Overnight Highlights from CHS Hedging's Tregg Cronin 3-20-2013

Outside Markets: Dollar Index down 0.153 at 82.836; NYMEX-WTI up $0.66 at $92.82; Brent Crude up $0.74 at $108.19; Heating Oil up $0.0232 at $2.8879; Livestock markets are weaker; Softs are better; Gold down $3.70 at $1607.50; Copper up $0.0310 at $3.4370; Silver up $0.022 at $28.865; S&P’s are up 8.50 at 1550.75, Dow Jones up 73.00 at 14,461.00 and Treasuries are weaker.

The feature in financial markets this morning is once again Cyprus and the ongoing drama there.  The plan now seems to be evolving to a one-off levy, not on bank deposits, to be paid by the Cypriot citizens which accounts for around 30% of the Cyprus GDP.  So gets around simply taking money out of people’s bank accounts, but still might be met with resistance.  It does, however, get the Russian billionaire’s off the hook.  Whew!  Otherwise global equity markets are faring pretty well with the NIKKEI up 2.03%, the Shang Composite up 2.66% and the IBEX-35 is up 0.77%.  The Euro is positive for the first time in three days with the EURUSD +0.264%.  The GBPUSD is also firmer this morning on BOE comments.  The FOMC is out later today with their rate decision.  Mortgage Apps -7.1%.

Not much for moisture the past 24 hours aside from some light precip in KS.  Quiet radar in the Midwest this AM.  Cold official start to spring with the Twin Cities 5* this morning.  Next moisture looks like Friday in SE-KS/E-OK/AR/MO to the tune of 0.20-1.40”.  Then by Saturday through Monday, another system works into the central corn belt, bringing 0.50-1.05” to E-KS/S-IA/MO/IL/IN/OH/KY/TN and all of the South East including AL/GA/SC.  MN/SD/ND look to be left dry, but this will stall any fieldwork further.  See map below for totals.  No change to 6-10 and 8-14 day outlooks from NOAA with sharply below normal temperatures and well below normal precip.  Cold and dry which again will not aid in dry down through the end of the month.

Continuation of gains witnessed yesterday during the overnight session with May corn back above $7.30 for the first time since February 6^th, while spring wheat is trading comfortably above $8.00 for the first time since the beginning of the month.  It isn’t just wheat and corn, however, as nearly every commodity around the globe is staging a rally this morning from palm oil to gasoline.  The wheat and corn rallies continue to be front-end led which seems to be a product of two things: 1) funds wishing to get either outright long or at least bullspread in anticipation of a bullish stocks report next week, and 2) end user margins on corn are rather profitable which should be bolstering buying power.  Wheat is a big short and must stay with corn for feed, but also US wheat is the cheapest in the world right now, so additional export business is probably occurring to a certain degree.  Soybeans are just seeing some corrective bounce along with commodities in general as cash remains flat/weaker and China absent for additional US stem.

Overnight headlines included wires suggesting the Sunrise Group isn’t the only Chinese trading firm to be canceling Brazilian soybean cargoes, although additional details weren’t available.  India’s trade minister is in talks with Egypt on becoming an approved supplier to the world’s largest wheat importer.  Egypt has the strictest quality standards of any importer, so the likelihood of India displacing more traditional exporters isn’t likely at first, but it does signal a shift in world wheat trade that is important.  Taiwan bought 60,000MT of Argentine corn for May 1-15 shipment at $326.87/MT C&F.  It also bought 58,865MT at $1.2850 over the July board.  Agriculture & Agri-Food Canada said they see grain prices dropping 10-20% in 13/14 on output, rising exports.  They see oilseed production up 5% and wheat up 4.4% with total exports up 0.9%.  Grain Industry Researchers have been comparing Australian soft and hard wheats with that of Saudi Arabia and said the two compare favorably.  See article below.

Open interest changes yesterday saw another huge jump in corn of 23,050 contracts, wheat down 2,500, beans down 6,120, meal down 4,070 and soyoil up 1,900 contracts.  Corn appears to be attracting trend type money with the rising open interest which is a short-term positive.  Liquidation in the soy complex which makes sense considering the relative size of the fund longs there.  Chinese markets were slightly better with beans up 4.75c, meal up $3.80, soyoil down 16c, corn down 1.25c, palm up 1c and wheat up 4c.  Malaysian Palm Oil was up 26 ringgit at 2,441.  There were 135 deliveries in Minneapolis last night.  Paris Milling wheat is up 1.26%, Rapeseed up 0.81%, UK Feed wheat up 1.14%, Corn up 0.77% and Canola is down 0.14%.

Call things better as the Ags benefit from a global risk-on mentality, but also due to the positive fundamental factors at work in corn and wheat.  Spreads are firm, but basis has been mixed as farmers have been selling into the rally heavily on corn and to a lesser extent on wheat.  Another 20-30c rally in wheat would buy a lot in the upper-Midwest, so a defensive basis position as long as futures keep rallying is probably warranted.  Funds have lots of room to buy on both corn and wheat should they decide to.  Farmer orders are probably waiting at $7.40-7.50, so we probably “have to go to where the orders are.”  Corn’s technical picture is good right now.  Soybeans will be the laggard.

Russia, Egypt Yet to Contribute to AMIS Commodity Database (1)

2013-03-20 10:51:52.774 GMT

     (Adds Nigeria unavailable for comment in 10th paragraph.)

By Rudy Ruitenberg

     March 20 (Bloomberg) -- Russia, Egypt and Nigeria are among

the five countries that still need to contribute data to the

Agricultural Market Information System set up by Group of 20

countries to avoid a repeat of the 2007-08 food-price crisis.

     The others are Kazakhstan and Saudi Arabia, David Hallam,

head of markets and trade at the United Nations’ Food &

Agriculture Organization, said in an interview in Geneva

yesterday. Russia was the world’s third-largest wheat exporter

in 2011-12, and Egypt was the biggest buyer of the grain, while

Nigeria is the world’s biggest rice importer, according to U.S.

Department of Agriculture estimates.

     Rice prices surged in 2008, after the Philippines failed to

fill a rice tender following export restrictions by countries

including Vietnam and India. That made other grains more

expensive and helped push global food prices to a record.

     Rome-based AMIS has “fairly complete” data for 18

members, some information from four and “really no useful data

at all” from five, Hallam said. AMIS consists of the G-20

members as well as seven countries that are large users or

producers of farm products.

     “All of the countries we’re working with, there isn’t a

single one saying they won’t collaborate,” Hallam said.

     AMIS was set up to improve data on stocks and production of

corn, wheat, rice and soybeans with the goal of reducing price

swings. To fill in the gaps for countries that haven’t directly

provided figures, AMIS uses publicly available information as

well as data from the International Grains Council and the USDA,

according to Hallam.

