Outside Markets: Dollar Index
down 0.040 at 80.270; NYMEX-WTI up $0.23 at $97.26; Brent Crude up $0.47 at
$118.59; Heating Oil up $0.0063 at $3.2378; Livestock prices
steady/weaker; Softs are all weaker; Gold up $0.80 at $1649.90; Copper up
$0.0145 at $3.7375; Silver up $0.005 at $30.915; S&P’s down 0.50 at
1512.50, Dow futures are down 5.00 at 13,919.00 and Treasuries are softer.
Better financial markets around the
globe overnight with the NIKKEI rallying 1.94% after being shut since Friday
while the Australian ASX closed unchanged. Europe is mostly firmer this
morning, although the British Pound is the notable weak currency this morning
with the GBPEUR -0.581% to 1.1613 and looking set for a decline to
1.1473. The GBPCHF is down 0.605%. The major currency news came
from the G7 Conference early this morning at which leaders said they would not
target exchange rates, inciting a global “currency war.” Also newsworthy
were reports North Korea conducted their third nuclear test in defiance of the
UN. Coca-Cola, Goodyear and Buffalo Wild Wings all report Q4 earnings
today. Not much for economic data. State of the Union Address from
Washington DC tonight.
Quiet in the upper-Midwest the
last 24 hours, but a large system is working across the southern plains this
morning bringing rain/snow mix to TX/OK/S-KS. The panhandle and high
plains areas should receive up to 0.80”, although KS isn’t expected to see
much. Best precip there in 30-days, however. The rest of the
Midwest will be dry the next 5-days. NOAA’s extended maps show much below
normal temps for WY/SD/MT/ND while below normal temps will encompass the rest
of the US. Normal to slightly above normal precip is seen. 8-14
looks nearly identical. Mostly quiet in SAM the last 24 hours.
Forecast sees rains possible in Argy to the tune of 0.20-0.60”
today/tomorrow. S-Brazil should see on and off showers for much of the
next week. 0.50-1.50” likely. Argy’s next chance at rainfall
is the end of next weekend with totals of 0.50-1.50” on 85% coverage.
Most forecasters are hanging their extended models on this rain system.
If it confirms and falls, patterns have changed. If it doesn’t, most will
continue to look for disappointment there.
Weaker on corn all night, and dragging wheat lower with it
as corn heads for its eighth straight losing session, the longest streak
since March of 2010. We broke the psychologically important $7.00
mark overnight after having held it yesterday, but that shouldn’t be too big of
deal considering there isn’t much support until $6.78. Still, the fact
farmers moved a fair amount of corn when price hit $7.35-7.45 at a time in
which our exports remain poor, 15-20% of our ethanol capacity remains idled and
South American production forecasts were being raised is definitely resonating
with the trade. Soybeans are bouncing a bit today, but it seems
mostly technical. NOPA crush data will be out Friday, and that
should show demand for soybeans remains strong. Yet it’s important to
remember front-month soybean prices were at $12.50 a year ago when South
America had much smaller crops. Logistics will remain a problem, but
soybean bulls may have to focus on the US domestic market moving forward.
In tender business, Japan is looking for 96,538MT of milling
wheat from the US and Canada with 64% of the wheat set to come from the
US. S-Korean flour millers bought 46,800MT of US wheat last week for May
shipment. No prices listed. ABARES released an updated Australian
wheat production estimate overnight of 22.1MMT, up slightly from 22.0MMT last
month. Exports are seen at 20.9MMT. These estimates compare
with the USDA at 22.0MMT and 19.0MMT, respectively. The French government
raised their SRW seeding estimate 3.1% from a year earlier to 12.3 million
acres. Brazil ethanol futures are trading above raw sugar prices for the
first time in almost 2-yrs, prompting some to lean positive towards sugar
demand in biofuels. World Cotton crops are forecast to slump 11% this
year, the biggest y/y change since 1993, to 23.2MMT thanks to smaller harvests
in the US & India and Chinese buying. Story below. Several made
the comment the price projections from yesterday’s USDA baseline numbers,
combined with lower forecasts from Goldman, are probably weighing on fund
sentiment. The USDA looks for corn price to average $4.30-5.40 over
the next decade. They see wheat price at $5.95-7.20, and bean prices at
$10.35-11.35 the next 10-yrs. These prices assume no weather events and
normal yields.
