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

Market Comments - 5-23-12 - What used to be open grain market calls!

It is about 8:45 and presently we have the grains weaker along with outside markets weaker.

Presently we have corn off about 4 cents, KC wheat off about 15 cents, MPLS down 13 cents, CBOT wheat off 19, and beans off 25 cents.  Outside markets have the cash dollar index about unchanged, EU wheat lower, equities a lower with the DOW off 80 points, and crude is down 60 cents.

One comment I had from a buyer today was is wheat really down 15 cents?  With the real lack of volume do the present prices mean much?  Yesterday it was like that as we seen big movements at 9:30 for the grains and seen volume really pick up and then really die off at 1:15.  So I guess it will be a learning lesson for many on all sides in the industry.

Technically things have turned a little ugly; we commented yesterday how the bean chart really looked ugly and how corn was just back towards the bottom end of it’s nearly 8 month range.  Wheat now weaker looks like we maybe put in a top on Sunday night; I guess it still goes back to how we close out in the next couple of days.  Was the correction the dollar rally wheat seen in it’s prices or is the 40-50 cents we are off of the highs from Sunday night the correction in the start of a bull market.

Forecasts are calling for some moisture in Russia and that has helped push the markets weaker.  But I also seen a comment this a.m. that Ukraine rain won’t help wheat, National Meteorology Center Says today. "As much as 30 % of the grain harvest in E and S Ukraine may be lost". 

We have seen Russian wheat production lowered by a couple different analysts the past few days.  So Hopefully the price action we are seeing in wheat is that just of a correction as the dollar rally in less then a week might have been a little much.

The other side of that is there are analysts out there that thing and feel wheat is just a feed grain and that it can’t hold it’s recent rally versus corn. 

When markets have so many factors and variables like our markets do; plus the fact that the funds are just huge players and make money flow be the biggest fundamental at times out weighing actual supply and or demand when it comes to marketing the only thing I can preach is to practice good risk management.  As I can give you possible outcomes where we are much higher; but I can also give one possible outcomes where the grains are much lower.  So finding a way to be comfortable whether the markets are falling out of bed or exploding higher really is key in having a grain risk management plan. 

Please don’t forget we do offer a Country Hedging Branch that can help you utilize futures and options when putting together your grain marketing plan.

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

Opening Grain Market Comments 5-15-12

Markets are called better behind a better overnight session; while outside markets are mixed and could lead to a little pressure with ideas that the grains open a little softer then where the overnight left off at.

In the overnight session corn was up 5, beans where up 18 on old crop, new crop beans where up 15, KC wheat was up 8-9 cents, CBOT wheat was firmer by 8, and MPLS wheat was 6 higher.  At 8:50 outsides are mixed; EU wheat is up about 1 %, equities are near unchanged with the DOW up 5 points, crude is off about a dime, gold is off 8.00 an ounce, and the US dollar looks like it is making another move up with the cash index at 80.903.

Yesterday we had a crop progress report; that basically showed the majority of the row crops planted with good emergence and a good wheat crop.  We really lack weather premium right now as headlines lately have been great big crops coming.

Basis remains firm for corn and beans; perhaps firming a little bit.  Yesterday we saw open interest in soybeans go up which indicates good commercial interest and end user pricing; not bad thing to happen.

One thing that has been on the headlines lately is the issues in EU.  If it leads to more macro liquidation then the grains could struggle; if not it feels like basis and demand are strong enough that the grains have a chance to bounce from these areas.

I have heard talk of higher protein getting harvested down south.  I seen a train of 13.76 pro yesterday and heard most of 12.5.  Overall higher protein isn’t exactly the best thing.  It acts as a replacement for spring wheat if it is high enough and then it doesn’t get feed and doesn’t help our export program out.  So I think a higher pro crop down south hurts demand a little bit and I think demand is really what wheat needs if we want to have a bull story at some point down the road.  I would also have to think that a higher pro crop means yields are off a little from what was expected……typically pro and yields go hand in hand in a reverse relationship.

One thing we need to watch going forward is the inverse in the grains.  Most have a big inverse between old crop and new crop so if you are storing grain your cost is very high.  It is a good demand sign when things are worth more today then they are tomorrow so to speak but it is also a huge risk when marketing grain as a general rule you don’t want to sit on product threw an inverse.  Every day that goes by we get closer to new crop and the risk becoming greater as along as the inverse is out there.  Bottom line the markets are close to saying if you want to own the grain own it on paper as it doesn’t make sense to sit through the inverse.

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