                          Data Required

     The five countries have failed to provide data “for a

variety of reasons, technical and organizational,” the FAO

director said.

     “Until we get everybody supplying data which is

comprehensive and up to the standards we want, we’re looking at

another couple of years,” Hallam said. “This whole exercise is

a long-term effort. It’s a similar effort as what was done for

oil, and that took eight or nine years.”

     Russia faces “an organizational issue” and a resolution

may be reached at an AMIS meeting in April, Hallam said.

     The Russian agriculture ministry wasn’t available to

immediately comment when called by Bloomberg today.

     Salisu Na’inna, the spokesman for Nigeria’s agriculture

ministry, wasn’t able to comment immediately when called by

Bloomberg. Saken Kalkamanov, a spokesman for the Astana,

Kazakhstan-based agriculture ministry, wasn’t immediately

available for comment when Bloomberg called his office and

mobile phones.

     Hallam said some countries have been more willing and

capable to provide information on production and stocks than may

have been expected.

     “China is a very active participant,” the FAO director

said. “Ukraine is one of the star performers. Indonesia is in

the top group of providing everything.”

Saudi officials learn the virtues of Australian wheat

2013-03-19 21:50:15.291 GMT

By Caitlyn Gribbin

     March 20 (ABC) -- Grain industry researchers say Australian

wheat is highly suited to producing flat breads popular with

millions of Saudi Arabian consumers.

     The Australian Export Grain Innovation Centre research has

compared the baking qualities of Australian premium white and

Australian hard wheats with samples of Saudi wheat.

     It found the Australian wheat compared favourably to Saudi

samples for flat bread production.

     There's major growth potential for Australia in Saudi

Arabia, with the country aiming for 100 per cent wheat

importation by 2016.

     The wheat research was presented to Saudi Arabian officials

in Perth yesterday.

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

Closing Comments 3-19-2013

Markets closed firmer for the most part in decent price action.

Corn closed up 8 – 9 cents a bushel, KC wheat was up 8, MPLS wheat was up a dime, CBOT wheat was up 9, outside markets had a bounce in the US dollar,  and stock markets were mixed with the DOW up 4 points.

Not a bad day for corn and wheat; charts look like they could inspire a little more bounce.  Wheat is up near resistance that if we can break threw could spur additional short cover from the funds.  This happening at a time when demand has been solid.

Corn basis feels ugly; I can’t find much of any bid for movement anytime soon.  PNW markets are soft a good 10-15 cents weaker than a week or two ago.  Bids haven’t dropped a ton in the country; but I think that is more due to elevators being competitive as corn basis is soft and coverage by end users feels heavy at least for any nearby slots. 

Corn charts have opened up a little bit on old crop corn too; but with the basis weakness I am seeing and the lack of volume I am not super convince that the rally has much life left.  It also looks like the funds have done a good job of already trying to get long ahead of next week’s stock’s report.  I guess caution is the word I would use for the corn rally.  The one positive has to be that we haven’t seen much negative corn demand headlines.  Sure exports are still horrible; but nothing worse than they have been and the really only demand headlines seem to be that of increased demand or ethanol plants looking to re-open. 

More talk of planting delays has been out lately; but that hasn’t helped out new crop corn yet.  Locally planting delays would be welcomed if the reason for them was too wet; but when the only reason I have seen is too cold of ground temps.  Other areas are also cold but most of the places east of us seem to have had a little relief to the dry weather talk.

Outside markets or the stock market in general didn’t have the worst close in the world; but the Cyprus drama has to make one a little nervous.  The VIX index was up and overall I don’t think grains really need to see a big money out flow.

Wheat basis was really undefined today; with very little on the spot and I didn’t hear of much for to-arrive trading.  It had felt weaker last week; but rail road slow performance probably has stopped the bleeding short term.  I would guess however that a 20-50 cent bounce will buy plenty of wheat and even though our demand is better than it was it still isn’t that of a super strong bull market.  There is plenty of wheat elsewhere and India seems to be a seller on a bounce. 

I do like how the wheat charts look, the fact that the funds are still short and the fact that demand has increased thus I look for a continued bounce.  But I do also think that should we get that bounce it needs to be rewarded with some sales.  With implied volatility rather low and basis strong if one wants to stay in the wheat game perhaps a bounce would be a time to look at selling the cash and buying a call option or  do a min price contract?

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

Thanks 

Closing Comments 3-18-2013

Grain markets closed mixed today despite the rather horrible start.

Corn closed positive with the May contract up 3 cents, KC wheat was down 7 cents, MPLS wheat was off 7, CBOT wheat was down a dime, soybeans had the May contract off 16 cents, while Nov beans were down 3 cents, equities got beat up a little bit with the DOW off 62 points, the US dollar was stronger up 369 on the June futures at 82.835, gold up 12 an ounce and crude up about a quarter.

Not a bad day for the grains as we managed to bounce off of the lows for the most part.  The weakness came from a risk off type of attitude; mainly from the Cyprus situation.  To my understanding they are looking at a one-off tax on bank savings accounts ……….“Accounts with more than €100,000 will be taxed at 9.9%, those with less at 6.75%, raising an expected €5.8 billion for the near-bankrupt nation.”

That spilled over to lots of equity weakness in parts of the world; but it also put some pressure on the Euro helping firm up the US dollar and the risk off type of attitude.  One thing I did find interesting was one of the CNBC guests mentioning the fact that it might mean more money flowing into our stock market.  To me it looks like a move that should make guys nervous……….some of the bears wondering if this will be the first domino to fall?

As for grain news the biggest thing I seen today was locally the railroads have done a 360.  Just a few short weeks ago they seemed to be a week or so ahead of time; but today when I came in expecting cars at 3-4 locations I found none got spotted over the weekend.  Some were suppose to be spotted late Friday night or early Saturday morning; but today the rail road said it looks like closer to Wednesday.  If the railroads are all performing like that I would expect some sort of basis spike in the short term.  But perhaps it just stops some of the spot basis bleeding as things have been under pressure for winter wheat, spring wheat, and corn spot basis for the last week or so.

Actual news out this a.m. included export shipments.  Beans were still above the number needed on a per week basis at 8.9 million, but that is a big down turn versus the two previous weeks of 40 million and 17.8.  Bean crush demand as noted by Friday’s crush numbers is still super strong and the actual demand that needs to be curbed in the next 6 months is higher than it has ever been year over year.  Basically it feels like the soybean market is or has turned from a demand game with China to a US Crush demand story.  To me that means that some of the work might have a better chance to be basis work over the board……..as China buying is headline story; while crush demand probably isn’t a headline story to get the funds wanting to get super long……..I guess only time will tell on this.

