Overnight Highlights from Country Hedging's Tregg Cronin

Below is from Country Hedging's Tregg Cronin; his overnight highlights.

Outside Markets: Dollar Index up 0.093 at 79.099; NYMEX-WTI down $0.70 at $95.93; Brent Crude down $0.38 at $113.93; Heating oil down $0.0028 at $3.1606; Cattle are firmer and hogs weaker; Gold down $9.30 at $1758.70; Copper down $0.0450 at $3.7650; The Yen, Pound and Franc are trading firmer; Cotton is the long soft commodity trading better; S&P’s are down 1.75 at 1459.00, Dow futures are down 19.00 at 13,522.00 and Treasuries are firmer.   

Grabbing most financial headlines this morning is the ongoing tension in the East China Sea where anti-Japanese demonstrations have ramped up, causing many Japanese companies such as Honda, Toyota, Panasonic and Mitsubishi to suspend operations or close plants.  The friction stems from a set of disputed islands in the China Sea, compounded by the fact today marks the 81^st anniversary of Japan’s occupation of parts of China that preceded the invasion of Manchuria.  Needless to say, Asian equities aren’t taking it likely, selling off on most indices overnight.  This could easily stifle the good-time feelings from QE3 and the European Central Bank intervention.  Doesn’t hurt China is the world’s largest consumer of soybeans.  This will have impact on our markets.

Moderate to heavy rains were seen in TN/KY/WV and parts of the Gulf Coast overnight with TN seeing localized amounts as high as 6.0”, but generally a 0.50-2.00” rain.  In the corn belt, IA/IL/WI/MI saw rains to the tune of a trace, but as high as 0.50” in C-IL.  The radar has pretty heavy rains moving across the ECB and much of the upper-East Coast.  OH should see decent rains, and promote SRW planting once the row crops are off.  The Midwest should be dry the next 3-days with the exception of a system in C-MO which should bring 0.25-0.75”.  By Friday, IN/OH/MI have some chances, but the WCB is expected to be cool and dry.  NOAA is keeping things cooler than normal and drier than normal the next 10-days on the extended maps.  Keeping some chances for rain in Australia the next few days with totals in the 0.25-0.75” which should keep the crop from going backwards any further.  The forecast in S.A. sees a strong front to bring rains of 0.50-1.50” to N-Argy and Uruguay tomorrow.  Northern Brazil also has chances which are badly needed.

Grain markets are picking up pretty much where they left off yesterday with the soy complex down another 1.50% while corn ticks lower and wheat straddles unchanged.  As noted above, the tensions in Asia aren’t helping matters, but more saliently are the larger than expected yields being harvested in the upper-Midwest.  Soybean harvest was estimated at 10% nationally last evening with SD at 15%, ND at 28% and MN at 16%.  There are more soybean piles in South Dakota this year than most can remember, which speaks to the better than expected yields as well as the poor performance of the railroad and the back log of wheat still around the country.  With gutslot still about a week away, the direction of futures should remain sideways lower through the balance of the month.

Other highlights from the crop progress included corn harvest at 26% nationally, almost 3 times the average.  SD was 19% complete, ND 10%, MN 12%, IA 22%, NE 23% and IL 36%.  Conditions on both corn and soybeans improved marginally, but not sure how much weight they carry at this point.  Winter wheat planting progress was estimated at 11% nationally, slightly below the 14% average.  SD was 14% complete, NE at 21%, KS at 5%, OK at 8%, TX at 11% and CO at 15%.  The uptick in moisture down south should help progress.  ABARE (Australia’s USDA) was out last night saying earnings from Aussie wheat exports are likely to rise to their highest in 27 years despite lower than expected production.  Wheat exports are expected to remain flat on the year at 23MMT, but the value of the exports is expected to jump 15% to around $7.6 billion.  They remain at 22.5MMT production, but larger carry in stocks are going to aid the export program.  Japan issued a tender for 101,158MT of US and Canadian milling wheat for Oct 21 and Nov 20 shipment.

Open interest changes yesterday saw a drop in wheat of 8,390, corn down 3,250, beans down 220, meal down 980 and oil down 2,770.  Heavy liquidation in the grains, but interesting to note the lack of liquidation in soybeans despite a limit down move.  Could possibly mean there was end user pricing on the way down.  Chinese markets were down sharply overnight with soybeans down 41c, meal down $20.00, soy oil down 205c/lb, corn down 1.25c and wheat down 10.25c.  Paris wheat is currently up 0.10%, Rapeseed is down 0.54%, Corn is unchanged, UK feed wheat is unchanged and Canola is up 1.19%.  One other soybean note, export inspections yesterday dropped 23% from the week before, a possible sign importers are putting off taking shipments.  Could be a one-week anomaly also.

Look for the soy complex to remain under pressure as harvest ramps up, end users remain patient, upper-Midwest shippers look for homes for the piles lying around their elevator and Asian tensions escalate.  Wheat and corn could see more chop today as yield reports are more mixed in corn than the universally better than expected soybeans, and wheat is waiting to see if forecasted rains actually fall in Australia, and as basis seems to have found a bottom.  September is a seasonally weak month for both commodities and equities.

Trade as of 7:10

Corn down 1-2

Beans down 24-31

Wheat up 2-5