Overnight Highlights from one of our speakers for this week (Tregg Cronin of CHS Hedging)

Below is a forward from one of our speakers (Tregg Cronin of CHS Hedging) for our meetings this week.

Grain Marketing Seminar 2012

We would like to invite you to our

free grain marketing seminars:

Dec. 19^th, 2012 – 1:00 pm MST at the

Ambulance Building in Philip, Tregg Cronin Speaker

Dec. 20, 2012 – 10:00 am CST at the Ramkota in

Pierre, Kevin Van Trump and Tregg Cronin will be speaking on the grain markets.  Lunch will be served

Please RSVP for either location by calling

800-658-3670 or 605-258-2686

Jeremey Frost

Grain Merchandiser

Midwest Cooperatives

800-658-5535

800-658-3670

605-295-3100 (cell)

605-258-2166 (fax)

jeremey.frost@chsinc.com

www.midwestcooperatives.com

http://grainmarketingplans.blogspot.com/

 Follow On:

This communication may contain privileged and/or confidential information and is intended only for the use of the individual or entity to which it is addressed.  If the reader of this message is not the intended recipient, you are hereby notified that any unauthorized dissemination, distribution, and/or use of this communication is strictly prohibited.   This communication makes no representation or warranty regarding the correctness of any information contained herein, or the appropriateness of any transaction for any person.  Nothing herein shall be construed as a recommendation to buy or sell any commodity contract.  There is a risk of loss when trading commodity futures or options.

From: Cronin, Tregg
Sent: Tuesday, December 18, 2012 7:19 AM
Subject: Overnight Highlights

Outside Markets: Dollar Index down 0.097 at 79.486; NYMEX-WTI up $0.61 at $87.81; Brent Crude up $0.71 at $108.33; Heating Oil up $0.0230 at $2.9793; Livestock markets are all firmer; Gold up $2.20 at $1700.40; Copper down $0.0050 at $3.6610; Silver up $0.225 at $32.500; S&P futures are up 4.25 at 1431.00, Dow futures are up 37.00 at 13,221.00 and Treasuries are softer.  

Every head line on every financial media outlet has “markets rally on hopes of budget compromise,” so I think that about covers it.  The compromise involves tax rates increasing for individuals making over $400,000/yr, and in exchange Boehner and the Republicans get $1.2 trillion in revenue increases and spending cuts.  The spending cuts do include entitlements tied to Social Security, but not Medicare.  Markets obviously liked it yesterday and appear to like it this morning.  The IBEX-35 is up 0.78% and the NIKKEI closed up another 0.96% on prospects for more monetary stimulus by the BOJ.  Sanderson Farms reported earnings this morning of $0.41/share vs. estimates for $0.32 and -$5.74 LY, becoming the latest meat packer to post better than expected earnings.  Thank you SA corn.

Precip the last 24 hours was concentrated in the ECB and East Coast, while the Midwest was largely quiet.  There are scattered systems moving across the upper-Midwest this morning bringing light snow.  The next 1-3 days will see additional moisture hit the central and eastern corn belt with the heaviest totals around the Great Lakes region to the tune of 1.72”.  IA should also see decent totals, the majority of which should fall as snow.  Omaha, NE could see as much as 7”.  NOAA’s extended maps have turned much more generous, painting above normal precip across the majority of the Midwest during the 6-10 & 8-14, and is even pushing it as far south as TX, part of the reason behind the pressure in HRW.  Temps will be normal/below.  “The forecast sees a front to bring rains of .50-1", isolated to 1"+ to the Argentine growing regions today and tomorrow and then things to be fairly quiet for the rest of the week, with some more rains possible by Sunday and Monday of next week. Early estimates on totals early next week are in the .35-.85" range, with some isolated heavier totals.” – John Dee.

