Have beans bottomed or just a correction before resuming slide?

Below is a Jan Soybean chart.

It shows that we bounced off of the long term up trend line...........can we resume the bull trend?  Or is this just a correction in a bear market?  If it is a just a correction where are some areas it could fail at?

Tools and Considerations in Grain Marketing - Presentation at Ag Horizon's Conference Weathering Change

Below is a presentation that I did today at the

Weathering Change - 2012 Ag Horizons Conference in Pierre, SD.

Afternoon Recap from Country Hedging's Tregg Cronin 11-26-12

Outside Markets as of 1:30: Dollar Index up 0.031 at 80.256; NYMEX-WTI down $0.45 at $87.85; Brent Crude down $0.35 at $111.03; Gold down $2.70 at $1748.70; Copper up $0.0050 at $3.5330; All major currencies are trading weaker; Livestock markets closed weaker.

Two pieces of economic data in the US today including the Chicago Fed National Activity Index which came in at -0.56 vs. a consensus of 0.18.  The Dallas Fed Manufacturing Survey was posted at -2.8 vs. a markets estimate of 4.7.  Equity markets were under moderate pressure as financial media dusted off fiscal cliff stories once the malaise of Black Friday wore off.  Nothing much to report in the financial markets, although the Dollar Index is throwing off some interesting chart patterns, as shown this morning.  Argentine Credit Default Swaps backed off from this morning’s highs, but remain at rather elevated levels.

Firmer for most of the night and all-day, but corn gave back much of its gains to close only 1-2 higher in most contracts.  The excitement from a big export sales report Friday seemed to wear off a bit, especially once the small shipments data arrived mid-morning.  Traders also made note of the fact Japan accounted for 57% of the 776,000MT sold last week, so other destinations remain somewhat absent.  One week of export sales doesn’t change the current situation if we follow it up with a paltry week this week which is possible considering last week was a holiday shortened one.  Export inspections were 15.9mbu vs. 14.4mbu last week and the 23.8mbu needed weekly.  Shipments are currently down 45.2% y/y, but soybeans are up 37.8% so there is definitely a pecking order with elevating capacity.  China did take 4.43mbu last week with one boat each of the Gulf and PNW.  Brazil’s corn lineup still shows 1.593MMT as of this morning vs. 1.366MMT last week.  Dr. Cordonnier was floating an article on his website talking about 3MMT of corn still in the Brazilian country side which needs to move to market before soybean harvest begins in mid-January.  I guess that’s near-term supportive but overall pressuring if they have that much corn left.  Charts certainly have a better feel to them now that December options are out of the way.  The next upside objective on corn is the $7.55 mark basis the December, then $7.76 from October 11^th.  We should run into some farmer selling between $7.50 & $7.75 now that the farmer has readjusted his marketing objectives with few thinking corn needs to make a run back at $8.50.  Ethanol margins are projected negative by $0.30/bu, and reports continue from the country about ethanol plant financial health.  Spreads were mixed/weaker with only the CZ/CH gaining 0.25c to -4.00c while the other calendar spreads weakened.  The Missouri River flows out of Gavin’s Point in Yankton are expected to be reduced this coming Friday, and the STL River Gauge read -1.5ft this morning.  At -5.00ft, navigation becomes impeded.  Rail freight hasn’t seen much excitement yet, but barge line operators are growing increasingly anxious with a closure all but assured without a massive rain system.  NOAA maps look dry the next 15-days.  Brazilian guru Michael Cordonnier cut his Brazilian corn production number 1.0MMT to 71.0MMT citing dryness.  CIF bids were indicated at +84Z through March while offers are around 4c above that.  This is putting IL river corn below delivery by 4.9-9.4c for Nov and FH-Dec, but 8c above for LH-Dec.

Wheat too benefited from a favorable export sales report Friday, but saw terrible shipment data today which helped temper things.  There was some decent inter-market spreading with buying KC wheat and selling Chicago/MPLS.  Renowned speaker and analyst Dennis Gartman issued a memo to clients saying he wanted to buy KC July ’13 wheat at a 50-52c premium over July Chicago with the expectation for it to go to $1.00.  This has already been a crowded trade, but apparently people wanted to own it today.  Wheat export inspections were 7.8mbu vs. 11.4mbu last week and the 23.3mbu needed weekly to hit the USDA’s mark.  Regular destinations took the wheat in this rather slow week.  Shipments for the year are down 14.0%.  Iraq issued another tender for a nominal 50,000MT with origins including Russia, Kazakhstan and Romania along with the US, Australia, Canada and France.  Unless something crazy happens and nobody offers any wheat, US wheat should be too expensive on this one again.  Dec 3 deadline.  Jordan issued a tender for 100,000MT.  India said it has shipped 800,000MT this year so far with another 1.3MMT worth of commitments to hit their 2.0MMT quota.  Odds are good another 1-3MMT will be sold from state reserves for export, and needs to be considered in the overall wheat export/import grid.  UK winter wheat planting was reported down 12% to 4.3 million acres due to wet weather preventing field work.  Spring barley will likely take up the slack.  The EU on the other hand, is generally in good condition including France.  There remain some risks to Russian wheat due to above normal temps which could lead to frost damage.  This all from a report by MARS (EU’s Monitoring Agriculture Resources).  Not much change to to-arrive bids with 14.0% exploders at +70/75Z while shuttles are seen at +55Z.  Call the PNW +85Z, but it would take +95Z to buy wheat from the country at any good west spreader.  The national winter wheat condition rating fell 1pt to 33% G/E.  Biggest declines were seen in MO (-6) IL (-3) OH (-3) NC (-6) TX (-9) AR (-11) SD(-2) NE(-3).  The PNW erased some its losses last week with a 22pt jump in OR and 10pts higher in WA.  Odd to see the huge swings.  Emergence is pegged at 88% vs. 90% average.  SD is still only 60% emerged, with MT at 68%.  This is the last crop condition rating of 2012.

