Overnight Highlights from Country Hedging's Tregg Cronin 10-25

Outside Markets: Dollar Index down 0.073 at 79.841; NYMEX-WTI up $0.76 at $86.49; Brent Crude up $1.17 at $109.02; Heating Oil up $0.0241 at $3.0635; Livestock markets are firmer this AM; Gold up $15.50 at $1716.00; Copper is up $0.0010 at $3.5690; The Yen is down 0.44%, but other major currencies are firmer; Softs are rallying at the moment, led by Coffee and Sugar which are both up 1.0%+; S&P’s are up 8.25 at 1413.25, Dow futures are up 61.00 at 13,082.00 and Treasuries are off 0.4-0.7%.    

Financials are mostly positive this morning with equities up and borrowing costs down.  A few data points overnight worth noting: The U.K.’s gross domestic product rose 1% in the third quarter, the fastest growth in five years and helping the UK to exit their double dip recession.  Olympic ticket sales and a surge in services helped the rebound.  Analysts think the UK growth could go back to flat to close out the year.  Also supportive overnight was a Nikkei newspaper saying the Bank of Japan will add to its stimulus policies.  Economic data in the US today will include weekly jobless claims (370,000; -18,000), the Chicago Fed Index (-0.2); Durable Goods Orders (+7.5% m/m) and US Capital Goods Orders (+0.8%).

Since midnight, rains have fallen in the upper-Midwest, dropping 0.25-1.00” amounts across E-NE/E-SD/NW-IA/S-MN/NW-WI.  This system continues to impact the upper-Midwest this morning with 0.75” having fallen in the Twin Cities in the last six hours.  The next 1-2 days will see more rain affect the central corn belt and Great Lakes areas with totals heaviest in WI to the tune of 0.25-0.90”.  This will continue to plague harvest efforts there.  Aside from that, the far eastern corn belt will be impacted by hurricane Sandy early next week.  OH/PA will see the most effect, two of the states lagging the national average in harvest.  No change to NOAA maps with normal/below normal precip for the southern plains and Midwest while below normal temps will be seen east of the Mississippi.  Late in the period, more normal/above temps will creep in over the Rockies and western corn belt.  South America is expected to see above normal precip in the central/southern growing areas while northern Brazil is expected dry the next 3-7 days.

Quiet trade in fairly narrow ranges overnight.  Grains seem unwilling to extend yesterday’s gains as most expect a disappointing corn export sales report, and unless wheat sales are near/above 500TMT, most will view as disappointing.  As of yet, it doesn’t appear corn can maintain strength on just domestic basis levels.  The market needs to see the export market claw back some business to give a sub-700mbu carryout some merit.  Soybeans and products should see another sizable week with soybean sales expected between 600-800TMT.  This will get soybeans back close to 80% of the marketing year forecast already on the books.  Encouragingly, crush basis and meal offers firmed again last night, in-keeping with robust meal export sales and a lack of rationing in domestic livestock operations.

Overnight, Taiwan Sugar Corp bought 23,000MT of US corn and 12,000MT of US soybeans from CJ International.  The grain was bought at $374.68/MT C&F for corn and $652.27/MT C&F on beans.  South American FOB offers remain at least 90c below US offers, or $38.58/MT.  Of particular interest overnight, China only 9.8% of the 398,025MT of soybeans auctioned overnight with an average price of $19.71/bu.  About ¼ of the beans were offered in Inner Mongolia which failed to attract buyers.  This is in-keeping with the recent uptick in soybean exports to China as the government tries to encourage demand of foreign beans at these prices.  Should signal value to US traders…  Japan said last evening they are poised to boost rapeseed imports to a record 2.4MMT this year, up from 2.3MMT in 2010.  Soybean imports may drop 4.6% to 2.7MMT, the lowest in 43 years.  Looks like diversification as opposed to a slowdown in outright demand.  Mexico’s stock exchange will now offer corn futures contracts denominated in pesos that will trade on MexDer, the Mexican derivatives market.  The contract size will be 25MT of yellow corn.  EU grain inspections from the French port of Rouen were up 78% last week to the highest total since March on large barley exports to Saudi Arabia and wheat shipments to Algeria.

Open interest changes yesterday included wheat up 9,890, corn up 5,000, beans up 690, meal up 3,020 and soy oil up 2,850.  Looked like some fresh speculative buying yesterday with the markets firm as they were.  Chinese markets were mixed overnight with soybeans up 6.50c, meal down $1.70/ton, soy oil down 4c, corn up 7.25c, palm up 1c and wheat up 7.75c.  The Chinese Yuan continues to strengthen, firming to 6.24 from 6.25 yesterday.  Malaysian Palm Oil was up 25 ringgit overnight to 2,603, the highest in almost a month on speculation stockpiles in Malaysia will decline now that exports have picked up.  Paris Milling wheat is down 0.75%, Rapeseed up 0.31%, Corn down 0.20%, UK feed wheat up 0.61% and Canola is up 0.42%.