Wheat and corn exports were very close to the numbers needed on a per week basis.  With wheat slightly above and corn a couple million bushels below.  Neither are really bullish nor bearish in my opinion.

There were some rumblings that a couple Valero ethanol plants might be opening back up in the very near future.  Also talking to a Valero buyer; it does sound like they have some interest in some of the replacement grains such as milo.  I don’t think they have committed to buying much if any; but it shows that margins have improved and they intent to try and weather out the storm until new crop.  Having said that he didn’t have much interest in all on my corn offers for June versus the May.  That is both good and bad; first off it doesn’t feel like ethanol plants or many buyers have much coverage for the June-August time period; as they simply don’t want to pay a carry for it and why would an elevator or producer sell for a discount in a few months when they can move and get paid now? 

But that is both good and bad; depending how it plays out.  First off guys without coverage can decide not to run a little easier than one with a book one.   Buyers will also try buy more nearby and get others to push out or delay the delivery and that can act like guys have some deferred coverage.  Some of the export markets and feed markets are showing some carries in their bids; but their bids are also not the nearby market.  Overall to me we have stages set for some basis volatility when producer move into the field and as we go into summer and wait for new crop.  If plants and other end users decide to buy things should push up; but once coverage or a replacement is found basis has potential to get very ugly in a hurry.  Bottom line is that the last guy to sell to the guy that needs the product likely gets a great basis; but the next guy could get 10 cents to 1 buck (maybe more) less.

Wheat basis to me has felt a little top heavy; but perhaps rail road performance will give it one more bounce.  I would be a little cautious with the extreme amount of wheat that needs to move in the next few months.  Demand is better and might allow basis to hang in there a little bit on a board rally; but any major board rally probably slows demand down and brings way more supply then we need. 

The birdseed market is on the soft side; but we have seen a little pick up on orders off of contract.

Don’t forget our Harvest 4 Hunger food drive is still going.  Please give us a call for more information.

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/

Overnight Highlights from CHS Hedging Tregg Cronin 3-18-2013

Outside Markets: Dollar Index up 0.409 at 82.665; NYMEX-WTI down $0.89 at $92.57; Brent Crude down $1.32 at $108.51; Heating Oil down $0.0280 at $2.9110; Softs all weaker; Gold up $9.70 at $1602.30; Copper down $0.0775 at $3.4430; Silver down $0.066 at $28.785; S&P’s are down 12.50 at 1541.00, Dow futures are down 72.00 at 14,361.00 and Treasuries are well bid.

The most important financial market news today, and arguably any market news today, is the unprecedented bank levy on Cyprus citizens as part of the agreement from the Eurozone to receive a bailout.  In essence, every citizen in the country of Cyprus who has money in a bank account will be charged a tax for having that money in a bank account which will in turn go towards paying off creditors and securing a bailout from the Eurozone.  This has caused markets across the globe to go into a tailspin, especially those of Spain and Italy as they could possibly be next.  It will almost certainly have the effect of a mini-bank run in which people run to ATM’s and banks across the country to try and pull money out ahead of the proposed levy.  The IBEX-35 is down 2.20%, the FTSE -2.00%, the NIKKEI closed off 2.71% and the Shanghai Composite was down 1.68%.  Portuguese, Spanish and Italian 10-yr yields were up 8-17bp, and the Cyprus 5-yr Credit Default Swap is up 44.28bp to 733.46bp, although well below the 2012 highs of 1,600bp.  The Euro is under heavy pressure as well with the EURJPY -1.227%, the EURUSD -0.948% and the EURGBP is off -0.988%.  Commodities are also getting hammered this morning with Copper -2.51%, Cotton -2.01%, Palm -1.16%, Gasoline -1.72% and Sugar off 1.75%.  Negative headwinds for grains.

Fair amount of moisture around over the weekend with rains in MO/S-IL/S-IN/S-OH, while snow is working its way across the upper-Midwest this morning.  Several major highways and interstates are closed across MN/ND this morning, so expect little grain movement by the farmer or the railroad, fouling up already poor train logistics.  After the current system moves through, things will quiet down in the corn belt with most dry weather impacting us the next 5-days.  Eastern areas of the southern plains have chances at another 0.50-1.40” in E-SKS/E-OK/MO/AR.  NOAA’s extended maps turn cooler and drier for much of the Midwest in the 6-10.  Below normal precip for all of the southern plains.  8-14 has a bit better precip for northern growing areas.

Sell pressure from the very get-go last night and accelerating as we progressed through the evening.  Hard to separate what is specific to the grain markets and what is tied to the pan-commodity and financial market selloff tied to the European contagion fears.  While Cyprus going bankrupt won’t necessarily affect ethanol and soybean crush margins in the US, it will continue to rally the Dollar Index as investors search for a safe-haven, and with our currency already at 7-month highs, it will have a negative effect on our Ag’s.  Aside from that, charts look ugly this morning, and soybeans look as though we’ll be testing the $14.00 mark this week, especially with little news until the March 28^th reports.  Crush is still at an unsustainable pace, wheat is still being fed and ethanol plants are starting back up.

News overnight included Valero announcing it was planning to restart output at its Bloomingburg, OH ethanol plant.  It also has plans to resume operations at its mill in Linden, IN “in the next couple weeks.”  Bloomberg reported investors increased bullish wagers on commodities by the most in eight months with net long positions up 30% to 528,680 contracts across 18 futures and options markets last week.  That could change this week.  Jordan issued two tenders for 100,000MT of milling wheat and 100,000MT of barley.  Palm oil remains in the headlines as stockpiles remain near record levels in Malaysia and China and the recently added 4.5% tax on palm oil exports remains in effect, curbing some demand.  While old news now, the NOPA crush report from Friday is mainly garnering negative headlines like “crush missing estimates.”  While the crush did come in nearly 5mbu under estimates, the pace is still unsustainable.  To hit the USDA’s 1,615mbu marketing year target, we need to slow Mar-Aug crush 19% from last year.  The biggest reduction ever in y/y Mar-Aug crush? 12%.  So we’re going to try and do something we’ve never been able to do, which will mean more imports of beans and meal from SAM, bigger inverses, and stronger cash markets.

Open interest changes Friday included wheat down 2,350 contracts, corn up 6,460, beans down 5,140, meal down 3,710 and soyoil up 3,780 contracts.  Chinese markets were down sharply with beans off 13.50c, meal off $12.40, soyoil down 23c, corn up 0.75c, palm down 19c, and wheat down 2.50c.  Malaysian Palm Oil was down 34 ringgit at 2,383 (1.16%).  Paris Milling Wheat is down 0.11%, Rapeseed off 0.38%, Corn off 0.55%, UK Feed wheat down 0.71% and Canola is down 0.59%.

