Overnight Highlights from County Hedging's Tregg Cronin 10-12-12

Outside Markets: Dollar Index down 0.179 at 79.596; NYMEX-WTI up $0.27 at $92.34; Brent Crude down $0.54 at $115.17; Heating Oil down $0.0181 at $3.2393; Livestock markets are firmer on the front-end; Gold down $0.50 at $1768.30; Copper down $0.0190 at $3.7400; The Yen and Aussie Dollar are weaker but the other majors are firmer; Most soft commodities are firmer; S&P’s are up 4.25 at 1432.75, Dow futures are up 33.00 at 13,298.00 and Treasuries are softer.  

Things are mostly quiet across the pond this morning, but the EU should have cause for celebration after they were awarded the Nobel Peace Prize for the solidarity and cooperation during the current EU fiscal crisis.  Whatever it takes I guess.  Also making headlines was JP Morgan beating analyst estimates with $1.40/share during the third quarter vs. $1.02 last year and the $1.24 estimated by analysts.  They cited a surge in the mortgage business and improved capital markets.  Also interesting overnight was Wal-Mart reporting its lay-away program has already brought in $400 million to date, over half of the entire 2011 total.  Better living through lower prices.  Eco data today in the US includes the PPI (+0.8%), PPI-ex energy & food (+0.2%), PPI y/y +1.8% and U of Mich consumer sentiment (78.0).

Not much for rain around overnight with some scattered precip in the Great Lakes, while another system impacted MO/AR/KY with scattered amounts, but localized up to 1.0”.  The next 1-2 days should see rain in the southern plains with the highest concentration in OK at 2.93”.  The precip chain extends all the way to WI, but the precip has shifted East and MN looks to be largely missed now.  E-IA/S-WI could see totals as high as 2.0+”.  The 5-day forecasted precip map is below.  NOAA’s extended look has moderated a bit with more normal temps in the 6-10 to below normal in the 8-14 for the upper-Plains.  Precip should be normal/above, but nobody is holding their breath.  No significant changes to S.A. with below normal precip in the 1-5, but more normal/above in the extended.  

Export sales will be released today at 7:30 CDT due to the Columbus Day Holiday Monday.

Grains are giving back a bit of yesterday’s gains this morning, possibly a sign that corn’s inability to hit limit up, or lock there, meant a straight shot over $8.00 wasn’t needed or likely.  Overnight wires are quick to say soybeans losses overnight are tied to the fact supplies are rising in the US while demand has yet to be fully realized.  I continue to view soybeans with a great deal of fundamental value at current price levels, and apparently the crush plants and exporters of the US tend to agree as evidenced by recent basis moves.  Farmer marketing has slowed appreciably below $16.00 and that is likely to continue.  As noted in yesterday’s recap, lows were likely made in late-Sept/early Oct for the foreseeable future, but that doesn’t mean steady and even range bound trade can’t develop.

Overnight headlines included South Korea’s NOFI canceling a tender to buy 210,000MT of corn and 70,000MT of wheat, citing high prices in an email.  Japan issued a tender for 66,000MT of feed wheat and barley due by October 26^th in an SBS tender.  Saudi Arabia said cereal imports in 12/13 are forecast at 12.8MMT, with wheat imports consisting of 2.3MMT to maintain demand levels for milling and conserve water needs domestically.  Saudi Arabia is expected to produce around 1MMT of wheat this year, and wants to stop growing wheat entirely by 2016.  Argentina’s wheat crop is forecast at 10.12MMT this year, down 28% from last year according to the BA Grains Exchange.  Farmers choosing to plant soybeans and corn as well as a struggle to drain flooded fields contributed.  As noted yesterday, Bloomberg made mention overnight soy crushers in China may increase imports after the government finished selling the cheap reserves and increased auction prices.  One investment bank is calling for a “twin peak” in commodity prices during Q1 of 2013.

Open interest changes yesterday included wheat up 14,030, corn up 50,120, beans up 3,250, meal up 1,370 and soy oil up 1,010 contracts.  The jump in wheat, and especially corn, were quite large.  Certainly fits with the moves we saw yesterday, but large nonetheless.  Interesting to note a lack of O/I jump in beans and meal, considering their moves yesterday, signaling the buying could have been short-covering.  Soy oil calendar spreads hit new lows for the move again last night.  Chinese markets didn’t react much to our news yesterday with their beans up just 1.75c, meal down $3.30, soy oil down 42c, corn up 0.25c and wheat unchanged.  Paris Milling wheat is down 0.76%, Rapeseed down 0.10%, corn down 0.31%, UK feed wheat down 0.50% and Canola is down 1.00%.

Call things weaker to get going today as markets seem to be saying the lows are in, but the highs aren’t in jeopardy just yet.  The focus has shifted back to demand now that the supply concerns are behind us, so a great deal of attention will need to be paid towards the SX/SF, CZ/CH, MWZ/MWH, KWZ/KWH and the WZ/WH spreads as well as interior and export basis levels.  Farmer movement is likely tapers off as harvest wraps up the next 10-14 days.  Then we have to determine where he sells grain again?  Still a lot of piles, however.

Trade as of 7:10

Corn down 3-5

Soy down 15-16

Wheat down 4-7

Tregg Cronin
Market Analyst
800-328-6530
651-355-6538
651-355-3723 fax
www.countryhedging.com
Country Hedging, Inc.
The Right Decisions for the Right Reasons