAM weather attached.

Two-sided to better trade overnight led once again by the grain markets as both wheat and corn post 2-3c gains.  Soybeans are once again languishing in negative territory, and the lack of volume and momentum at the upper-end range cap is particularly troubling.  Without a reversal soon, charts are going to look like soybeans failed for the 5th time at the $14.85-15.00 mark.  Fortunately for corn and soybeans, basis does remain firm if not stronger than a week ago in most demand centers which is keeping flat price levels elevated.  There were some notable spots of weakness yesterday, however, including PNW corn, Hereford corn, spot floor and to-arrive wheat bids and CIF soybean bids.  Movement has picked up, but not enough to squash bids.  Mixed spreads overnight.

Quite a bit of fodder on wires overnight including word from China the hog-to-corn ratio dropped to 5.95:1 which is below the approximate break-even point of 6:1.  The National Development and Reform Commission said they will “prevent excessive declines in hog prices to avoid wider losses.”  The USDA attaché to China said 13/14 soybean imports are forecast to increase 4% y/y to 65.5MMT.  He also said domestic production should fall another 4% as China focuses on self-sufficiency in grains.  A separate note said Chinese feed mills have bought 600,000MT, or 9 cargoes, of US corn for Oct delivery in February.  Total purchases are now around 900,000MT for new crop.  The corn being supplied is quoted around $337/MT C&F.  In wheat news, Iraq has issued a tender for 50,000MT of wheat with a bidding deadline of Mar 24 with validity to Mar 28.  All the usual suspects included.  India said they are seeking to be included on Egypt’s GASC list of approved wheat suppliers.  That would be one more foot in the door, and they’ve got the wheat to move.

Turkey is said to have contracted new crop wheat from Russia at prices of $268/MT C&F.  The newswires this morning are also talking about talks between Iran and the US to supply the former with wheat to the tune of 110,000MT.  It sounds like none of the 1MMT Iran bought months ago from Pakistan has been shipped, potentially putting Iran in a further supply bind.  Major Australian grain handler CBH said 13/14 wheat shipments will probably rise 13% as high prices encourage a rebound in plantings.

Open interest changes yesterday included wheat up 2,220, corn up 1,110, soybeans up 3,350 contracts, meal up 3,010 and soyoil up 1,440.  Delivery intentions included 1 meal, 3 oil and 5 soybeans.  Chinese markets were weaker once again with beans down 8.75c, meal down $3.80, soy oil down 93c, corn up 1.75c, palm down 110c and wheat up 1.75c.  Malaysian Palm oil was down 14 ringgit at 2,397 (0.52%).  Paris Milling Wheat is up 0.32%, Rapeseed down 0.43%, UK feed wheat unchanged, Corn unchanged and Canola down 0.14%.

Wheat/corn spreads continue to hit fresh contract lows on a daily basis, and the Minneapolis Wheat/Corn spread on a front-month basis at 59.75c is the weakest since July 1996.  On an active-continuation basis, the spread is basis the May and at 77.25c is the weakest level since August 9th, 2004.

Call things better to start, and it wouldn’t be a surprise to see soybeans trade positive at some point today.  Grains have mostly firm basis supporting them, and the technical picture on both remains fairly strong.  It feels like a solid rally of 20-30c would buy a lot of wheat and cool down the cash markets a bit.  I’m leaning toward it happening as opposed to not.  Soybeans continue to be plagued by large supplies in South America, and slowly but surely, they are moving.

Trade as of 7:15
Corn up 1-3
Soy down 3-5
Wheat up 1-2


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

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