Export sales, or lack thereof, is likely to drive early morning direction.  Demand remains real for the soy complex, but modest to poor on grains.  With barge freight jumping to 750-800% of tariff this week, corn is being stopped by the ethanol plant or feedlot before it even gets to water.  The jump in barge freight is said to be barges moving up the Miss with good quality corn to blend with afla corn.  Continue to pay attention to energy markets as they get sold.  Crude/Corn and RBOB/Corn spreads are at some very weak levels.

Trade as of 7:10

Corn down 1

Soy down 1-2

Wheat down 1-3 

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

Overnight Highlights from Country Hedging's Tregg Cronin

Outside Markets: Dollar Index down 0.374 at 79.035; NYMEX-WTI up $0.16 at $92.27; Brent Crude down $0.31 at $113.70; Heating Oil down $0.0094 at $3.1891; Cattle markets are firmer, while hogs are weaker; Gold up $5.20 at $1749.90; Copper up $0.0095 at $3.7175; All major currencies are firmer this morning; Softs are firmer except for coffee and cotton; S&P’s are up 2.00 at 1451.25, Dow futures are unchanged at 13,435.00 and Treasuries are weaker.    

Financial markets are bouncing quite well around the world overnight, led by the NIKKEI which was up 1.21% and the IBEX 35 (Spain) which is up 1.39%.  Much of the bounce in Europe is coming after Moody’s held the Spanish credit rating at investment grade as opposed to dropping it to junk.  EU officials also said Spain would be eligible for bailout funds if and when they asked for them.  Bond markets are reacting well as Spanish 10-yr yields dropped to 5.4785% this morning, down 28.4bp and the lowest since April 3^rd.  Italy’s 10-yr yields also dropped to 4.8028%, the lowest since March 8^th.  Economic data in the US today will include US Housing Starts (770,000), US Housing permits (+2.7% m/m) and US building permits (810,000 & +1.1% m/m).

Some very light precip impacted part of the Dakotas and a section of MT north of the interstate.  The big focus today in the Midwest will be the wind.  Below is the midday wind forecast, and west river-Dakotas are expected to be the worst.  A system is working across east-river ND/SD this morning.  The next 2-days are expected to bring solid precip to almost all of MN/WI/IN/IL/MI/KY and hit edges of IA/MO.  MN could see as much as 0.50-1.35” by Friday.  By Saturday, and through Monday, the Midwest should dry out, although the PNW should see rains chances this weekend.  NOAA maps are keeping things split down the mid-section wth normal/below temps for the upper-Midwest, while that same areas sees above normal precip.  South of I-80 should see below normal precip and above normal temps.  Weather continues beneficial in Brazil with even the dry areas in the North receiving chances, but rain delays to planting and too wet are being discussed in Argentina.

Slight bounce overnight in the Ags, although today has the look and feel of a quiet session inside Monday’s range which should produce flagging action.  Volumes in the grains yesterday were the lightest in several days, and based on the overnight news flow, there doesn’t appear to be much to right the ship and get traders engaged.  We are rapidly moving to a demand focused market with harvest on its final 10-15%.  Farmer marketing is slowing, and concerns about sourcing grains in 30-45 days are being heard.  Elevators have been active in the reseller market, but most think basis and spreads are going to do a larger share of the heavy lifting to close out the calendar year.  Spring wheat continues to pace the wheat market on Chinese buying ideas and soy oil led complex gains o/n, up 0.88%.

Overnight news included Japan issuing a tender for 320,000MT of feed wheat and barley for shipment by Jan 31 in an SBS-sale.  South Korea’s MFG also issued a tender for as much as 210,000MT of corn for delivery in March and April.  With some importers booking JFMAM needs already, it underscores the need for US corn to get competitive.  It should be pointed out, however, Brazil’s lineup to load corn is 3.023MMT vs. 3.105MMT last week and 1.191MMT last year.  This is thought to be 60-75 days long, and will have to taper off soon or risk impeding soybean exports when the world needs S.A. beans.  News from Australia said wheat reserves fell 14% from a year earlier to 7.1MMT at the end of the marketing year on Sept 30 thanks in large part to record shipments.  Private production forecasts for Australia seem to be gravitating towards 20-21MMT vs. the USDA at 23MMT.  Analysts said the combination of 7.1MMT ending stocks with a production of 20-21MMT will provide a domestic market which isn’t well supplied during 12/13.

Open interest changes yesterday included corn up 6,930, beans up 2,030, meal up 2,070 and soy oil up 4,820.  Wheat was down 850 contracts.  Interesting to see the entire complex and corn receive decent jumps in O/I while markets rallied yesterday.  Keep an eye on soy oil as world veg oil markets have a bottoming feel to them.  Chinese markets failed to go with us last night as soybeans fell 8.25c, meal was down $2.60 corn up 4c and wheat down 0.25c.  Their soy oil market was up 26c, however, and Malaysian Palm Oil was up 5 ringgits to 2,471 (although down 115c on the week).  Chinese crush margins are improving as soy oil and soybeans diverge.  Paris Milling wheat is up 0.10%, Rapeseed up 0.11%, Corn down 0.63%, UK feed wheat up 0.38% and Canola is up 0.56%.