Soybeans showed the most strength today, closing with 6-10c gains, although some late bearspreading hit spreads rather hard with the SF/SH closing down 3.75c to +12.00c.  A trade and close of +12.00c is the lowest print and close since March 30^th , 2012.  The weakness in both the bean and corn spreads seems to be tied to the panic on the river.  It looks rather likely the river will be restricted or altogether closed sometime in December, and if/when it does, it will render owning the spread to take delivery useless because one won’t be able to get the grain past St. Louis.  So despite the fact our basis is hot along the river, and the fact we are trading near or above delivery equivalence, we could continue to see the spread get pressured.  The USDA reported another 20,000MT of soybean oil sold to unknown destinations for the 12/13 marketing year.  The current soybean oil sales now exceed the annual USDA forecast for all of 12/13 by 60-80 million lbs, and we have 10-months of the marketing year left.  Soybean oil basis in IL is -300Z, while bean oil basis in Brazil is +100/150Z.  Soybean oil calendar spreads are still running 100-200% of full carry, signifying exporters are basically getting rid of it for free to make room for more oil as the guys crush beans to get the meal.  CIF bids were unchanged in the spot at +100F against no offers.  Dec is +95F.  This puts spot along the IL at 6.4c below delivery, but above delivery by 5-13c through February in Zone 3.  That’s supportive, and March is sitting around 19.5c above delivery, implying the SF/SH might be getting a little cheap.  Celeres reported soybean planting at 74% complete in Brazil vs. 81% a year ago.  The crop is thought to be 50% sold vs. 39% a year ago.  A big reason behind that has been the weakness in the Brazilian Real which has put more money in the farmers’ pocket per bushel, and has tempered the big correction we’ve seen in the CBOT prices.  Soybean inspections were 45.5mbu vs. 66.8mbu last week and the 19.9mbu needed weekly to hit the USDA’s mark.  Last week was shortened due to Thanksgiving which could account for some of the lighter totals.  Main concerns with South America right now are too wet areas in Argentina.  German milling wheat trading into Brazil should speak to the idea Argentina’s received too much rain.  This needs to be monitored, but it doesn’t seem to be setting off any alarm bells just yet.  No one is really axing production numbers anyway.  As big of a problem as the rain could be, if Argentina’s government defaults, it could be as big of a problem or worse.

Sláinte.

Tregg Cronin
Market Analyst
800-328-6530
651-355-6538
651-355-3723 fax

www.chshedging.com

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

Overnight Highlights 11-26-2012 from CHS Hedging's Tregg Cronin

Outside Markets: Dollar Index up 0.034 at 80.270; NYMEX-WTI down $0.52 at $87.76; Brent Crude down $0.42 at $110.98; Heating Oil down $0.0094 at $3.0677; Gold down $0.80 at $1750.50; Copper up $0.0065 at $3.5345; Most currencies are weaker this morning aside from the Yen; Softs are mixed, led lower by Coffee; S&P’s are down 7.00 at 1398.50, Dow futures down 56.00 at 12,905.00 and Treasuries are firmer, up 0.42%.  

European equity markets are softer this morning as are US equity futures.  Chatter in most financial outlets centers around ongoing discussions over Greek bailout terms and the increase in Black Friday shopping.  Sales over the 3-day haul were said to be up 12.8% over last year which is in-keeping with the consumer optimism as of late vs. the more pessimistic nature of businesses.  Also of note, Argentina’s 5-yr Credit Default Swaps surged another 924bp overnight to 4,047bp (See chart below).  It is looking increasingly likely they will default which could end up leading to a jump in export taxes.  For comparison purposes, the cost of insuring Spanish debt is only 320bp vs. Argentina’s 4,047bp.  US economic data today will include US Chicago Fed Index seen at 6.2.

Pretty dry the last 3-days, although some snow was seen in WY/MT.  Looks like another dry week this week with the exception of some rain in the MS-Delta and across the PNW.  NOAA’s extended maps do look like a warm up is on the way, however, with above normal temps seen in the 6-10 centered over the southern plains.  Precip should remain below normal for HRW states, however.  The 8-14 holds better chances for above normal precip.  Dry in Argentina over the weekend, although some rains did fall in S-Brazil.  A system is seen Wednesday and into Thursday for Argentina and S-Brazil to the tune of 0.50-1.50”.  Coverage over Argentina is seen at 80-90%.  More rain is seen in Argentina early next week and will remain an area of concern.  Brazil looks to be in real good shape.

Receiving a nice bounce in the grains overnight, rising steadily through the European open.  Encouragingly, corn has managed to push back above the $7.50 level for both December and March corn, and January soybeans are trading right at resistance of $14.28 ¼.  Trade above, and a close above that level will be technically positive, and could signal a near term bottom.  Supportive inputs seem to be more optimism about US grain and oilseed exports, which we saw better evidence of last week, and a real lack of farmer movement as price remains below marketing objectives.  While weather in South America remains mostly beneficial, the threat of a too-wet Argentina and a potential default is probably also keeping traders cautious about putting the SA crop “in the bag.”

Overnight headlines included Iraq issuing a tender for 50,000MT of wheat with a bidding deadline of Dec 3.  All major origins are open, including Kazakh, Russ and Romanian.  Jordan is tendering for 100,000MT of wheat with a deadline of Dec 11.  We also heard news Germany has been sending wheat cargoes into Brazil and the UK due to quality issues with the UK and Argentine wheat crops.  This needs to be monitored, and speaks to the torrential rainfall in Argentina.  India said it is considering fresh wheat exports to clear stockpiles ahead of new crop harvest.  State grain companies have already contracted to ship 1.3MMT with a quota of 2MMT.  800,000MT has been shipped already.  India is definitely helping bridge the gap.  Major grain handler CBH said Western Australia production is seen at 8.5-9.3MT with around 50% of it harvested to date.  Haven’t seen an update on river gauge levels in STL, but most still looking for restrictions on the river by Dec 15.