Weaker overnight led by the soy complex after trade failed to post a close above $15.00 which likely incited some technical selling.  Little on the newswires to help with direction, and that could be the problem: US grains still aren’t competitive into a lot of the swing destinations we need to be in order to justify current corn and wheat export forecasts.  That could be changing, however, as chatter this morning suggests US wheat is pricing itself into Brazil as Argentine supplies wither and quality becomes a problem on what supplies were harvested.  This after rumors Argentina may cuts its export quota on wheat to 3.37MMT from 4.5MMT.  The USDA is currently using 5.5MMT of exports.  Most analysts are counting on Brazil taking US wheat, so this wouldn’t be a complete surprise, just maybe more tonnage than originally anticipated.  Argy FOB offers on wheat this morning for Jan/Feb shipment are said to be around $370/MT compared with US-SRW at $321.47/MT and US-HRW at $354/MT.  Canadian wheat to Brazil has also been tossed around.

Japan is back in the mix looking for 121,026MT from the US and Canada with the majority US-origin.  These would be for shipment from Jan 16 to Feb 15 and arrival by March 31.  Other headlines included Russia’s grain stockpiles as of Dec totaling 29.7MMT, down 30% from 42.3MMT a year earlier.  The figure includes large producers who held stocks of 16.8MMT, down from 25.3MMT a year ago.  These figures don’t include small, private farms or household reserves.  YTD exports from Russia totaled 12.4MMT, down from 15.6MMT a year ago.  Palm Oil stocks in China could reach 1MMT in the near futures said a state government website.  Inventories last week were 890,000MT, up 50,000MT from a week earlier.  Little improvement is seen in demand as everyone wants meal right now.

Open interest changes yesterday included wheat down 500, corn down 4,500 contracts, soybeans up 5,610, meal up 2,680 and soy oil up 2,430.  More spec liquidation in corn while funds were probably adding length yesterday which is now underwater.  Chinese markets were mixed with beans up 8.25c, meal down $4.30, soyoil up 9c, corn unchanged, palm down 7c and wheat up 4.25c.  Malaysian Palm Oil was down 8 ringgit at 2,342.  Paris Milling Wheat is down 0.58%, Rapeseed down 1.13%, Corn down 1.11%, UK Feed Wheat down 0.92%, and Canola down 0.64%.  Also worth mentioning several private estimates flying around the trade about rising Brazilian soybean production.  Have seen several 81’s and 82’s and some larger.  Cordonnier unchanged at 80MMT but sees it larger if weather holds.

Call things weaker today as European prices dump, South American weather remains mostly beneficial in Brazil and is moderating in Argentina, demand for US grains remains slow and the light volume of this holiday trade allows prices to move pretty freely.  Longer-term, the sleeper in corn could be the feed/residual and harvested acres, but in the near-term, weekly data sets by ethanol and exports will keep the bias negative.  Wheat needs business bad.  Period.  Soybeans will struggle if grains can’t firm.

Trade as of 7:10

Corn down 4-6

Soy down 12-17

Wheat down 1-3 WW, up 1 SW

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

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This material has been prepared by a sales or trading employee or agent of CHS Hedging, Inc. and should be considered a solicitation.  This communication may contain privileged and/or confidential information and is intended only for the use of the individual or entity to which it is addressed.  If the reader of this message is not the intended recipient, you are hereby notified that any unauthorized dissemination, distribution, and/or use of this communication is strictly prohibited.  CHS Hedging, Inc. makes no representation or warranty regarding the correctness of any information contained herein, or the appropriateness of any transaction for any person.  There is a risk of loss when trading commodity futures and options.  

closing grain market comments 12-17-2012 - grains close weaker - beans leave doji on charts - Van Trump & Cronin Speaking at 2012 Grain Marketing Seminar

Markets closed mixed to weaker today after being slightly firmer this a.m.

Corn closed down 6-7 cents, beans closed unchanged, KC wheat was off 8 cents, MPLS wheat was down 7, CBOT wheat was off 6, the US dollar is near unchanged with the cash index at 79.560, crude is up about 60 cents, and the equity markets closed firmer with the DOW up 100 points.

Rather poor performance for the grains today; before the 9:30 bell most of the grains where slightly positive; but once the pit opened wheat came under pressure and then corn followed to the extent that beans closed about 13 cents off of their highs leaving a doji on the charts.  The doji has to be considered a warning sign when you consider beans are now over 1.25 off of their lows from about a month ago.

