Remember history ....yet remember to stay comfortable

I often talk about the fact that not one marketing plan is correct for everyone producer as everyone has different goals, needs, and circumstances that factor into each persons decision when to market grain.   Some guys need to promote cash flow at certain times of the year; some guys need to keep bankers happy while others are simply trying to avoid the tax man.

So my message today is more of the same.  Get yourself comfortable for you and your situation.  If you haven't made any or many sales and now feel like you will have at least a little protection it might mean making a few sales or spending a little money and buying some protection.  It might mean doing nothing for some as after there really is a long time until we see new crop in 2013....around a year for many areas.....maybe a little more in some.  Long time where plenty of things have to go just right for our balance sheets to fix them self.

What happens if see the drought prolonged another year.....what happens if we don't ration off demand as fast as we should.  The sky really could be the limit if we continue to get a perfect storm of tight supplies, solid demand, and money flow.  The last money flow is really where I get a little concerned for grain marketing.  I remember last year around this time......corn traded to nearly 8.00 by late August only to fall over 2.00 a bushel in the next 30-35 days.

I didn't do a lot of research on the fundamental change over that 30 days; but as I really remember it the crash happened mainly due to money flow.  I think we need to remember that many days the only true fundamental that matter's isn't always the supply and demand of a particular product; but the money flow.  We need to keep feeding the monkey; BIG MO....or give big money fund flow a reason to stay in the game.......maybe up their ante a little bit or at the very least not to start to take huge profits.

I have a couple charts below; one of Dec corn in 2011 and another of this years Dec contract.  You can see that last years rally was impressive but not nearly as impressive as this one has been.  The question really becomes will history repeat it self?  More importantly if it does......will you still be comfortable?

Don't mistake at all that I am very bullish grains......but who isn't when the markets are at the top....isn't the fact that nearly everyone is bullish ......too bullish a little scary by it self?   But I do know that just because I am friendly and feel that the market has an unprecedented drought that  needs more demand being curbed then ever before........that it self doesn't mean we have to go higher......and I remember last year......I also remember the market crash in 2008 along with the huge squeeze on spring wheat that took it nearly twice as high as anyone every thought it could go.

So I am not here to preach that the market will go up or will go down; I am just here to preach doing what is right.  Practicing good risk management that leaves one comfortable whether our markets go up or down.


Here are a couple of charts

Overnight Highlights from Country Hedging's Tregg Cronin

Outside Markets: Dollar Index up 0.087 at 81.994; NYMEX-WTI down $0.22 at $96.64; Brent Crude down $0.65 at $113.99; Heating Oil down $0.0108 at $3.1137; Livestock markets are lightly mixed; Gold up $1.80 at $1641.70; Copper down $0.0140 at $3.4430; The Yen is firmer, but all other major currencies are firmer; Sugar is firmer, but the other softs are weaker; S&P’s are down 3.75 at 1408.75, Dow futures are down 24.00 at 13,174.00 and Treasuries are firmer.  

Equity markets around the globe are softer this morning as trade data from Japan and a plea from Greece for more time encouraged profit taking.  It should be noted, however, that the S&P 500 hit its highest level since May of 2008 yesterday before closing with small losses.  Overnight, Japan reported a July trade deficit of $6.5 billion as Europe’s debt crisis curbed exports.  Exports to China were also down 12%, while those to the EU were down 25%, the biggest decline since October of 2009.  On the bright side, some countries in the EU are seeing borrowing costs fall to multi-year lows.  Portuguese 10-yr debt yields are now at 8.7486%, the lowest since May 19^th, 2011.  Irish 10-year yields are at the lowest since Oct of 2010.  Today we will get Existing Home Sales Data.

Rainfall in the last 24 hours was light and confined to TX/AZ/MT and scattered down the East Coast.  The radar is mostly quiet.  The 1-3 day forecasted rainfall map looks good for the central plains with sizable showers set to fall in OK/KS/N-TX with amounts around 0.25-1.25”.  E-NE/SD/E-ND/MN/NW-IA should also see a 0.25-0.50” in the heaviest locales.  Sat-Mon will see the WCB and Southern Plains with more rain chances with some areas receiving as much as 2.0” in the entire 5-day run.  This will be welcome as NOAA maps take on a drier/warmer tone for the 6-10 and 8-14 day outlook.  Temps should be in the upper 80’s and low 90’s.  “Australia’s forecast sees a system to bring 0.20-0.60” to South Australia, Victoria and far southern NSW by the end of this week.  Mainly dry weather will dominate the rest of the Australian growing weather the next 10-days.  The rains will be welcome, but more is needed, and the lack of rains in the west is becoming worrisome.”