Open interest changes Friday included wheat down 5,120 contracts, corn up 800, soybeans down 100, meal down 370, and oil down 630.  Very quiet day Friday despite option expiration.  We missed closing above $7.50 basis December corn, the largest area of open interest.  Chinese markets were very quiet overnight with beans unchanged, meal up $1.60, oil up 66c, corn up 3.75c, palm up 74c and wheat up 0.75c.  Malaysian Palm Oil was up 37 ringgit at 2,432.  Paris Milling wheat is up 0.47%, Corn up 0.39% Rapeseed up 0.16%, UK feed wheat up 1.01% and Canola is up 0.63%.

Call things firmer to start the week with more traders excited about the prospect for improved US exports in coming weeks.  Would caution getting too optimistic, considering over half of the export sales last week was Japan in a much talked about purchase.  Other destinations need to step up as well, and we still aren’t connecting on much swing wheat business in the Middle East.  Where is Egypt…?

Tregg Cronin
Market Analyst
800-328-6530
651-355-6538
651-355-3723 fax

www.chshedging.com

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

Closing Comments 11-19-12

Markets closed firmer today behind supportive outside markets.

Corn lead the way higher up 12 cents, beans were up 12, KC wheat was unchanged, MPLS wheat was up ½ cent, CBOT wheat was up 4, equities where firmer with the DOW up 208 points, crude up over 2.00 a barrel, and the US Dollar was weaker with the cash index at 80.852.

A nice little follow threw bounce for most of the grains following the mini bounce the grains had off of the lows from Friday.  Corn and beans started firm last night and stayed firm most of the session with corn leading the way.  Wheat didn’t seem to want follow despite the very bad conditions; this afternoon we had crop progress come out with a  2 % decline.

Wheat not following could be due to the technical weakness seen late last week as it broke support trading to new lows for the past several months.  Perhaps one positive could be the fact that wheat didn’t have huge follow through selling.

Export shipments came out this a.m. and the same story continued; poor for corn and wheat while very strong for beans.   Corn came in at 14.4 million bushels nearly 10 million less than they need per week to meet current USDA projections.  Wheat about ½ of what it needs on a per week basis coming in at 11.1 million.  While beans came in at 62 million nearly 3 times what we need on a per week basis to meet current USDA projections.

Look for markets to be a little on the slow side as we head into the holidays.  But that doesn’t mean they will be as tame as perhaps they should; but do look for them to be a little thin.

Basis feels a little firmer for all of the grains as producer movement is rather slow.  Many producers are very bulled up on prices; perhaps they should be but the fiscal cliff situation and outside markets in general should remind us that we never know if or when we will have another 2008 type of market.  So don’t be afraid to pull a little risk off the table with all of the unknowns we have.

As mentioned above wheat conditions continue to decline; I believe the worst on record for this time of the year.  But that still hasn’t lead to any new export business coming to the US; nor did it help wheat prices bounce today.  The market feels that the wheat crop isn’t made or broken in the fall; and that itself is correct; but the lack of emergence is rather scary.  But if you ask many advisor’s or analysts what comment is really needed for a bull market you will probably get the answer strong demand.  So far we lack that demand; and until that changes I don’t want to get too bulled up just because I look in our trade area and see a horrible dry situation.  A lack of supply is a good start of a bounce for prices; but it doesn’t create demand; longer term we need to see demand.  In marketing I think one needs to keep in mind that we are still a little high priced and not getting the business needed; so on a global front we are still too high priced.

The birdseed business remains slow with buyers showing very little interest.  I did talk to a couple guys today that indicated orders seem to pick up a little; but they were not sure if that was just pre-holiday ordering versus demand pickup.

One announcement; this week’s MWC Marketing Hour Round Table meeting will be on Tuesday at 3:30 in Onida due to the Thanksgiving Holiday.  Also MWC will be closed on Friday; if anyone is looking to do any marketing I will be available on my cell phone at 605-295-3100 as grain markets are open for a couple hours Friday.

Jeremey Frost

Grain Merchandiser

Midwest Cooperatives

800-658-5535

800-658-3670

605-295-3100 (cell)

605-258-2166 (fax)

jeremey.frost@chsinc.com

www.midwestcooperatives.com

http://grainmarketingplans.blogspot.com/

Afternoon recap from Country Hedging's Tregg Cronin 11-19-12

Outside Markets as of 1:00 CDT: Dollar Index down 0.294 at 80.872; NYMEX-WTI up $2.77 at $89.68; Brent Crude up $3.14 at $112.07; Heating Oil up $0.0974 at $3.0841; Livestock prices are firmer; Gold up $19.70 at $1734.00; Currencies firmer.

Very supportive outside markets today on optimism towards the fiscal cliff after comments Friday made it sound like the talks were “constructive.”  Highly doubt we’ve seen the last of the volatility tied to this issue.  On top of the comments from DC, the ongoing tension in Israel/Gaza has also put a bid under energy markets.  Commitments of Traders data showed funds holding the smallest net long in crude oil since September of 2010, leaving plenty of room for additional buying should it be deemed necessary.  Economic data in the US today included existing home sales which were reported at 4.79 million units, above the 4.70 million estimate.  This was a 2.1% increase from September, higher than the unchanged estimate.  Year-over-year sales were up 10.9%.