Today was really a lack luster news day for the grains; which we should expect more of as we move into the end of the year.  The things that will drive us should be demand news, weather (mainly in South America but here in parts of the US as well), macro events and money flow by the funds(fiscal cliff).  The next major report and probable fundamental market changer will be the USDA report on Jan 11^th.  I don’t know that I would look for the grains to be quiet; but I would look for our markets to be thin as we go into the holidays.  Many producers, buyers, and other participates will be in holiday mode for the next couple of weeks. 

Wheat is very over done on the downside; yet we still are not seeing any HRW export business come our way; we really need to find some export demand for our milling quality wheat and until we do the horrible conditions that we presently have with our wheat crop will likely take a back seat.  I have said many times I think wheat has ton’s of potential and I have noticed plenty talking about the 2008 wheat market.  But until we have some demand there is really no comparison.  I remember in 2008 when no one had any wheat left and when we where shipping train after train to the export market.  We have yet to ship a train this year to the export market.  In 2007-2008 we shipped train after train down to the Gulf and later in 2008 the mill market really had to pay up. 

As mentioned news was rather light and likely will be; but we did have export inspections out this a.m.

Corn came in at 15.01; which was slightly above trade estimates but still about 10 million short of what we need on a per week basis to meet current USDA projections.

Beans had shipments of 37 million bushels; which were the smallest since September and below estimates but still well above what we need on a per week basis.  So far we have 40% more shipped this year than a year ago.

Wheat shipments came in a t16.4 million bushel which was the best number we had seen in several weeks; but still short of the nearly 22 million bushels we need per week to meet current projection.

Basis is steady for most of the grains; but I also don’t see many end users looking very aggressively other then bean buyers.  I do get some calls from brokers for corn and wheat from time to time but not much interest from the ethanol plants nor the mills.  Birdseed buyers also look to be very quiet; but orders have picked up.

Railroads are not slowing down supply either which doesn’t help out basis. 

To get basis running we probably need to see some export demand to keep our domestic buyers honest.  On the flip side with producer selling limited to a few bushels to keep the tax man happy I don’t think end users could buy anything without a big jump in the board or a big basis push.  Bottom line is it is a waiting came; longer term unless we get demand I don’t want to get too bullish basis on many of the grains just because producers have strong hands.  I much rather be bullish from demand.

It was about a year ago this last weekend that the first bean bull story started as soybeans gapped up one Sunday night.  So far I am not seeing any bull story done there other then planting delays; which isn’t much of one.

As for marketing I have noticed over the past couple of weeks that many advisor’s services have made plenty of sales recently.  I noticed one that is 70% sold in 2013 new crop corn, which to me is a little aggressive.  I also have noticed another has some 2014 wheat sold.  I am not going to make no generic recommendation to have X sold or X not sold as I think that every situation is different with different goals, needs, and risk/reward objectives; but I do think that we should take note that the reason some advisors are making some deferred sales is because levels are historically attractive with good profit returns and there are huge unknowns.  Some of the unknown’s could be extremely bearish should things shake out; such as what happens to corn price should we plant a record amount and have trend line or better yields along with curbing demand?  Some are on record having predicted sub $4.50 corn on the board next year.  I do know that some of the unknowns could also be bullish; so I am not going to preach that the sky is falling and one needs to be aggressive making sales; but I am going to say that sometimes that first little bit of marketing really helps out the average and helps many get comfortable.  Part of risk management can be risk diversification; so don’t be afraid to spread out a little risk here and there at levels that are both profitable and historically good.

If you would like help writing a marketing plan or going over some grain marketing options please give us a call.

Also I want to remind everyone that we have our marketing meetings this week.  Both Kevin and Tregg can give some good information about the markets as well as some opinions on where this thing might be heading.

