Overnight Highlights from CHS Hedgings Tregg Cronin 2-28-13

Outside Markets: Dollar Index down 0.015 at 81.589; NYMEX-WTI down $0.08 at $92.68; Brent Crude up $0.42 at $112.29; Heating Oil up $0.0095 at $2.9974; Livestock markets are weaker; Softs are mixed; Gold down $4.40 at $1591.30; Copper up $0.0070 at $3.5740; Silver up $0.070 at $29.060; S&P’s are up 0.75 at 1516.50, Dow futures are up 2.00 at 14,062.00 and Treasuries are firmer.

Sharp rallies in Asia following the US led rally yesterday, and Europe is unchanged to better as tensions ease following the Italian elections.  Equity markets in the US yesterday rallied to within 100 points of the all-time record on the Dow Jones Industrial Average, seemingly paying little attention to tomorrow’s looming “sequestration.”  Strength by the New Zealand Dollar is a feature this morning after weakness the last several days.  Lots of important economic data today including Q4-GDP revisions (+0.5% vs. -0.1% prior), personal consumption (2.3%), jobless claims (360,000), Chicago PMI (54.0 vs. 55.6 prior) and KC Fed (-1 vs. -2 prior).  Obama will meet with Congressional leaders today.  Groupon and JC Penny’s missed earnings estimated badly and are under pressure.

Dry in the central and southern plains, while the central and eastern corn belt picked up another 0.01-0.10” in moisture by way of snow the last 24 hours.  Scattered snows in the East this morning.  Next chance at some moisture in the Midwest comes Sun-Tue when an area from Billings to Nashville could see 0.10-0.30”.  Otherwise, next chances for moisture come for ND/SD/T/MN from March 5^th-9^th, with more moisture in the 8-14 for the rest of the corn belt.  Above normal precip seen for all, while temps should be below normal and most of the moisture falling as snow.  Dry weather in almost all of South America yesterday, with the next system coming through Friday-Sat with 0.50-1.50” on 85-90% of Argentine growing areas.  On and off showers in Brazil.  Weather is pretty good.

Quite a bit better futures markets overnight led by wheat, and most especially KC wheat.  In fact, with May KC wheat up 1.45% this morning, it is the strongest of any commodity.  This appears in anticipation of improved export sales later this morning.  Estimates on wheat export sales are estimated at 350-900,000MT, but I’ve seen more than one wheat analyst suggest the total could be over 1MMT.  If that proves true, we have likely seen the bottom in wheat prices and will attempt to add more premium.  Having said that, we have enough wheat to put out any fire which pops up, but we are probably due for a bit of a rally to ease the rallying basis.  Soybeans are also firmer this morning on the same ideas, and lack of improvement in Brazilian logistics.

Overnight, South Korea’s Flour Mills bought 21,800MT of Canadian wheat at $336.50/MT FOB from Mitsui for May 1-15.  Bangladesh bought 50,000MT of optional-origin wheat at $328.16/MT C&F.  The Russian Ag Minister said overnight that the country won’t restrict grain exports no matter what the size of the next crop.  The crop estimate at current is 95MMT, up 34% y/y.  Grain exports are seen at 15MMT.  Several media outlets have commented on the shambles Egypt’s finances are in, and how this is probably affecting their ability to source grain.  Egypt’s ability to provide food and fuel is central to preventing social unrest.  The Egyptian Pound has depreciated 5.6% this year, making it one of the 10 worst-performing currencies.  Export house Toepfer said bean vessels at the Brazilian port of Santos may wait up to 6-weeks for loading.  Grain.gov.cn said Chinese crushers may need to continue buying high-prices US beans due to disruptions from Brazil.  Brazil loaded 1.5-1.8MMT of soybeans for China in February, down from 2.0-2.5MMT last year.  There are also many analysts making note of the almost unrealistic slowing to the pace of crush in the US which needs to happen in order to prevent the carryout from dropping below 100mbu.  The SN/SX should continue rallying.

There were 119 Chicago wheat deliveries overnight, 0 KC wheat, 296 Minneapolis wheat, 0 corn, 0 beans, 0 meal and 2,932 soy oil.  The Minneapolis deliveries were a bit surprising, but the bulk of the deliveries came from Term, which looks like the certs Louis Dreyfus stopped against the December and are simply re-delivering so as to not pay to get their certificates upgraded with the new Vomi specs.  The biggest stopped was a Newedge account which is most likely Gavilon.  It certainly makes sense to stop spring wheat and load it out against to-arrive bids at +120K.  No surprise on corn or soybeans.  Basis at the Gulf, and at the processor, firmed yesterday, keeping Illinois River basis on both well above delivery equivalence.  Talk of Mexico in for corn business last night so watch 8:00am.

Open interest changes yesterday included wheat down 6,270 contracts, corn down 18,930, beans up 3,280, meal down 3,340 contracts, soy oil up 1,480.  March corn saw an open interest drop of 41,100 contracts.  Chinese markets were mixed overnight with beans down 0.25c,  meal up $2.20, soyoil down 4c, corn up 0.75c, palm down 31c and wheat up 0.25c.  Dalian soybean oil fell to the lowest level overnight since September 2010.  Malaysian Palm Oil was also weak, down 13 ringgit at 2,397, or 0.54%.  In the last 7-sessions, Palm is down 7.2% on slower exports and heavier stocks.  Paris Milling Wheat is up 0.51%, Rapeseed down 0.21%, UK feed wheat up 0.44%, Paris corn up 0.22% and Canola is up 0.26%.

Call things better with an eye on export sales at 7:30am.  Looking at estimates, it looks like we have a decent chance to beat expectations based on what’s been reported by the daily reporting system as well as what’s been rumored to have been sold the last week.  Farm gate movement hasn’t been strong enough to quench basis thirst, so a futures rally seems likely.  Wheat basis has the potential to get sloppy if wheat moves, however, as there is plenty left in the northern plains.

Trade as of 7:05

Corn up 1-3

Soy up 1-6

Wheat up 7-11

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

www.chshedging.com

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