A very nice bounce in corn today which picked up around 10:00 CDT.  Trade managed to push through the $7.32 resistance level with relative ease, a positive technical signal and likely adding some additional buying.  It is also putting more distance between spot and the $7.00 level which currently contains the most amount of open interest for the expiring December options.  Option expiration is 12:00 CDT Friday.  At last glance, there were 41,763 total open options including 27,966 puts.  There are also 36,687 options open at the $7.50 strike, making it a potential candidate as well.  Supportive overnight was word Asian buyers are turning increasingly more to the US for corn import needs due in large part to still hefty lineups in Brazil.  While down from the 2.3MMT at the beginning of the month, the shipping lineup this morning was pegged at 1.366MMT, or 24 Panamax vessels.  The slow progress is no solace to Pacific Rim buyers waiting for replacement.  Somewhat encouragingly, there is only one vessel left in the lineup declared for the USA.  Doesn’t mean more can’t be declared later, but fewer than has been the case.  Movement was very slow to begin the holiday shortened week.  CIF values were seen down 1c on the bid side for Nov at +89/95Z while Dec was up 2c to +82/86Z.  Hedging was heavier today than last week, but by no means “heavy.”  Spreads held relatively well, up 0.25c on the day to -3.50c.  Would think it would show more strength were it not for worries about a river closure sometime mid-Dec.  No real change to that over the weekend, with draft restrictions looking likely around Dec 15.  The PNW situation has taken on new life with a potential strike at the Port of Portland on Nov 25 if an agreement isn’t reached.  Some of the elevators might not be affected, but not a great situation when the two major ports are hampered.  Export inspections were 14.4mbu, above last week’s 9.5mbu but below the 23.6mbu needed weekly to hit the USDA’s export forecast.  More expectation for a pickup in exports than what’s actually happening. 

Wheat markets managed a positive close, although it was definitely the laggard of the major Ag markets.  Some wind seemed to be taken out of the sail when Egypt didn’t show up to tender over the weekend, and offers on the Iraq tender were reported, showing US as $40-50/MT out of the money.  C&F offers included Romania at $394/MT (50TMT), then Russian at $399/MT (50TMT).  These were followed by 400TMT out of Australia at $401-407.65/MT, 300TMT from Canada at $404.95-425/MT, some Bulgarian at $402/MT and Hungarian at $406/MT.  US-HRW was offered at a staggering $444.04-454/MT.  This seemed to shock some traders as it means US hard wheat is by far the most expensive in the world, and there is still a fair amount of wheat for sale out of origins thought to have dwindling supplies.  In addition to this story, there were also wire accounts of Indian wheat trading into Eastern Africa as milling wheat, not feed wheat like many had been penciling it.  When one considers the Indian supplies (which weren’t available in 2007/08), and the fact the Black Sea is still shipping wheat, it becomes clear the situation isn’t as dire as even 2010/11, and the window for ratcheting up exports to hit the USDA’s target of 1,100mbu is slowly closing.  Bloomberg reported grain exports for November will probably be a record 3.2MMT for this month.  There has been 1.8MMT so far this month with 900TMT wheat and 800TMT corn.  Lastly, only around 2% of the UK’s wheat has been rated as “high-quality bread milling” as opposed to 40% in 2011.  Could mean quality imports later in the year.  Other notes included Western Australia’s harvest pegged at around 35%.  This is another item which could have been applying pressure to our markets in addition to the funds dumping.  The commercial shorts have increased from 234,794 contracts to 245,010 the last several weeks which could include some Australian farmer selling.  These prices look a lot more attractive to the world farmer than they do the US farmer, and as we’ve seen with Canadian farmers, they will sell.  Wheat/Corn spreads corrected further today with the KWZ/CZ tumbling all the way to +138.25c, the lowest level since October 12^th.  WZ/CZ closed at +103.00c, the lowest since mid-September.  These should continue to contract as we aren’t competitive on feed, and if our export prices remain as high as they are, we need feed demand to help out the lack of export demand, otherwise our balance sheet will get more comfortable.  Spreads were unchanged to better on the day, but the last trade on the MWZ/MWH put it at -11.00c.  Inter-markets were quiet.

Soybeans firmer all night as prices held some very important retracement levels, which also coincided with the old highs from September 2011 and April 2012.  Former resistance, once broken, becomes new support.  Combine that with enough people yelling “oversold” and we can bounce.  In addition, export inspections confirmed another huge week of shipments at the expense of grains.  We also saw the USDA announce another 20,000MT of soybean oil sold to unknown destinations for 12/13.  This follows two sales last week, giving us around 90,000MT of soybean oil sold in the last 7-days.  This has been a big reason behind the oilshare correction we’ve seen as of late.  Soy oil was up 1.79% today while meal was unchanged.  Soybean basis was unchanged on the river today at +99F.  PNW bids could be called +120F, unchanged.  Most eyes are waiting to see what happens next weekend with the PNW longshoreman strike.  South Korea is also sniffing around for some soymeal.  With the huge soymeal export sales and recent purchases of soybean oil, one has to wonder if imports are buying the products because that is cheaper than buying the beans and crushing them themselves.    Soybeans feel as though they should move back inside a 1400-1500 range.

Crop Conditions out tonight showed a huge drop in PNW conditions, presumably due to the excessive rains the past several weeks.  Note map below.  The central belt seemed like it stabilized, although CO also saw a very big drop of 12pts.  Safe to say this is the worst established wheat crop on record.

Tregg Cronin
Market Analyst
800-328-6530
651-355-6538
651-355-3723 fax

www.chshedging.com

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

Overnight Highlights from CHS Hedging's Tregg Cronin 11-19-12

Outside Markets: Dollar Index down 0.097 at 81.069; NYMEX-WTI up $1.11 at $88.02; Brent Crude up $1.21 at $110.16; Heating Oil up $0.0408 at $3.0276; Gold up $7.70 at $1722.00; Copper up $0.0405 at $3.4980; All major currencies are firmer; All the softs except cotton are better, led by Coffee up 1.18%; S&P’s are up 8.75 at 1368.50, Dow futures are up 67.00 at 12,637.00 and Treasuries are being offered this morning.

