Afternoon recap from Country Hedging's Tregg Cronin 11-19-12

Outside Markets as of 1:00 CDT: Dollar Index down 0.294 at 80.872; NYMEX-WTI up $2.77 at $89.68; Brent Crude up $3.14 at $112.07; Heating Oil up $0.0974 at $3.0841; Livestock prices are firmer; Gold up $19.70 at $1734.00; Currencies firmer.

Very supportive outside markets today on optimism towards the fiscal cliff after comments Friday made it sound like the talks were “constructive.”  Highly doubt we’ve seen the last of the volatility tied to this issue.  On top of the comments from DC, the ongoing tension in Israel/Gaza has also put a bid under energy markets.  Commitments of Traders data showed funds holding the smallest net long in crude oil since September of 2010, leaving plenty of room for additional buying should it be deemed necessary.  Economic data in the US today included existing home sales which were reported at 4.79 million units, above the 4.70 million estimate.  This was a 2.1% increase from September, higher than the unchanged estimate.  Year-over-year sales were up 10.9%.

A very nice bounce in corn today which picked up around 10:00 CDT.  Trade managed to push through the $7.32 resistance level with relative ease, a positive technical signal and likely adding some additional buying.  It is also putting more distance between spot and the $7.00 level which currently contains the most amount of open interest for the expiring December options.  Option expiration is 12:00 CDT Friday.  At last glance, there were 41,763 total open options including 27,966 puts.  There are also 36,687 options open at the $7.50 strike, making it a potential candidate as well.  Supportive overnight was word Asian buyers are turning increasingly more to the US for corn import needs due in large part to still hefty lineups in Brazil.  While down from the 2.3MMT at the beginning of the month, the shipping lineup this morning was pegged at 1.366MMT, or 24 Panamax vessels.  The slow progress is no solace to Pacific Rim buyers waiting for replacement.  Somewhat encouragingly, there is only one vessel left in the lineup declared for the USA.  Doesn’t mean more can’t be declared later, but fewer than has been the case.  Movement was very slow to begin the holiday shortened week.  CIF values were seen down 1c on the bid side for Nov at +89/95Z while Dec was up 2c to +82/86Z.  Hedging was heavier today than last week, but by no means “heavy.”  Spreads held relatively well, up 0.25c on the day to -3.50c.  Would think it would show more strength were it not for worries about a river closure sometime mid-Dec.  No real change to that over the weekend, with draft restrictions looking likely around Dec 15.  The PNW situation has taken on new life with a potential strike at the Port of Portland on Nov 25 if an agreement isn’t reached.  Some of the elevators might not be affected, but not a great situation when the two major ports are hampered.  Export inspections were 14.4mbu, above last week’s 9.5mbu but below the 23.6mbu needed weekly to hit the USDA’s export forecast.  More expectation for a pickup in exports than what’s actually happening. 

