Overnight Highlights from CHS Hedging's Tregg Cronin 3-22-2013

Outside Markets: Dollar Index down 0.146 at 82.593; NYMEX-WTI up $0.45 at $92.91; Brent Crude up $0.10 at $107.57; Heating Oil down $0.0034 at $2.8929; Livestock markets are mixed/weaker; Gold down $6.20 at $1607.60; Copper up $0.0280 at $3.4630; S&P’s are up 3.25 at 1542.25, Dow futures are up 33.00 at 14,381.00 and Treasuries are firmer.  

Despite the latest spate of headlines from Europe, global financial markets actually exhibiting a fair amount of calm and order.  While the NIKKEI fell 2.35% overnight, Europe is flat this morning and the FTSE MIB is actually up 0.35%.  Bond yields across Europe are easier this morning, and the Euro is rallying against all of its major trading partners.  The EURUSD +0.462%, EURJPY +0.266% and EURGBP +0.299%.  The latest headlines in the Cyprus Crisis is European officials rejecting an alternative plan from the Cyprus gov to save its banking sector and remain in the Eurozone.  Cyprus needs to raise €5.8 billion to avert crisis and secure bailout financing by Monday.  Expect a weekend chocked full of headlines heading into the Monday deadline.  No economic data today.

The last 24 hours saw precip in AR/S-MO, and some snow fell in NE/SD with more still falling this morning.  More precip will move into towards the weekend for the southern plains with all of KS expected to see 0.50-0.60” Sat/Sun.  This will push into MO as well where amounts will be slightly heavier.  OK sees moisture as well.  This system moves into IL/IN/KY/OH by Monday with S-IL seeing as much as 0.94”.  Following Sunday’s system, the Midwest will be quiet Monday through Friday.  NOAA’s maps continue to point cold and dry in the 6-10 with a slight moderation in the temps for the 8-14, but still fairly dry in that period.  Most of the WCB remains in some stage of drought and could use additional moisture as opposed to getting in the field early.

Slightly easier markets overnight as we consolidate recent gains in both grains and the sharp rally in oilseeds yesterday afternoon.  Unfortunately, there is no chatter on the wires this morning as to the reason behind the soybean rally yesterday.  Most traders will be watching the USDA website at 8:00am this morning to see if there were any sales reported to Washington.  The rally was back end led, but CIF traders noted as much as 770,000 bushels of new crop beans changing hands yesterday.  Between the logistical backups in Brazil, and the inability to source Argentine supplies until at least April (let alone their labor issues), it is possible we did some more old crop soybean business.  Corn and wheat seem to be running into soft cash markets following a solid week of movement by farmers.

Bloomberg released several polls ahead of next week’s USDA reports.  Rather than rehash them here, I’ve included them below.  Only blatant observations would be slightly lower corn acreage estimates, slightly higher soybean acreage and the trade clearly anticipating a bullish Mar 1 Stocks number.  With an average trade estimate below 5.00bbu, the trade is basically assuming Q2 corn feed demand didn’t slow to the level the USDA is currently implying.  Just looking at estimates, would appear 5.0-5.1bbu is the range: above 5.1bbu is bearish and below 5.0bbu is bullish.  News out of China overnight said March soybean imports may be 4.29MMT and 4.285MMT according to the Ministry of Commerce.  China needs around 4.8MMT a month for its crushing needs.  The slower pace of imports is thought to be due to logistical complications out SAM as opposed to slowing demand, but it’s too early to tell.  The USDA is currently estimating 12/13 soybean imports for China at 63MMT, although the average analyst estimate according to Bloomberg has slipped to 59MMT.

Japan bought 37,188MT of food wheat in an S-B-S tender overnight from Canada and Australia.  Articles from Russia said the price limit for purchasing milling wheat headed for state reserves in Aug-Sept is RU7,000/MT, or $210/MT ($5.71/bu).  They are clearly banking on a very large crop and declining global prices.  The Russian winter grain losses are being forecast at 1.3-1.6 million hectares vs. earlier estimates for 1.9 million according to the Ag Minister.  Cattle on feed report this afternoon at 2:00.  Estimates look like placements at 92.8%, marketings at 92.3% and Mar 1 on feed at 93.8%.

Overnight maps continue to look very dry for South America, although haven’t heard whether this is an issue or not.  Something to keep track of nonetheless.  Corn basis remains weak.  Wheat basis is steadying.  Everyone seems to be of the opinion wheat basis should get sloppy due to the amount of wheat left on farm.  While I agree with that in principle, it does concern me that logistics remain poor on rail, and that everyone seems to be of the same opinion on basis.  MWK/MWN is reluctant to trade a carry.

Open interest changes yesterday included another 12,640 contracts of corn, wheat down 690, beans up 1,560, meal down 1,310, soy oil down 4,480 contracts.  Corn open interest just keeps on climbing which is a short-term positive if the people doing the buying decide to defend their position.  Chinese markets were firmer with beans up 14c, meal down $0.40, soy oil down 35c, corn up 1.25c, palm down 15c and wheat up 0.25c.  Malaysian Palm Oil was up 47 ringgit at 2,493 (1.51%).  Paris Milling Wheat is up 0.10%, Rapeseed is up 0.16%, corn down 0.22%, UK feed wheat is unchanged and Canola is unchanged.

Call things a little bit weaker to start off with but keep an eye on the wires at 8:00am this morning or Monday morning.  Odds are good we did some export business to China per the rally yesterday.  Otherwise, the low volume chop ahead of the March 28^th reports could be setting in.

   

U.S. Soy Acres May Rise to Record, Survey Shows; Grain Area Up

2013-03-21 21:49:33.99 GMT

By Jeff Wilson

     March 21 (Bloomberg) -- U.S. farmers will plant the most

soybean acres ever, and corn seeding may rise to the highest

since 1936, according to a survey of 32 analysts by Bloomberg

News. Wheat acreage may rise to the highest in four years.

     The U.S. Department of Agriculture is scheduled to release

its estimates, based on a national survey of growers, on March

28 at noon in Washington.

     Below are the estimates of how much land farmers intend to

plant, in millions of acres.