Call things a tad better to start, but it wouldn’t surprise anyone to see the volume at 9:30am take it in a different direction.  We’ve had little for fresh fundamental input this week aside from firm cash markets and firm spreads in the interior.  It should be noted, soybean calendar spreads are especially weak overnight.  Wheat markets are clinging to the idea of better demand for hard wheat, although as the spot floor showed yesterday, the current demand is for lower proteins.  Should be some good basis opportunities coming.

Trade as of 7:10 

Corn up 2-4

Soy up 0.50c front end/5-7c back end

Wheat up 4-7

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

Overnight Highlights from County Hedging's Tregg Cronin 10-16-12

Outside Markets: Dollar Index down 0.371 at 79.369; NYMEX-WTI up $0.33 at $92.19; Brent Crude up $0.28 at $115.50; Heating Oil up $0.0039 at $3.2130; Livestock are quietly mixed; Gold up $7.60 at $1743.60; Copper up $0.0130 at $3.7245; The Yen and Loonie are getting sold this morning; The softs are bouncing rather sharply this morning with Cotton, Cocoa, Sugar and Coffee all up 1.1-2.8%; S&P’s are up 6.75 at 1442.25, Dow futures are up 59.00 at 13,419.00 and Treasuries are weaker.      

Equity markets are bouncing around the globe this morning, most likely catching up to the strong finish in the US yesterday afternoon.  Most economic data received yesterday was positive, and there seems to a bit better optimism from consumers, at least that’s what the underlying theme of the data seems to suggest.  Today’s data points in the US will include the Consumer Price Index, Industrial Production and the Housing Market Index.  The CPI is expected to show a 0.50% gain m/m, and up 0.2% less food and energy.  This measure, at least, continues to agree with the Federal Reserve’s recent policy initiatives.  Tonight will see the second Presidential debate in New York which will be a town hall format covering both domestic and foreign policy.

Not much for measureable precip in the last 24 hours.  There are some scattered showers over N-MN/N-WI.  The next 48-hours will see more moisture fall from LA to MI with totals expected in the 0.25-1.21” range.  Most The precip will be mostly east of the MS river.  N-MN and up into the Canadian Prairies should also see some solid amounts.  5-day totals should be generous, and the PNW also looks to finally see rain.  Areas along the Pacific in WA/OR could see between 2.0-5.0”.  ID will also see some showers.  Pretty split through the belly of the country on NOAA’s extended maps.  Below normal precip in the southern plains, above in the Great Lakes and far-northern plains for the 6-10.  Similar set up in the 8-14.  No discernible changes to either South America or Australia.

Moderate relief bounce overnight in all of the Ags with soybeans clawing back about half of what the lost and keeping their nostrils above the $15.00 mark.  Nothing in the overnight wires to point to directly, so we’ll attribute the bounce to being “oversold.”  There was talk of China snooping around for 3-5 cargoes of soybeans yesterday, but this is commonplace.  Remember, China imports 60MMT, which is just over 1MMT every week.  Assuming they spread it out evenly, that’s almost 2.5 Panamax vessels every single day of the week, including Sunday.  China shopping for soybeans is no reason to get excited.  Of the three major commodity markets, wheat holding the bottom end of its 12-week range (HRW & HRS) seems to be the most constructive thing about yesterday.

The China National Grains and Oils Information Center released update production forecasts overnight with corn at 201MMT, up from 197MMT last and up 4.26% y/y.  Wheat was seen at 118MMT, unchanged from the last guess and up 0.51% y/y.  Soybean production was estimated at 12.8MMT, down 0.2MMT from last month and -11.63% y/y.  FWIW, very few private estimates have China’s wheat crop anywhere near 118MMT, but are closer to 110MMT.  This on top of the rumored purchase of 300,000MT of Canadian spring wheat yesterday.  Also of note, Japan issued a tender for 128,144MMT from the US and Canada.  All but 28,068MT will come from the US.  A wire story also said Japan bought 250,000MT of corn from Ukraine at $1.10 over the December CBOT board.  The cargoes were said to be for Nov-Dec shipment.  Also from Ukraine, grain stocks as of Oct 1 were 19.4MMT, down 11% y/y.  Ukraine grain exports are up 73% y/y July 1-Oct 15 to 6.64MMT.  The ministry said exports will slow appreciably through the end of the year.

Open interest changes yesterday included corn down 6,124 contracts, wheat down 607, soybeans up 1,213, meal up 1,104, and soy oil up 4,421.  Corn is still seeing long liquidation, somewhat of silver lining, while the soy complex appears to be adding fresh shorts almost daily.  Open interest continues to steadily increase in soy oil which is likely to be noncommercials.  Chinese markets were a bit firmer last night with soybeans up 8.75c, meal down $1.00, soy oil up 75c, corn up 4c, Malaysian palm oil up 2 ringgit at 2,435 (Dec), Paris Milling Wheat is up 0.19%, Rapeseed is up 0.47%, Corn up 0.31%, UK feed wheat up 0.05% and Canola is up 2.20%.  Canola’s demand prospects still look incredibly strong, and after slightly smaller supplies, fits with it putting a growing premium over soybeans..

