Overnight highlight's from Country Hedging's Tregg Cronin 10-9-12

Outside Markets: Dollar Index up 0.112 at 79.652; NYMEX-WTI up $0.74 at $90.05; Brent Crude up $0.99 at $112.80; Heating Oil up $0.0241 at $3.1684; Cattle firmer, hogs a bit weaker; Gold up $1.70 at $1776.20; Copper up $0.0135 at $3.7405; The Loonie and Aussie Dollar are firmer while the other major currencies are weaker; The softs are all trading better; S&P’s are up 1.25 at 1451.00, Dow futures are up 10.00 at 13,511.00 and Treasuries are mixed/weaker.

Protesting in Athens upon the arrival of German officials, including PM Angela Merkel, seem to be grabbing the most headlines this morning.  Updated forecasts by the IMF also have some unnerved as they said the world economy will grow 3.3% this year, the slowest pace since the 2009 recession, and down from 3.5% in July.  Their 2013 forecast calls for growth of 3.6%, down from 3.9% previously.  The third quarter earning’s season begins today with Alcoa, and today is also the fifth anniversary of the S&P’s 1565.15 record close.  Economic data in Europe overnight included Finland’s economy expanding at 0.3% in July y/y.  In the US we are again light on the economic data front.  The NFIB Small Business Optimism Index came in at 92.8 vs. expectations for 93.5.

Light, scattered precip in the upper-Midwest overnight, but nothing measureable outside of MT.  There are some scattered systems moving across C-ND/S-SD/S-MN this morning.  2-day totals are expected to be rather light with the most accumulation in WI/MI/N-MN to the tune of 0.40”.  The 5-day forecasted precip map shows better chances towards the weekend for IA/MN/WI and then a separate system in OK/N-TX/MO.  Much of these areas look to see 0.50-1.00” amounts.  SD/ND should be mainly dry.  No change to NOAA’s latest 6-15 with above normal temps for the central plains and below normal precip.  The ECB has the potential for some above normal precip, which should keep harvest efforts labored after a wet week last week.  Maps for South America keep Argentina in good shape and the majority of Brazil.  Only trouble spot is far northern-Brazil, but it is early.  See the Vegetative Health Index vs. last year below.  Western Australia should be dry the next 10-days.  In the East rains of 0.20-0.60” should fall later tomorrow and into Thursday.

Grains are showing a slight bounce overnight, clawing back some of what we lost to begin the week as the choppy trade continues.  Encouragingly, November soybeans did take out Friday’s high at 15.69 ½, turning the short-term trend up.  Bulls would like to see trade above $16.13 ¾ from September 28^th before getting too overly excited, however.  There wasn’t a great deal of overnight news, so expect more of the same until Thursday.  Last night’s FOB  comparative still has South American corn well under US corn as vessels unload in Wilmington full of Brazilian maize.  FOB offers for Brazilian and Argy maize were reported at $264.56-268.49/MT vs. the US Gulf at $318.88 and PNW at $329.12.  The freight spread to get it from Brazil to the feedlot in NC is roughly $35-40/MT for reference sake.

Overnight headlines included China setting import quotas for 2013 which were unchanged for major grain’s and cotton and have been unchanged since 2004.  Wheat imports are limited to 9.636MMT, corn at 7.2MMT, rice at 5.32MMT and cotton at 894,000MT.  State-owned companies are entitled to 90% of the wheat quota and 50% of the corn quota.  In other words, the majority of the grain is destined for state-reserves.  Russia’s cereal stocks at the end of the marketing year on June 30 are forecast at 6.9MMT vs. 12.4MMT this past year, but officials claim the country has enough supply to meet demand.  Price usually takes care of that for you.  Overnight, South Korea’s Feed Leaders Committee bought 70,000MT of S.A. corn at $314.30/MT C&F for April arrival from CJ International.  Japan will be tendering for 152,647MT of milling wheat this week from the US, Canada and Australia.  Conab also released 12/13 production forecasts this AM, pegging the Brazilian soybean crop at 80.1-82.8MMT, up 21-25% y/y, and the corn at 71.9-73.2MMT, up around 7%.

Open interest changes yesterday included corn down 3,160, wheat up 2,490, beans down 800, meal down 820 and soy oil up 2,100.  Soy oil is up 18,823 contracts, or 6.4%, since September 28^th while prices have declined 0.88c/lb.  The lack of open interest change yesterday despite decent moves on the board suggest more ownership changing hands from the specs to the commercials as evidenced on the recent COT report.  Chinese markets were mostly lower again with beans down 13.75c, meal down $0.70, soyoil up 45c, corn down 5.75c and wheat up 5.25c.  Malaysian Palm Oil was up 70 at 2,438 ringgit, Paris Milling Wheat is up 0.58%, Rapeseed up 0.62%, Corn up 0.95%, UK feed wheat up 0.42% and Canola is up 0.72% today and 6.2% since the lows last Wednesday.

Call things a bit better today as we bounce from yesterday’s sell off, but the trade is still concerned about a shocking supply increase on soybeans and corn Thursday.  The trade seems convinced world wheat production is going to be cut, just to what extent.  Keep in mind corn is still being rationed on the export front, and ethanol production has yet to come back online in a big way.  Soybean demand remains robust and should be reflected as so Thursday regardless of how large the national soybean yield is.

Trade as of 7:15

Corn up 2-3

Soy up 16-17

Wheat up 6-7

Tregg Cronin
Market Analyst
800-328-6530
651-355-6538
651-355-3723 fax
www.countryhedging.com
Country Hedging, Inc.
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