*T

                  Crop Production           USDA Estimates

                                         February

               Average      Range         2013       2012

Corn             97.339    96.5-98.5      96.5     97.155

Soybeans         78.351    77.0-80.0      77.5     77.198

All Wheat        56.32     55.6-57.3      56.0     55.736

Spring Wheat     12.39    11.91-12.8       n/a     12.289

Durum Wheat       2.13      2.0-2.3        n/a      2.123

Firm Estimates                           All   Spring  Durum

                       Corn   Soybeans  Wheat  Wheat   Wheat

============================================================

ABN Amro Clearing        98.000  78.000  56.20  12.40  2.00

A/C Trading Inc.         97.500  78.500   n/a    n/a    n/a

ADM Investor Services    97.000  79.500  56.00  12.40  2.00

Advanced Market Concepts 98.500  77.400  56.50  12.80  2.20

AgriVisor LLC            97.000  78.500  57.00  12.80  2.20

Allendale Inc.           96.956  78.342  56.26  12.06  2.18

Alpari                   98.000  78.200    n/a    n/a   n/a

Citigroup Global Markets 96.800  77.600  56.10  12.32  2.19

Commodity Information    97.000  78.200  56.00    n/a   n/a

EFG Group                97.500  78.500  56.50    n/a   n/a

Farm Direction           97.500  78.200  56.20    n/a   n/a

Farm Futures             97.430  79.090  56.12  11.91  2.06

Fintec Group Inc.        98.000  77.000  56.00    n/a   n/a

Grain Service Corp.      98.200  78.000  56.50    n/a   n/a

Global Cmd Analytics     96.900  78.100  57.10    n/a   n/a

Hightower Report         97.500  78.500  56.50  12.50  2.10

Jefferies Bache          96.760  78.500  56.85  12.42  2.24

Kropf & Love             97.500  78.500  56.50  12.70  2.00

Linn Group               96.500  77.500  56.00    n/a   n/a

McKeany Flavell          97.800  77.900  55.60    n/a   n/a

Mcquarie Bank            96.600  79.700  57.30    n/a   n/a

Newedge USA LLC          97.500  78.800  56.80  12.80  2.30

Northstar Commodity      98.200  78.100  55.80  12.35  2.15

PIRA Energy Group        97.000  78.000  56.10    n/a   n/a

Prime Ag Consultants     98.000  80.000    n/a    n/a   n/a

Rice Dairy LLC           97.600  78.500  56.06  12.20  2.05

R.J. O’Brien             97.000  78.500  56.30  12.20  2.10

Risk Management          96.800  78.000    n/a    n/a   n/a

Stewart-Peterson         96.500  78.500  56.20  12.40  2.10

U.S. Commodities Inc.    97.500  77.500    n/a    n/a   n/a

Vantage RM               97.000  78.500  56.00    n/a   n/a

Water Street Solutions   96.800  79.100  56.14  12.05  2.18

U.S. Corn, Soybean Inventories Fell on March 1, Survey Shows

2013-03-21 21:17:43.537 GMT

By Jeff Wilson

     March 21 (Bloomberg) -- U.S. corn inventories on March 1

probably fell to the lowest in 15 years for the date, while

soybean stockpiles dropped to the lowest since 2004, according

to a survey of as many as 31 analysts by Bloomberg News. Wheat

inventories probably fell to a four-year low.

     The U.S. Department of Agriculture is scheduled to update

its reserve estimates with a quarterly report at noon on March

28 in Washington. Figures below are in billions of bushels.

*T

             U.S. March 1 Inventory Forecasts

          Average      Range             Previous USDA

                                  March 1, 2012  Dec. 1, 2012

Corn       4.995    4.743-5.248        6.023        8.030

Soybeans   0.948    0.900-1.059        1.374        1.966

Wheat      1.165    1.010-1.249        1.199        1.660

*T

*T

Analyst Estimates          Corn    Soybeans   Wheat

===========================================================

ABN Amro                   5.080    0.925    1.055

A/C Trading Inc.           4.950    0.940     n/a

ADM Investor Services      5.037    0.940    1.193

Advanced Market Concepts   4.783    1.015    1.125

AgriVisor LLC              4.990    0.955    1.180

Allendale Inc.             5.071    0.912    1.107

Citigroup Global Markets   4.960    0.984    1.211

Commodity Information      4.975    0.948    1.185

CHS Hedging Inc.           4.997    0.934    1.191

Doane Advisory             5.005    0.945    1.185

EFG Group                  5.000    0.960    1.190

Farm Direction             5.050    1.000    1.170

Farm Futures               5.248    0.972    1.125

Fintec Group Inc.          4.743    0.910    1.210

Grain Service Corp.        5.056    0.928    1.166

Hightower Report           5.025    0.955    1.200

Jefferies Bache            4.941    0.936    1.238

Kropf & Love               4.985    0.930    1.197

Linn Group                 5.020    0.912     n/a

Macquarie Bank             5.103    0.913    1.207

McKeany Flavell            5.020    0.900    1.010

Newedge USA LLC            4.948    0.921    1.205

Northstar Commodity        4.885    0.911    1.170

Prime Ag Consulting        5.100    0.940    1.200

Rice Dairy LLC             4.969    0.925    1.249

R.J. O’Brien               5.030    0.928    1.179

Risk Management            5.223    1.059    1.010

Stewart-Peterson           5.020    0.950    1.160

U.S. Commodities Inc.      4.952    0.970     n/a

Vantage RM                 4.750    1.050    1.150

Water Street Solution      4.916    0.926    1.162

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 3-14-2013

Outside Markets: Dollar Index up 0.243 at 83.132; NYMEX-WTI down $0.29 at $92.23; Brent Crude up $0.02 at $108.26; Heating Oil down $0.0130 at $2.9110; Cattle markets are better, hogs weaker; Softs are weaker; Gold down $9.70 at $1578.60; Copper up $0.0105 at $3.5355; Silver down $0.323 at $28.630; S&P futures are up 4.00 at 1554.00, Dow futures are up 20.00 at 14,418.00 and Treasuries are weaker.  

After the Dow Jones Industrial Average hit new all-time record highs earlier this month, and the S&P 500 has moved within 11 points of its all-time highs, European shares are now nearing 5-yr highs as all seems to be well around the globe.  Overnight, the NIKKEI rallied 1.16%, and European shares are being paced by the FTSE MIB, up 1.0%.  A fair amount of economic data today including weekly jobless claims which are seen at 350,000.  The Producer Price Index is seen up 0.7%, but ex food & energy is up 0.1%.  In forex, the Norwegian Krone and Swedish Krona are getting pounded with the former down well over 1.0% against almost all major trading partners as Norway’s Central Bank signals they may cut rates.  The EURNOK is up 0.927% and the USDNOK is up 1.200%.

Snow moving across the northern plains overnight with light snowfall accumulating in the Twin Cities this morning.  Several locations have received 1-2” in MN.  System is moving into IA/WI/IL later today, but chances of snow remain high for the northern plains the next 7-days.  5-day moisture totals are calling fir 0.50-1.00” amounts across ND/MN/WI/MI while a separate system should bring 0.25-0.40” across KS and MO/IL/IN/KY/OH should see 0.50-1.7” in total with the majority falling tonight and tomorrow for the North and Sunday for the mid-South.  Patterns remain the same in the 6-10 & 8-14 with above normal precip and below normal temps seen for most of the Midwest.  Favorable pattern remains in place, although early planting might not be an option this year.