Grain Marketing Seminar 2012

We would like to invite you to our

free grain marketing seminars:

Dec. 19^th, 2012 – 1:00 pm MST at the

Ambulance Building in Philip, Tregg Cronin Speaker

Dec. 20, 2012 – 10:00 am CST at the Ramkota in

Pierre, Kevin Van Trump and Tregg Cronin will be speaking on the grain markets.  Lunch will be served

Please RSVP for either location by calling

800-658-3670 or 605-258-2686

USDA Supply and Demand Report - Market thoughts 12-11-2012

The USDA report was out this a.m. and it showed the following

US 2012/13 Ending Stock Estimates
	USDA Dec '12	Avg. Trade Guess	Avg. Trade Range	USDA 2011	USDA Nov '12
Corn	.647	0.663	0.493 - 0.752	0.988	0.647
Soybeans	.130	0.130	0.063 - 0.145	0.169	0.140
Wheat	.754	0.712	0.612 - 0.754	0.743	0.704

Global Ending Stock Estimates
	USDA Dec '12	Avg. Trade Guess	Avg. Trade Range	USDA Nov '12
Corn	118	118.006	115.700 - 125.100	117.990
Soybeans	59	59.409	56.700 - 60.700	60.020
Wheat	177	173.435	170.000 - 175.680	174.180

A mixed report; neutral to friendly corn and beans and negative/bearish for wheat. 

For corn the market was looking for an increase in US stocks but they came in un-changed; perhaps adding more volatility to the January report?  For soybeans the market was looking for a decrease in ending stocks but only got exactly what they were looking for as the USDA increased crush; some feel there is room to increase more in the export category; but that wasn’t done.  For wheat the USDA decreased our exports by 50 million bushels; mainly in HRW; so that estimate was much higher than expected by many. 

For the world balance sheets the big negative was also in wheat with an increase of 3-4 mmt from estimates and last month; otherwise corn and bean numbers came in line with estimates.  There were some small adjustments that some didn’t care for; such as an increase in the Australia wheat size and not much for decreases in the SA crops despite the slow planting pace.

As for price action the corn and bean numbers help those markets trade positive right after the report but they have since fallen under the pressure that wheat has spilled over to them.  At 8:00 we have corn off 4 cents, beans off 5, KC wheat down 13, CBOT wheat off 16, and MPLS off 8 cents.

Outside markets are supportive to grains with the US Dollar weaker, equity futures firmer, and crude up slightly.

I think we are probably already done trading this report.  The biggest negative I see out of the report is it has took some of the wheat contracts below the range that we have held for months.  I think our biggest risk is more technical selling.  Keep in mind that the dry HRW talk isn’t getting us demand nor does the price we have today have much correlation to where prices could be in several months depending on what happens to supply, demand, and money flow.   Money flow is still very nervous with the increase capital gains taxes, fiscal cliff, and Europe situation.  Today’s report should remind us that we don’t have much for demand yet and odd’s of increase supply down; but that really won’t be known for several months.

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

Thanks

A couple of announcements don’t forget we will have our weekly MWC Marketing Hour Round Table meeting in Onida on Wednesday’s at 3:30. 

Grain Marketing Seminar 2012

We would like to invite you to our

free grain marketing seminars:

Dec. 19^th, 2012 – 1:00 pm MST at the

Ambulance Building in Philip, Tregg Cronin Speaker

Dec. 20, 2012 – 10:00 am CST at the Ramkota in

Pierre, Kevin Van Trump and Tregg Cronin will be speaking on the grain markets.  Lunch will be served

Please RSVP for either location by calling

800-658-3670 or 605-258-2686

Closing Grain Market Comments - Day Ahead of USDA Supply and Demand Report

Grain markets closed mixed to weaker ahead of the USDA report that will be out in the a.m.

Corn was off 7 cents, beans closed up 2-3, KC wheat was down 7, MPLS wheat was off 7, CBOT wheat was down 12, equities seen the DOW close up 15 points, the dollar is near unchanged, and crude is down about a quarter.

Not a big news day today; more of just a risk off day with all of the unknowns such as the USDA report that is out in the a.m., the fiscal cliff, ideal weather, and other tax concerns as we go into the new year. 

One positive that we had today was the reversal that soybeans did; after trading down nearly 20 cents they managed to turn around and close up a couple; which I viewed as a good technical sign.

We did get a little wheat business today doing a little more SRW and white wheat with Egypt; but there was also some Saudi Arabia business done that have very little US wheat; more EU and Australia wheat.

