Overnight Highlights from Country Hedging's Tregg Cronin

Below is overnight highlights from Country Hedging's Tregg Cronin

Outside Markets: Dollar Index up 0.105 at 79.354; NYMEX-WTI down $0.64 at $94.65; Brent Crude down $1.28 at $110.75; Heating Oil down $0.0251 at $3.1020; Livestock are all in the red; Gold up $10.10 at $1778.50; Copper up $0.0095 at $3.8120; The Yen and Loonie are firmer, while the other major currencies are weaker; Cocoa and Lumber are positive; S&P’s are up 1.00 at 1460.25, Dow futures are up 14.00 at 13,584.00 and Treasuries are bid.

Japan is still making headlines overnight, but for a change, it doesn’t have to do with the China/Japan conflict.  Overnight, the Bank of Japan unexpectedly increased their asset purchase program by $126 billion as officials try desperately to stave off economic contraction in the world’s third largest economy.  The NIKKEI equity index rose 1.19% last evening, but the Yen is currently 0.15% higher.  The EURUSD briefly ticked below $1.30 last night following comments from the European Commission which said strict conditionality will accompany all aid programs.  That wasn’t a provision to begin with?  The US economic calendar today has housing starts, building permits and the already released MBA Mortgage Applications which came in -0.2% vs. 11.1% the week previously.

The Midwest was mostly devoid of any moisture the last 24 hours, but the East Coast did see rain from NC to NY.  Some light showers are working across N-MN this morning.  No big change to the 5-day forecasted precip map, although the storms impacting MO and bringing 0.70” will extend east through S-IL/IN/OH/MI to the tune of 0.40-0.80”.  The WCB will be dry through Monday.  NOAA’s extended maps last night show above normal temps building over ID and beginning to push the cold air mass east, centering over the US-SE.  The WCB should see normal/above temps by September 24^th, but moisture will remain below normal, aiding harvest, through the end of the month.  The coldest day the next 10-days will be Saturday with chances of frost present as 33* temps will be witnessed.  Australia saw a few light showers of less than 0.10” in most wheat areas with some totals up to 0.35” in W-Aus.  The forecast sees things quiet for the next week or so, but the very end of next week sees a front to bring 0.20-0.60” to NSW and Queensland.

Grains are seeing “green across the screen” this morning for the first time since Friday as a relief bounce makes its way through the Ag space.  Following the $1.00+ break in soybeans the past two days, it is generally believed end users will grow more interested down at these levels, and the balance sheet can ill-afford a ton of new demand cropping up.  It also doesn’t hurt the US’s largest export destination enacted another $126 billion worth of monetary stimulus last night.  Today’s bounce doesn’t change the lower trend mind you, and prices are still expected to work lower through the balance of the month which will mark month end, quarter end, increasing harvest and the September 28^th Grain Stocks report.  The last several Sept 1 Grain Stocks reports have been especially bearish to our space.

Harvest progress in Ukraine was pegged at 28.49MMT as of Sept 18^th, which covered about 72% of the total area to be harvested.  Average yields were pegged at 2.63MT/ha vs. 3.08MT/ha last year.  Ukraine had harvested 36.48MMT at this point last year.  Russia’s Ag Minister is still pegging total grain harvest to hit 72-73MMT.  Harvest has covered 76% of the total acreage to be harvested with 63MMT in the bin.  In export news, South Korea bought 28,700MT of US wheat from LD for shipment in December.  The wheat was 8.5-9.5% protein soft white wheat at $328/MT FOB.  The mills also bought a small quantity of HRW (11.5) and DNS (14) at $362 and $378/MT FOB, respectively.  Taiwan’s BSPA is tendering for 40-60,000MT of soybeans from the US or South America for shipment April 26-May 10.  South Korea’s MFG is also tendering for 55,000MT of soy meal for arrival by Jan 5.  Japan bought 51,890MT of feed wheat and 36,555MT of feed barley in a S-B-S tender.  Deliverable Stocks in Duluth/MPLS rose to 25.349mbu, up 3.5mbu and vs. 13.8mbu last year.

Open interest changes yesterday included drops on everything including wheat down 5,440, corn down 3,000, beans down 3,230, meal down 3,840 and soyoil down 8,260.  These all fit with modest liquidation, but still seem light considering the severity of the drops.  Still arguing end users are stepping up a bit of pricing at these levels.  Chinese markets finally stabilized seeing beans up 7c, meal up $1.70, soy oil up 27c, corn up 2.50c and wheat up 6c.  Paris Milling Wheat is currently up 8c, Rapeseed up 14c, corn up 11.5c, UK feed wheat up 8c and Canola up $8.00.  The US remained the world’s largest exporter of Ag products in 2011 at $168.2 billion according to WTO data.  We were followed by the Netherlands at $108.1 billion, and Germany in third place at $94.5 billion.  Cattle-on-feed out Friday.

Call things firmer today as we enjoy a bit of a relief bounce.  Ethanol production at 9:30 will be watched closely, but the themes of the week haven’t changed: specs are still loaded up, harvest is going to advance rapidly the next 15-days, harvest prices are record high, and the monetary silver bullets are being spent by the ECB, Fed and BOJ as we speak.  The long-term fundamental stories haven’t changed, but that doesn’t mean short-term direction can’t deviate.

Trade as of 7:10

Corn up 3-6

Soy up 12-19

Wheat up 10-16