***At 83.126, the Dollar Index traded to the highest level since August 3^rd.  This matters.***

Continuation of lower prices overnight in the soy complex while grains continue to try and press higher led by wheat.  There is certainly some inter-market spreading taking place with a lot of the long soy/short grain spreads being unwound following the disappointing WASDE for soy bulls.  In addition, the technical crowd is beginning to jump on the deteriorating soybean chart picture, calling for lower prices.  Export sales will be the feature today, but it could be the last big week of bean and meal sales before starting the seasonal decline.  The wheat export total will be watched closely, although the details of where the wheat is going could be just as important.  Corn basis is on the defensive in Hereford, TX and at the Gulf and is undermining spread potential at least for now.

Overnight, Vietnam bought 15,000MT of Indian corn at $290/MT C&F.  More importantly, India reportedly sold 13,700MT of corn to China for April delivery at a price of $275/MT FOB and $320/MT C&F.  This was said to be a test run cargo, but it’s clear China is looking to diversify its corn needs outside of just the US.  Japan bought their 130,533MT of milling wheat from the US, Canada and Australia with around 64,000MT coming from the US.  Malaysia announced they are deferring the purchase of wheat import deals totaling 350,000MT to July-Sept on the anticipation of a rapid decline in prices.  Malaysia mainly buys from Australia.  Strategie Grains cut their EU-27 soft wheat estimate by 0.7MMT to 130.5MMT, but raised corn production by 0.4MMT to 64.1MMT.  Goldman Sachs was ranked No. 1 in commodities revenue in 2012 according to Coalition.  JP Morgan was ranked second and Morgan Stanley third.  The U.K. pig herd shrank to the smallest since 2000 as costs rise for feed, but the number of cattle and sheep increased.

Research group IKAR said Russia may purchase as much as 6MMT of grains for government stockpiles following their new crop harvest.  Russia has been aggressively selling grain from government reserves to cool domestic prices following their severe drought in 2012.  This could end up hampering exports depending on crop size in 2013.  Crude Palm Oil in Malaysia fell another 1.38% overnight, its fourth straight lower close.  This due in part to rising Indian cooking oil stocks, and the record amount of product waiting to be loaded at Brazilian ports, most of which is headed for Asia.  This is obviously weighing on Soybean Oil, and that chart has a Head and Shoulders Continuation Pattern forming, a particularly bad formation.

The wheat/corn spread and demand topic has received a lot of discussion in recent days.  Overnight, corn bids fell again in TX with shuttle values for spot trains indicated at +98K while April is +100K.  These are down 2-6c from yesterday, and down 5-8c from week ago values.  Feeders are actively taking wheat, and canceling or pitching out corn length where they can.  Along with CIF corn bids down 2-4c, this is having a pressuring effect on the CK/CN and a supportive feature to WK/WN.  Funds short a lot of WK, and could be forced to cover should this keep inverting further.

Open interest changes yesterday included wheat down 4,320 contracts, corn up 5,200, beans down 4,050, meal down 2,150 and soyoil up 4,100 contracts.  Let the short-covering rally begin in Wheat.  Chinese markets were soft with beans down 4c, meal down $7.80, soyoil down 29c, corn down 1.25c, palm down 77c and wheat up 1.25c.  Paris Milling Wheat is up 0.43%, Rapeseed down 0.27%, UK Feed wheat up 0.64%, corn up 0.56% and Canola is down 0.37%.  Deliveries overnight included 7 Chicago Wheat, 1 meal and 23 bean oil.  Worth noting, someone (thought to be LDC) canceled 545 March Chicago Wheat receipts in Toledo last night.  The total bushels would be 2.72mbu which is roughly 3 laker sized vessels.  This is probably headed for Europe, and remains supporting WK/WN.

Call things mixed to weaker to start, although we aren’t likely to keep wheat down for long if recent days are any guide.  Corn has somewhat of a bearspread bias at current which doesn’t bode well for continued futures’ gains.  Soybeans are developing a weak technical picture at the same time beans are leaving Brazil as they pass the 50% mark.  Domestic demand remains strong, but with reduced exports the $15.00 mark will be difficult to push through.

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 Hedgings Tregg Cronin 2-22-2013

Outside Markets: Dollar Index down 0.080 at 81.381; NYMEX-WTI up $0.33 at $93.17; Brent Crude up $0.96 at $114.49; Heating Oil up $0.0182 at $3.1139; Livestock markets are lightly mixed; Softs are all firmer; Gold up $0.60 at $1579.20; Copper up $0.0015 at $3.5545; Silver up $0.051 at $28.75; S&P’s are up 7.75 at 1508.75, Dow futures are up 66.00 at 13,938.00 and Treasuries are mixed.

Not much for economic and financial news overnight with most equity indices higher.  European indices are mostly over 1.0%, and Asia had a mixed close.  The European Commission released their updated growth forecast for the Eurozone in 2013, seeing a -0.3% contraction, weaker than expected.  Little for economic data in the US today, with few notable companies reporting earnings.  Italians go to the elections polls Sunday and Monday.  Gird your loins for the sequestration fight next week ahead of the March 1 deadline.  Only notable currency moves are a sharp rally in the Aussie Dollar and Kiwi, after the RBA’s governor said he’s not interested in intervening in currency markets at this time.

More snow in the Midwest overnight with the water equivalent moisture table for the last three days below.  Additional snowfall is falling in IA/SD/MN/WI/MI this morning with 2-5” expected in those states today.  Hutchinson, KS received 14” of snow.  While not wishing to incite a fight over drought, will simply say this is a definitely a step in the right direction.  Forecasted precip maps show additional moisture hitting the central and eastern corn belt by next Monday and continuing through Wednesday.  Totals look like 0.40-1.12” of water equivalent.  Extended maps turn notably drier in the 6-10 for almost all of the Midwest and southern plains.  Temps will generally be normal/below with the cold focused in the southeast.  8-14 is similar.  Some light rains in Argentina overnight but should be dry until tomorrow night.  Forecast calls for 0.50-1.00” on nearly 100% of their growing areas.  More rain later next week.  Brazil still in good shape, although probably a little wetter than preferred in the north.

Sharply better overnight led by the soy complex as front month March was finally able to push through $15.00, something it hasn’t been able to do since October in any meaningful fashion.  News of additional soybean business, and continued bottlenecks in South America are behind the buying, and it is likely we see additional sales to China either today or early next week.  As much as 7MMT of beans are waiting to be loaded in Brazil, and the port strike today and Tuesday won’t aid logistics.  The strike is said to include containers only, not bulk grain, but will likely affect all loadings.  There is also a stranded ship at an Argentine port.  The pickup in sales won’t show up on this morning’s weekly export sales report, so don’t be surprised at a low number today.  Fortunately, prices in China are confirming the SAM problems with beans and meal rallying sharply there overnight as demand pull becomes more serious.  Chinese analyst JC Intelligence Co said China may have bought 400-500,000MT of soybeans from the US this week alone.