Global equity markets are firm this morning, led by European markets which are up over 1.0%.  The main themes seem to be tied to constructive comments surrounding the fiscal cliff talks in Washington.  One of the main sticking points is still the tax rates on the top earners, although few comments have made mention of anything tied to entitlement programs, the real source of the growing deficit.  Also supportive overnight was  a Spanish official saying Spain may need less than €40 billion for its banks from the ESM.  Today’s economic news will include existing homes sales (4.75 million/0%).  Notable earnings this morning will include Tyson Foods which analysts are estimating at $0.44/share.  Krispy Kreme is due this afternoon and seen at $0.08/share.

Some very limited precip over the weekend in the eastern parts of the south.  The 5-day forecasted precip map is devoid of moisture in the Midwest, but the PNW is expected to see very good rains in ID/CA/OR/WA and W-MT to the tune of 0.50” to as much as 8.6” in OR.  Not much change in the NOAA extended maps yesterday with below normal precip seen for all areas south of I-70 while MT/ND and parts of SD could see some limited moisture.  Temps are expected to remain above normal the next 15-days.  The weather continues to look pretty good for the S. American growing regions. Some rains are seen in Argentina and S. Brazil, but will not be heavy enough to resurrect issues with excess moisture seen in Sept and Oct. Yet will also insure that these areas do not slip into too dry of a pattern. The tropical rainfall in N. Brazilian growing regions will continue to feed crops moisture there.

Ag’s are enjoying a nice bounce overnight which was present from 7:00pm as bargain hunters and technical traders claiming “oversold” seem to be finding their way to our space.  A solid export sales report Friday in the complex continues to offer underlying support, and farmer movement of new beans has been notably absent.  Chatter from the country makes it sound like resellers in the East have basis length from harvest, but the same doesn’t seem to be true in the West as elevators hurry to get piles picked up and shipped.  There was no weekend tender by Egypt, much to the chagrin of wheat bulls.  This isn’t to say Egypt won’t buy US-SRW when they come back, it’s just each week that flips over is one week off the window the US will be the only suitable supplier.

There was some tender business overnight, however, as South Korea’s Nonghyup group reaches for as much as 110,000MT of soymeal for April delivery.  Egypt’s FIHC is also seeking 30,000MT of sunflower oil and 30,000MT of soybean oil.  A wire said African wheat buyers have turned to India as of late, and it’s odd few have made mention of just how much wheat has been sold out of state reserves.  Recent prices were said to be around $348/MT C&F.  Other articles talked of Brazil’s shipping lineup being around 1.5MMT long, and Asian buyers turning increasingly toward the US.  CIF bids going home Friday were +92Z, up 20c w/w.  Winter wheat conditions in Ukraine are being rated as “fairly good” by the USDA-FAS.  Plantings are right at year ago levels.  The wheat harvest in Western Australia is being estimated at 35% complete by one of the regions’ largest grain handlers at around 3.2MMT.  Farmers in Victoria are said to be “happy with the start of harvest.”  Canola and barley are said to be faring the best.

Open interest changes Friday included wheat down 2,540 contracts, corn down 1,710, soybeans down 1,750, soymeal up 4,090, soyoil down 5,510.  There are 272,000 contracts of corn remaining in the December with FND 10-days away.  Overnight, Malaysian Palm Oil was up 30 ringgit to 2,459 on an expected pick up in export demand.  Chinese markets were firmer with beans up 5.25c, meal up $4.20, soy oil up 25c, corn up 4.50c, palm up 26c, and wheat down 0.75c.  For reasons undisclosed, China’s government said it will suspend soybean auctions from state reserves this week.  Paris Milling Wheat is up 0.47%, Rapeseed up 0.30%, Corn up 0.30%, UK feed wheat up 0.57% and Canola is up 0.73%.

Things look as though we’ll be firmer today, and prices are probably due for a bounce considering the losses sustained last week.  Demand has shown no signs of slowing down on soybeans, and combined March 1 stocks of South American and United States soybeans will still be the tightest on record.  Domestic demand for corn remains fairly strong, and analysts remain optimistic on export demand moving forward.  Wheat needs to pick up some business or we fall relative to corn to find feed demand.  Short week with low volume.

Trade as of 7:10

Corn up 5-6

Soy up 10-15

Wheat 3-4

  

Overnight Highlights from CHS Hedging Tregg Cronin

Outside Markets: Dollar Index up 0.076 at 81.154; NYMEX-WTI up $0.65 at $86.09; Brent Crude up $0.79 at $108.82; Heating Oil up $0.0157 at $2.9892; Livestock are quiet; Gold down $6.40 at $1706.90; Copper is down $0.0235 at $3.4455; Currencies are mixed; Softs are mixed, but Cocoa is down near 1.0%; S&P’s are up 2.25 at 1353.50, Dow futures are up 4.00 at 12,526.00 and Treasuries are near unchanged.     

Not much for economic news overnight, but the main feature in the US will be Congressional leaders heading to the Whitehouse to meet with President Obama for talks on taxes and the fiscal cliff.  One thing is for certain, markets won’t like anything that comes out of the talks and equities are likely to take it on the chin.  The only real piece of economic data on today’s docket is industrial production, so the focus will be on the Whitehouse.

Dry in the Midwest the last 24 hours, and expected dry the next 5-days aside from some precip in the PNW over the weekend.  No change to  extended maps from NOAA with above normal temps seen the next 6-15 days, and below normal precip as well.  The southern plains will enter dormancy without any follow up moisture which will keep conditions under pressure.  Forecasts in South America are dry the next 5-days, but rains move back into Argentina during the 6-10.  There will be wetness concerns in Argy, but Brazil should be in good shape.  There isn’t much confidence in the 11-15 at this point, but maps are showing pretty widespread moisture across Brazil.  The only threat at this point seems to be wetness in certain areas of Argentina.