Ag markets are under a bit of back and fill this morning, although the weakness pales in comparison to the strength witnessed the past two sessions.  Soybeans put in new contracts highs while December corn posted new high closes.  Wheat markets have made solid advances as well, but remain anywhere from 15-30c away from breaking the downtrend and putting in a higher high.  The main catalyst for the strength this week seems to be the ProFarmer Tour’s disappointing yield results from SD/OH and now IN/NE, on top of the solid export demand witnessed in soybeans on the break.  Possibly adding some pressure this morning is two more states lining up to petition the EPA to waive the ethanol mandate.  NC, AR, GA and NM have now sent petitions.  More on this tonight.

Headlines overnight included the US Army Corp of Engineers issuing a statement saying low water levels that are restricting shipping traffic, forcing harbor closures and barges to run aground will continue into Oct.  I can hear the railroads smiling.  The Pro Farmer tour released SD and OH yields on Monday night with those down 47% and 29% on corn, respectively.  Pod counts were down 17% in OH and 47% on SD.  This compared with the USDA down 16% and 12% in Aug.  Should be noted, the tour went through the absolute worst areas of SD, hit the hardest by the drought.  The entire state of SD will not be down 47%.  From Moscow we learn grain stocks as of Aug 1 totaled 27.692MMT, down 14.8% y/y.  More cuts to Russian corn production were being discussed as well.  A little further west, the German grain harvest may hit 43.8MMT, up 5% y/y according to the German farmers association.  Wheat production is expected down 6%, however, with barley the big gainer.  Argentina corn is said to be around ¥260/MT less than domestic Chinese supply before VAT.

Open interest changes yesterday included corn up 21,270 contracts, wheat up 6,810, soybeans up 12,670, meal up 2,990 and oil up 2,710.  The big jump in open interest suggests the trend following funds are getting back on board, and chatter from the floor suggest it was in fact fund buying, not commercials adding coverage.  This could still lead to panic buying yet.  Chinese markets were firmer again overnight with soybeans up 21c, meal up $9.20, soy oil up 114c, corn down 2.75c and wheat down 2.50c.  Paris Wheat is down 0.47%, Paris Rapeseed down 0.05%, Paris Corn down 0.48% and UK feed wheat is down 0.12% after hitting new contract highs this morning.  Quickly, JP Morgan was in buying calls again yesterday, adding another 20,000 CZ970 calls and 5,000 CH1080 calls.

Call things a bit softer to begin with today, but we get ethanol production at 9:30 which could be supportive, and the increases in volume and open interest on the recent rallies suggest participation is picking up.  Pro Farmer should continue to supply a steady stream of poor looking crop pictures and yield reports with their final estimate coming on Friday.  StatsCan will be out this morning with their updated Canadian estimates.  Increases are seen in Wheat and Canola.

Trade as of 7:05

Corn down 3-5

Soy down 5-10

Wheat down 4-9

Tregg Cronin
Market Analyst
800-328-6530
651-355-6538
651-355-3723 fax
www.countryhedging.com
Country Hedging, Inc.
The Right Decisions for the Right Reasons

Country Hedging's Midday in the Markets 8-20-12

Midday In The Markets

GRAINS

Corn is up 12c  after a slow overnight session with the market trading on a lack of new fundamental news and traders trying to figure out what prices will curb demand even more. Reports from early harvests have been worse than expected so far. Many eyes will be on the Pro Farmer crop tour that began this morning. You can follow along throughout the week with updates from our twitter account @hedgeit. Early reports coming from SE South Dakota have not been good with very low yields and many fields already chopped. Soybeans are stronger on a drier weather outlook and continuing strong demand.  Export sales are higher than USDA projections so far this year and there is still strong demand from domestic crushers. Analysts expect bean conditions to increase 1-3% in this afternoon’s crop progress report. After trading lower overnight and throughout much of the early morning wheat has turned higher on the heels of corn. The USDA’s weekly export inspections report has been delayed until 2pm CST today due to technical difficulties.