In addition to the soybean business, Bloomberg reported this morning China’s feed mills bought at least 120,000MT of corn from the US for Sept/Oct delivery at $290-300/MT.  This would be the first purchases of corn by China from the US in quite some time.  Their market is in a huge carry while ours is in a large inverse.  Aside from the grain buying, comments from the Ag Minister of China were also supportive.  “China has a structural shortage” of its grain supply because demand continues to rise.  “Chines faces a very difficult task balancing its grain demand and supply.”  Japan was in for some wheat last night, buying 37,773MT of food wheat, 24,026MT of food barley and 5,000MT of malting barley.  The food wheat came from Australia and Canada.  The USDA is on the tape this morning with their full Outlook Conference balance sheets, but I’ll just send out an update later.  Markets aren’t paying attention to them anyway, and justifiably so.  Canada has left its 13/14 wheat production estimate unchanged at 28.5MMT, up 4.8% from a year ago.

Open interest changes during yesterday’s session included wheat down 6,960 contracts, corn down 4,030, beans down 5,850, meal up 100 and soyoil down 1,290.  March option expiration today, and it looks like we’ll put some squeeze on the $15.00 calls and puts.  I still won’t rule out a tangle with the $7.00 strike in corn at some point.  Chinese markets were sharply better last night with soybeans up 30.50c, meal up $12.70, soyoil up 34c, corn up 4c, palm up 20c and wheat up 0.75c.  Malaysian Palm Oil was down 2 ringgit at 2,534.  Paris Milling Wheat is up 0.10%, Rapeseed up 0.53%, Corn up 0.56%, Canola up 0.44% and UK Feed wheat up 0.15%.

Soybean basis firmed off the PNW and in the Gulf last night, but remains very thin.  Posted numbers on shuttles for spot trains are +165H or better, while CIF bids are back above +80H for beans.  Corn basis also continues to firm at both export terminals as well as domestic locations such as ethanol and feedlots.  Any wheat basis strength is about poor logistics and the CP being 2 weeks late on want dates.  Cars simply aren’t moving.

Call things firmer today as beans continue to do export business we really can’t afford to do.  Corn and wheat should trade higher in sympathy, but need to see the kind of export demand beans are seeing to really get excited.  Corn needs a rally to fill the domestic pipeline, but traders are focused on weather right now.  Until futures pop, farmers aren’t going to be willing sellers of corn.  Wheat might not have a choice.  Export sales at 7:30.

Trade as of  7:10

Corn lightly mixed

Beans up 15-17

Wheat up 1-2

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 Heding's Tregg Cronin 2-13-2013

Outside Markets: Dollar Index down 0.243 at 79.867; NYMEX-WTI up $0.34 at $97.85; Brent Crude up $0.11 at $118.77; Heating Oil up $0.0008 at $3.2370; Livestock markets are all weaker; Softs are mixed; Gold down $2.70 at $1646.70; Copper up $0.0120 at $3.7560; Silver up $0.006 at $31.025; S&P’s are up 3.00 at 1519.25, Dow futures are up 17.00 at 13,990.00 and Treasuries are weaker.  Euro is up 0.34%, BP -0.54%, AUD +0.29%.

The obvious financial news of note is the President’s State of the Union speech last night, although equities don’t seem to be giving it a second glance this morning.  More importantly seems to be comments from outgoing Bank of England President Mervyn King who responded to the recent “currency wars” talk by saying countries need to allow currency rates to move, and he said they will support their recovery even if it means incurring more inflation.  This was taken to mean a weak British Pound and it is losing dearly to its major counterparts this morning by 1.0-1.8%.  The British Pound/Swedish Krona is at the lowest level since 1992 and the British Pound/New Zeeland Dollar is at the lowest level on record.  At 1.5562, the GBPUSD is at the lowest level since August 3^rd.  Otherwise the NIKKEI fell 1.04% last night, the Argentine 5-yr CDS is up 216bp to 2,472.99bp and John Deere beat earnings estimates by returning $1.65/share vs. estimates for $1.40 in Q4.  MBA Mortgage Applications fell 6.4% w/w, and business inventories are due at 9:00am (+0.2%).

After the southern plains system finished up yesterday, there hasn’t been much for precip in the last 12 hours.  There is a rain/snow mix moving across KY/S-IL/S-IN this morning which should continue to support MS-River levels.  STL River gauge looks like it will be in good shape through February.  Dry in the Midwest the next 5-days, but 7-days out sees another major system moving in over the MS-River Valley and on up the OH-River valley.  Totals 100-miles either side of the river should be in the 0.50-1.30” range.  NOAA’s extended maps confirm with above normal precip for the ECB.  Temps should remain below normal during the 6-15.  Some light rains fell in Cordoba, Argentina yesterday in the 0.10-0.60”  range.  Otherwise quiet with all eyes on the system Sat/Sun which is supposed to bring 0.50-1.50” to 85% of growing areas.  S-Brazil is expected to see 0.40-1.00”.  “The rains may not totally end dryness concerns, but if realized, should go a long way towards easing current conditions.” –John Dee.

Lower for most of the night with corn working on its ninth straight lower close which would be the longest such streak without a higher close since September of 2008.  One day in that stretch of 2008 was unchanged.  The meltdown in the Ag space has caught many off guard and searching for answers.  The catalyst seems clear: the pipeline was empty so futures “went to where the offers were.”  Farmers turned palmed out sellers with corn at $7.40-7.50 (futes) and beans at $14.75-14.98.  At the same time, weather began to moderate in South America with better chances of rain the driest areas of their growing regions.  In addition, speculative length bought heavily during a month which is seasonally weak and laden with bearish inputs (USDA baseline numbers, Outlook Conference).  Add on top of the aforementioned the constant barrage about closing ethanol plants, weak exports and better precip in the southern plains and we had ample reason to take price down.  At some point, demand should be uncovered given the lack of farm gate movement.

Japan was in last night tendering for 320,000MT of feed wheat and barley, but canceled the tender due to a lack of “buyers and sellers.”  This is the third consecutive tender to be canceled with the tender rescheduled for February 20^th.  After buying 50,000MT at $380/MT the night before last, Jordan is back in tendering for 100,000MT due to prices dropping further.  The 50,000MT was probably Canadian.  Russian analyst IKAR said the recent swoon in domestic wheat prices is temporary, and prices should start rising again in March of April on low inventories.  Currently at $388/MT.  The United Kingdom said they may be a net importer of wheat in 2013/14 for the second year in a row after wet weather prevented fall seeding.  India’s state owned PEC is looking to sell another 245,000MT of wheat from government stockpiles this week.  Palm Oil reserves at the end of January fell 1.9% to 2.58MMT in Malaysia which was above the median estimate of 2.53MMT, causing prices to retreat sharply on their first day of trading since Friday.