Call things weaker today as a pure “risk-off” day takes hold, regardless of the underlying fundamentals in the grain markets.  More moisture is falling in the Midwest which is bearish until it impacts planting progress which isn’t occurring yet.  Charts, as I mentioned earlier, also don’t have a good look to them today.  Bullspreads should still work near-term as the break isn’t likely to move any grain on top of the winter weather in the upper-plains.

Trade as of 7:10

Corn down 3-5

Soy down 9-16

Wheat down 3-7

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

www.chshedging.com

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

Overnight Highlights from CHS Hedging's Tregg Cronin 3-15-2013

Outside Markets: Dollar Index down 0.334 at 82.272; NYMEX-WTI up $0.57 at $93.60; Brent Crude up $1.14 at $110.11; Heating Oil up $0.0314 at $2.9609; Livestock markets are weaker; Softs are a bit firmer this morning; Gold up $0.90 at $1591.60; Copper up $00.80 at $3.5445; Silver up $0.068 at $28.875; S&P’s are up 0.25 at 1556.25, Dow futures are unchanged and Treasuries are lightly mixed.

Flat US futures this morning in what looks to be a fairly quiet close to the week.  If the Dow closes up today it will be 11 sessions in a row which would be the longest streak since 1991.  Asian shares were firm last night, but Europe is weaker this morning led by the IBEX-35 which is down 0.78%.  All appears to be well as the Volatility Index, or VIX, dropped to a fresh low for the move of 11.30%, the lowest since March 2007.  Seems like there is a growing sense of complacency out there, but we have been getting better economic data to support it.  Currency moves overnight are highlighted by the Aussie Dollar weakness as the GBPAUD is up 0.640% and the SEKAUD is up 0.713%.  Yen, Euro and Dollar are flat.  A few economic data points today including the Empire Manufacturing (prior 10.04), CPI (+0.5%) and Industrial Production (+0.4%).  JP Morgan is back in the news for trading losses.

More snow in the upper-Midwest overnight impacting MN/ND/SD/NE/WI and continuing to fall in ND/MN/WI this morning.  A winter storm watch is in effect for portions of MN through tomorrow morning.  The next 3-days’ worth of moisture will bring 0.25-0.70” to the Dakotas and MN, while 0.50-2.00” amounts will drop in MO/S-IL/S-IN/KY/S-OH.  Moisture is not an issue East of the MS-River, and could soon be bordering on excessive but I won’t be the first to say that.  The 6-10 and 8-14 still look cold and wet for much of the Midwest, but concentrated East of the MS-River.  Coldest temps will be in ND/SD/MT/MN.  Private forecasters aren’t really latching onto the cold in the south, or frost conditions, like they were yesterday.  I’ll try and follow up with more later today.

Mixed trade overnight with strength led by soybeans and weakness by wheat.  Looks like a bit of inter-market spreading, but in the opposite direction it has been most of the week.  Oilseed markets were firm around the globe overnight with Malaysian Palm Oil up 2.12%, Dalian soybeans up 1.10%, Rapeseed up 0.76% and Bean Oil up 0.93%.  Palm Oil experienced a sharp rally overnight after four days of losses after Malaysia decided to not implement a higher tax on palm oil exports as originally intended.  Inventories there remain burdensomely large, so makes sense.  Otherwise grains are taking a bit of a breather, although few would be surprised to see wheat return to its winning ways by the close considering the positive demand story, short fund position and mixed weather outlook.

Very light news overnight aside from the aforementioned Malaysian tax situation.  The Paraguayan Finance Minister said soy exports from that country will double this year as farms recover from drought.  Output there is seen as high as 9MMT vs. 4MMT last year.  Soybean production accounts for 12% of GDP, highlighting their vulnerability to weather.  New Zealand is experiencing its most widespread drought in 30 years according to Bloomberg, causing global milk prices to rise.  Russia’s Ag Minister said their target for the 13/14 wheat harvest is 40-45MMT vs. 12/13 at 37.7MMT.  They also intend on buying 5MMT of grain for state reserves, with wheat obviously being the highest.  Their 5-yr average wheat production is 52.2MMT highlighting poor wheat conditions going into dormancy.  The priority to rebuild state reserves could limit an expansion of their export program.  Stay tuned.  The much anticipated port strike in Brazil has been postponed.

There were some deliveries against the March overnight on the last day able with 1 meal, 203 soy oil, 99 corn, 16 beans and 21 Chicago wheat.  0 Minneapolis wheat.  Not too surprising to see 99 corn actually delivered considering CIF bids of +71K are actually +55H which come in right at delivery equivalence, and some bids were weaker, most likely putting a margin in.  Doesn’t seem to be impacting the CK/CN too terribly much this morning.

Open interest changes were interesting with corn up a huge 23,260 contracts but only on volume of around 200,000 contracts which is rather light.  Somewhat conflicting signals.  Wheat dropped 6,210 contracts which isn’t surprising considering the large spec which is being forced to cover.  Beans were up 950, meal up 940 and soy oil up 2,990 contracts.  Malaysian Palm closed up 50 ringgit (2.12%) at 2,414.  Chinese markets were sharply better with beans up 22.75c, meal up $1.00, soyoil up 42c, corn up 3.25c, palm up 22c and wheat up 0.25c.  Paris Milling wheat is up 0.11%, Rapeseed is up 0.71%, UK feed wheat up 0.25%, Corn up 0.11% and Canola up 0.15%.

Call things mixed to start, but I’m not going to rule out positive trade in the grains by day’s end.  Spreads remain firm in wheat overnight, and it doesn’t feel like we’ve priced in the renewed export and feed demand of SRW to the fullest extent yet.  We obviously haven’t seen the short-covering rally which could be in the offing.  Otherwise we will slowly begin out March 28^th reports’ vigil, so expect the light volume to continue.  Weather will begin taking on increased importance the next several weeks.

Trade as of 7:10

Corn down 1

Soy up 4

Wheat down 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

Closing Comments 3-14-2013

Markets closed firmer for the most part.

Wheat lead the way up 15 firmer in CBOT, KC wheat was 15 higher, MPLS wheat was up 5-6, corn was up 6, soybeans were down 12, the stock market had some strength up 84 points, the US dollar was down 332 with the June US dollar at 82.82.

A couple good things happened today on the charts.  Wheat continued it’s winning streak and gained a little more momentum; some of the contracts now have 6 days up in a row and are near some resistance levels that could lead to even further short covering.  The other positive we had was the US dollar had a little reversal; as it got to it’s highest levels since last September but then closed lower.