LIVESTOCK

Live cattle futures continue to rise with a strong cash market due to increasing demand ahead of Labor Day. Feeder cattle have been trading two sided today and are currently trading higher. Lean hogs are trading lower at mid-session after early gains.  Traders are concerned with increasing supplies and high feed costs as corn is trading higher today. Analysts expect this week’s hog slaughter to be the highest since January at 2.2 million head. The August cattle on feed report was neutral with fewer cattle placed and marketed.  Cattle added to feed lots were 10% below last year’s value, but 8.5% above the five year average. Marketed cattle were at 100%.

ENERGY & FINANCIALS

US stocks are trading lower across the board amid concerns of the ongoing European debt situation and after the nation’s number two home improvement store missed earnings expectations. Traders are keeping an eye on Greece as their Prime Minister meets with Germany and France this week to discuss extending the deadline to meet their fiscal responsibilities. Crude oil is also trading lower due to Europe’s economy and is back below $96.  Drivers are buying the most expensive gas on record for August 20^th at a national average of $3.72. The higher prices are due to interruptions in the supply chain and stronger crude oil prices. Analysts expect prices to rise until after Labor Day. US$ is trading lower while gold is higher.

Lance Kuhlmann

800-328-6530

Are you still Comfortable?

Below is a newsletter article that will be out in a few weeks.

Are you still Comfortable?

My last newsletter article focused on comfortable changes; I stated …..”A pro-active risk management strategy that allows you to be successful in the future whether the crop prices for corn, wheat, soybeans, and sunflowers go up, down, or sideways?”  My idea’s where not to say that the markets where going up or down; as I still don’t know for sure what will happen in the future.  But I wanted to communicate that at the end of the day to do something that allowed you to be comfortable no matter what happened.  My message this month is more of the same.  Are you still comfortable? 

Did you make some decent sales on the massive rally we had over the past few months?  If you felt you where oversold did you re-own some sales with min price contracts or call options?  Are you going to be comfortable if our markets turn around and lose a couple dollars a bushel or more?  What about if we see 10.00 or 12.00 corn or higher?  Have you done things that allow you to be comfortable not knowing what the next move or event causing the move will be?

Once again I am not here to tell you or tell anyone where we are going to go from here; because if I really new and never got it wrong I think I would be on a beach someplace.  I can give you my opinion and my opinion is that the drought we have had is off of the charts.  It is so extreme that there is really no telling what could happen to prices if we don’t ration off demand.  What could happen to prices if we see another dry poor yielding year in the US next year?  What about if the dry weather hits South America again?  What happens if it starts spilling over to some of the wheat producing areas?  I think there could really be no limit as to where we could go.  But at the end of the day it really comes down to demand and I have a good example of just how important demand can be.  In Aug-Sept of 2011 sunflower prices traded up to 50.00 a cwt or so; we followed that up with the smallest US crop since the mid 1970’s.  What do you think happened to sunflower prices?  Well for the majority of the year they traded around 25.00 a cwt or half of what they did last summer despite the supply being cut.

Why?  One word DEMAND and a lack of selling when the demand was around.   High prices cure high prices and demand slipped so much that the rally never happened to the sunflower market like many thought it would. 

My point is that this year could be very similar for the corn and bean markets.  On the other hand it could make the 2008 spring wheat market look cheap.  If we see supplies continue to get smaller and follow that up with good solid demand there really is no limit to what the last buyer could have to pay.  On the other hand if we start shutting down ethanol plants left and right who’s to say that we don’t end up with ton’s of corn left at the end of the day.  I don’t know how it will shake out and I really am not going to try and guess.  I do know that if we get price breaks or corrections that should add back demand and longer term price beaks today should help us go higher later.  On the other side if we see corn rally another couple of dollars we could see demand slip more then expected and that could cause a long period of weak prices.  The bottom line is I want to make sure that I am still comfortable no matter what the next move is.  I don’t want guys to have the stress of thinking they sold too soon on days the market goes up nor do we want guys to have the stress of thinking they haven’t sold enough on the days the markets are going down.  We want to find a happy comfortable place in the middle and we want to do that via using some of the tools that Midwest Cooperatives and our Country Hedging Branch has.

If you need some help with your marketing plans and getting yourself in a comfortable situation please give us a call.