Not much really stood out about the crop progress report with corn harvest heading down the homestretch at 79% complete.  Notable progress remains in OH at 31%, MI at 36%, PA at 41% and WI at 54%.  On soybeans the stand outs are OH at 38%, KS at 40%, TN at 33%, SC at 7% and KY at 42%.  Much of these are double crop beans, however, and national progress remains 13% ahead of average.  Winter wheat emergence in the northern plains remains a big concern.  SD is at 11%, MT at 25%, ID at 33% and OR at 24%.  Too dry.

Not a surprise to see a decent bounce today consider the Fri/Mon break.  Most fundamentalists continue to scratch their head at the current sell off given the lack of movement from the farm, firm cash markets and firm spreads.  This seems to point toward value at current flat price levels, so would caution against getting overly bearish “down here.”  On the other hand, liquidation events usually last longer than anybody thinks they can, so no need to a hero…

Trade as of 7:10

Corn up 5-7

Soy up 11-13

Wheat up 7-10  

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

Overnight Highlights from County Hedging's Tregg Cronin 10-12-12

Outside Markets: Dollar Index down 0.179 at 79.596; NYMEX-WTI up $0.27 at $92.34; Brent Crude down $0.54 at $115.17; Heating Oil down $0.0181 at $3.2393; Livestock markets are firmer on the front-end; Gold down $0.50 at $1768.30; Copper down $0.0190 at $3.7400; The Yen and Aussie Dollar are weaker but the other majors are firmer; Most soft commodities are firmer; S&P’s are up 4.25 at 1432.75, Dow futures are up 33.00 at 13,298.00 and Treasuries are softer.  

Things are mostly quiet across the pond this morning, but the EU should have cause for celebration after they were awarded the Nobel Peace Prize for the solidarity and cooperation during the current EU fiscal crisis.  Whatever it takes I guess.  Also making headlines was JP Morgan beating analyst estimates with $1.40/share during the third quarter vs. $1.02 last year and the $1.24 estimated by analysts.  They cited a surge in the mortgage business and improved capital markets.  Also interesting overnight was Wal-Mart reporting its lay-away program has already brought in $400 million to date, over half of the entire 2011 total.  Better living through lower prices.  Eco data today in the US includes the PPI (+0.8%), PPI-ex energy & food (+0.2%), PPI y/y +1.8% and U of Mich consumer sentiment (78.0).

Not much for rain around overnight with some scattered precip in the Great Lakes, while another system impacted MO/AR/KY with scattered amounts, but localized up to 1.0”.  The next 1-2 days should see rain in the southern plains with the highest concentration in OK at 2.93”.  The precip chain extends all the way to WI, but the precip has shifted East and MN looks to be largely missed now.  E-IA/S-WI could see totals as high as 2.0+”.  The 5-day forecasted precip map is below.  NOAA’s extended look has moderated a bit with more normal temps in the 6-10 to below normal in the 8-14 for the upper-Plains.  Precip should be normal/above, but nobody is holding their breath.  No significant changes to S.A. with below normal precip in the 1-5, but more normal/above in the extended.  

Export sales will be released today at 7:30 CDT due to the Columbus Day Holiday Monday.

Grains are giving back a bit of yesterday’s gains this morning, possibly a sign that corn’s inability to hit limit up, or lock there, meant a straight shot over $8.00 wasn’t needed or likely.  Overnight wires are quick to say soybeans losses overnight are tied to the fact supplies are rising in the US while demand has yet to be fully realized.  I continue to view soybeans with a great deal of fundamental value at current price levels, and apparently the crush plants and exporters of the US tend to agree as evidenced by recent basis moves.  Farmer marketing has slowed appreciably below $16.00 and that is likely to continue.  As noted in yesterday’s recap, lows were likely made in late-Sept/early Oct for the foreseeable future, but that doesn’t mean steady and even range bound trade can’t develop.

Overnight headlines included South Korea’s NOFI canceling a tender to buy 210,000MT of corn and 70,000MT of wheat, citing high prices in an email.  Japan issued a tender for 66,000MT of feed wheat and barley due by October 26^th in an SBS tender.  Saudi Arabia said cereal imports in 12/13 are forecast at 12.8MMT, with wheat imports consisting of 2.3MMT to maintain demand levels for milling and conserve water needs domestically.  Saudi Arabia is expected to produce around 1MMT of wheat this year, and wants to stop growing wheat entirely by 2016.  Argentina’s wheat crop is forecast at 10.12MMT this year, down 28% from last year according to the BA Grains Exchange.  Farmers choosing to plant soybeans and corn as well as a struggle to drain flooded fields contributed.  As noted yesterday, Bloomberg made mention overnight soy crushers in China may increase imports after the government finished selling the cheap reserves and increased auction prices.  One investment bank is calling for a “twin peak” in commodity prices during Q1 of 2013.