Open interest changes yesterday included corn up 8,690
contracts, wheat up 7,700 contracts, beans down 330, meal down 5,190 and soy
oil up 2,120 contracts. Likely some fresh speculative shorts being added
in grains considering the lower closes and the lack of farm gate selling.
Malaysian and Chinese markets remain closed. Paris Wheat is down 0.71%,
Rapeseed down 0.11%, Corn down 0.55%, UK Feed wheat down 0.84% and Canola up
0.43%. Calendar spreads are firmer overnight with the CH/CK up 0.25c to
+1.00c. Hereford and Chicago rail markets were firmer yesterday, but cash
traders said it had more to do with freight costs than demand pull. Corn
and Soybean basis on the Illinois River remains well above delivery
equivalence, so no deliveries are expected as of yet.
Grains lower and oilseeds better to start, but wouldn’t be
surprised to see some bottom picking send grain prices higher after 8 straight
lower closes. Bouncing above the $7.00 mark might be a moral victory, but
not much more. These markets have afforded ample opportunity to sell
higher prices, and that is true more than ever on new crop. Quite a bit
of time to go before spring planting, but there is better moisture around the
last 10-days. Funds will be sellers on rallies.
Trade as of 6:55
Corn down 4-5
Soy up 2-6
Wheat down 1-3
Cotton
Crops Slumping Most Since 1993 as China Buys: Commodities
2013-02-12 11:21:06.612 GMT
(To get alerts for Commodities
columns: SALT CMMKT)
By Luzi Ann Javier and Oliver Renick
Feb. 12 (Bloomberg) -- Cotton
harvests are heading for the
biggest drop in more than two decades as farmers from the
U.S.
to India reduce planting and China increases demand for
higher-
quality imports.
Crops will tumble 11 percent,
the most since 1993, to 23.2
million metric tons in the year beginning Aug. 1, data
from the
International Cotton Advisory Committee show. Farmers
will
reduce sowing to 31.58 million hectares (78 million
acres), a
7.7 percent decline and the largest in 11 years,
according to
Washington-based ICAC, which represents 41 governments.
By July
2014, stockpiles will shrink 4.9 percent to 15.9 million
tons,
the first reduction in four years, the group’s data show.
Prices that slumped 62 percent
from a record in 2011,
prompting farmers to switch to soybeans and corn, are
poised to
rally 15 percent to 95 cents a pound by the end of 2013,
according to the median of 16 estimates from analysts and
traders compiled by Bloomberg. China is buying
higher-grade
American and Australian fiber for textile makers at
cheaper
prices than domestic supplies and sitting on
lower-quality local
stockpiles to subsidize farmers.
“China will want to import some
cotton that the world
doesn’t have to give next season,” said Peter Egli,
director at
Chicago-based Plexus Cotton Ltd. “Prices will have to go
higher
to satisfy mill demand and China imports,” he said in a
telephone interview.
Bullish Wagers
Cotton advanced 9.8 percent to
82.52 cents this year on ICE
Futures U.S. in New York, the best performer among 24 raw
materials on the Standard & Poor’s GSCI Index. The
commodities
gauge climbed 5.1 percent and the MSCI All-Country World
Index
of equities rose 4.6 percent. Treasuries lost 0.8
percent, a
Bank of America Corp. index shows.
Money managers are gearing up
for a rally. Bets on price
gains in futures and options outnumbered wagers on
declines by
59,138 contracts as of Feb. 5, the most since Oct. 12,
2010,
data from the Commodity Futures Trading Commission show.
While global cotton output is
tumbling, consumption will
increase 3 percent as the world economy recovers, leading
to a
shortage for the first time since 2010, according to
ICAC.
Farmers in Spain begin planting
the first crops of 2013
this month. The U.S. will follow in March, then China,
Egypt and
Central Asia in April, South Asia in June, Australia and
Argentina in September and Brazil in October, according
to the
U.S. Department of Agriculture’s crop calendar.
Soybeans, Corn
In the U.S., the world’s largest
exporter, planting will
slump 16 percent this year to 10.32 million acres, the
least
since 2009, according to the average of 13 analyst
estimates
compiled by Bloomberg. Acreage may plunge 27 percent as
farmers
shift to more profitable crops, the Memphis,
Tennessee-based
National Cotton Council said on Feb. 9.