This morning we had export shipments out and they continued the trend as of late.  Good bean shipments of 46.6 million bushels which is well above the 18.3 we need on a per week basis to meet current USDA estimates.  Wheat came in at 13.9 million bushels nearly 10 million bushels light of what we need on a per week basis to meet current USDA projections.  While corn came in a 7.9 million bushels shipped versus the nearly 25 million bushels we need per week to meet current USDA projections.

We haven’t come close hitting what we need on a per week basis for either corn or wheat since sometime in September.  While beans have been super strong since that same time.  I guess the point isn’t bean demand is super strong or wheat and corn demand is super weak.  We do need to keep that in mind; but the point is that keep in mind there is only so much elevations in our infrastructure.  As example I know our local elevator’s can’t handle ton’s of corn at the same time they handle ton’s of wheat; as there are only so many rail cars along with so many bin’s.  I think more important then shipments has to be sales as this point because we are in the time period when many exporters are still focusing on handling the beans due to the inverse in the market.  In  few months hopefully that opens the door for more wheat/corn shipments.

Below is information for the USDA report.

US 2012/13 Ending Stock Estimates
	USDA Dec '12	Avg. Trade Guess	Avg. Trade Range	USDA 2011	USDA Nov '12
Corn	?	0.663	0.493 - 0.752	0.988	0.647
Soybeans	?	0.130	0.063 - 0.145	0.169	0.140
Wheat	?	0.712	0.612 - 0.754	0.743	0.704

Global Ending Stock Estimates
	USDA Dec '12	Avg. Trade Guess	Avg. Trade Range	USDA Nov '12
Corn	?	118.006	115.700 - 125.100	117.990
Soybeans	?	59.409	56.700 - 60.700	60.020
Wheat	?	173.435	170.000 - 175.680	174.180

As you can see the market is expecting a bearish report for both corn and wheat; while a bullish report for soybeans.  Ideas are they cut the US corn export numbers, cut the US wheat export numbers, and increase the soybean export numbers. 

Typically the December report isn’t a huge market mover.  The big report is Jan 11^th; which if memory serves me right has had one grain or another trade limit up or limit down every year since 2008.

One somewhat silver lining is that if the reports do come in a little bearish for both wheat and corn perhaps that adds back a little needed demand.  Longer term I think the January report and what it does for final production and quarterly stocks to be very important.  The January report will give us final production whereas the report in the a.m. won’t have any adjustments to production.  The January report will also have winter wheat acres planted.

Possible unknown cards that the USDA could throw out tomorrow include demand estimates and world production estimates.  The above shows the markets expectation but the above doesn’t say exactly what the market is already trading.  Sometimes for markets to really move on report days you need to really miss the trade estimate while other times just coming in inline with trade estimates causes sparks.  To me the recent sell off the past couple days on corn…..nearly  35 cents from the highs on Thursday to the lows today has priced in a bearish report.  So to me that says if we don’t get a bearish report the market has a good chance of bouncing and if the report is bearish will it already be priced in???

Basis was mixed to weaker the past couple of days.  But with the weakness in the board thus lack of producer selling basis seems to have stabilized.  Also I would note that for the first time in a long time the railroad didn’t set cars in when expected; but rather a couple days late.  If this is wide spread it could quickly cause some pop in basis values.  But nearing the holiday’s probably doesn’t help because many industries have plenty of down time.

A couple of announcements don’t forget we will have our weekly MWC Marketing Hour Round Table meeting in Onida on Wednesday’s at 3:30. 

 Grain Marketing Seminar 2012

We would like to invite you to our

free grain marketing seminars:

Dec. 19^th, 2012 – 1:00 pm MST at the

Ambulance Building in Philip, Tregg Cronin Speaker

Dec. 20, 2012 – 10:00 am CST at the Ramkota in

Pierre, Kevin Van Trump and Tregg Cronin will be speaking on the grain markets.  Lunch will be served

Please RSVP for either location by calling

800-658-3670 or 605-258-2686

Charts 12-7-12

Here are a couple of bean and corn charts.

Closing Comments 12-4-12

Markets closed mixed today in a rather choppy quiet session.