Open interest changes yesterday included wheat up 14,030, corn up 50,120, beans up 3,250, meal up 1,370 and soy oil up 1,010 contracts.  The jump in wheat, and especially corn, were quite large.  Certainly fits with the moves we saw yesterday, but large nonetheless.  Interesting to note a lack of O/I jump in beans and meal, considering their moves yesterday, signaling the buying could have been short-covering.  Soy oil calendar spreads hit new lows for the move again last night.  Chinese markets didn’t react much to our news yesterday with their beans up just 1.75c, meal down $3.30, soy oil down 42c, corn up 0.25c and wheat unchanged.  Paris Milling wheat is down 0.76%, Rapeseed down 0.10%, corn down 0.31%, UK feed wheat down 0.50% and Canola is down 1.00%.

Call things weaker to get going today as markets seem to be saying the lows are in, but the highs aren’t in jeopardy just yet.  The focus has shifted back to demand now that the supply concerns are behind us, so a great deal of attention will need to be paid towards the SX/SF, CZ/CH, MWZ/MWH, KWZ/KWH and the WZ/WH spreads as well as interior and export basis levels.  Farmer movement is likely tapers off as harvest wraps up the next 10-14 days.  Then we have to determine where he sells grain again?  Still a lot of piles, however.

Trade as of 7:10

Corn down 3-5

Soy down 15-16

Wheat down 4-7

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

Overnight Highlight's - from Country Hedging's Tregg Cronin 9-25-12

From Country Hedging's Tregg Cronin

Outside Markets: Dollar Index down 0.046 at 79.479; NYMEX-WTI up $0.93 at $92.86; Brent Crude up $1.11 at $110.92; Heating Oil up $0.0206 at $3.1193; Livestock markets are all firmer; Gold up $4.50 at $1766.70; Copper up $0.0300 at $3.7755; The Euro and Loonie are weaker, but all other major currencies are firmer; The softs are better; S&P’s are up 2.00 at 1453.50, Dow futures are up 25.00 at 13,514.00 and Treasuries are up 0.32%.      

World equity markets are very lightly mixed today ahead of a fair amount of data in the US.  The FTSE 100 is up +0.07%, the CAC 40 -0.20% and the IBEX 35 +0.10%.  The NIKKEI was up 0.25%.  It was interesting to note in a Bloomberg article this morning the ECB’s bond market intervention is essentially making it cheaper for investors to de-risk out of Spanish debt and into safer, German bonds.  By buying up Spanish debt, it’s making German debt cheaper to own, and if Spain does end up requesting a bailout, it will fall on German shoulders which will inevitably raise their borrowing costs.  German 10-yr yields are currently at 1.532%.  Economic data in the US data includes the Case-Shiller 20-city home price index, expected up 0.75% m/m.  We also get consumer confidence and the Richmond Fed.

The last 24 hours saw rain in N-MO and W-IL to the tune of 0.10-0.50” with localized totals up to 3.0”.  The system is now perched atop IL/S-IN and should bring decent rainfall totals there to the tune of 0.75-1.00”.  The next 3-day rainfall totals are expected to bring heavy rains to the southern plains and Midwest with OK/KS/MO/IL/IN/KY/OH all seeing a general 0.50-1.00” with the heaviest amounts in E-KS at 3.40”.  These couldn’t be timed better, although the N-TX plain might be a little short changed.  NOAA maps keep the northern plains dry and mostly above normal on temps in the 6-10, while the 8-14 looks closer to normal on both.  A patch of below normal temps are excepted to run north to south from MN-LA and east to MI and south to GA.  In S.A., the forecast sees an active pattern to produce average to above average rainfall in much of the growing regions the next 10-days.  They are sitting in good shape looking at % of average precip Sept 1-22.  Australia is still waiting on rains to begin Friday-Saturday as heading starts on the wheat.

Markets are letting loose a bit of relief bounce on a “turnaround-Tuesday,” although all three of the major Ag’s remain firmly entrenched in recent ranges or downtrends.  Crop conditions yesterday afternoon were unchanged on corn at 24% G/E, but harvest continued to chug along at 39% vs. 26% last week and 13% average.  Most were expecting 40-45%, but it’s still fast.  Soybean conditions up-ticked 2 points to 35% vs. 53% last year.  Soybean harvest was estimated at 22% vs. 10% last week and 8% average.  This was in-line to slightly faster than estimates.  ND leads harvest progress with 56% complete, followed by SD at 47% and MN at 45%.  Winter wheat plantings were seen at 25% vs. 11% last week and 27% average.  SD has just 37% planted vs. 52% average.

Wires overnight showed Iraq issuing a tender for at least 50,000MT of wheat from all origins with a bidding deadline of Oct 1.   Last week, Iraq bought 150,000MT of Russian wheat at $412-413.89/MT C&F.  It will be interesting to see if US wheat comes anywhere close to being competitive.  If Russia doesn’t win, it should likely be EU wheat.  The EU’s crop monitoring service cut the bloc’s corn yields again to 6.05MT/ha from 6.28 last month.  Temperatures and lack of rainfall were cited.  South Korea also bought 120,000MT of corn for February delivery at $308.45-308.85/MT C&F from Bunge on an optional origin purchase.  Should be Brazilian corn at that price with US-FOB offers at $316/MT.  From IKAR we saw that Russian wheat for export hit the highest price since the collapse of the Soviet Union last week at $340/MT.  While an incredibly important development, our markets need to be careful as the latest COT report from Friday showed managed funds amassing some huge net long positions in both KC-HRW and MPLS-HRS.  It’s that boat getting tipped thing.