Open interest changes yesterday weren’t heartwarming: corn up 11,340 contracts, wheat up 9,440, soybeans down 2,760, meal up 240 and soy oil up 5,340 contracts.  Fresh speculative shorts are being added in corn and wheat which is not positive.  Chinese markets remain closed, but Malaysian Palm Oil fell 55 ringgit to 2,505 (2.15%) on bearish stocks data.  Paris Milling Wheat is down 1.45%, Rapeseed down 0.60%, UK Feed wheat down 0.78%, Corn down 1.78% and Canola is down 0.29%.  Worth mentioning, on the selloff, wheat basis does continue to appreciate.  At the Gulf, HRW is valued at +125/135H which is the highest since 2008.  SRW is seen at +80/85H.  Still, this seems like a lack of supply being offered as opposed to robust demand.  Calendar spreads are holding together overnight.  The Northern Plains farmer also needs to consider the possibility the southern plains might not have a drought this year.  Without that, there is a lot of wheat left in bins north of I-80 which is at risk.

Call things weaker again this morning as speculative selling is far outweighing any desire by end users to step in and price.  Cash is perking up in a lot of areas, and spreads could be called steady/better in corn and SRW, but not so for beans and HRS.  Ethanol production this morning should be a bit better with several plants rumored to be coming back on-line thanks to improving margins.  In fact, most domestic end users of corn have seen margins improve w/w.  

Trade as of 6:50

Corn down 5-9

Soy down 9-11

Wheat down 5-9   

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 2-12-2013

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

www.chshedging.com

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

Overnight Highlights from CHS Hedging's Tregg Cronin 2-11-2013

Outside Markets: Dollar Index up 0.055 at 80.252; NYMEX-WTI down $0.12 at $95.61; Brent Crude down $.87 at $118.03; Heating Oil down $0.0094 at $3.2290; Softs are lightly mixed; Gold down $8.80 at $1658.10; Copper down $0.0075 at $3.7520; Silver down $0.231 at $31.210; The Euro is up 0.30%; S&P’s are up 3.75 at 1516.00, Dow futures are up 33.00 at 13,959.00 and Treasuries are slightly weaker.

The biggest breaking headline this morning has to go to Pope Benedict and his decision to “leave the pontificate” at the end of February.  News agencies quoting a statement from the Vatican said Pope Benedict made the decision due to his lack of strength and inability to carry out his papal duties.  The conclave is expected to convene in March.  Otherwise, all is mostly quiet in the financial markets with almost all of Asia closed for “Golden Week,” or the Chinese New Year.  Australian shares were down 0.24%, Spain off 0.50% and Italy down 0.39%.  The Japanese Yen is trading, however, and is getting crushed against the Euro (-1.13%), the USD (-0.870%) and the Swedish Krona (-1.484%).  Little to nothing on the economic docket today.  Gasoline futures are down 1.04%.

Substantial precip over the weekend for the first time in many weeks.  The WCB saw snow fall in most states with E-SD receiving upwards of 1.0-1.5” of moisture.  IL/MN/MO also saw heavy rain/snow as did the Gulf Coast where severe weather moved in yesterday.  Unfortunately, the central and southern plains didn’t see much of any in the core HRW areas.  See map below.  The 5-day forecasted precip map is putting better moisture across all of OK, but that’s really about the extent of it.  The central and WCB will be dry this week.  NOAA’s 6-10 day looks cold and dry for most Midwest growing areas, but the 8-14 see above normal precip for nearly the entire Midwest.  Private maps concur.  Things were quiet across Argentine growing regions for Friday/Saturday with rains under 0.50” developing Sunday on 65-75% coverage.  S-Brazil saw 0.25-0.75” on 85% coverage.  Forecast sees more Argy rains possible late tonight into tomorrow with totals of 0.20-0.60”.  The 1-5 and 6-10 day maps this morning look fairly wet.

Weak start last night and continuing to find willing sellers this morning in the row crops while wheat has been very reluctant to stay in negative territory.  The technical damage from Friday and the wet maps overnight seem to be providing the selling pressure, although cash markets, spreads and demand numbers suggest taking risk premium completely out of the soy complex might be a bit hasty.  NOPA crush will be released later this week, and January soybean exports are expected to be an all-time record.  Moving forward, however, the soybean market may rely more on basis and spreads to move beans than futures.  Corn seems lost, and wheat appears to have the most fundamental support in many weeks when looking at weather maps, spreads, Gulf basis (SRW) and headlines.

ANZ Bank is advocating firmer corn prices on slower Brazilian exports, and to buy Kansas City wheat options on expectations wheat will rally in coming sessions.  ANZ went so far as to say investors should go long corn as technical indicators could rise to at least $8.58-8.60/bu by mid-2013.  Bangladesh bought 50,000MT of optional origin wheat from a reseller in South Korea for $332/MT C&F.  Russia said they will decide on measures to cancel the country’s 5% import duty on grains before April.  Insiders have suggested talk by Russia to remove their import duty has just been posturing to get Kazakhstan to lower their wheat offers as opposed to seriously entertaining the idea of US or European imports.  Goldman lowered their 3-mo corn forecast to $7.50/bu from $8.25, soybeans to $14 from $15.25 and wheat to $7.80.  The Associated Press released a partial list of the ethanol plants closed this year which I’ve included below.  Just glancing at it, there appears to be plants who have been left off the list unless some have been re-started and not reported on.

Open interest changes Friday included a big drop on corn of 16,670 contracts.  Wheat was down 120, beans were up 3,180, meal down 5,690 and soy oil was down 1,600.  Corn volume Friday  totaled 495,808 contracts which was the highest level since July 10^th.  Soybean volume of 319,712 contracts was the highest since October 11^th.  Large volume and a lower close isn’t particularly positive.  Chinese and Malaysian markets were closed.  Paris wheat is up 0.41%, Rapeseed down 0.48%, Corn down 0.11%, UK feed wheat down 0.26% and Canola is down 0.63%.  IL-River basis has been incredibly firm and is probably supporting the CH/CK and SH/SK despite the Goldman Roll.  Friday, Zone 3 delivery economics put corn 9.4-14.9c above gross DVE.  Soybeans were 13.9-24.1c above.  This means the CH/CK looks cheap at +0.75c.  Any carry now might be a gift on corn unless delivery economics change.  Hard wheat spreads aren’t hinting at any undue rally, but the WH/WK refuses to budge, likely due to the export interest out of the Gulf by Turk/China/Braz/Egypt.

Look for a lower start to begin with as speculators dump the fair amount of longs they’ve acquires the past several weeks.  Through the week ended Tuesday, most had continued their buying spree.  Now that we’ve knocked markets down a bit, spreads and basis are implying the risk-reward “down here” might not be quite as favorable.  Continue to monitor Brazilian logistics, SAM weather, C-Plains weather, cash markets and spreads for clues on direction.  Farm gate movement should shut off notably at these price levels.