Wheat markets managed a positive close, although it was definitely the laggard of the major Ag markets.  Some wind seemed to be taken out of the sail when Egypt didn’t show up to tender over the weekend, and offers on the Iraq tender were reported, showing US as $40-50/MT out of the money.  C&F offers included Romania at $394/MT (50TMT), then Russian at $399/MT (50TMT).  These were followed by 400TMT out of Australia at $401-407.65/MT, 300TMT from Canada at $404.95-425/MT, some Bulgarian at $402/MT and Hungarian at $406/MT.  US-HRW was offered at a staggering $444.04-454/MT.  This seemed to shock some traders as it means US hard wheat is by far the most expensive in the world, and there is still a fair amount of wheat for sale out of origins thought to have dwindling supplies.  In addition to this story, there were also wire accounts of Indian wheat trading into Eastern Africa as milling wheat, not feed wheat like many had been penciling it.  When one considers the Indian supplies (which weren’t available in 2007/08), and the fact the Black Sea is still shipping wheat, it becomes clear the situation isn’t as dire as even 2010/11, and the window for ratcheting up exports to hit the USDA’s target of 1,100mbu is slowly closing.  Bloomberg reported grain exports for November will probably be a record 3.2MMT for this month.  There has been 1.8MMT so far this month with 900TMT wheat and 800TMT corn.  Lastly, only around 2% of the UK’s wheat has been rated as “high-quality bread milling” as opposed to 40% in 2011.  Could mean quality imports later in the year.  Other notes included Western Australia’s harvest pegged at around 35%.  This is another item which could have been applying pressure to our markets in addition to the funds dumping.  The commercial shorts have increased from 234,794 contracts to 245,010 the last several weeks which could include some Australian farmer selling.  These prices look a lot more attractive to the world farmer than they do the US farmer, and as we’ve seen with Canadian farmers, they will sell.  Wheat/Corn spreads corrected further today with the KWZ/CZ tumbling all the way to +138.25c, the lowest level since October 12^th.  WZ/CZ closed at +103.00c, the lowest since mid-September.  These should continue to contract as we aren’t competitive on feed, and if our export prices remain as high as they are, we need feed demand to help out the lack of export demand, otherwise our balance sheet will get more comfortable.  Spreads were unchanged to better on the day, but the last trade on the MWZ/MWH put it at -11.00c.  Inter-markets were quiet.

Soybeans firmer all night as prices held some very important retracement levels, which also coincided with the old highs from September 2011 and April 2012.  Former resistance, once broken, becomes new support.  Combine that with enough people yelling “oversold” and we can bounce.  In addition, export inspections confirmed another huge week of shipments at the expense of grains.  We also saw the USDA announce another 20,000MT of soybean oil sold to unknown destinations for 12/13.  This follows two sales last week, giving us around 90,000MT of soybean oil sold in the last 7-days.  This has been a big reason behind the oilshare correction we’ve seen as of late.  Soy oil was up 1.79% today while meal was unchanged.  Soybean basis was unchanged on the river today at +99F.  PNW bids could be called +120F, unchanged.  Most eyes are waiting to see what happens next weekend with the PNW longshoreman strike.  South Korea is also sniffing around for some soymeal.  With the huge soymeal export sales and recent purchases of soybean oil, one has to wonder if imports are buying the products because that is cheaper than buying the beans and crushing them themselves.    Soybeans feel as though they should move back inside a 1400-1500 range.

Crop Conditions out tonight showed a huge drop in PNW conditions, presumably due to the excessive rains the past several weeks.  Note map below.  The central belt seemed like it stabilized, although CO also saw a very big drop of 12pts.  Safe to say this is the worst established wheat crop on record.

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

www.chshedging.com

CHS Hedging, Inc.
The Right Decisions for the Right Reasons

Overnight Highlights from CHS Hedging's Tregg Cronin 11-19-12

Outside Markets: Dollar Index down 0.097 at 81.069; NYMEX-WTI up $1.11 at $88.02; Brent Crude up $1.21 at $110.16; Heating Oil up $0.0408 at $3.0276; Gold up $7.70 at $1722.00; Copper up $0.0405 at $3.4980; All major currencies are firmer; All the softs except cotton are better, led by Coffee up 1.18%; S&P’s are up 8.75 at 1368.50, Dow futures are up 67.00 at 12,637.00 and Treasuries are being offered this morning.

Global equity markets are firm this morning, led by European markets which are up over 1.0%.  The main themes seem to be tied to constructive comments surrounding the fiscal cliff talks in Washington.  One of the main sticking points is still the tax rates on the top earners, although few comments have made mention of anything tied to entitlement programs, the real source of the growing deficit.  Also supportive overnight was  a Spanish official saying Spain may need less than €40 billion for its banks from the ESM.  Today’s economic news will include existing homes sales (4.75 million/0%).  Notable earnings this morning will include Tyson Foods which analysts are estimating at $0.44/share.  Krispy Kreme is due this afternoon and seen at $0.08/share.

