Morning Thoughts 3-5-2013

Markets are having a small bounce as of 8:50 this a.m.

Corn is up 2, beans are leading the way up 15, KC wheat is up 2, MPLS wheat is up 1, and CBOT wheat is unchanged.  Outside markets are supportive with the DOW making new all time highs this morning up about 100 points at 14,227, crude is up 50 cents, and the US dollar is a little lower.

I did see an announcement that the CME grain market trading hours will change on April 7^th.  The Open outcry or pit and the Globex or electronic will start trading weekdays at 8:30 a.m. central time and close at 1:15 p.m. central time.  The overnight Globex or electronic will open at 7:00 PM central time and remain open until 7:45 a.m. central time the next morning.  There is no pause for the USDA reports; but perhaps the CME is opening the doors for the USDA to move release times to 8:00 a.m.?????

We do have a USDA report out on Friday with estimates at 646 for a corn carryout.  Presently we are at 632.  Market is basically looking for a decrease in exports/ethanol; but really not a major change is expected.

For soybeans the market is thinking we could see an increase in crush and or exports as the average estimate is 122 million bushel carryout versus the present 125 million bushel carryout.  But really not a major change.

For wheat the trade is looking for a small increase via lack of exports as the estimate is pegged at 702 million bushels versus the present 691 million bushels.

Overall not much for changes expected in our carryout’s.  Just looking at the numbers I would say that we have a small bearish risk; but most likely the USDA waits until the March stocks report and thus the April S & D before we have any major changes if we do.

The bigger thing is likely to be South America production.  Market is looking for a Brazilian soybean crop to decrease slightly and for the Argentina bean crop to slightly decrease.  Same thing for corn crops.  Now here is another potential risk; will big crops get bigger?  The ranges are rather wide so unless we have a major surprise it might not be another major market mover and we have seen some strength happen lately in beans despite the fact that we have record crops coming.  I don’t know how long logistics can provide support as eventually the South America crop will provide supply.

We did have some state updates on crop conditions yesterday and we seen some improvements.  KS up 1% on the G/E, OK improved 16%, and TX was unchanged.

We did sell more beans to Unknown and to China this a.m.; 330k tones of old crop sold to unknown and 345 k tones of new crop sales.

Basis remains strong; but more from a lack of supply then super strong demand.  Some of the local ethanol plants are full through April.  The coverage needed is for later on; but with the inverses in the board; not many plants have a lot strong interest either.

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

Overnight Highlights from CHS Hedging's Tregg Cronin 1-29-2013

Outside Markets: Dollar Index up 0.052 at 79.802; NYMEX-WTI up $0.13 at $96.56; Brent Crude down $0.06 at $113.38; Heating oil up $0.0023 at $3.0639; Livestock markets are all taking a bit of a breather this morning; Gold up $8.70 at $1661.60; Copper down $0.0025 at $3.6590; Silver up $0.265 at $31.040; Softs are mixed although Cotton is up over 1.0%; S&P’s are down 4.75 at 1492.00, Dow futures are down 29.00 at 13,803.00 and Treasuries are firmer.

Quietly weaker equity markets around the globe overnight, although Australia’s main equity index continues to show strength.  Last night it tacked on another 1.11% and is trading at the highest levels since mid-2011, not too different from the DJIA or S&P.  Main financial headlines would include Ford beating earnings’ estimates by reporting Q4 EPS of $0.31/share vs. the $0.25 estimate.  Revenues were a beat by more than $3 billion.  Other notable earnings this morning will include Polaris, Pfizer, Harley-Davidson, Valero and the Canadian Pacific Railway.  Overnight, India’s central bank cut its benchmark rate to revive growth as inflation there cools.  United States Bakery is in talks to buy Hostess bread brands for $29 million.  Case Shiller Home Price Index later today seen up 0.7% m/m.