One other quick announcement; back in the middle of August we started sending out a Voice Recording Mid Day Market up date.  This goes out around noon and it is a quick 30 second to 1 ½ minute update on what the markets are doing and why.  Sometimes we will include information on hot prices we might have or basis information.  If you are not getting this please give us a call and we can get you added; there is no cost for this service; just a little information to help you make the best decision possible.

overnight highlights from Country Hedging's Tregg Cronin 8-15-2012

Below are overnight highlights from Country Hedging's Tregg Cronin

Outside Markets: Dollar Index up 0.261 at 82.744; NYMEX-WTI down $0.37 at $93.08; Brent Crude down $.25 at $113.78; Heating Oil down $0.0011 at $3.0335; Cattle are firmer and Hogs weaker; Gold down $7.40 at $1592.00; Copper down $0.0125 at $3.3520; All major currencies are firmer this morning; The softs are all firmer except for Coffee, although Sugar is on the lows this morning. S&P’s are down 2.25 at 1399.25, Dow futures are down 20.00 at 13,112.00 and Treasuries are weaker.  

Asian and most European equities were lower overnight, although there is some optimism in London this morning. U.K. jobless claims unexpectedly fell in July as did one measure of unemployment, obviously tied to the pickup in hiring surrounding the Olympic games.  Jobless-benefit claims fell 5,900 to 1.59 million vs. estimates for a gain of 6,000.  The jobless total fell to 8.0% from 8.1% in the second quarter.  However, Britain’s economy shrank 0.7% in the second quarter, so context needs to be included.  The BOE voted unanimously to keep their bond-purchase target unchanged this month.  Economic data in the US today includes the CPI, Empire State Mfg Survey, Industrial Production and the Housing Market Index.  Borrowing costs for the PIIGS are lower this morning.

Rainfall in the last 24 hours was confined to N-TX where areas around Ft. Worth and Dallas picked up 0.50-1.00” while portions of OH/KY/WV/PA received scattered amounts.  NE/S-SD also saw some light totals.  There are some scattered systems on the radar this morning including a heavy a storm in N-TX as well as rain moving across MT/ND.  The next 1-2 days will see rains impact most of MN and a portion of IA with chances around 0.20-0.60”.  IL/IN/MI also have good chances of picking up 0.50-1.00”.  Following the next two days’ worth of rain, the Midwest should be mostly quiet.  Tue-Sun will see heavy rains across almost all of TX, however, with localized amounts as high as 3.50”.  The extended maps from NOAA look cool and dry through the end of August, while private maps are trying to remain more generous with rains across the Northern Plains in the 6-10 and southern plains in the 11-15.  Australia will see around 0.20-0.60” for South Australia and NSW by the end of the week, but coverage will be limited.

In a repeat of yesterday, Ag markets are riding a bounce from the overnight session as US traders fill offices.  What will be interesting is whether we can hold gains through the session today, or see them erode and lead to sharp losses like those of Monday and Tuesday.  Forgive me for sounding like a broken record, but our markets are having a difficult time gaining traction as the market shifts from one completely focused on supply to one more concerned with demand.  Now that the weather has shifted to a more favorable pattern, supplies have likely finished getting smaller, even if we aren’t sure how small they actually got in the first place.  One thing is for certain, however, and that is the tone of the farmer has turned much more optimistic with some thinking they can still pull this off.

Headlines from last night included the China National Grain and Oilseed Information Center forecasting corn production at a record 197MMT, up 2.2% y/y.  Several articles did note the crop could get smaller, however, due to a severe infestation of army worms.    They maintained their wheat forecast at 118MMT, even though most privates are well below that level.  Also from China, pork imports from the US are expected to rise 29% this year following a 30% increase in LH-2011 according to the Beijing Orient Agribusiness Consultant Ltd.  Imports from the US will account for 2% of China’s annual pork consumption this year.  Total imports could reach 620,000MT according to BOABC.  Following that story was another which said the China Yurun Food Group Ltd, the country’s second largest meat supplier, reported a 93% decline in FH-2012 profits as hog prices plunged.  The combination of a slowdown in economic growth as well as the increase in production costs are being blamed.