Trade at 7:00

Corn down 1-3

Soy down 11-15

Wheat steady/mixed

02/10 11:43 CST Ethanol plants idled since drought began
   
Ethanol plants idled since drought began
   
By The Associated Press
Many U.S. ethanol plants have halted production over the past year, mostly
because the drought has made it difficult to get locally produced corn. Most
plan to restart, but it may not be until the 2013 corn crop is harvested in
September.
Below is a list of idled plants and the month they ceased operation:
NEBRASKA
Midwest Renewable Energy LLC in Sutherland, February 2012.
NEDAK Ethanol, in Atkinson, June.
Valero-Albion in Albion, June.
Aventine in Aurora-East, September.
Abengoa in York, January.
Abengoa in Ravenna, January.
INDIANA
Valero in North Linden, June.
New Energy Corp. in South Bend, November.
MINNESOTA
Central Minnesota Ethanol Co-op in Little Falls, August.
Biofuel Energy in Fairmont, September.
NORTH DAKOTA
ADM in Wallhalla, March.
ARIZONA
Pinal Energy in Maricopa, July.
KANSAS
East Kansas Agri-Energy in Garnett, August.
ILLINOIS
Aventine-dry mill in Pekin, September.
GEORGIA
Southwest Georgia Ethanol in Camilla, October.
MISSISSIPPI
Bunge-Ergon in Vicksburg, November.
OHIO
Valero in Bloomingburg, December.
MISSOURI
POET in Macon, January.
TEXAS
White Energy in Plainview, January.
CALIFORNIA
Aemetis in Keyes, January.
[Related Stories]

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 2-5-2013

Outside Markets: Dollar Index up 0.040 at 79.594; NYMEX-WTI up $0.67 at $96.85; Brent Crude up $0.98 at $116.58; Heating Oil up $0.0320 at $3.1860; Livestock markets are mixed with cattle better, hogs weaker; Softs are trading better save for cotton; Gold down $.30 at $1676.00; Copper is up $0.0030 at $3.7715; S&P’s are up 7.00 at 1500.50, Dow futures are up 65.00 at 13,910.00 and Treasuries are weaker.

Equity markets are recovering a bit this morning led by Europe which has the IBEX-35 up 1.67%, FTSE MIB +1.15% and the CAC 40 +1.08%.  Asia took theirs on the chin overnight after the drubbing we saw yesterday afternoon as the NIKKEI fell 1.90%.  Surprisingly, China’s Shanghai Composite closed up 0.20%.  Part of the risk-on mentality this morning is due to the Yen reverting back to its losing ways.  The USDJPY is up 0.877% this morning, while the EURUSD is +1.260%.  The Yen carry trade (borrowing in Japan where interest rates are low, and investing the monies in a high interest rate country like Brazil) seems to be back on.  Computer maker Dell is set to have its board meet on the subject of a leveraged buyout worth a reported $24 billion.  Several Ag/food companies releasing earnings today including Kellogg at 7:00am.  Archer Daniels Midland released this morning showing earnings of 77c/share, up from 12c/share a year ago.  The gain was due in large part to better margins in their soy crushing unit.  ISM Non-Manufacturing Survey at 9:00 (55.0 est).

More snow in the upper-Midwest and Great Lakes Region overnight with more falling this morning.  5-day forecasted precip map shows a sizable system moving into the southern plains and Gulf Coast late in the period with parts of TX/E-OK/E-KS seeing as much as 0.80-1.00”.  Some precip is expected in NE, but nothing over 0.40”.  NOAA’s extended maps still calling for above normal precip for almost everything East of the Rockies.  Epicenter of the moisture will be the Mid-South, but the WCB should see moisture.  Temps will be split down the middle of the country with above normal east of the plains and below normal west of the plains.  Dry weather in South America yesterday with temps in the 80’s and 90’s.  Forecast is dry through the weekend in Argentina.  The first half of next week sees some rains in N-Argentina and S-Brazil to the tune of 0.35-0.85” with 75-85% coverage.  6-10 day maps are backing that up this morning.  The trouble is the tendency for moisture in the extended maps not to roll forward and actually fall.  Stay tuned. 

http://www.cpc.ncep.noaa.gov/products/predictions/610day/index.php

Rather quiet trade overnight with two-sided markets in corn and wheat inside narrow ranges, while the soy complex attempts to retain its hard-fought-for risk premium.  South American weather hasn’t offered anything new this morning, so no real reason to crash the soy complex, and grain markets are slowly drifting.  Demand remains slow on corn and wheat, although cash markets are holding surprisingly well considering the movement witnessed last week.  The events in front of the market include the weekly data sets, Friday’s WASDE report, the February USDA Outlook Conference and the insurance pricing period.  Range bound trade may develop until we clear our plates of some of the aforementioned, but in general, funds still seem to have an affinity for risk as evidenced by rising O/I.

Tender business overnight included Japan seeking 126,184MT of milling wheat from the US, Canada and Australia for Mar-May delivery.  Only 35% of the wheat is expected to be sourced from the US with Canada being asked to provide 52,000MT of Western Red Spring.  A story from Dow Jones overnight suggested India’s actual wheat shipments have only been about 1/3 of the level actually auctioned off from government reserves.  No one else has reported this, so some additional confirmation will be needed, but India is 2-months away from harvesting another 91MMT+ of wheat.  Reports from that country conclude crops are in good shape and are receiving plenty of finishing rains.  A chart from Bloomberg included below suggests Chinese wheat imports will continue after flour prices rose to a record price in December.  Wheat prices in China are $2.82/bu above US export values, almost triple what they were 3-months ago.  There has been chatter about China snooping for Apr/May SRW cargoes out of the Gulf.  Chinese crush plants will begin closing this week in anticipation of the week-long Chinese New Year celebrations occurring next week.  Wheat/Corn spreads hit fresh contract lows yesterday, and reports from other offices say HRW is working back into feed lot rations.  Stress testing short wheat/long corn positions might be prudent in coming sessions.  A report from Russia said more than 9% of Russian winter crops in bad condition.  Discussions continue about the removal of the 5% import levy, but again this shouldn’t materially change wheat export/import grids.

Open interest changes yesterday included corn up 5,280 contracts, wheat up 3,780 contracts, soybeans up 3,300, meal up 4,560 and soy oil down 160.  Chinese markets were mostly weaker overnight including soybeans down 3.5c, meal up $0.10, soyoil down 35c, corn down 3.5c, palm down 36c and wheat down 4.75c.  Malaysian Palm Oil down 18 ringgit at 2,548 (-0.70%).  Paris Milling Wheat is down 0.30%, Rape up 0.05%,  Corn down 0.21%, UK feed wheat down 0.70% and Canola is up 0.43%.  Calendar spreads are unchanged to better overnight.  A couple quick notes: Dr. Cordonnier cut his Argentine soybean production estimate to 51MMT, down 1.0MMT and vs. the USDA at 54MMT.  He also cut Paraguay 0.25MMT to 8.75MMT.  Still looking at a 29MMT increase y/y for all of SAM.  To-arrive spring wheat basis firmed yesterday by 5-10c on exploders and shuttles yesterday as farmers await $8.50 cash.  ADM-Marshall is now paying +9K for AMJJ.