Precip in the last 24 hours was heaviest in SD/ND/MN/WI/MI where totals as high as 1.0” fell north of Madison, WI.  This storm continues to work east this morning bringing more rain to WI/MI, but a separate system is tracking across OK this morning with watch-boxes present.  KS is also seen getting some rain.  Most of the accumulation in the southern plains will take place in the eastern part of the state where 0.50-1.00” is possible.  The 5-day forecast keeps a heavy system in place over AR/MO/IL/MS/TN and surrounding areas where as much as 2.50” is seen dropping.  This should aid in keeping river levels adequate and the STL River Gauge below is seen rising through Feb 1 because of it.  NOAA’s extended maps showed a stark change to recent model runs, bringing in much above normal temps for TX/OK/KS/NE in the 6-10 while precip looks more normal.  This would be interesting considering all of KS was 70+ degrees yesterday.  The 8-14 shows a similar looks.  Follow the link below to see the maps.  They’re worth the look.  South American maps don’t look a whole lot changed this morning, although S-Brazil is looking wetter in the 6-10.  The 1-5 day continues to call for precip across 2/3’s of the Argentine growing areas.  Around 1/3 will still be subject to moisture stress as we head into February.

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

Slightly better trade overnight across the major Ag markets as markets attempt to add to yesterday’s late rally.  Several analysts much smarter than myself were questioning the spark for yesterday’s rally, and probably the additional gains overnight at that, because there didn’t seem to be a ton of new developments in the last 36 hours.  Some cited the WCB drought, others a pickup in corn export inspections and some the fact China continues to take US purchased corn.  More than anything, it appears all of our major grains are locked in ranges, and will continue there until fresh news comes in.  One thing is certain, the longer we coil up inside ranges, the larger the break out should be when it comes.  Brazil’s biggest soybean state of Mato Grosso is 7.1% harvested vs. 2.8% a week ago and 5.8% a year ago.  Brazil’s soybean lineup is picking up with 3.4MMT as of yesterday.  This along with 1.3MMT of meal and 2.8MMT of corn totals 7.5MMT, an all-time record for February.

Headlines overnight included Dr. Michael Cordonnier cutting hit Argentine soybean production estimate 1.0MMT to 52.0MMT, bringing his estimate in-line with Oil World, but 2MMT below the USDA.  Two oil barges struck a railroad bridge near Vicksburg, MS yesterday backing up more than 300 barges on either side of the bridge.  Cleanup is thought to continue until Thursday and should limit barge traffic.  Could possibly put a bit of strength in ETA soybean barges.  According to Agriculture & Agri-Food Canada, the Canadian wheat harvest in 2013/14 will climb 4.8% to 28.5MMT thanks to larger acres.  The USDA’s Foreign Ag Service said Russia’s wheat exports will be 11MMT for 12/13 vs. the 10.5MMT currently forecasted by the USDA.  Several southern plains states released winter wheat condition ratings yesterday afternoon.  KS’s wheat crop was rated 20% Good/Excellent vs. 24% on Dec 30.  OK was seen at 5% G/E vs. 11% in December, and only 22% of the state’s wheat was being used for grazing vs. 36% on average.  NE reported 8% G/E vs. 14% in December, and SD reported 3% G/E, unchanged from the end of December.  South Dakota’s report did make mention of better snow cover since the last report.  Definitely going to need spring moisture.  The KWN/WN is currently trading at +57.75c.

Open interest changes yesterday included wheat down 1,350 contracts, corn up 4,650, beans up 5,740, meal up 6,180 and soy oil up 3,510 contracts.  Corn continues to see solid gains in open interest, suggesting managed funds are still interested in re-entering that market.  Chinese markets were steady/better overnight with beans up 0.25c, meal down $0.30, soy oil down 22c, corn up 1.25c, palm up 1 and wheat down 4c.  Malaysian Palm Oil re-opened after its holiday and saw a 1.23% rally with the April contract closing up 30 ringgit at 2,475.  Paris Milling Wheat is up 0.40%. Rapeseed is up 0.68%, Corn up 0.32%, UK Feed wheat up 0.02% and Canola is unchanged.