Wheat appears to having some things starting to line up; funds still short; demand increasing as seen via increased feed demand and better exports this a.m.  We also have a forecast that might be freezing in some of the areas that wheat has came out of dormancy.  I don’t think it is a major threat today; but it is another possible headline to cause the funds to cover some shorts or maybe even look at going long.

Wheat basis feels defensive; but not as defensive as corn basis is.  I can’t sell within a dime the numbers that I could a week or two ago for corn; just a lack of homes.  Interest is still out there just not for anytime soon.  Longer term risk is that nearby coverage spills over to later slots.

Exports for wheat were great this a.m.   Beans also had solid export numbers.  The corn number was nothing great. 

Watch weather and what the funds do over the next couple of weeks for market direction.  Keep in mind we are near the time when we ideally see some weather scares.  Planting isn’t exactly on this torrid pace as even locally it seems we are a couple weeks behind last year.

NOPA crush numbers are out tomorrow and March futures went off of the board.  Some thought we could have some fireworks but that wasn’t really the case.

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

Afternoon Recap from CHS Hedging's Tregg Cronin

Financials

Outside Markets as of 1:30: Dollar Index down 0.366 at 82.520; NYMEX-WTI up $0.61 at $93.10; Brent Crude up $0.88 at $109.40; Heating Oil up $0.0019 at $2.9267; Livestock markets are mixed with hogs up and cattle down; Softs mixed but Cotton strong, up 2.65%; Gold up $1.80 at $1590.50; Copper up $0.0100 at $3.5360; S&P’s are up 4.25 at 1554.25, Dow futures are up 44.00 at 14,442.00 and Treasuries are lightly mixed.

10^th day in a row of higher highs in the Dow Jones Industrial Average which is the longest winning streak since 1996.  European shares also finished strong with the FTSE up 2.45% and the IBEX up 1.88%.  The Dollar Index has put on a sizable reversal to the downside today after reaching new highs for the move.  This had been a negative influence to commodities on what has been an impressive rally in the Dollar.  The EURUSD is back over 1.3000 this afternoon.

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Grains

Wheat rallied for the 6^th day in a row today, the longest streak since July thanks in large part to robust export sales, strong feed demand and what appears to be the beginning of a short-covering rally.  Late in the session, midday maps and models suggested we could have a frost threat in HRW country for around 3 nights March 21-25.  A little far out, but it only adds to the bullish sentiment.  A late push drove wheat to its highs, although the $7.27 corrective high in May Chicago wheat remained elusive today.  Trade above that level would likely cause further short-covering.  For the first time in quite a while, all the stars seem to be lining up for wheat, but it only took a $2.00 selloff in order to pull it off.

Export sales on wheat today came in at a strong 32.6mbu, up from 22.8mbu last week and above the 12.2mbu needed weekly to hit the USDA’s export projection.  Shipments were also very strong at 28.9mbu, above the level needed.  Shipments will be the key moving forward.  Export sales commitments are now down only 2% below last year while the USDA is calling for a 2.3% decline, so about as close as it gets.  HRW led sales for the first time in a long time at 14.7mbu, a little over double the level needed.  Aside from durum, every class of wheat hit the level needed.  Sales of corn came in at 11.1mbu vs. -1.9mbu last week and the 12.6mbu needed weekly so very close to the level needed.  Soybean sales were also a supportive surprise at 24.2mbu vs. 8.8mbu last week and the 4.6mbu needed weekly.  This is likely the last strong sales week we’ll see unless China comes scrambling back for more boats, although this doesn’t seem likely.  Stories circulating yesterday suggested China has close to 5MMT worth of beans at their ports to unload.  Still, it also isn’t very probable China takes to canceling US beans anytime soon given the logistical problems in Brazil.  More rumors today suggest the “cancelations” of Brazilian beans were actually just rolling sales down to Argentina which makes sense.

As noted above and in a previous email, there are frost threats beginning to crop up in the southern plains for the Mar 21-25.  Forecasted temps are thought to fall to 20-25 degrees those evenings.  While snow cover was solid, forecasted temperatures in SW-KS today were 75-80 degrees, so isn’t likely there is much left.  Our KC office said all of the wheat south of I-70 has broken dormancy.  The party is definitely still in Chicago thanks to the robust demand, but some adverse weather could still impact the HRW crop.  The KWN/KWZ spread closed up 1.75c today to -26.50c.  Keep an eye on that one for indications about crop size and condition.  Chicago spreads were very firm today to with the WK/WN up 3.25c to +5.00c.  The strong this one goes, the most short covering it is likely going to induce.  The MWK/MWN firmed 1.25c to +1.50c, but honestly can’t make up my mind about buying or selling it as the basis weakness should weigh on that spread eventually, but everyone remembers the strength witnessed in the MWH/MWK.

Lots of wheat moving today across North Dakota with producers taking advantage of what will be a good basis given the amount of hard wheat left in the producers’ hands.  Several elevators across North Dakota have bought between 500,000 and 1,000,000 bushels of wheat the last couple days, and most have been actively shopping to stay in front of what should be decent basis weakness.  CIF bids on corn and soybeans continue to erode with corn bids now at +72K and bean bids at +77K.  Hereford bids are also soft given the fact feedlots are trying to buy wheat and get a home for their corn length.  This weighed on the CK/CN which closed down 0.25c to +17.75c and probably has more of a setback to +15.00c before it’s through. 

Corn and soybean news was much lighter.  The Buenos Aires Grain Exchange released their weekly update saying soy crop yields are 30% lower than a year ago in N Argentina as the yields are affected by drought.  They left their forecasts unchanged at 48.5MMT on soybeans and 25MMT on corn with 12% of the corn harvested.  They did say the corn harvest was 16% higher than a year ago so far.  They did make note that today’s frost did impact some areas of the soy crop.  In Brazil, logistics remain a mess.  198 vessels waiting to load soybeans while the truck line is said to be 9.3 miles long, up from 8.7 miles a week ago.  We get NOPA crush out in the morning with expectations for 141-143mbu although I’ve seen some analysts at 138mbu.  Anything over 140mbu would be supportive and signal a crush which is still too strong for the USDA’s export forecast.  We are tracking way above 2010/11 right now, and that year we crushed 1,648mbu vs. this year’s 1,615mbu forecast.  Highlights how much we need to slow crush the second half of the year.

Would think Wheat tries to close the week on a strong note given the bullish demand factors and now the new influence of weather.  Corn is tagging along, but weakening basis levels and spreads can only happen for so long until futures begin to notice.  Soybeans have taken a shellacking this week, but will probably take direction from the crush report in the morning.  Otherwise we wait for the reports on the 28^th.

