Report Day Overnight Highlights 1-11-13 from CHS Hedging's Tregg Cronin

Outside Markets: Dollar Index up 0.066 at 79.806; NYMEX-WTI down $0.77 at $93.05; Brent Crude down $1.57 at $110.32; Heating Oil down $0.0370 at $3.0173; Livestock markets are mixed with lower cattle and higher hogs; Gold down $11.20 at $1666.80; Copper down $0.0345 at $3.6755; Silver down $0.293 at $30.625; Softs quietly mixed; S&P’s up 0.75 at 1467.75, Dow futures are down 4.00 at 13,402.00 and Treasuries are lightly mixed.

Mixed equities in Asia overnight, while Europe is quietly better.  The NIKKEI was up another 1.40% last night after the new Prime Minister announced a Y10.3 trillion ($116 billion) economic stimulus package that the government expects to lift GDP by 2.0% and create 600,000 jobs.  The Yen has sold off promptly and is trading above 90.00.  The big data point from overnight was the Chinese Consumer Price Index which rose to 2.5% y/y from 2.0% in November and vs. a consensus of 2.3%.  This pushed the Shanghai Composite down 1.78% to the lowest close since 12/28, and could limit stimulus efforts by the government.  Argentina’s Credit Default Swaps are spiking this morning with the 5-yr CDS up 118bp to 1,914bp, the highest since 12/4.  Wells Fargo reports earnings before the bell this AM.

Some decent moisture the past 24 hours along the Mississippi River and Great Lakes Region with rain falling in most of the upper-Midwest.  This storm continues to dump precip in the ECB this morning.  Going to be some moisture around the next 5-days with the heaviest in the central and eastern corn belt.  Cold temps forecast by NOAA the next 6-10 days across the entire Midwest.  Two swaths of above normal precip will hit TX and then the upper-Midwest including SD/ND/MN/WI/MI, but below normal precip cuts the country in half and will leave CO/OK/KS/NE/MO/S-IL/TN/KY dry.  South American weather is attached and looks nearly ideal.  Only area of concern seems to be some heat and dryness in Argentina, but not yet a problem according to forecasters.

Feature of the overnight session would have to be the selling pressure witnessed in the soybean and products market.  At the lows, March soybeans were down 20c, but have pared around half of those losses.  Corn is content around $7.00, and probably should remain close to their until report time at 11:00 CDT.  The general expectation of the market is a friendly corn report which could benefit wheat, but larger production in the US/Brazil/Argy are expected to hinder soybeans.  Convenience table attached.  Limit moves have been achieved each of the last 6-years, but it wouldn’t surprise me one bit to see this be the one year which is close to “normal.”  Export business has been healthy this week and on wheat and beans, but corn remains notably absent. 

A little bit of tender business overnight with Japan buying 121,188MT of Australian wheat for the first time in six weeks.  There was no US or Canadian wheat.  This follows GASC’s tender in which they bought 1 cargo each of US and Canadian SRW, disappointing to most analysts.  Still rumors of China buying US and Canadian wheat, although split ideas about whether its HRS or SRW.  Indonesian mills also bought a cargo Aussie wheat at $351/MT C&F.  South Korea’s KFA bought 55,000MT of optional origin feed wheat from Cargill at $328.35/MT C&F for April.  South Korea’s Mills bought 39,500MT of Aussie hard wheat at $360/MT C&F for April shipment.  Taiwan’s MIPA is tendering for 60,000MT of optional origin corn next week.  Lots of export business, but very little US participation.  Indonesia is planning to cut their palm oil export tax, matching Malaysia and remaining competitive.  Palm Oil stocks rose to a record 2.63MMT last month, putting pressure on the global Veg Oil market.  Chicken wing prices are at new record highs just in time for the playoffs and Super Bowl.  See chart below.

Open interest changes during yesterday’s session included wheat down 5,520 contracts, corn up 6,090, beans up 110, meal up 2,750 and soy oil up 5,580.  Index fund rebalancing seems to be continuing as scheduled.  Interestingly, since January 4^th, corn open interest is up 27,439 contracts, despite the fact funds are supposed to be selling corn.  Chinese markets were mixed with beans up 8.75c, meal down $1.70, soy oil down 58c, corn down 0.25c, palm down 77c and wheat down 3.50c.  Malaysian Palm Oil was down 19 ringgit to 2,368.  Paris Milling Wheat down 1.12%, Rapeseed is down 0.22%, Corn is down 0.11%, UK feed wheat is down 0.72% and Canola is down 0.31%.

Not much matters until we get the report out in four hours.  We’ve got the pre-report expectations.  We’ve got the index fund rebalance on the downhill slide.  Now we just have to get the numbers.  A little discouraging we still aren’t mopping up export business left and right, but we are getting more competitive and the funds are still big shorts.  More fun later this morning.

Trade as of 7:20:

Corn flat down 2c

Soy down 3-8

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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