ADM Marshall, Chicago 25’s, Hereford and PNW corn basis was all a bit firmer yesterday based solely on posted bids.  PNW beans, however, looked to be down at almost every export house by a good 5c.  The CH/CK is inverted by 0.50c this morning.

Call things better to start as we continue to chop inside ranges.  Two-sided trade again today wouldn’t surprise anyone, and with no real data releases set for today, a breakout doesn’t look likely.  South American weather, weekly data sets and farmer movement remain the focus.  Keep an eye on new crop ’13 prices as we head into the insurance pricing period.  There are a lot of producers who are not at all comfortable with the prices they’d have to sell today if they had to, even if they are concerned about dryness in the WCB.

Trade as of 7:00

Corn mixed

Soy up 1-2

Wheat up 1

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

Report Day Overnight Highlights 1-11-13 from CHS Hedging's Tregg Cronin

Outside Markets: Dollar Index up 0.066 at 79.806; NYMEX-WTI down $0.77 at $93.05; Brent Crude down $1.57 at $110.32; Heating Oil down $0.0370 at $3.0173; Livestock markets are mixed with lower cattle and higher hogs; Gold down $11.20 at $1666.80; Copper down $0.0345 at $3.6755; Silver down $0.293 at $30.625; Softs quietly mixed; S&P’s up 0.75 at 1467.75, Dow futures are down 4.00 at 13,402.00 and Treasuries are lightly mixed.

Mixed equities in Asia overnight, while Europe is quietly better.  The NIKKEI was up another 1.40% last night after the new Prime Minister announced a Y10.3 trillion ($116 billion) economic stimulus package that the government expects to lift GDP by 2.0% and create 600,000 jobs.  The Yen has sold off promptly and is trading above 90.00.  The big data point from overnight was the Chinese Consumer Price Index which rose to 2.5% y/y from 2.0% in November and vs. a consensus of 2.3%.  This pushed the Shanghai Composite down 1.78% to the lowest close since 12/28, and could limit stimulus efforts by the government.  Argentina’s Credit Default Swaps are spiking this morning with the 5-yr CDS up 118bp to 1,914bp, the highest since 12/4.  Wells Fargo reports earnings before the bell this AM.

Some decent moisture the past 24 hours along the Mississippi River and Great Lakes Region with rain falling in most of the upper-Midwest.  This storm continues to dump precip in the ECB this morning.  Going to be some moisture around the next 5-days with the heaviest in the central and eastern corn belt.  Cold temps forecast by NOAA the next 6-10 days across the entire Midwest.  Two swaths of above normal precip will hit TX and then the upper-Midwest including SD/ND/MN/WI/MI, but below normal precip cuts the country in half and will leave CO/OK/KS/NE/MO/S-IL/TN/KY dry.  South American weather is attached and looks nearly ideal.  Only area of concern seems to be some heat and dryness in Argentina, but not yet a problem according to forecasters.

Feature of the overnight session would have to be the selling pressure witnessed in the soybean and products market.  At the lows, March soybeans were down 20c, but have pared around half of those losses.  Corn is content around $7.00, and probably should remain close to their until report time at 11:00 CDT.  The general expectation of the market is a friendly corn report which could benefit wheat, but larger production in the US/Brazil/Argy are expected to hinder soybeans.  Convenience table attached.  Limit moves have been achieved each of the last 6-years, but it wouldn’t surprise me one bit to see this be the one year which is close to “normal.”  Export business has been healthy this week and on wheat and beans, but corn remains notably absent. 