Open interest changes in yesterday’s session included a drop of 4,400 wheat, corn down 7,720, soybeans down 2,750, meal up 960 and soy oil down 3,270.  Some decent liquidation yesterday as markets reversed course.  Chinese markets were up last night with beans 22.75c higher, meal up $8.30, soy oil up 1c, corn up 3.25c and wheat up 11.50c.  Paris Milling wheat is up 0.69%, Rapeseed up 0.05%, UK feed wheat unchanged, Paris corn up 0.50% and Canola up 0.55%.  RJO’s domestic margin recap showed value added margins improving on ethanol, poultry, hogs and cattle.  Should be noted, however, that poultry and hog crush margins are near multi-year lows while cattle is above the 5-year average.  In talking with one of our exporters yesterday, it sounds like the bean business to China last week will end up totaling around 1.4MMT vs. the 500-600,000MT which was reported in the daily reporting system.  Look for sales tomorrow to be big.  Also, there is a vessel in C-Brazil waiting to load grain which is set to discharge in Wilmington, NC on 8/24.

Call things better today as it looks like we might actually hold together for a change.  Wheat has had its biggest three day losing streak in over a year and can afford to bounce just a bit.  Soybeans have shown no signs of demand rationing whatsoever with improved crush, strong export sales and firm basis levels both on exports and domestically.  Look for beans to regain some of its losses the balance of the week.  Weekly ethanol production will be released at 7:30 and should show another uptick.

Trade as of 7:05

Corn up 3-4

Beans up 7-14

Wheat up 5-7

Tregg Cronin
Market Analyst
800-328-6530
651-355-6538
651-355-3723 fax
www.countryhedging.com
Country Hedging, Inc.
The Right Decisions for the Right Reasons

Midday in the Markets via Country Hedging

Midday In The Markets

GRAINS

Grains are trading mixed after yesterday’s losses as the market continues its attempts to ration demand. Beans are slightly higher after mixed trading and strong demand by processors. Domestic soybean crushers processed 137.4 million bushels in July which is about 6mb higher than analysts expected. Soybeans continue to receive relief from cooler weather and more rainfall forecasted in the coming days. August bean futures expire today. After trading higher overnight wheat is currently lower as it follows in the footsteps of corn. Corn is currently a few cents firmer after trading mixed.

LIVESTOCK

Live cattle are trading mixed on tightening supplies, strengthening demand, and profit taking after reaching three month contract highs. Feeder cattle are stronger on stable corn prices. Cash cattle markets aren’t expected to trade until late this week with no bids or asks currently. Lean hogs are mixed with August futures expiring today and profit taking after yesterday’s rally. October hog futures are higher on the wide discount to cash prices. Cash hogs are expected to weaken on rising supplies. Pasture conditions were mostly stable in yesterday’s report due to the fact that they can’t get much worse than they already are.

ENERGY & FINANCIALS

US stocks are higher after an unexpected strong July retail sales report this morning showed that consumers are still spending in all major categories. Retail sales rose by the most in five months at 0.8% in July. This is after a 0.7% drop in June. Greece held its largest debt sale in two years as it raised $5 billion in short term debt in order to pay off a bond that matures next week.  Crude oil is up again today on the positive news from the retail sales report while the US dollar also turned higher after the report was released.

Lance Kuhlmann

800-328-6530

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Country Hedging, Inc.
The Right Decisions for the Right Reasons

Market Comments 8-17-2012 USDA report thoughts after the fact

Good morning; it is Tuesday the 14^th  around 8:30 and presently we have the grain markets slightly firmer as they try to bounce a little bit from the selloff the past couple of sessions.

Presently Dec corn is up 2-3 cents, beans are 6 higher, KC wheat is up 1-2, MPLS up 4-5, and CBOT wheat up 4.  Outside markets have the equities firmer with the DOW up 26 points, the US dollar is near unchanged, and crude is up about a dollar a barrel.

The big news in the past week has been the recent weather changes and more so the big report that was out on Friday.  The USDA report that was out last week was bullish for the row crops; but maybe not bullish enough to say that we need to go up now.  The report estimated balance sheets for corn and beans about as tight as ever but also the pegged carryout numbers came very close to trade estimates. 

Bottom line is last week’s report did a good job or started the job of defining our supply size.  Now the next thing for our market to do is try to determine demand.  Last week’s report showed corn and bean demand being cut big time.  Perhaps too much if we see a price break that adds back any demand.