Some very limited precip over the weekend in the eastern parts of the south.  The 5-day forecasted precip map is devoid of moisture in the Midwest, but the PNW is expected to see very good rains in ID/CA/OR/WA and W-MT to the tune of 0.50” to as much as 8.6” in OR.  Not much change in the NOAA extended maps yesterday with below normal precip seen for all areas south of I-70 while MT/ND and parts of SD could see some limited moisture.  Temps are expected to remain above normal the next 15-days.  The weather continues to look pretty good for the S. American growing regions. Some rains are seen in Argentina and S. Brazil, but will not be heavy enough to resurrect issues with excess moisture seen in Sept and Oct. Yet will also insure that these areas do not slip into too dry of a pattern. The tropical rainfall in N. Brazilian growing regions will continue to feed crops moisture there.

Ag’s are enjoying a nice bounce overnight which was present from 7:00pm as bargain hunters and technical traders claiming “oversold” seem to be finding their way to our space.  A solid export sales report Friday in the complex continues to offer underlying support, and farmer movement of new beans has been notably absent.  Chatter from the country makes it sound like resellers in the East have basis length from harvest, but the same doesn’t seem to be true in the West as elevators hurry to get piles picked up and shipped.  There was no weekend tender by Egypt, much to the chagrin of wheat bulls.  This isn’t to say Egypt won’t buy US-SRW when they come back, it’s just each week that flips over is one week off the window the US will be the only suitable supplier.

There was some tender business overnight, however, as South Korea’s Nonghyup group reaches for as much as 110,000MT of soymeal for April delivery.  Egypt’s FIHC is also seeking 30,000MT of sunflower oil and 30,000MT of soybean oil.  A wire said African wheat buyers have turned to India as of late, and it’s odd few have made mention of just how much wheat has been sold out of state reserves.  Recent prices were said to be around $348/MT C&F.  Other articles talked of Brazil’s shipping lineup being around 1.5MMT long, and Asian buyers turning increasingly toward the US.  CIF bids going home Friday were +92Z, up 20c w/w.  Winter wheat conditions in Ukraine are being rated as “fairly good” by the USDA-FAS.  Plantings are right at year ago levels.  The wheat harvest in Western Australia is being estimated at 35% complete by one of the regions’ largest grain handlers at around 3.2MMT.  Farmers in Victoria are said to be “happy with the start of harvest.”  Canola and barley are said to be faring the best.

Open interest changes Friday included wheat down 2,540 contracts, corn down 1,710, soybeans down 1,750, soymeal up 4,090, soyoil down 5,510.  There are 272,000 contracts of corn remaining in the December with FND 10-days away.  Overnight, Malaysian Palm Oil was up 30 ringgit to 2,459 on an expected pick up in export demand.  Chinese markets were firmer with beans up 5.25c, meal up $4.20, soy oil up 25c, corn up 4.50c, palm up 26c, and wheat down 0.75c.  For reasons undisclosed, China’s government said it will suspend soybean auctions from state reserves this week.  Paris Milling Wheat is up 0.47%, Rapeseed up 0.30%, Corn up 0.30%, UK feed wheat up 0.57% and Canola is up 0.73%.

Things look as though we’ll be firmer today, and prices are probably due for a bounce considering the losses sustained last week.  Demand has shown no signs of slowing down on soybeans, and combined March 1 stocks of South American and United States soybeans will still be the tightest on record.  Domestic demand for corn remains fairly strong, and analysts remain optimistic on export demand moving forward.  Wheat needs to pick up some business or we fall relative to corn to find feed demand.  Short week with low volume.

Trade as of 7:10

Corn up 5-6

Soy up 10-15

Wheat 3-4

  

Overnight Highlights from CHS Hedging Tregg Cronin

Outside Markets: Dollar Index up 0.076 at 81.154; NYMEX-WTI up $0.65 at $86.09; Brent Crude up $0.79 at $108.82; Heating Oil up $0.0157 at $2.9892; Livestock are quiet; Gold down $6.40 at $1706.90; Copper is down $0.0235 at $3.4455; Currencies are mixed; Softs are mixed, but Cocoa is down near 1.0%; S&P’s are up 2.25 at 1353.50, Dow futures are up 4.00 at 12,526.00 and Treasuries are near unchanged.     