A little bit of tender business overnight with Japan buying 121,188MT of Australian wheat for the first time in six weeks.  There was no US or Canadian wheat.  This follows GASC’s tender in which they bought 1 cargo each of US and Canadian SRW, disappointing to most analysts.  Still rumors of China buying US and Canadian wheat, although split ideas about whether its HRS or SRW.  Indonesian mills also bought a cargo Aussie wheat at $351/MT C&F.  South Korea’s KFA bought 55,000MT of optional origin feed wheat from Cargill at $328.35/MT C&F for April.  South Korea’s Mills bought 39,500MT of Aussie hard wheat at $360/MT C&F for April shipment.  Taiwan’s MIPA is tendering for 60,000MT of optional origin corn next week.  Lots of export business, but very little US participation.  Indonesia is planning to cut their palm oil export tax, matching Malaysia and remaining competitive.  Palm Oil stocks rose to a record 2.63MMT last month, putting pressure on the global Veg Oil market.  Chicken wing prices are at new record highs just in time for the playoffs and Super Bowl.  See chart below.

Open interest changes during yesterday’s session included wheat down 5,520 contracts, corn up 6,090, beans up 110, meal up 2,750 and soy oil up 5,580.  Index fund rebalancing seems to be continuing as scheduled.  Interestingly, since January 4^th, corn open interest is up 27,439 contracts, despite the fact funds are supposed to be selling corn.  Chinese markets were mixed with beans up 8.75c, meal down $1.70, soy oil down 58c, corn down 0.25c, palm down 77c and wheat down 3.50c.  Malaysian Palm Oil was down 19 ringgit to 2,368.  Paris Milling Wheat down 1.12%, Rapeseed is down 0.22%, Corn is down 0.11%, UK feed wheat is down 0.72% and Canola is down 0.31%.

Not much matters until we get the report out in four hours.  We’ve got the pre-report expectations.  We’ve got the index fund rebalance on the downhill slide.  Now we just have to get the numbers.  A little discouraging we still aren’t mopping up export business left and right, but we are getting more competitive and the funds are still big shorts.  More fun later this morning.

Trade as of 7:20:

Corn flat down 2c

Soy down 3-8

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 Hedging's Tregg Cronin

Outside Markets: Dollar Index up 0.305 at 80.155; NYMEX-WTI down $0.36 at $92.76; Brent Crude down $0.28 at $112.19; Heating Oil down $0.0208 at $3.0255; Livestock markets are steady/better; Gold down $10.10 at $1678.70; Copper is down $0.0180 at $3.7180; Silver down $0.157 at $30.840; S&P’s are down 4.25 at 1452.75, Dow futures are down 29.00 at 13,302.00 and Treasuries are slightly better.

A little bit of profit taking evident in the overnight trade with Asian equities closing firmer, but European equities under pressure as the IBEX-35 drops 1.10%.  The Shanghai Composite (China) rose to its highest level last night since June 20^th.  Also worth noting, The Bloomberg Financial Condition Index, which ranks things like equity levels, bond yields, volatility and corporate spreads, rose to its highest level since April of 2007.  Their proprietary Economic Surprise Index is at its highest level since April of 2012.  In other news, it looks increasingly likely Speaker Boehner will retain his position in the House.  China’s service industries expanded at their fastest level in four months, while manufacturing expanded at its fastest level in 19-months.  Mortgage Applications fell 10.4% in the latest week.  Later this morning we will get the ADP Private Payroll data for December which is seen +140,000.  Initial jobless claims are seen at 360,000, up 10,000, and the New York ISM is up at 9:45 (52.5 prev).

No precip in the last 24 hours pretty much anywhere in the continental US.  Virtually nothing seen for the Midwest the next 5-days, although by the middle of next week a better system is seen impacting the southern plains.  Total guesses at this point are seen around 0.7-1.4” for the vast majority of TX, a good chunk of OK/AR/LA and scattered areas in MO/KS.  Things dry up a bit more in the 8-14, and temperatures are seen above normal for the central/east belt throughout.  Late in the period, temps moderate to normal/below in the west.  The forecast sees things to be fairly quiet in most of the Argentine growing regions for the 5-7 days. Some rains will fall in the far northeast (far northern BA, most of Entre Rios and Corrientes) for Friday and the weekend, with totals of .25- .75”, isolated to 1”+. By the middle of next week, a front looks to bring rains of .40-1” to all of the Argentine growing regions. Things will be fairly quiet in the S. Brazil growing regions for the rest of this week and by the weekend rains look to start up and bring totals of .40-1”, isolated to 1”+. More rains are seen for next week in the S. Brazil growing regions as well, early estimates running in the .50-1”+ range. The tropical rainfall in the northern Brazil growing regions looks to run close to average for the next week to 10-days.” –John Dee