6-10 & 8-14 day temperature maps from NOAA below.

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

Morning Market Thoughts 3-14-2013 - Great Wheat Export sales

Markets are showing a little bounce this a.m. behind great wheat export sales.

At 9:15 we have soybeans still in the red down 2, but corn is up 2, KC wheat is up 5, MPLS wheat is up 3, and CBOT wheat is up 6 cents a bushel.  Outside markets have the stock market bouncing with the DOW up 60 points, crude up about a quarter, gold off 3 bucks an ounce, and the US dollar back to about unchanged which is a couple hundred points off of it’s highs.

We did have ethanol production numbers out yesterday and they were mixed.  Ethanol production was off slightly which was a little disappointing because margins have improve a little bit for that industry.  Stocks however dropped and that was supportive.

We did have export sales out this a.m. and old crop wheat was at 32.6 million bushels which is well above the 12.2 we need on a per week basis to hit present projections.  We also had good new crop sales.

Corn was not anything special coming in at 11.1 which is slightly below the 12.6 million we need on a per week basis.  But in line with estimates.

The soy products were light; but soybeans had good sales at 24.2 million bushels; while we only need about 4.6 per week to hit present USDA projections.  The soybean number isn’t off the charts; but it is also a pace that if continued would really tighten things up.

Corn basis is softer; I can’t seem to find much nearby homes.  Yet outlook for basis remains good for later slots.

We continue to hear of lots of wheat going into feed down south.  Yesterday I heard of 12-13 shuttles; some out of the delivery houses.

Wheat basis is supported a little bit from the strong exports; but it is hard not to be wanting to sell basis at these levels.  Especially if the board does decide to bounce.  We just have too much wheat.  Some of the nearby markets have went from firm to no bid; as rail roads have had small improvements and some mills are really plugged.  But we are also nearing spring work and that typically takes away a little supply and gives a little support to basis.

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

Overnight Highlights from CHS Hedging's Tregg Cronin 3-14-2013

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

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

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

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

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

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

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

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

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

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

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

www.chshedging.com

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

Wheat Chart 3-13-2013

Wheat's showing a little life today despite corn and bean weakness............could we expect more strength as we go forward?

Overnight Highlights from CHS Hedgings Tregg Cronin 3-13-2013

Outside Markets: Dollar Index up 0.020 at 82.606; NYMEX-WTI up $0.18 at $92.72; Brent Crude down $0.41 at $109.24; Heating Oil down $0.0029 at $2.9455; Livestock markets are firm again this morning, one more day and we can call it a winning streak; softs are mixed; Gold up $3.50 at $1595.20; Copper down $0.0035 at $3.5510; Silver down $0.031 at $29.140; S&P’s are down 2.50 at 1544.25, Dow futures are down 22.00 at 14,364.00 and Treasuries are firmer.

Black smoke, no Pope.  Otherwise, equities fell around the globe last night with the Shanghai Composite down 0.99%, and the FTSE MIB pacing Europe, down 1.61%.  Italy’s equity and bond markets are under pressure after a poor debt auction there.  Their 10-yr yield jumped 9.6bp to 4.690%.  The Japanese Yen is showing quite a bit of strength this morning with the USDJPY -0.365%, EURJPY -0.610%.  Pound up strong as the GBPEUR +0.630%.  Ireland plans to return to the long-term debt market with a 10-yr bond sale worth $15.6 billion, their first 10-yr issue since 2010.  Retail sales due up later today.

Nothing doing for precip the last 24 hours, and nothing but some flurries on the radar this morning.  5-day forecasted precip map still showing the best chances for moisture in the ECB late in the period with 0.50-1.00” amounts falling in IL/IN/OH/PA.  Favorable extended maps as well with above normal precip over much of the corn belt and northern plains.  Southern plains is expected to be normal to below, while temperatures for most of the continent will be below normal.  8-14 looks similar.  SAM weather attached.

Two-sided to better trade overnight led once again by the grain markets as both wheat and corn post 2-3c gains.  Soybeans are once again languishing in negative territory, and the lack of volume and momentum at the upper-end range cap is particularly troubling.  Without a reversal soon, charts are going to look like soybeans failed for the 5^th time at the $14.85-15.00 mark.  Fortunately for corn and soybeans, basis does remain firm if not stronger than a week ago in most demand centers which is keeping flat price levels elevated.  There were some notable spots of weakness yesterday, however, including PNW corn, Hereford corn, spot floor and to-arrive wheat bids and CIF soybean bids.  Movement has picked up, but not enough to squash bids.  Mixed spreads overnight.

Quite a bit of fodder on wires overnight including word from China the hog-to-corn ratio dropped to 5.95:1 which is below the approximate break-even point of 6:1.  The National Development and Reform Commission said they will “prevent excessive declines in hog prices to avoid wider losses.”  The USDA attaché to China said 13/14 soybean imports are forecast to increase 4% y/y to 65.5MMT.  He also said domestic production should fall another 4% as China focuses on self-sufficiency in grains.  A separate note said Chinese feed mills have bought 600,000MT, or 9 cargoes, of US corn for Oct delivery in February.  Total purchases are now around 900,000MT for new crop.  The corn being supplied is quoted around $337/MT C&F.  In wheat news, Iraq has issued a tender for 50,000MT of wheat with a bidding deadline of Mar 24 with validity to Mar 28.  All the usual suspects included.  India said they are seeking to be included on Egypt’s GASC list of approved wheat suppliers.  That would be one more foot in the door, and they’ve got the wheat to move.

Turkey is said to have contracted new crop wheat from Russia at prices of $268/MT C&F.  The newswires this morning are also talking about talks between Iran and the US to supply the former with wheat to the tune of 110,000MT.  It sounds like none of the 1MMT Iran bought months ago from Pakistan has been shipped, potentially putting Iran in a further supply bind.  Major Australian grain handler CBH said 13/14 wheat shipments will probably rise 13% as high prices encourage a rebound in plantings.

Open interest changes yesterday included wheat up 2,220, corn up 1,110, soybeans up 3,350 contracts, meal up 3,010 and soyoil up 1,440.  Delivery intentions included 1 meal, 3 oil and 5 soybeans.  Chinese markets were weaker once again with beans down 8.75c, meal down $3.80, soy oil down 93c, corn up 1.75c, palm down 110c and wheat up 1.75c.  Malaysian Palm oil was down 14 ringgit at 2,397 (0.52%).  Paris Milling Wheat is up 0.32%, Rapeseed down 0.43%, UK feed wheat unchanged, Corn unchanged and Canola down 0.14%.

