Thursday, March 14, 2013

Overnight Highlights from CHS Hedging's Tregg Cronin 3-14-2013

Outside Markets: Dollar Index up 0.243 at 83.132; NYMEX-WTI down $0.29 at $92.23; Brent Crude up $0.02 at $108.26; Heating Oil down $0.0130 at $2.9110; Cattle markets are better, hogs weaker; Softs are weaker; Gold down $9.70 at $1578.60; Copper up $0.0105 at $3.5355; Silver down $0.323 at $28.630; S&P futures are up 4.00 at 1554.00, Dow futures are up 20.00 at 14,418.00 and Treasuries are weaker.  

After the Dow Jones Industrial Average hit new all-time record highs earlier this month, and the S&P 500 has moved within 11 points of its all-time highs, European shares are now nearing 5-yr highs as all seems to be well around the globe.  Overnight, the NIKKEI rallied 1.16%, and European shares are being paced by the FTSE MIB, up 1.0%.  A fair amount of economic data today including weekly jobless claims which are seen at 350,000.  The Producer Price Index is seen up 0.7%, but ex food & energy is up 0.1%.  In forex, the Norwegian Krone and Swedish Krona are getting pounded with the former down well over 1.0% against almost all major trading partners as Norway’s Central Bank signals they may cut rates.  The EURNOK is up 0.927% and the USDNOK is up 1.200%.

Snow moving across the northern plains overnight with light snowfall accumulating in the Twin Cities this morning.  Several locations have received 1-2” in MN.  System is moving into IA/WI/IL later today, but chances of snow remain high for the northern plains the next 7-days.  5-day moisture totals are calling fir 0.50-1.00” amounts across ND/MN/WI/MI while a separate system should bring 0.25-0.40” across KS and MO/IL/IN/KY/OH should see 0.50-1.7” in total with the majority falling tonight and tomorrow for the North and Sunday for the mid-South.  Patterns remain the same in the 6-10 & 8-14 with above normal precip and below normal temps seen for most of the Midwest.  Favorable pattern remains in place, although early planting might not be an option this year.

***At 83.126, the Dollar Index traded to the highest level since August 3rd.  This matters.***

Continuation of lower prices overnight in the soy complex while grains continue to try and press higher led by wheat.  There is certainly some inter-market spreading taking place with a lot of the long soy/short grain spreads being unwound following the disappointing WASDE for soy bulls.  In addition, the technical crowd is beginning to jump on the deteriorating soybean chart picture, calling for lower prices.  Export sales will be the feature today, but it could be the last big week of bean and meal sales before starting the seasonal decline.  The wheat export total will be watched closely, although the details of where the wheat is going could be just as important.  Corn basis is on the defensive in Hereford, TX and at the Gulf and is undermining spread potential at least for now.

Overnight, Vietnam bought 15,000MT of Indian corn at $290/MT C&F.  More importantly, India reportedly sold 13,700MT of corn to China for April delivery at a price of $275/MT FOB and $320/MT C&F.  This was said to be a test run cargo, but it’s clear China is looking to diversify its corn needs outside of just the US.  Japan bought their 130,533MT of milling wheat from the US, Canada and Australia with around 64,000MT coming from the US.  Malaysia announced they are deferring the purchase of wheat import deals totaling 350,000MT to July-Sept on the anticipation of a rapid decline in prices.  Malaysia mainly buys from Australia.  Strategie Grains cut their EU-27 soft wheat estimate by 0.7MMT to 130.5MMT, but raised corn production by 0.4MMT to 64.1MMT.  Goldman Sachs was ranked No. 1 in commodities revenue in 2012 according to Coalition.  JP Morgan was ranked second and Morgan Stanley third.  The U.K. pig herd shrank to the smallest since 2000 as costs rise for feed, but the number of cattle and sheep increased.

Research group IKAR said Russia may purchase as much as 6MMT of grains for government stockpiles following their new crop harvest.  Russia has been aggressively selling grain from government reserves to cool domestic prices following their severe drought in 2012.  This could end up hampering exports depending on crop size in 2013.  Crude Palm Oil in Malaysia fell another 1.38% overnight, its fourth straight lower close.  This due in part to rising Indian cooking oil stocks, and the record amount of product waiting to be loaded at Brazilian ports, most of which is headed for Asia.  This is obviously weighing on Soybean Oil, and that chart has a Head and Shoulders Continuation Pattern forming, a particularly bad formation.

The wheat/corn spread and demand topic has received a lot of discussion in recent days.  Overnight, corn bids fell again in TX with shuttle values for spot trains indicated at +98K while April is +100K.  These are down 2-6c from yesterday, and down 5-8c from week ago values.  Feeders are actively taking wheat, and canceling or pitching out corn length where they can.  Along with CIF corn bids down 2-4c, this is having a pressuring effect on the CK/CN and a supportive feature to WK/WN.  Funds short a lot of WK, and could be forced to cover should this keep inverting further.

Open interest changes yesterday included wheat down 4,320 contracts, corn up 5,200, beans down 4,050, meal down 2,150 and soyoil up 4,100 contracts.  Let the short-covering rally begin in Wheat.  Chinese markets were soft with beans down 4c, meal down $7.80, soyoil down 29c, corn down 1.25c, palm down 77c and wheat up 1.25c.  Paris Milling Wheat is up 0.43%, Rapeseed down 0.27%, UK Feed wheat up 0.64%, corn up 0.56% and Canola is down 0.37%.  Deliveries overnight included 7 Chicago Wheat, 1 meal and 23 bean oil.  Worth noting, someone (thought to be LDC) canceled 545 March Chicago Wheat receipts in Toledo last night.  The total bushels would be 2.72mbu which is roughly 3 laker sized vessels.  This is probably headed for Europe, and remains supporting WK/WN.

Call things mixed to weaker to start, although we aren’t likely to keep wheat down for long if recent days are any guide.  Corn has somewhat of a bearspread bias at current which doesn’t bode well for continued futures’ gains.  Soybeans are developing a weak technical picture at the same time beans are leaving Brazil as they pass the 50% mark.  Domestic demand remains strong, but with reduced exports the $15.00 mark will be difficult to push through.

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

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