Follow through selling in the grains overnight with soybeans down the worst.  The exception is of course wheat, but it shouldn’t come as that much of a surprise. What was probably more surprising was the sharp sell off yesterday.  Wheat was competitive before the selloff, and is even more so this morning.  FOB offers out of the Gulf on US-SRW are seen at $306.90/MT vs. French dlvd Rouen offers at $325.46/MT FOB.  What’s not supportive to wheat is the lack of tender business showing up.  Syria is in for 100,000MT, Iraq is in for 50,000MT, but that’s about it.  In fact, Egypt once again took to the wires last night proclaiming they have enough wheat for domestic use until June 17^th, with their harvest beginning in May.  Soybeans seem to be about SAM weather and index rebalancing.

Pretty thin newswires overnight, which should further highlight the selling pressure is coming from managed money players.  Scattered headlines included Credit Suisse saying corn prices have peaked for the marketing year and wheat has the most upside of any farm commodities.  “High corn prices have rationed demand.”  The USDA’s Foreign Ag Service raised Brazil’s soybean output to 83MMT vs. USDA’s last official guess at 81MMT.  They see exports climbing to 39MMT from 32.1MMT a year ago.  Farmers in Argentina have sown 80% of the soybean area and 75% of the corn area.  Concerns exist about the delayed planting and eventual yield potential.  Deutsche Bank AG said the US hog supply is signaling the USDA may have to raise its domestic use assumptions for corn and meal use as animal feed.  One other story said Australia is facing its most wide-ranging heat wave in more than a decade as 80% of the continent is hit by temps above 104 degrees.  Harvest is obviously complete down there, but noteworthy nonetheless.

Open interest changes yesterday included wheat up 6,220 contracts, corn up 16,400, beans up 2,860, meal down 80 and soy oil down 3.  Not delicious to see wheat, corn and soybean open interest pop that much with futures down as hard as they were.  Likely we saw fresh shorts enter the market.  The lack of open interest changes yesterday in meal and oil show unwinding of spreads, and a fair amount putting oil/meal spreads on instead of meal/oil.  Deliveries overnight included 9 meal and 2,754 soy oil.  Chinese markets were once again closed, but will re-open tomorrow.  Malaysian Palm Oil was down 27 ringgit to 2,474.  Paris Milling Wheat is down 0.10%, Rapeseed down 0.11%, Corn down 0.52%, UK feed wheat down 0.48% and Canola down 1.12%.

Lower to start, but wouldn’t be surprised to see some intra-day pop.  Ethanol and exports will be delayed until tomorrow morning, and will be released concurrently with the monthly employment report.  The Dollar Index strength is a pressure point as is the ongoing index fund rebalance (including front-running and tail-running).  Demand has become stale, and weather in South America looks about as good as one can ask for with early beans already being harvested in northern Brazil.  The Bulls’ next hope has to be the Jan 11 reports, and those feel like they’re a month away.

Trade as of 7:05

Corn down 4-7

Beans down 12-15

Wheat mixed: SRW -1/HRS +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

Overnight Highlights from CHS Hedging's Tregg Cronin 12-3-12

Outside Markets: Dollar Index down 0.335 at 79.872; NYMEX-WTI up $0.50 at $89.41; Brent Crude up $0.67 at $111.91; Heating Oil up $0.0165 at $3.0772; Gold is up $8.30 at $1721.20; Copper up $0.0120 at $3.6615; All major currenencies are trading firmer led by the Brazilian Real which is up 1.14% (Brazilian manufacturing data accelerated at the fastest level in 2-years); S&P’s are up 5.75 at 1420.25, Dow futures are up 50.00 at 13,058.00 and Treasuries are weaker.   