Wheat/corn spreads continue to hit fresh contract lows on a daily basis, and the Minneapolis Wheat/Corn spread on a front-month basis at 59.75c is the weakest since July 1996.  On an active-continuation basis, the spread is basis the May and at 77.25c is the weakest level since August 9^th, 2004.

Call things better to start, and it wouldn’t be a surprise to see soybeans trade positive at some point today.  Grains have mostly firm basis supporting them, and the technical picture on both remains fairly strong.  It feels like a solid rally of 20-30c would buy a lot of wheat and cool down the cash markets a bit.  I’m leaning toward it happening as opposed to not.  Soybeans continue to be plagued by large supplies in South America, and slowly but surely, they are moving.

Trade as of 7:15

Corn up 1-3

Soy down 3-5

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

Morning Thoughts 3-13-13

Rather choppy quiet markets this a.m.

At 8:45 we have a mixed bag; May corn is off a penny, July corn is up a penny, May Soybeans are down 14, KC wheat is unchanged, MPLS wheat is off 2 cents, and CBOT wheat is also unchanged.  Stock markets are choppy with the DOW off 30 points, the US dollar is up strong, crude is up 50 cents, and gold is up a buck.

Not much for news out this a.m.  But it is a little disappointing to see corn spreads a little weaker.  Basis also feels a little weaker for corn; and local ethanol plants have very good coverage. 

It sounds like the USDA is considering intervening in the US Sugar market.  Prices presently are below loan value and rather than own a bunch of corn it sounds like the USDA is looking at buying about 400k tons of sugar to help push the price back above loan.  This might go into some US ethanol plants; but it also sounds like some plants might not want to increase sugar usage because of the income they lose off of the byproducts.

Sounds like some milo was sold to unknown this a.m.  That first off is good for milo; but secondly it shows that end users are still looking for alternatives to corn because of the very tight supplies.

We have had a lack of soybean exports the past couple of days; and bull markets really need bullish news.  So a lack of the bullish news isn’t helping soybeans out at all.  Spreads are also weak on beans.

Sounds like Ukraine’s production is expected to have a big jump; one forecast for 2013/2014 has a jump to 55 MMT from 46 this year.

As for driving the grain market price direction going forward we need to watch a couple things.  First off will be the March stocks and acre report.  That really helps set the stage; if old crop remains tight or gets tighter then you have firework potential later.  The more acres the less need for great yields; the less acres the bigger the need for higher trend line type yields.  After the report we really should turn into a weather market; especially for new crop.  We will have some planting delays?  Probably can’t afford too many of them with the tight old crop situation that might need to get bailed out via new crop.

The other major thing we need to watch is the funds.  Right now the US dollar seems to be very strong; if that continues I don’t look for a huge risk on type of attitude from the funds; plus it fundamentally isn’t good for the grains that we export a lot of such as wheat.  If we really want to see bull markets a weak dollar helps; but at the very least we need to have some sort of headline to get the funds interested in pushing prices up.

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

CHS Hedging - Technical Update - Wheat

Below is CHS Hedging Technical update on Wheat.........good info

Overnight Highlights from CHS Hedging's Tregg Cronin 3-12-2013

Outside Markets: Dollar Index up 0.131 at 82.704; NYMEX-WTI up $0.04 at $92.10; Brent Crude down $0.32 at $109.92; Heating Oil down $0.0052 at $2.9637; Livestock markets are mixed/weaker; Softs are weak; Gold up $16.90 at $1594.90; Copper up $0.0135 at $3.5305; Silver up $0.407 at $29.260; S&P’s are down 2.00 at 1548.50, Dow futures are down 22.00 at 14,359.00 and Treasuries are firmer.

Fairly subdued equity trade around the globe overnight with Europe flat, although Asia was weaker with the Shanghai Composite down 1.04%.  The Volatility Index, or VIX, dropped to 11.56% yesterday, the lowest close since December of 2006.  This speaks to the sense of complacency in both DC and New York.  As we push to higher and higher highs, keeping track of the VIX could be timely.  Spain’s 10-yr yield dropped to 4.7037% overnight, the lowest level since November 16^th, 2010.  Successful treasury auctions and a relative calm out of Italy are contributing.  The Roman Catholic Cardinals will set about electing a new pope today.  I’ll pass around later today, but the Dow Jones-UBS Commodity Index has posted very poor performance YTD.  Not much of anything on the economic calendar today.

Not much for precip in the Midwest the last 24 hours.  Radar quiet aside from a few flurries.  5-day forecasted precip map puts moisture in for MO/S-IL/S-IN to the tune of 0.25-0.8”, but fairly quiet elsewhere.  Northern ND could see another 0.40”.  Extended maps from NOAA remain favorable.  Above normal precip for the entire Midwest during the 6-10, while temps will be below normal for the WCB.  More of the same in the 8-14, although more normal precip for the southern plains.

Mostly weaker trade overnight across the major grain and oilseed markets in a bit of a correction from yesterday’s decent rallies.  Two things to note about yesterday: 1) a fair amount of farmer selling took place in corn, and to a lesser extent wheat, yesterday on the rally.  2) There has been almost no volume on the most recent rally in any of the major markets: wheat, corn, soybeans, meal and soyoil.  The latter point is particularly concerning considering soybeans are tangling with an area of major resistance at the $14.85-15.00 range which has blunted rallies in October, December and February.  In addition, cash markets continue to strengthen on corn, making the need to push to new futures highs less of a necessity.  My views on wheat have been well discussed.

In export news overnight, Japan bought 130,533MT of milling wheat from the US, Canada and Australia.  60,000MT of the total came from the US.  Articles overnight said Brazilian farmers have harvested around 48% of the crop as of March 8^th compare with 46% last year according to Safras.  News of the progressing harvest along with the lightest soybean export inspections in several months are definitely weighing on things overnight.  Winter Wheat condition ratings improved a bit in OK/TX/KS last week with KS now seen at 27% G/E, up 3%, OK at 20% G/E, up 4% and TX at 18% G/E, unchanged.  The weighted index improved for all states.  Goldman Sachs issued a note to customers yesterday that prices of commodities have fallen too far and investors should buy.  This as commodity index products post some of the worst returns of the year while equities continue to push to new highs on a daily basis.  More articles about 2,800 dead hogs being found in a Chinese river.  Their hog herd was 460 million last year.