A farmer in Arkansas, the
third-largest cotton-growing
state in U.S., can earn $385 an acre growing corn this
year and
$320 on soybeans, based on an analysis of prices and
costs as of
Feb. 8 by the University of Arkansas division of
agriculture.
Even after a rally in prices this year, cotton would
fetch only
$200 an acre, according to the December study of surface-
irrigation farms, the most common type in the state. The
figures
exclude land costs, including rent.
Cotton production in Texas, the
top-growing U.S. state,
will decrease in 2013 as year-long drought conditions
that
prevented grain planting begin to lift in some regions,
said
Darren Hudson, the director at Texas Tech University’s
Cotton
Economics Research Institute.
“If we don’t have a drought to
keep yields down, we’re
going to flood the place with corn,” Hudson said in a
phone
interview from Lubbock, Texas. “Producers are looking at
corn
and grain sorghum as those prices are attractive.”
Australia, India
Upland cotton planting in the
western high plains of Texas,
a dry area, will probably fall to 3.7 million acres from
an
estimated 4.2 million acres the year before, according to
Steve
Verett, executive vice president at Plains Cotton
Growers, a
group in Lubbock representing more than 1,000 producers.
In Australia, the fourth-largest
shipper, sowing will
tumble by 19 percent for next crop, while in India area
will
drop 7 percent, the ICAC estimates dated Feb. 5 show.
Farmers in
all seven top shippers, including Brazil, Uzbekistan,
Greece and
Burkina Faso, will reduce plantings, shrinking the
acreage to
the smallest in four years, the data show. These early
estimates
for 2013-2014 are revised every month, ICAC said.
Imports Expand
Growth in China, the
second-largest economy and the top
cotton user, will accelerate to 8.3 percent in the third
quarter
after ending a two-year slump in the last three months of
2012,
estimates from economists compiled by Bloomberg show.
Chinese imports jumped 75
percent in December from the
previous month to 532,177 tons, a third monthly gain and
the
longest run of increases since September 2011, customs
data
show. Foreign purchases will reach 3.05 million tons in
the year
through July, 12 percent more than the 2.72 million tons
predicted in January, the USDA said Feb. 8.
Retail sales of garments,
footwear and textiles in China
advanced for a fifth straight month in December, the
longest
expansion in almost two years, statistics bureau data
show.
“Textile makers, especially
those of us who are export-
focused, have little choice but to use machine-picked
high-end
imported raw material,” Kong Jia, a manager at Hebei
Xindadong
Textiles Printing & Dyeing Co., said by phone from
Shijiazhuang
in northeastern China. “The government is trying to
offload
part of the huge stockpiles, but textile makers aren’t
enthusiastic about buying that cotton because the quality
and
price aren’t attractive.”
Growing Stockpiles
While China’s growth is
accelerating, Standard & Poor’s
said Jan. 31 it has the highest risk of a downturn among
32 of
the largest economies and the International Monetary Fund
forecasts a second year of contraction in the euro area.
Cotton
use fell 11 percent in 2008-2009 during the global
financial
crisis, USDA data show.
China stockpiled a record 6
million tons for reserves in
the first five months of the 2012-2013 year, which began
in
September, or 88 percent of the nation’s output, the
official
Xinhua News Agency reported last month. Purchases were
3.12
million tons the previous year, according to the
government.
Inventories are set to climb to
about 9 million tons this
season, enough to meet the production shortfall for the
next six
years, Joe Nicosia, an executive vice president at Louis
Dreyfus
Commodities, the world’s largest cotton trader, said at a
conference in Hong Kong in November.
Supplies from state reserves
were sold at 19,179 yuan a ton
or $1.40 a pound, according to the National Development
and
Reform Commission. That’s 70 percent more than prices in
New
York of 82.52 cents at 11:11 a.m. in London, data
compiled by
Bloomberg show.
“If I thought there was any
quality in those stockpiles
I’d be sweating more,” said Jack Scoville, vice president
at
Chicago, Illinois-based Price Futures Group Inc. “But
it’s
borderline unusable so that doesn’t concern me.”
Tregg Cronin
Market Analyst
800-328-6530
651-355-6538
651-355-3723 fax
Market Analyst
800-328-6530
651-355-6538
651-355-3723 fax
CHS Hedging, Inc.
The Right Decisions for the Right Reasons
The Right Decisions for the Right Reasons
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