Corn closed down 3- to up 2 with the deferred months gaining on the nearby, beans closed up 2 nearly 20 cents off of the lows, KC wheat was off 4, MPLS wheat was off 3, CBOT wheat was off 4, DOW was off 13, crude was down 80 cents, Gold was off over 20.00 an ounce, and the dollar was weaker.

Not bad price action at all for beans and even wheat and corn bounced a little bit off of the lows; but still disappointing compared to where the markets where at one time.  Not much to really blame the weakness on today; but it was negative to see spreads work wider; mainly in corn.  As spreads work wider it isn’t exactly strong demand sign.

A little weakness came from Taiwan buying Brazilian corn; from what I heard 60 cents a bushel cheaper then US corn.  Basis is defensive a little bit today as it just seems like there is a hair too much corn north of us that is flowing down to our typical buyers cheaper then what local guys are willing to sell for.  Ethanol profitability probably doesn’t help this at all.  Tomorrow we should have the weekly ethanol numbers out; we really need to stay above what we need on a per week basis to meet current USDA forecast because seasonally we usually see a nice slow down in the summer as plants due maintenance and there just isn’t enough corn to source cheap enough.  That in itself is bullish but it also can turn bearish in a hurry when you end up curbing demand.

Not a lot of new news for direction this time of year.  We should focus on weather in South America, demand, and the funds.

 Presently weather isn’t perfect in South America but I don’t think it is a bull story either.  Only potential thing I have heard about is too much water leading to weak stand’s that could cause yield drop should we get hot and dry.  Weather is supportive prices in the US as it remains dry everywhere but that is and has been old news for some time.

Demand side of things is mixed; corn demand isn’t anything special as end user profitability struggles and we just are not in the export market.  Wheat you could say demand has picked up; but not really for milling quality wheat as we simply are not getting any HRW export business to speak of.  Soybeans have had strong demand; but enough to push us back to the previous highs?  It doesn’t seem like it right now.

The funds don’t seem to be playing our game right now; more are worried about possible tax implications and the fiscal cliff then anything so it seems like money is an outflow from investments and grains in particular.  I have said many times if we are going to rally we need the funds involved and for them to get involve we need good headline story. 

The headline story isn’t here today; could it be in the next few weeks or months?  Sure; but today it isn’t here.  I think we all can think of plenty of possibilities that could be that headline such as a bullish Jan USDA report, strong demand, continued wheat production problems, or continued dry weather.  Plus a hundred other things.  But there is also another hundred negative things that could happen.

One thing that has stuck out to me the past couple of weeks is volatility in options in our market place.  Volatility is extremely low; meaning options are fairly cheap.  So perhaps now isn’t the worst time to consider getting some protection.  Volatility for some of the grains has dropped as much as 20%; which means options are cheap.  So perhaps now isn’t the worst time to consider protection some of bad possibilities that are out there while yet looking for higher prices.

If we seen volatility jump 10% most options would increase in value dramatically.  As example an at the money put option would cost nearly 14 cents more for March Corn, 15 cents more for March wheat, and 26 cents more for March soybeans.  While puts 50 cents below the money would be double the cost for both corn and wheat while a March 14 bean put would increase by 25 cents.  Bottom line is I think the market is providing an opportunity to make a good business decision and that is getting some rather cheap protection.  Most ag options are seeing volatility as low as they have for nearly 10 years. 

If you need help looking at what protection might fit best for you and your operation give us a call; keep in mind we do offer CHS Hedging services.  Keep in mind that the above option talk might not be the right move for everyone; buying a put option would be a good move for someone that is nervous of the fiscal cliff, nervous on corn prices because of the lack of ethanol profitability, or nervous for prices in general; yet they really don’t want to sell.  In the case where one doesn’t want to sell yet wants protection buying a put option can be a way to help lock in a good min price level; another option is the simple min price contract.  To see which tool might make most sense for you check out presentation from 2012 Ag Horizon’s at http://grainmarketingplans.blogspot.com/2012/11/tools-and-considerations-in-grain.html

A couple of announcements don’t forget we will have our weekly MWC Marketing Hour Round Table meeting in Onida on Wednesday’s 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.