Open interest changes yesterday included wheat down 280, corn down 400, soybeans down 2,720, meal down 3,670 and soy oil down 5,540.  Soy oil got taken to the woodshed as Palm Oil prices hit the lowest level in two years as supplies are estimated to grow considerably this year.  Funds were loaded up on longs there.  Based on the latest COT report, it looks like the lack of change in O/I on wheat is length being transferred from the commercials to the managed money, which is a concern.  Corn looks the opposite with funds dumping length to the end users.  Chinese markets rallied sharply with beans up 35.75c, meal up $8.70, oil up 17c, corn unchanged and wheat down 5.50c.  Paris Wheat is up 0.67%, Rapeseed up 0.81%, Corn up 0.10%, UK feed wheat up 0.22% and Canola up 0.75%.

Looks for a bit of recovery today, but it doesn’t look like markets are going anywhere.  We’ve got month end, quarter end and big USDA reports all on Friday.  The propensity for managed money will be to “de-risk” and take money off the table, not add to positions.  We still have 60-80% of harvest to bring in, farmers are selling a lot of grain off the combine and quality is a concern in the central belt.  Yield reports remain better than expected on soybeans and more mixed on corn.

Trade as of 7:15

Corn flat/up 1/2c

Soy up 11-15

Wheat 1-2

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

Overnight Highlight's from Country Hedging's Tregg Cronin

Outside Markets: Dollar Index up 0.452 at 79.507; NYMEX-WTI down $0.27 at $91.71; Brent crude up $0.47 at $108.67; Heating Oil up $0.0154 at $3.0594; Cattle are weaker and hogs firmer; Gold down $7.00 at $1762.00; Copper down $0.0715 at $3.7500; The Yen is firmer while all other currencies are weaker; Sugar is firmer this morning but all the other softs are weaker; S&P’s are down 4.00 at 1455.75, Dow futures are down 34.00 at 13,536.00 and Treasuries are mostly better.

Economic data from around the globe last night was fairly negative, setting up the stage for a big day of economic reports here in the US.  Last night, China’s flash preliminary-PMI climbed to 47.8 in September from 47.6 in August.  While better than the previous month, it remains below the economic expansion/contraction line at 50.0.  Japan also confirmed the reasoning behind their latest round of stimulus Tuesday night when they reported exports down 5.8% in August y/y, and imports down 5.4%.  Euro economic data wasn’t much better with their PMI falling to 45.9 in September from 46.3 in August.  The Euro is currently down 0.87%.  In the US today we have jobless claims, the Preliminary PMI, Philadelphia Fed and Leading Indicators.  Note the Dollar strength this morning.

Rains in the last 24 hours were confined to the Great Lakes region where trace to 0.25” amounts fell in WI/MI.  Radar is mostly quiet this morning aside from a small system working across C-IL/N-IN. The 5-day forecasted precip map is mostly unchanged from yesterday with the WCB dry the next 5-days while precip will fall in S-MO/S-IL/IN/N-OH/MI with heaviest amounts in the northern Great Lakes at 0.75-1.25”.  The ECB areas should see 0.30-0.60” in general.  NOAA’s latest extended look still shows much below normal precip the next 10-days for the corn belt as well as cool temperatures in the East, but a warming pattern sitting in the Rocky Mountains and moving East.  The coolest day of the next 10 should be Saturday where widespread frost chances are likely.  South America appears to be catching some showers ahead of planting season which begins in earnest in October.  No change to the Australian forecast with dry weather the next 7-10 days while any showers which do fall look to be 0.10” or less.

In-keeping with the choppy nature of the last several sessions, our Ag markets find themselves under a bit of pressure this morning, but clinging to the top-end of yesterday’s gains.  There isn’t a heavy amount of overnight news, and hedging activity last night was the lightest in recent memory, so the general theme from earlier in the week seems to hold: large spec positions moving for the exit as harvest ramps up and yield reports continue better than expected.  Most are still calling for a lower corn yield on the October report, but more analysts are arguing for an uptick in the soybean yield.  A                 Bloomberg article seemed to sum up the funds attitude towards commodities as of late quite well: Fed Stimulus Fading as Forecasters Say Best is Over.  Demand for paper can decline while physicals rise.  Ukraine’s Ag Minister said in a story last night Ukraine won’t need to ban exports this year as sales slow in November when harvest rises.  “We will be a stable supplier.  Our wheat exports won’t exceed 5MMT.”  Some privates have them at 6.5MMT currently. 

