Overnight Highlights from CHS Heding's Tregg Cronin 11-13-12

Outside Markets: Dollar Index up 0.085 at 81.116; NYMEX-WTI down $0.39 at $85.16; Brent Crude down $0.74 at $108.33; Heating Oil down $0.0208 at $2.9781; Livestock markets are weaker; Gold down $9.20 at $1721.10; Gold down $0.0165 at $3.4565; The Pound is firmer while other major currencies are weaker; Coffee is under pretty solid pressure this morning; S&P’s are down 6.75 at 1371.50, Dow futures are down 51.00 at 12,729.00 and Treasuries are slightly better.   

Equities and credit markets are fairly quiet overnight as the euro rises from a two-month low against the dollar after reports said Germany favored combining several aid payments to Greece into one large tranche.  Also interesting to read in several articles overnight two key Republicans, Columbia Business School Dean (Romney advisor) Glenn Hubbard and conservative commentator Bill Kristol, appear to be breaking ranks on the issue of higher taxes for the wealthiest Americans.  Analysts think this will give Republicans more shelter to do the same.  Odds makers put the US going over the fiscal cliff at this point at only 10-15%.  Key economic data from Europe overnight saw the ZEW Indicator of Economic Sentiment for Germany drop 4.2 points in Nov to -15.7, missing estimates.

Nothing for moisture since midnight, although some lingering showers brought precip to the soggy Northeast.  Still dry the next 5-days in all major growing areas of the US.  The PNW is going to see some additional moisture by Friday.   NOAA maps confirm Sunday’s readings, looking for a warm up in the 6-10 with above normal temps centered over MN.  Below normal precip will also be the law of the land for the entire Midwest the next 15-days.  The rains in Argentina over the weekend likely stalled planting, but with dry weather for the next 7-8 days, and then just light to moderate totals to occur the middle of next week, planting of summer crops and ripening and harvest of winter crops will be able to be done without harassment from the weather. Things look good in Brazil, with welcomed rains in the north and limited rains in the south in the next 7-10 days.  Hard to find much to argue with in South America as it slowly dries out.  Australia continues to plug away harvest and dry weather is welcomed.

“Turnaround Tuesday” in the Ag markets this morning with most commodities bouncing off of yesterday’s lows which also contained some critical support areas, especially in soybeans.  The highs from September 2011 ($14.00) and the highs in April of 2012 ($13.90) should offer decent short-term support on any further pull backs.  The main theme from the overnight seems to be the flurry of import tenders which surfaced on our break.  Japan will be in this week for 195,008MT of US and Canadian milling wheat for Dec 21-Jan 20 delivery with 73% coming from the US.  South Korea’s MFG is seeking 70,000MT of corn for May delivery, and KFA is looking for 55,000MT of corn for April delivery.  China’s markets stabilized overnight, but no word on possible export interest just yet.

Some scattered headlines o/n: Ukraine’s grain harvest is about 16% behind last year with 43.3MMT harvested on 95% of the total area.  Corn harvest is 85% complete with 17.1MMT reaped, implying as much as 19.665MMT if yields are unchanged.  Export ban chatter from Ukraine is still making headlines, although its effect is less prominent now.  Most exports are doing additional business past Dec 1.  Interesting to note that sunflower seeds remain the most profitable crop to produce in Ukraine.  Russia sold 63,315MT of grain from intervention stocks last night.  376,764MT of wheat has been auctioned so far, most of which is from 2008.  Wheat output in South Australia is seen at 3.3MMT vs. 4.4MMT in 2011/12, down 25%.  As noted in an email sent late yesterday, CIF corn basis popped nicely by commercials trying to get nearby logistics bought and grain sent down the river ahead of a potential MO river closure.  We also saw ADM-Marshall improve bids from -17Z to -11Z, and Valero in Aurora move to -5Z from -7Z.  If corn < $7.30, expect firming basis levels.

Open interest changes yesterday included wheat down 9,240 contracts, corn up 8,370, beans up 2,400, meal up 1,500 and oil up 1,060.  Heavy fund liquidation/profit taking in wheat after Friday’s failed breakout.  Possibly some new shorts bring added in corn, and definitely new shorts being added in soybeans.  Chinese markets were mixed o/n with soybeans up 15.75c, meal down $7.70, soy oil up 16c, corn down 5.75c, palm up 80c and wheat down 15.34c.  Rumors of Chinese soy cancelations were abound yesterday, and the divergence between meal and beans doesn’t help.  Malaysia was closed for holiday.  Paris Milling wheat is up 1.11%, Rapeseed up 0.48%, Corn up 1.28%, UK feed wheat up 1.13% and Canola is down 0.93%.  Canola is the lone weak oilseed, but it was closed yesterday.

Call things a bit better to start today, but be cautious of getting runaway bullish on a one-day bounce.  The two themes from overnight, firm European grain prices and tender business, are supportive.  Yet, severe technical damage was done the past several sessions, and that does often instigate further chart based selling.  There should be good value down here on corn and wheat from world importers.  Continue to watch basis for clues about soy demand.  These prices should look pretty cheap relative to current ownership.

Trade as of 7:10

Corn up 2-5

Soy up 4-5

Wheat up 2-4

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

www.chshedging.com

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