I think our weather markets are nearing the end and the markets will soon focus on weather in other countries and more importantly at this time should be demand.   Good demand hopefully or lack of demand will start to lead the headlines.  It should really provide some rather volatile markets as we move forward.  Because it really is a chicken and egg thing or catch 22 thing. 

If you think about it the report out on Friday basically said that supply will be so tight and prices will go up so high that demand will be cut.  What happens to demand under basic ECON 101 if we get a price break; much like we have the past few sessions.  I know it doesn’t hurt any end user’s profitability unless their output (ethanol/ddg/etc) happened to be down more than the input this case corn/beans.  So a price breaks don’t do the job or rationing off demand. 

Really at the end of the day the report told me for the next several months we need to stay at levels that curve demand year over year and don’t bring on any extra demand from the nearly 2.5 billion bushels of demand that the USDA has cut over the past several months.  In June the 2012/2013 usage for corn was pegged at 13.775 billion bushels while on Friday the USDA pegged it at 11.225 billion bushels.  The markets job will be to make sure that we don’t go low enough to entice enough demand that we run out of product too soon.

Having said the above you can see that I have an underlying bullish tone for the market.  But it should be pointed out that each of the last couple of years we have had the USDA print carryout levels on corn around the 600-800 million bushel type carryout and by the time we were all said and done both of the last couple years ended up seeing an ending carryout closer to a billion bushels and that happened without 10.00 corn.  It happened with corn typically around 6.00-6.50 on the board the majority of the past year; while trading from mainly 6.00-8.00 the year before.  Bottom line is near the top of the markets each of the past couple years most thought the markets would need to go higher and well they didn’t.  I would agree that this drought isn’t nothing like we have ever seen before.  But I would also point out that sometimes demand can be curved faster than supply is cut.  Case in point the sunflower market the last year or so; in which we say sunflower trade at 50 cents or so; only to have the smallest crop since the early 70’s and yet prices for the majority of the year traded from 25-30 cents or about ½ of what they where a year ago before the small crop.

Bottom line is high prices curve high prices and things always look the best at what ends up being the top.  So never stop practicing good solid risk management in your grain marketing plan in a way that allows you to feel comfortable whether the next move is a couple dollar break or a couple dollar rally as either is possible and both are probably probable if you consider the volatile markets of 2008 and how this year from a fundamental standpoint could make 2008 look tame.

As for market direction as we move forward watch for yield estimates to help the market  more determine the supply.  If that supply get’s smaller more reason for us to bounce.  If we have already seen the smallest production number while then more reason to think that perhaps a top has been put in.  But at the end of the day I think it will come down to demand and that with supply should be difficult to balance out without some rather sharp moves; probably in both directions.

Please give us a call if there is anything we can do for you.

8-14-2012 Overnight Highlight's from Country Hedging's Tregg Cronin

Below are overnight highlight's from Country Hedging's Tregg Cronin

Outside Markets: Dollar Index down 0.048 at 82.390; NYMEX-WTI up $0.30 at $93.02; Brent Crude up $0.13 at $113.73; Heating Oil up $0.0138 at $3.0321; Cattle are firmer, while hogs are weaker; Gold up $0.90 at $1610.50; Copper up $0.0145 at $3.3735; The Yen is weaker, but the other major currencies are firmer; Cocoa, Sugar and Cotton are all trading better; S&P’s are up 3.00 at 1405.50, Dow futures are up 27.00 at 13,164.00 and Treasuries are offered this morning.  

World equity markets are firmer today as economic data from Europe showed the core countries aren’t slowing as much as feared.  Both the French and German economies slowed less than forecast in the second quarter with France unchanged vs. -0.1% estimated and Germany +0.3% vs. a +0.2% forecast.  While those two avoided a larger slowdown, Italy and Spain are back in recession and the entire euro-area GDP dropped 0.2%.  Portugal’s economy declined -1.2%, its seventh straight quarter of contraction. The rating agency Moody’s did drop the outlook on German credit to negative from stable, but retained its Aaa rating.  Also worth noting, Greece sold €4.06 billion worth of 13-week bills with a yield of 4.43%, up from 4.28% at the end of July, a negative sign.  Yields are mixed in Europe this morning with AAA rated nations higher and PIIGS lower.  Economic data of note in the US today will include the Producer Price Index, Retail Sales and Business Inventories.  Also, The Volatility Index on options on the S&P 500 hit a 5-year low of 13.70%.  All is well.