Overnight headlines updated us on Lock and Dam 27 north of St. Louis which remains shut down due to damage from the drought.  As of Wednesday morning, nearly 60 tugboats and more than 400 barges were caught up in the logjam.  This is undoubtedly part of the firmer CIF basis on corn and beans this week.  In export news, South Korea’s MFG has issued a tender for up to 140,000MT of corn for delivery in February.  Japan bought 101,158MT of milling wheat from the US and Canada in a regular tender with 82,103MT coming from the US.  Yesterday, the UN’s FAO forecasted Brazil’s 2012 corn harvest at 72.8MMT, up 29% from a year earlier and a new record.  This is directly correlated with the lack of US exports the past 6-weeks.  As noted in last night’s afternoon comments, there are four more vessels set to discharge in Wilmington, NC between Oct 3-22 carrying Brazilian maize.  Expect it to continue.  Bloomberg also reported China overtook the US as the world’s largest imported of Ag products, going from $108.3 billion in 2010 to $144.7 billion in 2011.

Open interest changes yesterday were fairly light with wheat up 340, corn up 2,850, soybeans up 340, meal down 2,010 and soy oil down 2,080.  The lack of open interest changes during moves which are pretty exaggerated would suggest a fair amount of ownership continues to change hands.  Early in the week it seemed to be funds dumping into the hands of end users.  With yesterday’s bounce, it still could have been the same.  Chinese markets were firmer overnight with beans up 1.25c, meal up $1.40, soy oil up 1c, corn up 5.75c and wheat up 4.25c.  Paris Milling Wheat is up 0.19%, Rapeseed down 0.44%, corn unchanged, UK feed wheat down 0.29% and Canola down 0.71%.  The Canola/Soybean spread (weight and currency adjusted) is back to $32/MT from even money in late August.

Call things a shade weaker to begin with, but don’t rule out two-sided trade once the pit gets open.  Short and intermediate term trends are still down, harvest pressure will be increasing the next two weeks, yield reports are still better than expected and the funds seem more apt to sell positions than add.  Longer-term, the bullish underlying principles still exist and will likely mean higher prices down the road.  Until then, however, prices should continue their sideways/lower trend, providing good call buying opportunities.

Trade as of 7:05

Corn down 2-3

Soy down 4-9

Wheat down 1-2

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

Overnight Highlights from Country Hedging's Tregg Cronin

Below is overnight highlights from Country Hedging's Tregg Cronin

Outside Markets: Dollar Index up 0.105 at 79.354; NYMEX-WTI down $0.64 at $94.65; Brent Crude down $1.28 at $110.75; Heating Oil down $0.0251 at $3.1020; Livestock are all in the red; Gold up $10.10 at $1778.50; Copper up $0.0095 at $3.8120; The Yen and Loonie are firmer, while the other major currencies are weaker; Cocoa and Lumber are positive; S&P’s are up 1.00 at 1460.25, Dow futures are up 14.00 at 13,584.00 and Treasuries are bid.

Japan is still making headlines overnight, but for a change, it doesn’t have to do with the China/Japan conflict.  Overnight, the Bank of Japan unexpectedly increased their asset purchase program by $126 billion as officials try desperately to stave off economic contraction in the world’s third largest economy.  The NIKKEI equity index rose 1.19% last evening, but the Yen is currently 0.15% higher.  The EURUSD briefly ticked below $1.30 last night following comments from the European Commission which said strict conditionality will accompany all aid programs.  That wasn’t a provision to begin with?  The US economic calendar today has housing starts, building permits and the already released MBA Mortgage Applications which came in -0.2% vs. 11.1% the week previously.

The Midwest was mostly devoid of any moisture the last 24 hours, but the East Coast did see rain from NC to NY.  Some light showers are working across N-MN this morning.  No big change to the 5-day forecasted precip map, although the storms impacting MO and bringing 0.70” will extend east through S-IL/IN/OH/MI to the tune of 0.40-0.80”.  The WCB will be dry through Monday.  NOAA’s extended maps last night show above normal temps building over ID and beginning to push the cold air mass east, centering over the US-SE.  The WCB should see normal/above temps by September 24^th, but moisture will remain below normal, aiding harvest, through the end of the month.  The coldest day the next 10-days will be Saturday with chances of frost present as 33* temps will be witnessed.  Australia saw a few light showers of less than 0.10” in most wheat areas with some totals up to 0.35” in W-Aus.  The forecast sees things quiet for the next week or so, but the very end of next week sees a front to bring 0.20-0.60” to NSW and Queensland.

Grains are seeing “green across the screen” this morning for the first time since Friday as a relief bounce makes its way through the Ag space.  Following the $1.00+ break in soybeans the past two days, it is generally believed end users will grow more interested down at these levels, and the balance sheet can ill-afford a ton of new demand cropping up.  It also doesn’t hurt the US’s largest export destination enacted another $126 billion worth of monetary stimulus last night.  Today’s bounce doesn’t change the lower trend mind you, and prices are still expected to work lower through the balance of the month which will mark month end, quarter end, increasing harvest and the September 28^th Grain Stocks report.  The last several Sept 1 Grain Stocks reports have been especially bearish to our space.