The feature in financial markets overnight has to be the sharply better equity markets in Europe.  At current, Spain is up 1.00%, Italy up 1.44% and France up 1.01% after the Italian/German 10-yr bond spread narrowed to less than 300bp for the first time in eight months.  Borrowing costs for Portugal, Italy and Spain are 10-16bp lower this AM.  This was after Chinese manufacturing data came in above 50.0, the contraction/expansion level.  This didn’t help Asian equities, however, with the Shanghai Composite dropping 1.03% and the Hang Seng down 1.19%.  Chinese equities remain near the lowest levels since Jan of 2009.  Eco data in the US today will include ISM Manufacturing (51.3), Construction Spending (+0.40%) and total vehicle sales for November (14.80 million).

Precip over the weekend was limited to WY/MT and some scattered precip in the ECB-NorthEast.  The 5-day forecasted precip map is showing some moisture in the Midwest for the first time in quite a while.  States along the MS-River from STL south and also those along the OH-River north will see anywhere from 0.25-1.4” over the 5-day stretch.  See map below.  Dry areas of the plains and WCB will continue to be missed.  NOAA extended maps are turning a bit more generous with precip, showing above normal precip for all areas East of the MS-River and north of I-80.  Temps above normal.  “The Argentine growing regions will see another round of unwelcome, heavy rains fall this week and then there are some signs that the pattern might be changing to one that is drier.  The bottom line is rains this week will continue to cause delays in summer crop planting and quality issues with winter wheat. Things in Brazil are in pretty decent shape in most cases.”  –John Dee

Positive trade in the grains all night, but accelerated to the upside about the time of the Dalian open at 8:00 CDT.  Dalian markets did see firmer closes on everything, but not to the extent that we find out markets up this morning.  Looking at weekend news flow, the support looks derived from Egypt’s GASC finally buying US wheat, the heavy rains in Argentine growing regions forecast this week and the steady demand for US soy and products.  We’ve also seen commodity funds turn a bit more friendly the space, even if not all corners of the Ag space.  Hedge funds increased bullish bets on commodities (all commodities, not just grains) by the most since August, jumping long positions by 9.8%.  Obviously some see China’s economy bottoming and the fiscal cliff finding resolution.

Over the weekend, Egypt’s GASC bought 400,000MT of wheat for delivery between Jan 15-Feb 10.  Of that total, 165,000MT was US-SWW at $335.87-337.39/MT and 115,000MT was US-SRW at $348.89-351.49/MT.  These are on a FOB basis.  Egypt also bought 60,000MT of Romanian wheat at $362.04/MT and 60,000MT of French at $359.89/MT.  The US absolutely had to participate in this tender, and it did, so now the question becomes what other destinations will the US turn competitive for?  It’s a good start but much more business needs to get done.  In other export news, Israeli groups are tendering for 115,000MT of corn in addition to some barley and feed wheat.  Shipments begin Jan 20.  Canada will update production estimates later today and Deutsche Bank thinks wheat will be revised slightly larger.  Australian grain handler CBH says Western Australian receivals have been 5.5MMT so far, or around 61% of the estimated total.  Lastly, Ukraine and China signed a memorandum of understanding with China’s COFCO to buy corn from Ukraine.  No sales have yet been signed.