Not much for economic news overnight, but the main feature in the US will be Congressional leaders heading to the Whitehouse to meet with President Obama for talks on taxes and the fiscal cliff.  One thing is for certain, markets won’t like anything that comes out of the talks and equities are likely to take it on the chin.  The only real piece of economic data on today’s docket is industrial production, so the focus will be on the Whitehouse.

Dry in the Midwest the last 24 hours, and expected dry the next 5-days aside from some precip in the PNW over the weekend.  No change to  extended maps from NOAA with above normal temps seen the next 6-15 days, and below normal precip as well.  The southern plains will enter dormancy without any follow up moisture which will keep conditions under pressure.  Forecasts in South America are dry the next 5-days, but rains move back into Argentina during the 6-10.  There will be wetness concerns in Argy, but Brazil should be in good shape.  There isn’t much confidence in the 11-15 at this point, but maps are showing pretty widespread moisture across Brazil.  The only threat at this point seems to be wetness in certain areas of Argentina.

The feature from the overnight has been continued liquidation in the soybean complex as prices trended steadily lower overnight until a last burst of selling around 3:30am sent things through support and to new lows for the move.  Soybean prices are now at the lowest level since June 22^nd.  The main rumor from the overnight according to Reuters is China canceled 600,000MT of US soybeans due to poor crush margins.  It wouldn’t appear this is the case based on CIF and PNW basis considering the sharp advances we’ve seen in those values this week.  Still, crush margins have been thought to be rather negative, and with the large break in the futures board, almost every soybean purchase any importer has made since June is now more expensive than it is today.

Other headlines last night included word South Korean feed mill KFA had begun to buy new crop South American soy meal for arrival by late-April.  Prices were said to be around $507/MT C&F.  MFG was said to have bought meal for $505.36/MT C&F for arrival by Apr 25^th.  Another article from Bloomberg quoting analysts in Germany also said China had “scrapped deliveries that were supposed to be dispatched in Dec and Jan that just a few weeks ago had been agreed at significantly higher prices… It is likely these shipments will be renegotiated at lower prices.”  Other headlines included articles talking about Egypt moving on US wheat in its next tender with that rumored to be this weekend.  A trader with Venus said they expect the next tender to be about 50/50 French-US.  Also worth noting, India has continued to sell what from state reserves for use in the global export market.  Headlines said they may tender to export another 500,000MT of wheat for December, and this would continue to displace Australia and the US.

Open interest changes yesterday included wheat up 1,620 contracts, corn down 1,810, beans up 5,160, meal down 880 and soy oil up 3,180.  Soybeans now appear to be adding fresh shorts, although the shorts would seem to be managed money as opposed to commercials considering the lack of farmer movement and the firm cash levels being paid.  Malaysian Palm Oil was down 38 ringgit to 2,396 overnight, but was up 80 on the week.  Chinese markets were relatively steady, so not the cause for selling in our market.  Soybeans were down 0.25c, meal down $6.50, soy oil down 74c, corn up 0.75c, palm down 51c and wheat down 3c.  Paris Milling Wheat is up 0.19%, Rapeseed down 0.74%, Corn down 0.39%, UK feed wheat down 0.38% and Canola down 1.11%.

Export sales this morning which should show big product sales, decent bean sales, and continued slow exports on corn and wheat.  Possibly stabilizes things near the lows, but I wouldn’t count on anything with support almost non-existent in this soybean market.  Corn basis did firm at several ethanol plants in the upper-Midwest, at feed lots in Hereford and off the PNW.  It would seem most of our basis strength, on everything, is lack of farmer movement for the time being, but demand should be being bought down here.

