Friday, March 15, 2013

Overnight Highlights from CHS Hedging's Tregg Cronin 3-15-2013

Outside Markets: Dollar Index down 0.334 at 82.272; NYMEX-WTI up $0.57 at $93.60; Brent Crude up $1.14 at $110.11; Heating Oil up $0.0314 at $2.9609; Livestock markets are weaker; Softs are a bit firmer this morning; Gold up $0.90 at $1591.60; Copper up $00.80 at $3.5445; Silver up $0.068 at $28.875; S&P’s are up 0.25 at 1556.25, Dow futures are unchanged and Treasuries are lightly mixed.

Flat US futures this morning in what looks to be a fairly quiet close to the week.  If the Dow closes up today it will be 11 sessions in a row which would be the longest streak since 1991.  Asian shares were firm last night, but Europe is weaker this morning led by the IBEX-35 which is down 0.78%.  All appears to be well as the Volatility Index, or VIX, dropped to a fresh low for the move of 11.30%, the lowest since March 2007.  Seems like there is a growing sense of complacency out there, but we have been getting better economic data to support it.  Currency moves overnight are highlighted by the Aussie Dollar weakness as the GBPAUD is up 0.640% and the SEKAUD is up 0.713%.  Yen, Euro and Dollar are flat.  A few economic data points today including the Empire Manufacturing (prior 10.04), CPI (+0.5%) and Industrial Production (+0.4%).  JP Morgan is back in the news for trading losses.

More snow in the upper-Midwest overnight impacting MN/ND/SD/NE/WI and continuing to fall in ND/MN/WI this morning.  A winter storm watch is in effect for portions of MN through tomorrow morning.  The next 3-days’ worth of moisture will bring 0.25-0.70” to the Dakotas and MN, while 0.50-2.00” amounts will drop in MO/S-IL/S-IN/KY/S-OH.  Moisture is not an issue East of the MS-River, and could soon be bordering on excessive but I won’t be the first to say that.  The 6-10 and 8-14 still look cold and wet for much of the Midwest, but concentrated East of the MS-River.  Coldest temps will be in ND/SD/MT/MN.  Private forecasters aren’t really latching onto the cold in the south, or frost conditions, like they were yesterday.  I’ll try and follow up with more later today.

Mixed trade overnight with strength led by soybeans and weakness by wheat.  Looks like a bit of inter-market spreading, but in the opposite direction it has been most of the week.  Oilseed markets were firm around the globe overnight with Malaysian Palm Oil up 2.12%, Dalian soybeans up 1.10%, Rapeseed up 0.76% and Bean Oil up 0.93%.  Palm Oil experienced a sharp rally overnight after four days of losses after Malaysia decided to not implement a higher tax on palm oil exports as originally intended.  Inventories there remain burdensomely large, so makes sense.  Otherwise grains are taking a bit of a breather, although few would be surprised to see wheat return to its winning ways by the close considering the positive demand story, short fund position and mixed weather outlook.

Very light news overnight aside from the aforementioned Malaysian tax situation.  The Paraguayan Finance Minister said soy exports from that country will double this year as farms recover from drought.  Output there is seen as high as 9MMT vs. 4MMT last year.  Soybean production accounts for 12% of GDP, highlighting their vulnerability to weather.  New Zealand is experiencing its most widespread drought in 30 years according to Bloomberg, causing global milk prices to rise.  Russia’s Ag Minister said their target for the 13/14 wheat harvest is 40-45MMT vs. 12/13 at 37.7MMT.  They also intend on buying 5MMT of grain for state reserves, with wheat obviously being the highest.  Their 5-yr average wheat production is 52.2MMT highlighting poor wheat conditions going into dormancy.  The priority to rebuild state reserves could limit an expansion of their export program.  Stay tuned.  The much anticipated port strike in Brazil has been postponed.

There were some deliveries against the March overnight on the last day able with 1 meal, 203 soy oil, 99 corn, 16 beans and 21 Chicago wheat.  0 Minneapolis wheat.  Not too surprising to see 99 corn actually delivered considering CIF bids of +71K are actually +55H which come in right at delivery equivalence, and some bids were weaker, most likely putting a margin in.  Doesn’t seem to be impacting the CK/CN too terribly much this morning.

Open interest changes were interesting with corn up a huge 23,260 contracts but only on volume of around 200,000 contracts which is rather light.  Somewhat conflicting signals.  Wheat dropped 6,210 contracts which isn’t surprising considering the large spec which is being forced to cover.  Beans were up 950, meal up 940 and soy oil up 2,990 contracts.  Malaysian Palm closed up 50 ringgit (2.12%) at 2,414.  Chinese markets were sharply better with beans up 22.75c, meal up $1.00, soyoil up 42c, corn up 3.25c, palm up 22c and wheat up 0.25c.  Paris Milling wheat is up 0.11%, Rapeseed is up 0.71%, UK feed wheat up 0.25%, Corn up 0.11% and Canola up 0.15%.

Call things mixed to start, but I’m not going to rule out positive trade in the grains by day’s end.  Spreads remain firm in wheat overnight, and it doesn’t feel like we’ve priced in the renewed export and feed demand of SRW to the fullest extent yet.  We obviously haven’t seen the short-covering rally which could be in the offing.  Otherwise we will slowly begin out March 28th reports’ vigil, so expect the light volume to continue.  Weather will begin taking on increased importance the next several weeks.

Trade as of 7:10
Corn down 1
Soy up 4
Wheat down 2-4

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

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