Look for a quiet, choppy day with two-sided trade likely in all of our Ag markets.  We have no weekly data sets today, outside markets are firm and market breaking news is slow.  Further consolidation is likely in the sessions directly ahead as we await refreshed data tables, more weekly demand numbers and the USDA’s first opinion of our 13/14 balance sheets.  Index fund rolls begin Thursday.

Trade as of 7:00

Corn down 3-4

Soy up 1-3

Wheat down 1-3

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 1-8-2013

Outside Markets: Dollar Index unchanged; NYMEX-WTI up $0.40 at $93.59; Brent Crude up $0.88 at $112.28; Heating Oil up $0.0340 at $3.0661; Feeders and Hogs are firmer, but fats weaker; Gold is up $7.70 at $1654.70; Copper up $0.0035 at $3.6810; Silver up $0.243 at $30.320; Softs are quiet; S&P’s are down 1.50 at 1454.00, Dow futures are down 8.00 at 13,299.00 and Treasuries are weaker.

Weaker equity markets in Asia, but firmer in Europe led by the FTSE MIB which is up 0.92%.  Economic data out of Europe overnight included executive and consumer sentiment rising to 87 from 85.7 in November.  The euro-zone’s unemployment rate did rise to 11.8% in November, however, from 11.7% in October.  It is the highest unemployment rate since the data set began in 1995.  Germany’s exports fell 3.4% in November from October.  Interesting piece from Bloomberg below on the weakness of the Dollar and how it’s been masked by an even weaker Yen.  One possible explanation for why the precipitous fall the past several weeks in the Dollar Index has supported grains any better.  Little for economic data in the US today.

Little to nothing in the way of precip in the Midwest the last 24 hours, although some snow is impacting SW-MT.  The next 48-hours will see heavy rainfall impact TX/OK/LA/AR/S-KS/S-MO/MS.  Areas of E-TX are set to receive as much as 8.0”.  Even parts of the HRW belt in N-TX and the panhandle areas are slated for meaningful precip.  See map below.  The 5-day map pushes this moisture up into the central/east corn belt.  Our Indianapolis office said they have rebuilt soil profiles.  NOAA’s 6-10 day maps confirm the push to cold and wet with below normal temps and above normal precip for much of the Midwest and WCB.  “The forecast continues to look favorable for the South American growing regions, with limited rains to favor the Argentine growing areas and average to above average rainfall to occur in the growing regions of Brazil.” – John Dee.  Only area anyone is talking about with concern is some dryness in NE-Brazil, but maps look good for coverage.  Dryness and heat in Argentina will need to be monitored.

Quiet, two-sided trade inside 5c ranges for the grains and a 9c range for beans which speaks to the lack of confidence going into Friday’s reports.  Average estimates have been published, so now it’s a matter of how far off they are from the USDA at 11:00 CDT.  Most are looking for a supportive corn report by way of higher feed/residual demand and possibly lower harvested acres offsetting a cut to exports.  No arguments here.  It will be difficult to find something bullish on wheat, unless wheat feeding occurred in much higher volumes than anyone thought.  Soybeans will be about how much the USDA raises the national yield and how large they choose to make South American crops.  Crush and exports leave little room for surprise.  Expect chop until then with yesterday’s lows to hold.

There was a bit of export business overnight with South Korea’s KFA buying 110,000MT of optional-origin corn from Noble for June delivery at a price of $310.60/MT C&F.  South Korea’s MFG bought 137,000MT of optional-origin corn from Cargill at $305.48/MT C&F for July arrival.  In total, it is though South Korea has purchased 315,000MT of corn since Friday, but most looks like SAM origin.  Worth noting, South Korea did choose to buy SAM feed wheat instead of Indian due to quality concerns.  The story said “foreign material such as bags, stones and steel is too high and cleaning costs too much.”  Deutsche Bank said they see short-term value in grains and oilseeds and recommend buying cattle and selling corn.  They also said soybean oil may outperform the Ag complex in 2013.  They are “cautious” on deferred hog contracts.  The good Dr. Michael Cordonnier left his South American production estimates unchanged, but said Brazil could move higher than 80MMT on beans if it rains in NE-Brazil.  The USDA is at 81MMT.  He did have this to say about transportion:

“According to the president of the Mato Grosso Soybean and Corn Producers Association (Aprosoja-MT) Carlos Favaro, the freight costs for exporting soybeans from Mato Grosso equates to approximately 35% of the price of the soybeans.  For corn exports it’s even worse at 50 to 60% of the price of the corn.  These figures were calculated based on the 2011/12 crop and they are expected to be even worse when the 2012/13 crop is exported.  Aprosoja-MT calculates that it takes approximately 56 days to transport soybeans from Mato Grosso to users in China while it only takes 32 days to get soybean from the Midwest to China via the Port of New Orleans.  In the U.S. the time could be reduced by nearly half if the grain is shipped out of West Coast ports.  In Brazil it can cost as much as US$ 150 per ton to transport soybeans from central Mato Grosso to a port in southern Brazil, while it only cost approximately US$ 35 per ton to move soybeans from the Midwest to New Orleans.” 

Open interest changes yesterday included wheat up 6,920 contracts, corn up 4,520, beans down 3,140, meal up 4,720 and soy oil up 2,700.  Chinese markets were mixed with beans down 5.25c, meal up $3.80, oil down 22c, corn up 2.75c, palm down 67c and wheat up 5.75c.  Meal and wheat are showing noticeable change since last Friday.  Malaysian Palm Oil closed down 28 ringgit at 2,390.  Paris Milling Wheat is unchanged, Rapeseed is up 1.71%, Paris Corn up 0.11%, UK feed wheat up 0.12% and Canola is down 0.05%.  The situation in Australia in terms of heat and wildfires continues to get worse.  Temperatures in the most populous province of New South Wales reached 108 degrees yesterday, and wild fires are evacuating thousands.  Wheat harvest is over, but sorghum is at risk.

Have to believe today will be another choppy, mixed session in the lead up to the report.  Farmers are on the sidelines awaiting the results of the report, and until then, basis and spreads will remain firm.  Whether the report is bullish or bearish and whether the farmer decides to sell grain will decide how long one can retain a bullish cash and spread stance.  Wheat/corn also looks to have value down here.

Trade as of 6:50

Corn down 1

Soy down 4-5

Wheat up 3-4

Dollar Weakness Masked by Yen as Deficit Talks Loom: Currencies

2013-01-08 05:17:33.825 GMT

     (For a Currencies column daily alert: SALT FXCOL.)

By Joseph Ciolli and Mariko Ishikawa

     Jan. 8 (Bloomberg) -- Dollar weakness against the

currencies of some of the largest U.S. trading partners is being

masked by a plunge in the yen as bets by futures traders for a

drop in the greenback re-approach the highest levels on record.

     The Dollar Index, which measures the currency against six

counterparts, has gained 1.5 percent since reaching a two-month

low on Dec. 19, as the yen tumbled 3.5 percent. The pound, the

third-most weighed currency in the index after the euro and yen,

touched a more than 16-month high versus the dollar on Jan. 2.