Rains in the last 24 hours were confined to the ECB including IL/MI/OH while additional rains also fell in the Mid-south and South as KY/TN/MS/AL also picked up rains.  IN & OH saw totals in the north as high as 0.50-1.00”, but coverage was less than 15% for those totals.  Most areas were dry.  The radar currently shows rains moving across OH and KS, which will be welcome news to wheat farmers.  The 1-3 day forecasted precip map will keep the Dakotas dry, while NW-IA/MN/N-WI/MI/N-IN and a separate system in OK/AR/N-TX should bring sizable rainfall.  The upper-Midwest storms should drop 0.40-1.00” in most areas while the Southern Plains should bring over an inch to the entire state of OK & AR.  By Fri-Sun, the WCB will be dry, while storms are possible SE of a lien from Tulsa to Toledo.  Private 6-10 day maps stay on the dry side while the 11-15 holds better chances in the West.  NOAA stays dry and has temps well below normal throughout.  Indian rains are improving and there is no notable shift in the Australian forecast.

Grain markets are letting loose a relief bounce overnight, but it doesn’t look to be much more than that.  Condition ratings came in as expected on soybeans and corn, and harvest progress on wheat remained above normal.  Wasn’t much more to last night’s crop progress report than that as the crop remained ahead of schedule on development.  The only deliveries in the soy complex overnight included 167 soybean oil, no meal and no beans.  One can make the argument yesterday’s sell off was needed as it’s still difficult to quantify what the turn to favorable weather is doing for the soybeans.  The uncertainty alone is enough to keep this market two-sided near $16.00.  Corn doesn’t want to break much, and shouldn’t, while wheat lacks the fundamental demand story to push higher.

Headlines from last night included Japan tendering for 70,865MT of milling quality wheat, all from the US.  The total included 46,115MT of DNS.  NOPA is set to release member crush statistics later this morning with the market looking for crush near 131mbu, although some estimates are as high as 134mbu.  More Russian chatter overnight as well with SovEcon estimating the crop at 40.5-42.5MMT (USDA was 43 on Fri) while Agritel is pegging it at 41.3MMT.  SovEcon also said yields in the Volga district were half yr-ago levels.  Their estimate of the Urals area was near half as well (2.4-2.7MMT vs 5.0 LY).  Their Siberia estimate was 7.2-7.7MMT vs. 9.8 LY.  Agriculture and Agri-Food Canada said earlier today Canadian wheat production, including durum, may rise to 26.7MMT vs. 25.261MMT a year ago.  Wheat excluding durum is estimated at 22MMT vs. 21.089 last year.  Canola is pegged at 15.7MMT vs. 14.165MMT previously.  Lastly, the Australian Bureau of Meteorology said climate indicators remain close to El Nino thresholds.  The Central Pacific continues to warm.

Open interest changes yesterday included wheat down 4,320, corn down 930, beans down 3,770, meal down 940 and soy oil down 2,760.  Chinese markets were down swiftly last night with beans down 18.75c, meal down $6.40, soy oil down 58c, corn up 3.25c and wheat up 0.75c.  Malaysian Palm Oil was down 13 ringgits at 2,858 (Oct).  Paris Milling Wheat is up 0.29%, Rapeseed down 0.05%, UK feed wheat up 0.82% and Canola up 0.03%.  CIF corn barges traded down to the lowest level since January yesterday as the market is having a difficult time swallowing the early Southern Plains harvest hitting the market.  This will keep pressure on the CU/CZ which is 0.25c weaker at -9.75c overnight.  ND elevators continue to take bids from the Chicago/beyond market due to PNW issues and ECB shortages.

Call things better to start with on a turnaround Tuesday-type bounce, although some intra-day selling wouldn’t surprise.  The forecasts are less threatening, cash markets and spreads are on the defensive because of early Southern-harvest, and conditions are stabilizing across the crops.  ND has about 1/3 of their spring wheat to harvest yet while Canada’s haul is just getting ramped up.  Markets feel like we’ve got the supply side threats priced in for now and the focus is rapidly shifting to demand. 

Trade as of 6:55

Corn up 5-6

Soy up 8-15

Wheat 5-8  

Tregg Cronin
Market Analyst
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651-355-6538
651-355-3723 fax
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