Overnight Highlights from Country Hedging's Tregg Cronin

Outside Markets: Dollar Index down 0.374 at 79.035; NYMEX-WTI up $0.16 at $92.27; Brent Crude down $0.31 at $113.70; Heating Oil down $0.0094 at $3.1891; Cattle markets are firmer, while hogs are weaker; Gold up $5.20 at $1749.90; Copper up $0.0095 at $3.7175; All major currencies are firmer this morning; Softs are firmer except for coffee and cotton; S&P’s are up 2.00 at 1451.25, Dow futures are unchanged at 13,435.00 and Treasuries are weaker.    

Financial markets are bouncing quite well around the world overnight, led by the NIKKEI which was up 1.21% and the IBEX 35 (Spain) which is up 1.39%.  Much of the bounce in Europe is coming after Moody’s held the Spanish credit rating at investment grade as opposed to dropping it to junk.  EU officials also said Spain would be eligible for bailout funds if and when they asked for them.  Bond markets are reacting well as Spanish 10-yr yields dropped to 5.4785% this morning, down 28.4bp and the lowest since April 3^rd.  Italy’s 10-yr yields also dropped to 4.8028%, the lowest since March 8^th.  Economic data in the US today will include US Housing Starts (770,000), US Housing permits (+2.7% m/m) and US building permits (810,000 & +1.1% m/m).

Some very light precip impacted part of the Dakotas and a section of MT north of the interstate.  The big focus today in the Midwest will be the wind.  Below is the midday wind forecast, and west river-Dakotas are expected to be the worst.  A system is working across east-river ND/SD this morning.  The next 2-days are expected to bring solid precip to almost all of MN/WI/IN/IL/MI/KY and hit edges of IA/MO.  MN could see as much as 0.50-1.35” by Friday.  By Saturday, and through Monday, the Midwest should dry out, although the PNW should see rains chances this weekend.  NOAA maps are keeping things split down the mid-section wth normal/below temps for the upper-Midwest, while that same areas sees above normal precip.  South of I-80 should see below normal precip and above normal temps.  Weather continues beneficial in Brazil with even the dry areas in the North receiving chances, but rain delays to planting and too wet are being discussed in Argentina.

Slight bounce overnight in the Ags, although today has the look and feel of a quiet session inside Monday’s range which should produce flagging action.  Volumes in the grains yesterday were the lightest in several days, and based on the overnight news flow, there doesn’t appear to be much to right the ship and get traders engaged.  We are rapidly moving to a demand focused market with harvest on its final 10-15%.  Farmer marketing is slowing, and concerns about sourcing grains in 30-45 days are being heard.  Elevators have been active in the reseller market, but most think basis and spreads are going to do a larger share of the heavy lifting to close out the calendar year.  Spring wheat continues to pace the wheat market on Chinese buying ideas and soy oil led complex gains o/n, up 0.88%.

Overnight news included Japan issuing a tender for 320,000MT of feed wheat and barley for shipment by Jan 31 in an SBS-sale.  South Korea’s MFG also issued a tender for as much as 210,000MT of corn for delivery in March and April.  With some importers booking JFMAM needs already, it underscores the need for US corn to get competitive.  It should be pointed out, however, Brazil’s lineup to load corn is 3.023MMT vs. 3.105MMT last week and 1.191MMT last year.  This is thought to be 60-75 days long, and will have to taper off soon or risk impeding soybean exports when the world needs S.A. beans.  News from Australia said wheat reserves fell 14% from a year earlier to 7.1MMT at the end of the marketing year on Sept 30 thanks in large part to record shipments.  Private production forecasts for Australia seem to be gravitating towards 20-21MMT vs. the USDA at 23MMT.  Analysts said the combination of 7.1MMT ending stocks with a production of 20-21MMT will provide a domestic market which isn’t well supplied during 12/13.

Open interest changes yesterday included corn up 6,930, beans up 2,030, meal up 2,070 and soy oil up 4,820.  Wheat was down 850 contracts.  Interesting to see the entire complex and corn receive decent jumps in O/I while markets rallied yesterday.  Keep an eye on soy oil as world veg oil markets have a bottoming feel to them.  Chinese markets failed to go with us last night as soybeans fell 8.25c, meal was down $2.60 corn up 4c and wheat down 0.25c.  Their soy oil market was up 26c, however, and Malaysian Palm Oil was up 5 ringgits to 2,471 (although down 115c on the week).  Chinese crush margins are improving as soy oil and soybeans diverge.  Paris Milling wheat is up 0.10%, Rapeseed up 0.11%, Corn down 0.63%, UK feed wheat up 0.38% and Canola is up 0.56%.

Call things a tad better to start, but it wouldn’t surprise anyone to see the volume at 9:30am take it in a different direction.  We’ve had little for fresh fundamental input this week aside from firm cash markets and firm spreads in the interior.  It should be noted, soybean calendar spreads are especially weak overnight.  Wheat markets are clinging to the idea of better demand for hard wheat, although as the spot floor showed yesterday, the current demand is for lower proteins.  Should be some good basis opportunities coming.

Trade as of 7:10 

Corn up 2-4

Soy up 0.50c front end/5-7c back end

Wheat up 4-7

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