The feature from the overnight has been continued liquidation in the soybean complex as prices trended steadily lower overnight until a last burst of selling around 3:30am sent things through support and to new lows for the move.  Soybean prices are now at the lowest level since June 22^nd.  The main rumor from the overnight according to Reuters is China canceled 600,000MT of US soybeans due to poor crush margins.  It wouldn’t appear this is the case based on CIF and PNW basis considering the sharp advances we’ve seen in those values this week.  Still, crush margins have been thought to be rather negative, and with the large break in the futures board, almost every soybean purchase any importer has made since June is now more expensive than it is today.

Other headlines last night included word South Korean feed mill KFA had begun to buy new crop South American soy meal for arrival by late-April.  Prices were said to be around $507/MT C&F.  MFG was said to have bought meal for $505.36/MT C&F for arrival by Apr 25^th.  Another article from Bloomberg quoting analysts in Germany also said China had “scrapped deliveries that were supposed to be dispatched in Dec and Jan that just a few weeks ago had been agreed at significantly higher prices… It is likely these shipments will be renegotiated at lower prices.”  Other headlines included articles talking about Egypt moving on US wheat in its next tender with that rumored to be this weekend.  A trader with Venus said they expect the next tender to be about 50/50 French-US.  Also worth noting, India has continued to sell what from state reserves for use in the global export market.  Headlines said they may tender to export another 500,000MT of wheat for December, and this would continue to displace Australia and the US.

Open interest changes yesterday included wheat up 1,620 contracts, corn down 1,810, beans up 5,160, meal down 880 and soy oil up 3,180.  Soybeans now appear to be adding fresh shorts, although the shorts would seem to be managed money as opposed to commercials considering the lack of farmer movement and the firm cash levels being paid.  Malaysian Palm Oil was down 38 ringgit to 2,396 overnight, but was up 80 on the week.  Chinese markets were relatively steady, so not the cause for selling in our market.  Soybeans were down 0.25c, meal down $6.50, soy oil down 74c, corn up 0.75c, palm down 51c and wheat down 3c.  Paris Milling Wheat is up 0.19%, Rapeseed down 0.74%, Corn down 0.39%, UK feed wheat down 0.38% and Canola down 1.11%.

Export sales this morning which should show big product sales, decent bean sales, and continued slow exports on corn and wheat.  Possibly stabilizes things near the lows, but I wouldn’t count on anything with support almost non-existent in this soybean market.  Corn basis did firm at several ethanol plants in the upper-Midwest, at feed lots in Hereford and off the PNW.  It would seem most of our basis strength, on everything, is lack of farmer movement for the time being, but demand should be being bought down here.

Trade as of 7:15

Corn down 2-5

Soy down 9-16

Wheat down 1-4

Tregg Cronin
Market Analyst
800-328-6530
651-355-6538
651-355-3723 fax

www.chshedging.com

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

Wow's and What's News letter article

Wow!  What????

Our grain markets seem to have plenty of “Wow’s!” and “What’s”.  Are you prepared for the next one?  Where you comfortable for the last few surprises our markets had?  It is never easy to know what the next curve ball producers will face in marketing their grain.  Look at some of the curve balls we had this past year.

First last spring we had USDA reports that forecasted nearly a 2 billion bushel corn carryout on yields over 160 bushels per acre.   It had some predicting sub $4.00 corn. 

 We followed that up via perhaps the worst drought since the 30’s.   When corn got to 8.00-8.50 on the board some thought we could have 10.00-12.00 corn; at the same time when beans hit nearly $18 talk was of $20 or $30 beans.

 Now we are in the process of balancing out demand with our somewhat known supply.  But even that supply is still debated and will be into the January crop report.  A report that has seen some limit type move in one grain or another every year since 2008. 

Presently as I write this we have our government dealing with a fiscal cliff; one that hopefully will be resolved by the time anyone reads this.  But a more then scary situation and possible huge implications on the funds and their investment attitudes.  Some days they are risk on buying everything and other days they are risk off selling everything.    They tend to help our markets over due things and make the extremes tough to swallow at times.  Presently we also have huge demand for soybeans leaving some still thinking we have 20.00 beans in the future; while some other analysts are out there thinking 9.00 corn will still happen.  For wheat there are many comparing the world wheat situation to 2008.  But on the flip side others are talking about huge South America bean crop; thinking that we will plant fence row to fence row next year and with normal yields we will be swimming in grain.  Many are already predicting sub $4.00 dollar corn next year and sub $10.00 beans.  The possible extremes depending on weather and what the headline catches the funds attention are more than extreme.

Bottom line is our industry will always have lots of unknowns that lead to a lot of “what’s” and “wow’s”.  The only thing we can do in marketing is be prepared; be comfortable not knowing for sure what direction the next big event will be.  I think our markets are at very profitable levels but my personal bias remains slightly to the upside; yet I think that everyone knows that the right thing to do when it comes to marketing is to take risk off the table at good profit levels; making sales that make $ense; yet NEVER getting oversold.

Many have done a good job getting them self comfortable via making smart good business decisions or profitable sales over the past several months.   If you want help the MWC Grain Team is willing to help you.  We can sit down and do up a marketing plan for you; come up with a strategy that helps get you comfortable for the unknown future.  We can’t pick tops nor are we ever going to try to; but we can take a fundamental and technical look at the market and tie that into what makes good business sense for you and your operation.    We can come to your farm and write up a grain marketing plan or you can schedule an appointment at our office.  Just give us a call if you would like some assistance writing up a grain marketing plan.

Along those risk management lines we want to make sure everyone is getting our mid day update; which is a voice update around noon everyday on what the markets are doing plus a little reason why.

