Overnight Highlights from CHS Hedging's Tregg Cronin 1-23-13

Outside Markets: Dollar Index down 0.140 at 79.734; NYMEX-WTI up $0.08 at $96.76; Brent Crude up $0.16 at $112.60; Heating Oil up $0.0040 at $3.0722; Livestock markets are all trading a bit weaker this morning; Softs are mixed; Gold is down $0.20 at $1693.00; Copper is up $0.0050 at $3.7090; Silver up $0.108 at $32.285; S&P’s are down 3.25 at 1486.50, Dow futures are down 13.00 at 13,683.00 and Treasuries are firming as I write.

Quiet equity markets around the globe overnight, although the NIKKEI did drop over 2.0%.  The Japanese government hit back against critics who say they are trying to revive their economy at the expense of the nation’s trading partners.  At current, the JPYUSD is down 0.18% at 88.5425.  There will be some big earnings announcements today including Apple, McDonald’s, WellPoint, Motorola and Coach.  Apple will report after the close and is expected to announce 47.8 million iPhones sold.  MBA Mortgage Applications rose 7.0% last week after a 15.2% jump the week prior.  Today we’ll get the FHFA House Price Index which is expected to be up 0.7% m/m.  Secretary of State Clinton will testify before the Senate Foreign Relations committee on Benghazi.

Some light snow falling in the upper-Midwest overnight and that system will work East over the Great Lakes later today.  5-day forecasted precip maps don’t amount to much with the heaviest moisture in E-KS to the tune of 0.60”.  The PNW will continue receiving rain on the coastal side.  Extended maps from NOAA look cool and wet during the 6-10 and 8-14.  Odds look good for some additional snow accumulation.  TX and most of the southern plains will see normal/above temps, but normal/below precip.  Overnight maps from South America don’t looks a whole lot changed with dry and hot in the 1-5 days for Argentina, although the 6-10 looks a bit wetter for southern Argy.  Not so much for the dry northern areas.  A change in the long-range maps will be critical come February 1.  N-Brazil looks to continue receiving rainfall as harvest tries to progress.  As noted in yesterday’s emails, lineups are building for both corn and soybeans in Brazil, and weather will become an increasingly important factor for logistics, not just crop development.

Slightly firmer trade overnight in all of the major Ag markets as wheat stabilizes and recovers a couple cents of yesterday’s dime losses.  Would really like to be able to point at some specific news or market development this morning, but newswires are notably absent, and overnight hedging activity was limited to a handful of contracts.  The drivers of price seem to be pretty clear: South American weather, US domestic corn demand, the overall health of the ethanol industry, wheat/corn exports (or lack thereof), and the financial stability of the US farmer which could be impacting grain movement.  From now until our next Quarterly Stocks report when we get a clue about Q2 corn feed demand, these will be the drivers of price.  The February insurance pricing period is just 8-days away.

Headlines of note overnight included a rehash of yesterday’s news that Oil World had become the first major analyst to reduce the Argentine soybean production estimate.  They cut their guess by 1MMT to 52MMT vs. the USDA at 54MMT.  One respected analyst said the world can afford a 2-4MMT decline in SAM production as y/y production is currently forecast up 32MMT.  What we can’t afford is a 5MMT+ reduction.  That will require additional risk premium.  Palm oil in Malaysia advanced to the highest level in three weeks on speculation a rally in soybean oil will boost demand for the cheaper vegetable oil.  Also of note, Brazilian soybean basis continues to appreciate.  Feb slots continue to be no offer against +55H bid.  LH-Feb/FH-Mar is now +50/60H vs. +52/60H a week ago.  Full March slots are now +43/46H vs. +40/43H a week ago.  Most slots through July are up 2-3c w/w.  Corn basis did ease in the latest week in Paranagua and is now +10/25H for Jan, +10/25H for Feb vs. +15/35H a week ago.  Meal basis is firmer w/w by 2-8c.

Open interest changes yesterday included wheat down 3,000 contracts, corn up 5,320 contracts, beans up 8,330, meal up 4,310 and soy oil up 2,200.  Nice to see decent increases in open interest in corn and the soy complex on the rally yesterday.  Funds have definitely changed their tune and appear to be coming back in our space.  Chinese markets were mixed overnight with beans up 0.25c, meal up $3.20, soy oil down 6c, corn down 0.25c, palm up 26c and wheat up 0.25c.  Malaysian palm Oil was up 16 ringgit at 2,481.  Paris Milling wheat is down 0.40%, Rapeseed up 0.32%, corn down 0.31%, UK feed wheat down 0.35% and Canola is up 0.26%.  Calendar spreads are mostly weaker overnight.

Call things slightly better today, but don’t be surprised to see some two-sided trade as there isn’t a lot of fresh news today specifically to make this market really want to rally.  Today could see some consolidation after the rally, but corn needs to take out last week’s high of $7.35 in order to keep the post-crop report trend as up and the money flowing in.  Wheat will continue to be handicapped by a lack of export business and a lag until we start focusing on the crop breaking dormancy and conditions.

Trade as of 7:15

Corn steady/better

Soy up 1-2

Wheat up 1-2

 

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

www.chshedging.com

CHS Hedging, Inc.
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