Jeremey Frost

Grain Merchandiser

Midwest Cooperatives

Afternoon Recap from CHS Hedging's Tregg Cronin 12-3-12

Outside Markets as of 1:15 CDT: Dollar Index down 0.350 at 79.857; NYMEX-WTI up $0.16 at $89.06; Brent Crude down $0.37 at $110.86; Heating Oil down $0.0042 at $3.0565; Cattle firmer and hogs weaker; Gold up $6.40 at $1719.10; Copper up $0.0075 at $3.6560; S&P’s are down 3.25 at 1411.50, Dow futures are down 34.00 at 12,974.00 and Treasuries are softer.

Financial markets gave back most of the morning gains after weaker than expected readings off the ISM-Manufacturing survey which shoved us back below the boom/bust level of 50.0 for the first time since July.  Many were quick to cite Hurricane Sandy for the disruptions, but details seemed to suggest it had more to do with uncertainty generated by the fiscal cliff than the super-storm.  The new orders component and the employment index did drop, but the production index actually rose.  If Sandy had forced widespread closures, the production index also would have dropped.  There was little for comments from Washington DC which might have been a good thing.  The dollar index remains under pressure, trading at the lowest levels since October 31^st.  The continuous commodity index was up 0.50% today to 574.28.

A rather uninspiring close today with corn giving up 8c gains to see the front-end of the curve close down 1-2c.  The deferred contracts did manage to close in positive territory, pushing a bearspread bias on the day.  Slower than expected export shipments, weakness in wheat, softening cash markets after last week’s movement and still no strong stopper on the 246 December deliveries all seemed to be factors.  Export inspections were just 9.6mbu, the second-lowest shipment total of the marketing year and well short of the 24.1mbu we need to ship each week to hit the USDA forecast.  Total shipments to date are 208.3mbu, down 48% from a year ago.  Worth noting, China took 2.01mbu off the PNW, an encouraging sign to see them keep taking our corn.  Farmer hedging today slowed quite dramatically considering these prices were available last week after some better movement early.  Despite the lack of movement, cash corn basis seemed to back off today.  CIF bids were indicated at +78H, off a few cents from Friday as the push seems to be about getting soybeans south of Cairo before corn.  Once the river closes in mid-December, corn will have to move to the Gulf by rail, or go to Hereford, the PNW or possibly the Atlantic.  An article from Bloomberg said farmers could see freight costs double as things need to move by rail instead of barge, or because the barges have to be loaded so light in order to avoid grounding in the low areas.  Other newswires said the US Army Corp of Engineers intends to speed rock blasting between Thebes, IL and Grand Tower, IL on 13% of the river rocks will begin January 3^rd.  This could allow light loaded barges to make it through the affected area.  Parties are still petitioning the President to release more water out of the MO-River, but no word on that yet.  Midday bids off the PNW looked a bit weaker as well with +100/108H bid for Dec/Jan.  +110/113H is available for Feb/Mar, but the majority of corn isn’t actually working to the PNW, but instead being spread to another domestic destination.  Most ethanol production margin calculations remain rather negative.  In export news, an Israeli firm is tendering for 115,000MT of corn for Jan 20 shipment.  COFCO (China’s state reserve buyer) and Ukraine have continued their talks about Ukrainian corn working into the country.  Most still seem to think Ukraine could ship their first cargo in December.  Supportive to corn is the ongoing rains in Argentina which are prompting acreage shift ideas from corn to beans.  Heavy rains will continue this week, but most see a drier pattern in the 6-10.  Brazil’s vessel lineup to load corn was seen at 1.942MMT vs. 1.593MMT a week ago.  Brazil’s corn planting progress is seen at 86.3% vs. 94.3% a year ago according to Celeres.  The summer crop is forecast at 37.1MMT and the winter crop at 38.5MMT.  One note of the COT report, commercial gross longs (end users) saw their position drop 67,286 contracts, or 16.1%, to 364,511 contracts in the latest week.  The specs have continued their buying, but that’s a big drop by the guys who actually use the corn.  March corn looks as though the $7.15-7.75 range will continue for the foreseeable future.  Farmers sell at the top and end users buy at the bottom.  Looks like selling straddles and strangles could be a safe bet, kind of like ADM has been doing as of late.