Lots and lots of talk about RINs and the ethanol mandate, although very few understand the situation totally.  The central problem to our ethanol issue at current is the fact the US consumer is driving less (due to high gasoline prices, economic conditions, etc.), at the same time we’re all driving more fuel efficient cars.  This has caused a drop in gasoline demand.  The problem with this is the Renewable Fuels Standard, which was published in 2007, never accounted for Americans driving less.  In fact, the law basically assumed Americans would continue to drive more every year, and therefore we’d be able to use more ethanol every single year.  When the aforementioned happens, we simply don’t have enough gasoline supply with which to blend a larger and larger share of ethanol with.  On top of that, we also never planned on having high priced corn (and therefore high priced ethanol) from back to back droughts  Yet, obligated parties still have to meet the mandate, and that is why RIN prices have spiked: you either blend the ethanol, or you buy the piece of paper known as a RIN to satisfy your obligation.  Well if you can’t physically blend more ethanol, you buy the paper which is what has caused a 1400% rally in the price of RINs since the beginning of the year.  Without producing and blending ethanol, you can’t produce RINs, and that is the other part of the problem: eventually we run out of those too.  We need to either drive more, adopt E15/E85, produce a ton of cheap corn which will lower ethanol prices and make E85/E15 more economical or export a ton of ethanol.  Take your pick…

Open interest changes yesterday included corn up 14,490 contracts, wheat up 3,480, beans up 3,780, meal up 1,550 and oil down 180 contracts.  Chinese markets were weak overnight with beans down 14c, meal down $6.80, soy oil down 42c, corn down 0.75c, palm down 39c and wheat up 4.25c.  Malaysian Palm Oil was down 39 ringgits to 2,411 (-1.59%).  Malaysia continues to be hamstrung by lower trending demand and record stocks.  Paris Milling wheat was down 0.43%, Rapeseed down 0.42%, UK Feed wheat up 0.23%, Corn down 0.56% and Canola is down 0.21%.

Call things mixed to weaker this morning as we correct yesterday’s rally.  Outside markets are mixed/negative toward commodities and today should be devoid of any market breaking news for the grains.  Lineups remain large in Brazil, but PNW basis is sinking on soybeans, while the Gulf still indicates some interest.  Technicals might be playing a negative role in the soy complex as we approach recent highs.  Everyone now gearing up for the March 28^th reports.

Trade as of 7:20

Corn down 1

Soy down 5-10

Wheat down 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

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Closing Grain Market Comments 3-11-2013

Markets closed firmer across the board for the grain markets with some follow up strength from Friday’s USDA report.

Corn closed up 8 cents, beans closed up 8-9, KC wheat was up 2, MPLS wheat was up 2, CBOT wheat was up 3, equities continue to run with the DOW making new all time highs once again today up 50 points, and the US dollar was softer.

More talk of lots of wheat needing to move.  Both in the Northern US as well as India; but also still hearing world wheat values are slightly below the min price that the India government has in presently in place.  In the US it feels like we have tons of wheat to move; but it also feels like producers might simply wait it out.  If they do decide to wait it out realize what happened last year to spring wheat basis; when harvest basically started a month or two before it actually did.  If we have a wheat crop this year there is just a huge amount of old crop wheat that might decide to try and move before harvest actually hits.  I don’t view this as having a huge effect on the board; but it could cause plenty of basis weakness. 

Wheat spreads in KC and MPLS firmed slightly while corn spreads showed a little weakness.  A lack of producer selling and slow rail movement helped out the wheat spreads.  While the May-July corn spread showing a little weakness appears to be coming from a little basis weakness and the fact that some end users ethanol plants in particular have rather decent coverage. 

Export shipments were out this a.m.   They showed beans at the lowest level in 24 weeks; around 17 million bushels; which is still about 2 times the amount we need; but only 1/3 to ½ of what they have been for months.  Perhaps the huge demand train is starting to slow down????? 

Wheat numbers came in at about 27-28 million bushels; above what we need to hit estimate and an improvement from last week.

Corn export inspections came in at 14.4 million bushels; which is off slightly from last week and also slightly below the pace we need on a per week basis to hit the latest USDA number of 825 million bushels.

I did see a couple rumors out there that some cold weather might lead to frost damage.  One mentioned it hurting Brazil corn and another mentioned a late cold surge in Argentina may threaten late crops.  Perhaps this helped out our markets a little bit.  Also on the weather front lately has been a lot of pictures of wheat and most of them are not very good.  Plus the last system missed Western Kansas.

I would note that overall the weather card has changed a little bit; I seen a note today talking about Canadian flooding and that isn’t the only place.  Anyone here anything about a lack of water in the Missisippi lately?  No that has changed; don’t get me wrong many areas such as ours are still dry.  But many have seen some improvements.  That doesn’t mean we won’t get another weather scare or a different type of weather scare at some point; but the game we are playing is one that is always changing.  So we probably need to keep that in mind in regards to marketing.

Many advisors are out there saying one needs to already have a large portion of new crop on the books.  Keep in mind that all the sales anyone made early the past couple years looked bad; but the reason sales were made was because of the crop potential.  We have tons of potential to produce a big crop on big acres.  This year more than the others we also probably have more risk if we do produce that crop.  Why?  Because of what we have done with demand.  We have done a good job of curbing some demand for corn.

Only time will tell if demand can bounce as fast as we curbed it the past couple of years.  But the risk and the reason advisors like the idea of having stuff sold is because if demand doesn’t perform a miracle and we do grow a big crop we simply will have carryout numbers that we haven’t had to deal with in a long time. 

Bottom line is one needs to realize that good weather opens up probably more downside risk then we think is out there.  Bad weather probably does the same to upside potential.  So if we are treating grain marketing as a business that is out there trying to manage risk then a marketing plan needs to have that pro-active approach.

Be ready to pull the trigger on some baby step sales if we can get a bounce as we go into spring planting.  Heck maybe be ready to pull the trigger on some sales even if we don’t; so you don’t end up having to try and do all the marketing at once at a time that might not have the best prices in the world.

The other thing that one probably really needs to be watching is old crop basis.  Do not give away the inverse that is out there.  Old crop winter wheat basis is strong as is old crop corn basis.  If one sits on old crop corn; now until new crop you have about a  2.00 inverse in the cash bids.  That is a storage cost of nearly 30 cents a month.  The more time that goes by the higher per month that storage cost could be.  I don’t know that we have seen the top of corn basis; but I do think one should be ready to lock in basis sometime in the near future.  Probably when guys get busy in the field and movement really slows down. 

Wheat basis still says sell me; but keep in mind that the carry in the board will offset some of the basis strength seen.  I guess to me wheat basis says lock in or lock in sometime in the next 30-60 days; but only if I plan on pricing the board by July-August.

The birdseed market is on the slow side; but some sunflowers have been flowing down to the crush market.  Perhaps that will help prices when the birdseed buyers come back in?  Also talking to a buyer today he indicated that he felt like sales might pick up; just from the little bit of softer prices. 

Don’t forget we are still offering free delayed price on wheat and corn.  But also keep in mind that part of the reason we are offering free delayed price is because basis is strong.

Thanks