Harvest progress in Ukraine was pegged at 28.49MMT as of Sept 18^th, which covered about 72% of the total area to be harvested.  Average yields were pegged at 2.63MT/ha vs. 3.08MT/ha last year.  Ukraine had harvested 36.48MMT at this point last year.  Russia’s Ag Minister is still pegging total grain harvest to hit 72-73MMT.  Harvest has covered 76% of the total acreage to be harvested with 63MMT in the bin.  In export news, South Korea bought 28,700MT of US wheat from LD for shipment in December.  The wheat was 8.5-9.5% protein soft white wheat at $328/MT FOB.  The mills also bought a small quantity of HRW (11.5) and DNS (14) at $362 and $378/MT FOB, respectively.  Taiwan’s BSPA is tendering for 40-60,000MT of soybeans from the US or South America for shipment April 26-May 10.  South Korea’s MFG is also tendering for 55,000MT of soy meal for arrival by Jan 5.  Japan bought 51,890MT of feed wheat and 36,555MT of feed barley in a S-B-S tender.  Deliverable Stocks in Duluth/MPLS rose to 25.349mbu, up 3.5mbu and vs. 13.8mbu last year.

Open interest changes yesterday included drops on everything including wheat down 5,440, corn down 3,000, beans down 3,230, meal down 3,840 and soyoil down 8,260.  These all fit with modest liquidation, but still seem light considering the severity of the drops.  Still arguing end users are stepping up a bit of pricing at these levels.  Chinese markets finally stabilized seeing beans up 7c, meal up $1.70, soy oil up 27c, corn up 2.50c and wheat up 6c.  Paris Milling Wheat is currently up 8c, Rapeseed up 14c, corn up 11.5c, UK feed wheat up 8c and Canola up $8.00.  The US remained the world’s largest exporter of Ag products in 2011 at $168.2 billion according to WTO data.  We were followed by the Netherlands at $108.1 billion, and Germany in third place at $94.5 billion.  Cattle-on-feed out Friday.

Call things firmer today as we enjoy a bit of a relief bounce.  Ethanol production at 9:30 will be watched closely, but the themes of the week haven’t changed: specs are still loaded up, harvest is going to advance rapidly the next 15-days, harvest prices are record high, and the monetary silver bullets are being spent by the ECB, Fed and BOJ as we speak.  The long-term fundamental stories haven’t changed, but that doesn’t mean short-term direction can’t deviate.

Trade as of 7:10

Corn up 3-6

Soy up 12-19

Wheat up 10-16

Re-owning on Paper..........from Country Hedging's Tregg Cronin

Below is good info from Country Hedging's Tregg Cronin on re-owning on paper for soybeans.

A lot of guys have expressed interest in taking advantage of high priced soybeans by selling them off the combine but wanting to re-own them on paper with calls, call spreads or some sort of option strategy.  Below I’ve outlined two such strategies using today’s settlements.

The first is a simple call diagonal spread.  It would consist of buying the January $17.00 call for $0.51 and selling the March $18.00 call for $0.38375 for a net cost of $0.12 5/8 or $630.  At expiration, this would have a break even at $17.12 5/8, or the bottom strike plus the cost of the strategy.  The maximum gain on this strategy is $0.87 or $4,350 per 1 lot contract.  The maximum loss, provided both options are exited at the same time, would be $0.12 5/8 or the cost of the strategy.  This particular example has differing expirations which would need to be managed if the desired outcome hasn’t been achieved by December 21^st when the January $17.00 call expires.  The nice thing about this method is it has a favorable delta and gamma ratio, especially as we get closer to November/December.  It should be noted this strategy carries a bit of spread risk, in that if March soybeans were to all of the sudden rally sharply against January soybeans, it could put more value in the March call vs. the January call, making the position worth less.  I can go further into detail if needed.

The second strategy is  known as a 3-way because you buy 1 call, sell 1 call and sell 1 put.  In this example I used March options which would expire on February 22^nd.  One could do a similar strategy for January if they wanted.  The particular strikes I used on this one was buying the $16.00 March call, selling the $18.00 March Call and selling the $15.00 March put for a net cost of $0.11 1/8 or $550 per 1 lot position.  This strategy would have a maximum gain of $1.88, or $9,443, at expiration if soybeans closed above $18.00 on February 22^nd.  The maximum loss is a bit more tricky because of the short put.  You would actually be unprotected to the downside and would lose penny for penny below $15.00 should beans drop that far.  Obviously if soybeans were headed below $15.00, something big would have changed in our market place and the correct thing would be to exit the trade at a loss.  The nice thing about this strategy is it offers more upside for the tradeoff of downside vulnerability.

It really comes down to how much a guy wants to spend and what sort of risk profile he is willing to carry.  For what it’ worth, an at-the-money January $16.60 call would cost $0.67 ($3,350), and an at-the-money March $16.00 call would cost something around $0.94 ($4,700).  Owning strictly calls would limit one’s risk to the premium paid.  There are also serial options which offer a guy to calls without so much time premium and should therefore be cheaper, but we would also need the market to respond faster before our option expires.  If anyone has interest in these or other strategies, let me know and I can put together some charts which show the profit and loss graphs.  Thanks.

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

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

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

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
800-328-6530
651-355-6538
651-355-3723 fax
www.countryhedging.com
Country Hedging, Inc.
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