We also will be sponsoring a couple of Grain Marketing workshops.  First on December 19^th in Philip and December 20^th in Pierre. Both Kevin Van Trump from farm and Tregg Cronin from CHS Hedging will be speaking in Pierre; while Tregg will be speaking in Philip.  Make sure to join us to get a little more market insight.

Lastly I want to thank all of you for your patronage this past year; we are hoping you enjoy some decent patronage paybacks early next year and most importantly wish you and your family the best this Holiday Season.

Happy Holidays!

Jeremey Frost

Overnight Highlights from CHS Heding's Tregg Cronin 11-13-12

Outside Markets: Dollar Index up 0.085 at 81.116; NYMEX-WTI down $0.39 at $85.16; Brent Crude down $0.74 at $108.33; Heating Oil down $0.0208 at $2.9781; Livestock markets are weaker; Gold down $9.20 at $1721.10; Gold down $0.0165 at $3.4565; The Pound is firmer while other major currencies are weaker; Coffee is under pretty solid pressure this morning; S&P’s are down 6.75 at 1371.50, Dow futures are down 51.00 at 12,729.00 and Treasuries are slightly better.   

Equities and credit markets are fairly quiet overnight as the euro rises from a two-month low against the dollar after reports said Germany favored combining several aid payments to Greece into one large tranche.  Also interesting to read in several articles overnight two key Republicans, Columbia Business School Dean (Romney advisor) Glenn Hubbard and conservative commentator Bill Kristol, appear to be breaking ranks on the issue of higher taxes for the wealthiest Americans.  Analysts think this will give Republicans more shelter to do the same.  Odds makers put the US going over the fiscal cliff at this point at only 10-15%.  Key economic data from Europe overnight saw the ZEW Indicator of Economic Sentiment for Germany drop 4.2 points in Nov to -15.7, missing estimates.

Nothing for moisture since midnight, although some lingering showers brought precip to the soggy Northeast.  Still dry the next 5-days in all major growing areas of the US.  The PNW is going to see some additional moisture by Friday.   NOAA maps confirm Sunday’s readings, looking for a warm up in the 6-10 with above normal temps centered over MN.  Below normal precip will also be the law of the land for the entire Midwest the next 15-days.  The rains in Argentina over the weekend likely stalled planting, but with dry weather for the next 7-8 days, and then just light to moderate totals to occur the middle of next week, planting of summer crops and ripening and harvest of winter crops will be able to be done without harassment from the weather. Things look good in Brazil, with welcomed rains in the north and limited rains in the south in the next 7-10 days.  Hard to find much to argue with in South America as it slowly dries out.  Australia continues to plug away harvest and dry weather is welcomed.

“Turnaround Tuesday” in the Ag markets this morning with most commodities bouncing off of yesterday’s lows which also contained some critical support areas, especially in soybeans.  The highs from September 2011 ($14.00) and the highs in April of 2012 ($13.90) should offer decent short-term support on any further pull backs.  The main theme from the overnight seems to be the flurry of import tenders which surfaced on our break.  Japan will be in this week for 195,008MT of US and Canadian milling wheat for Dec 21-Jan 20 delivery with 73% coming from the US.  South Korea’s MFG is seeking 70,000MT of corn for May delivery, and KFA is looking for 55,000MT of corn for April delivery.  China’s markets stabilized overnight, but no word on possible export interest just yet.

Some scattered headlines o/n: Ukraine’s grain harvest is about 16% behind last year with 43.3MMT harvested on 95% of the total area.  Corn harvest is 85% complete with 17.1MMT reaped, implying as much as 19.665MMT if yields are unchanged.  Export ban chatter from Ukraine is still making headlines, although its effect is less prominent now.  Most exports are doing additional business past Dec 1.  Interesting to note that sunflower seeds remain the most profitable crop to produce in Ukraine.  Russia sold 63,315MT of grain from intervention stocks last night.  376,764MT of wheat has been auctioned so far, most of which is from 2008.  Wheat output in South Australia is seen at 3.3MMT vs. 4.4MMT in 2011/12, down 25%.  As noted in an email sent late yesterday, CIF corn basis popped nicely by commercials trying to get nearby logistics bought and grain sent down the river ahead of a potential MO river closure.  We also saw ADM-Marshall improve bids from -17Z to -11Z, and Valero in Aurora move to -5Z from -7Z.  If corn < $7.30, expect firming basis levels.

Open interest changes yesterday included wheat down 9,240 contracts, corn up 8,370, beans up 2,400, meal up 1,500 and oil up 1,060.  Heavy fund liquidation/profit taking in wheat after Friday’s failed breakout.  Possibly some new shorts bring added in corn, and definitely new shorts being added in soybeans.  Chinese markets were mixed o/n with soybeans up 15.75c, meal down $7.70, soy oil up 16c, corn down 5.75c, palm up 80c and wheat down 15.34c.  Rumors of Chinese soy cancelations were abound yesterday, and the divergence between meal and beans doesn’t help.  Malaysia was closed for holiday.  Paris Milling wheat is up 1.11%, Rapeseed up 0.48%, Corn up 1.28%, UK feed wheat up 1.13% and Canola is down 0.93%.  Canola is the lone weak oilseed, but it was closed yesterday.

Call things a bit better to start today, but be cautious of getting runaway bullish on a one-day bounce.  The two themes from overnight, firm European grain prices and tender business, are supportive.  Yet, severe technical damage was done the past several sessions, and that does often instigate further chart based selling.  There should be good value down here on corn and wheat from world importers.  Continue to watch basis for clues about soy demand.  These prices should look pretty cheap relative to current ownership.

Trade as of 7:10

Corn up 2-5

Soy up 4-5

Wheat up 2-4

Tregg Cronin
Market Analyst
800-328-6530
651-355-6538
651-355-3723 fax

www.chshedging.com

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

closing comments 11-12-12

Markets got hit hard today.