Wheat had a very similar session to corn, rallying overnight and early, only to give up gains and close lower despite some weekend tender business, dry HRW-wheat areas and more rain in Argentina.  Wheat bulls finally saw the export business they’d been waiting for when Egypt decided to buy 165,000MT of US-SWW at $337/MT FOB, and 115,000MT of US-SRW at $348-351/MT.  As supportive as Egypt taking US wheat was the fact the offerings from France and the Black Sea were somewhat limited.  Egypt did buy one cargo each from France and Romania.  While this is certainly supportive, it’s the higher pro wheats such as US-HRW which is so badly behind the pace needed to hit the USDA’s export forecast.  It would be very encouraging to see Iraq move on some US-HRW in its current tender, but based on the last trades, that might be a tall order.  Bottom line is it looks like importers are coming for US wheat now, but will need to continue to do so in order to keep prices elevated.  Australia’s harvest is moving past the halfway mark, especially in W-Australia where it is 61% complete.  Export inspections totaled 14.2mbu today, above last week’s 8.1mbu but below the 23.8mbu needed weekly to hit the USDA’s mark.  While not a new feature, interesting to note the cash spread on the spot floor in Minneapolis and KC.  12.0% HRW was quoted at +85/100H today, so using the offer side would put it at $10.06.  14.0% HRW was quoted at +82H which would put it at $10.13.  If these two classes of wheat are nearly the same price, but one offers you 2.0% more protein content, which would you rather own?  Would imagine mills will try working in more HRS were applicable.  COT data out Friday offered a couple interesting observations.  First, the net long position held by the funds in Kansas City wheat dropped to 26,735 contracts, the smallest since the week of June 26^th.  This despite commercial gross longs having been buyers for the past 5-weeks.  On the other side of the coin, Chicago wheat saw a big drop by the commercial gross longs (end users) last week.  That group shed 69,647 contracts (36% of their position) in the latest week.  This while specs bought roughly 10,000 contracts.  In Minneapolis wheat, funds pushed their net long position to 8,433 contracts, the largest since April 24^th.  Some very different actions across the three wheat exchanges.  Dry forecasts remain for the southern plains the next 10-15 days.  This should be a back burner issue for the near-term, but will be a talking point nonetheless.  A little discouraging to see us get the business we wanted and sell off, whereas all fall we rallied every time Egypt or a big importer bought wheat from a competing nation because they were that much closer to running out…

Soybeans managed a good close, finished up 12-17c, although they were off their highs by around 8c.  Without regurgitating most of the news outlined above, supportive influences continue to be the wet forecasts in Argentina, solid demand on both soybeans and products, and firm basis levels in both the US and SA.  Export inspections in the latest week were 51.1mbu vs. 46.6mbu the week before and the 19.1mbu needed weekly to hit the USDA’s mark.  Interesting to see 2.0mbu destined for China inspected off the Atlantic.  Consolidated Grain & Barge (CGB) sent out an email to customers today saying they will essentially stop taking barges north bound up the river by December 9^th.  Celeres released data today on farm marketings and planting progress with 50% of next year’s crop thought to be sold vs. 40% a year ago.  Plantings were seen at 83% vs. 88% a year ago.  They kept their soybean production outlook unchanged at 79.1MMT, but this is lower than the USDA’s 81MMT.  It was interesting to see the % of average precip totals for South America this morning.  One can definitely see the trouble areas and the really good areas.  Buenos Aires in Argentina is definitely a trouble area with their reporting stations showing 308% of normal precip during the month.  Other regions were anywhere from 158% (La Pampa), 796% (San Luis) down to 15% (Correnties).  Brazil wasn’t as saturated but did have some areas in the south which would have liked to have received more rain.  Most areas there were between 57-88% of normal.  Largest amount of open interest in January soybeans is at the $15.00 strike.  Option expiration is around 20 days away, so keep it on the radar.  One last note on the COT data, funds continued to liquidate their position last week, dropping their net long down to 73,150 contracts, the smallest since February 14^th.  Their positions are following the exact same trajectory as last year before the weather problems started.

6-10 South American weather forecast.  Drying up in the south where drier weather is needed.

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

www.chshedging.com

CHS Hedging, Inc.
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