The number of contracts hedge funds and other large speculators

hold betting on a decline in the value of the dollar against

currencies traded at the CME Group Inc. rose to 276,830 in the

seven days ended Jan. 1, the most since October and approaching

the all-time high reached in March 2011.

     Intercontinental Exchange Inc.’s 40-year-old index, which

money managers use to help hedge against movements in exchange

rates, may be giving investors false optimism as new Japanese

Prime Minister Shinzo Abe vows to weaken the yen to spur

economic growth. Vassili Serebriakov, a foreign-exchange

strategist at BNP Paribas SA, said speculation the Federal

Reserve may end asset purchases before the end of the year,

lessening a devaluation of the dollar, may be premature with the

U.S. economy at risk from protracted budget-deficit talks.

                        Discussion Tone

     “The sharpness of the movement of the DXY is not

necessarily reflective of the overall positioning of the

dollar,” Serebriakov said in a Jan. 4 telephone interview from

New York. “Markets aren’t necessarily turning bullish on the

dollar. The tone of the discussion has changed, but this is not

a game-changer. We still think the dollar will underperform.”

     BNP sees the greenback dropping to 75 yen per dollar by the

end of 2013, compared with the median estimate of 88 in a

Bloomberg survey of forecasters. Only HSBC Holdings Plc is more

bearish on the dollar, predicting it will trade at 74 yen by

year-end, according to the survey.

     Against the euro during the same period, BNP expects the

dollar to trade at $1.32, compared with a gain to $1.27 as

forecast in a separate survey. The Dollar Index will fall to

77.20 by the end of the year, according to BNP projections.

     The Dollar Index, which also tracks the greenback against

the Swiss franc, Canadian dollar and Swedish krona, fell 0.5

percent in 2012. The benchmark gauge reached a two-year high in

July 2012 before declining 5.2 percent over the rest of the

year. It is up 0.5 percent since December, trading at 80.186 as

of 1:59 p.m. in Tokyo.

                          Ratings Risk

     The greenback may be experiencing some artificial strength

because investors have yet to look ahead to the possible

repercussions of a budget bill passed Jan. 1 that broke a

yearlong impasse over $600 billion in U.S. tax increases and

spending cuts. The sovereign-credit profile of the U.S. may be

one area that takes a hit, according to Masashi Murata, a

currency strategist in Tokyo at Brown Brothers Harriman & Co.

     “The market has not priced in the risk of a U.S. ratings

cut,” Murata said in a Jan. 4 interview. “The problems of the

debt ceiling are likely to linger in the future, and that could

be a selling catalyst for the U.S. dollar.”

     Moody’s Investors Service warned Jan. 2 that the bill

passed last week by Congress and President Barack Obama to avoid

the so-called fiscal cliff won’t reduce U.S. deficits enough to

avoid a credit-rating downgrade and further measures were needed

to support the nation’s top Aaa rating.

                          Debt Ceiling

     The U.S. reached its debt ceiling Dec. 31. Without an

extension of the spending limit, the Treasury will exhaust

measures to finance the government as early as mid-February,

according to the Congressional Budget Office.

     At the same time, the Dollar Index has gained 7.2 percent

since Standard & Poor’s stripped its AAA rating in August 2011,

triggering a surge in demand for U.S. assets as investors sought

a refuge in Treasuries, the world’s safest securities.

     The dollar’s relative strength versus its Dollar Index

peers has also been bolstered by the combination of better-than-

forecast U.S. economic data and the European recession, said

Callum Henderson, global head of currency research in Singapore

at Standard Chartered Plc.

     U.S. gross domestic product grew at a 3.1 percent annual

rate in the third quarter, exceeding the highest projection in a

Bloomberg News survey. The median estimate of economists called

for a 2.8 percent advance. December payrolls also increased more

than analysts anticipated.

     “At the moment, you have a divergence between slightly

better data out of the U.S., but persistent recession in Europe,

and that’s positive for the dollar,” Henderson said in a Jan. 4

telephone interview. “In the second half, we expect the global

economy as a whole to be recovering. And, in that environment,

U.S. investors are likely to go abroad, and that will weaken the

dollar.”

                       Technical Reversal

     The extent of the slide in the yen since Abe appeared as

the front-runner in the fourth quarter to retake the prime

minister’s post may lead to a reversal, according to analysts

who follow technical patterns.

     The yen-dollar exchange rate is close to its 30-year

channel support area at 89.15 per dollar, which could be a

“sticking point,” MacNeil Curry, head of foreign-exchange and

interest-rates technical strategy at Bank of America Merrill

Lynch in New York, wrote in a Jan. 4 note to clients.

     “The yen’s extreme move in the last three months does make

it vulnerable to some corrective activity,” Simon Smith, chief

economist at FxPro Group Ltd. in London, said in a Jan. 4

telephone interview. “The Dollar Index should remain below the

peaks we saw in mid-November going forward.”

     The benchmark gauge reached its highest level in more than

two months on Nov. 16, touching 81.46.

                          Yield Spreads

     The yen, which comprises 14 percent of the Dollar Index, is

mired in a slump that saw it reach its lowest level since July

2010 versus the greenback on Jan. 4. The yen fell for an eighth

week against the dollar, the longest losing streak since 1989.

     The dollar has lost 0.6 percent over the past three months,

while the yen has fallen 12 percent, the biggest drop among the

10 developed-nation currencies monitored by the Bloomberg

Correlation-Weighted Indexes. The euro has gained 0.8 percent.

     U.S. 10-year note yields were 38 basis points more than

similar-maturity German bunds yesterday, nearly twice the amount

as recently as Dec. 4. The difference widened to 44 on Dec. 31,

its largest margin since April.

                        ‘Marginal Driver’

     The increased appeal of U.S. sovereign debt over that of

its German counterpart can be attributed to positive economic

data, according to Shahab Jalinoos, a senior currency strategist

for UBS AG in Stamford, Connecticut. It has also contributed to

the strength of the greenback in the Dollar Index, not just

against the yen, but also the euro, which is weighted more

heavily at 58 percent, he said.

     “Interest-rate differentials between the U.S. and Europe

are actually moving in the U.S.’s favor,” Jalinoos said in a

Jan. 2 telephone interview. “There’s been an underlying

improvement in U.S. data, allowing yields to go towards the top

of the trading range they’ve been in for the past six or seven

months.”

     Foreign-exchange strategists predict that the yen will

trade at 88 per dollar by the end of 2013, while the Dollar

Index is projected to be at 80.8.

     “The Dollar Index seems to be unraveling a bit,” Jalinoos

said. “The marginal driver of the Dollar Index has been yen

weakness, but that doesn’t really represent what’s going on.”

For Related News and Information:

Top currency stories: TOP FX <GO>

Currency forecasts: FXFC <GO>

Foreign-Exchange Information Portal: FXIP <GO>

World currency ranker WCRS <GO>

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