Corn was off 20-21 cents, beans where off 46, KC wheat off 32, MPLS off 26, CBOT wheat off 29, crude, the US dollar, and equities where all near unchanged.

Bad risk off day for the grains; a spill over from Friday’s report with technical selling lead by the bean market.  The weakness for beans is also coming from South America weather and Friday’s report that showed a big increase in production.  Beans are now at their lowest level since late June; basically gave back nearly the whole drought rally.   

One positive we have is that if ECON 101 still works lower prices cure lower prices; so demand for our grains probably hasn’t been hurt by the lower prices.  But one question you have to ask is; can end users buy the product easier today than they could last week?  You did have ethanol go down a little today along with corn; and with a softer board it probably takes a better basis to see corn come out.  I have seen many say over the past couple months the lower we go on price breaks the higher we go later and I am not sure if that is the case if the product actually won’t trade lower.  As example with our recent price break producer selling has really slowed down; so lower prices might not be completely helping the end users if they can’t get the product.

As for news today; we really didn’t have any new highlights to cause the markets to get beat up so bad; just a combination of Friday’s report, South America weather, and Technical selling.   One thing that could have lead to more technical selling today and fund liquidation in general was the holiday.  Many banks where closed so wire transfers didn’t happen and if one was long out of Friday’s report and had a margin call there might not have been many options depending on how firm the margin calls where.  

Export shipments and crop progress was delayed due to holiday.  Look for the same theme however of very good bean shipments with wheat and corn not so good; part of that is just the fact that the whole infrastructure isn’t able to handle all three commodities at once.  Take a look locally at the elevators; we don’t ship much if any wheat during fall harvest and we never ship any row crops during wheat harvest.  So I don’t view the lack of shipments too important for corn and wheat right now; we are not at the historical time when we see heavy shipments.  Sales however really need to pick up sooner than later and this weeks bean sales will be important as well; because last week they were not very impressive.

Basis didn’t feel any better today despite the weak board; I would say it was firmer either just undefined for most markets(corn, winter wheat, spring wheat, milo).  The MPLS spot floor didn’t even have a single car for sale.  Seasonally we are nearing the time when wheat basis heats up into Holiday Baking season; so perhaps now isn’t the worst time to have some basis offers out there.  But to really see basis get wild we need to see some export business happen; the same thing we need to happen if we want to see the wheat board run.  Until it does wheat is starting to look a little over priced when you consider how far off the summer highs beans are it makes wheat sales look good.  Don’t get me wrong there remains plenty of upside potential for wheat; but without the funds backing it along with a  headline story and solid demand wheat is more than fair priced.    Keep in mind that early September KC wheat was a 8.35 discount to Soybeans on the board; now that discount is only 5.18; so reality is that even though there is some potential upside for wheat there is also plenty of downside risk should corn and beans continue to see pressure.

The birdseed market is also very soft; demand is light and the soybean complex isn’t helping out at all.  End users lack coverage but also are showing very little interest.

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

closing comments election day.......what effect will it have on grain markets?

Markets closed firmer today.

Corn was up 5-6 cents, beans up 12-13, KC wheat 10-11 higher, 8  for MPLS, CBOT wheat was up 11, DOW Jones was up 133 points, crude over 3.00 a barrel higher, and the US dollar was off slightly.

Election day.  A good bounce lead by wheat and it’s struggles in the US as well as the world.  Wheat conditions horrible in the US along with contract highs for Paris Milling wheat helped push markets higher.  Wheat conditions are at or near the worst in history.  Keep in mind things are early and the potential is still there but a small crop along with a smaller world carryout and you have a potential bull market out there.

After the election is over hopefully we can get some fund involvement into our markets.  A tie or something that is undecided could make markets nervous; but just knowing what the playing field will be should be supportive to our markets or at least no longer be a reason to have risk off.

We will have a USDA report out on Friday.  Market is looking for an increase in corn carryout despite the market looking for a decline in production via less harvested acres.  The increase in carryout is coming from soft demand.  There seems to be some potential for some corn export business later in the marketing year with some of the “cheap” corn offers coming up.  We are no longer seeing Argentina corn coming into the US and there is some chatter that the US will later be in the game; but today we are not getting any business so ideas are that the USDA cuts exports and potentially ethanol demand behind poor margins.  Now if they do cut them on this report and we see a major price break perhaps that doesn’t allow the cuts in demand to happen.  Bottom line is market should still be range bound; tight enough supplies to keep a major price break yet not enough demand or headline story for the funds to really run things up.  At least not yet.

For wheat on the report the market is also looking for a slight increase in carryout; via soft demand.  We simply haven’t got much exports and wheat’s premium to corn should slow down any wheat feeding.  The world numbers could tighten up behind a smaller Australia crop; so overall market is looking for a neutral type report maybe slightly negative US numbers and slightly positive world numbers.

For the beans the market is also looking for a somewhat bearish report.  But for a different reason then the corn and wheat markets.  The expectations are for an increase in soybean production; most of which likely will see demand off set; but overall a small net increase in carryout is the expectation.  There is some talk that with the ideal weather that parts of South America will have that we could actually see an increase in production down there as well; but I have also seen plenty of other reports of too wet and areas too dry that cause me to think the USDA won’t do much with that crop as of yet; after all I think their production numbers are fairly aggressive especially when you consider the fact that many of their increased acres are not exactly the best acres either.

As for marketing our markets have been rather sideways for some time.  Don’t be afraid to take a little risk off the table near the top end of the recent ranges.  For wheat that means making some cash sales between 8.50 and 9.00 or so.  For corn 7.00-7.25 should be a good spot to make some cash sales.  I think all of our grains have some potential but there are always black swans plus as we sit today we have no head line story for the funds nor do we have the demand to really take this thing explosively higher.  So don’t forget to get yourself comfortable in your grain marketing.

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

Thanks