Open interest changes Friday included wheat down 9,220 contracts, corn down 8,090, beans down 3,330, meal up 5,990 and soy oil up 4,630.  Looks like some pretty heavy liquidation considering the losses witnessed Friday, but much can be attributed to ongoing December liquidation and month end.  There were 1,939 re-deliveries in Chicago Wheat overnight, 246 corn and 1,616 soy oil.  In Minneapolis, there were 329 re-deliveries after 600 on FND.  When it’s all said and done, most of the corn should fine strong hands.  The St. Louis River gauge was quoted at -2.2ft this morning, with the expectation it will drop to -4.0ft by Dec 14.  -5.5-6.0ft would halt navigation.  Chinese markets o/n saw beans up 9.25c, meal up $6.40, soy oil up 71c, corn up 2.50c, palm up 87c, and wheat up 4c.  Paris Wheat s up 0.74%, Rapeseed up 0.26%, Corn up 0.79%, UK Feed wheat unchanged and Canola up 0.39%.

Call things better as demand is beginning to pick up in wheat, it remains steady on soy and the products and corn supplies remain a question mark.  The River will continue to be a negative effect toward price, but world importers still need our grain.  Soybeans would do themselves a favor to break out of their current downtrend which they are bumping up against this morning.  Keep in mind we’re between Thanksgiving and Christmas, and no substantial progress has been made on the Fiscal Cliff.

Trade as of 7:10

Corn up 6-10

Soy up 14-18

Wheat up 7-10   

  

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

www.chshedging.com

CHS Hedging, Inc.

Morning Market Thoughts

Markets are bouncing to start the month.

At 8:20 we have a little bounce happening in the grain markets this a.m.; corn is up 9, beans are up 17, KC wheat is up 8, MPLS wheat is up 9, and CBOT wheat is up 11.  Outside markets have DOW futures firmer by 50, US Dollar is weaker with the cash index at 79.972, crude is up about a dollar a barrel, and Gold is also up 4.50 an ounce.

Markets firmer on a combination of things this a.m., including some wet weather preventing planting in parts of Argentina, a Egypt tender that saw the US get a big piece of business, strong demand for soybeans and products, and perhaps a little fresh month buying that is supporting our markets as well as outside markets.

Egypt bought 165tmt US soft white and 115tmt US soft red wheat for January-February shipment. They also bought 60tmt Romanian and 60tmt French. Prices were $20 to $40 per tonne cheaper than Black Sea.  This is good news; but keep in mind we need to have some of this just to meet present expectations; so by no means is this totally bullish; it is news that could easily be buy rumor sell fact.  We need to have this happen more often than not; and it appears we are sitting in a good spot to get more; but more than what the USDA has already penciled in?  What about more then what the market has penciled in?

HRW area remains very dry; but we won’t have a crop condition update for several months; some individual states will do updates but nothing for the US in whole.

We need to watch the fiscal cliff headlines and developments as we don’t need or want to see the funds having another reason to hit the exit door.  Despite the huge sell off’s they still own plenty of grain; not so much soybeans but they are still long beans and long plenty of corn.  Last week they added to corn and wheat positions while they were sellers of beans.

The CME Group did complete the acquisition of the KCBT.

Wheat deliveries remain strong which isn’t the best demand sign.

Not sure what to think of basis this a.m. I did notice lots of rail cars around which probably keeps some pressure on things as bids roll from the Dec to the March; I guess it will really come down to demand.  Right now that seems to be hit and miss; ethanol margins are not the best and you will notice the US got some wheat business to Egypt but none of it was HRW or DNS; but rather SRW and White wheat.

A couple of announcements don’t forget we will have our weekly MWC Marketing Hour Round Table meeting in Onida on Wed at 3:30.  Also make sure to mark your calendars for Dec 19^th and Dec 20^th for our marketing meetings in Philip and Pierre where we will have Tregg Cronin and Kevin Van Trump speaking.

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

Thanks

Jeremey Frost

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

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

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

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

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

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

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

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

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

www.chshedging.com

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

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

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

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

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

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

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

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

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

Trade as of 7:10

Corn up 5-6

Soy up 10-15

Wheat 3-4

  

Overnight Highlights from CHS Hedging Tregg Cronin

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

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

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

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

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

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

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

Trade as of 7:15

Corn down 2-5

Soy down 9-16

Wheat down 1-4

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

www.chshedging.com

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

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

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