Trade as of 7:15

Corn down 2-5

Soy down 9-16

Wheat down 1-4

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

www.chshedging.com

CHS Hedging, Inc.
The Right Decisions for the Right Reasons

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

CHS Hedging, Inc.
The Right Decisions for the Right Reasons

Afternoon Recap from Country Hedging's Tregg Cronin 11-26-12

Outside Markets as of 1:30: Dollar Index up 0.031 at 80.256; NYMEX-WTI down $0.45 at $87.85; Brent Crude down $0.35 at $111.03; Gold down $2.70 at $1748.70; Copper up $0.0050 at $3.5330; All major currencies are trading weaker; Livestock markets closed weaker.

Two pieces of economic data in the US today including the Chicago Fed National Activity Index which came in at -0.56 vs. a consensus of 0.18.  The Dallas Fed Manufacturing Survey was posted at -2.8 vs. a markets estimate of 4.7.  Equity markets were under moderate pressure as financial media dusted off fiscal cliff stories once the malaise of Black Friday wore off.  Nothing much to report in the financial markets, although the Dollar Index is throwing off some interesting chart patterns, as shown this morning.  Argentine Credit Default Swaps backed off from this morning’s highs, but remain at rather elevated levels.

Firmer for most of the night and all-day, but corn gave back much of its gains to close only 1-2 higher in most contracts.  The excitement from a big export sales report Friday seemed to wear off a bit, especially once the small shipments data arrived mid-morning.  Traders also made note of the fact Japan accounted for 57% of the 776,000MT sold last week, so other destinations remain somewhat absent.  One week of export sales doesn’t change the current situation if we follow it up with a paltry week this week which is possible considering last week was a holiday shortened one.  Export inspections were 15.9mbu vs. 14.4mbu last week and the 23.8mbu needed weekly.  Shipments are currently down 45.2% y/y, but soybeans are up 37.8% so there is definitely a pecking order with elevating capacity.  China did take 4.43mbu last week with one boat each of the Gulf and PNW.  Brazil’s corn lineup still shows 1.593MMT as of this morning vs. 1.366MMT last week.  Dr. Cordonnier was floating an article on his website talking about 3MMT of corn still in the Brazilian country side which needs to move to market before soybean harvest begins in mid-January.  I guess that’s near-term supportive but overall pressuring if they have that much corn left.  Charts certainly have a better feel to them now that December options are out of the way.  The next upside objective on corn is the $7.55 mark basis the December, then $7.76 from October 11^th.  We should run into some farmer selling between $7.50 & $7.75 now that the farmer has readjusted his marketing objectives with few thinking corn needs to make a run back at $8.50.  Ethanol margins are projected negative by $0.30/bu, and reports continue from the country about ethanol plant financial health.  Spreads were mixed/weaker with only the CZ/CH gaining 0.25c to -4.00c while the other calendar spreads weakened.  The Missouri River flows out of Gavin’s Point in Yankton are expected to be reduced this coming Friday, and the STL River Gauge read -1.5ft this morning.  At -5.00ft, navigation becomes impeded.  Rail freight hasn’t seen much excitement yet, but barge line operators are growing increasingly anxious with a closure all but assured without a massive rain system.  NOAA maps look dry the next 15-days.  Brazilian guru Michael Cordonnier cut his Brazilian corn production number 1.0MMT to 71.0MMT citing dryness.  CIF bids were indicated at +84Z through March while offers are around 4c above that.  This is putting IL river corn below delivery by 4.9-9.4c for Nov and FH-Dec, but 8c above for LH-Dec.

Wheat too benefited from a favorable export sales report Friday, but saw terrible shipment data today which helped temper things.  There was some decent inter-market spreading with buying KC wheat and selling Chicago/MPLS.  Renowned speaker and analyst Dennis Gartman issued a memo to clients saying he wanted to buy KC July ’13 wheat at a 50-52c premium over July Chicago with the expectation for it to go to $1.00.  This has already been a crowded trade, but apparently people wanted to own it today.  Wheat export inspections were 7.8mbu vs. 11.4mbu last week and the 23.3mbu needed weekly to hit the USDA’s mark.  Regular destinations took the wheat in this rather slow week.  Shipments for the year are down 14.0%.  Iraq issued another tender for a nominal 50,000MT with origins including Russia, Kazakhstan and Romania along with the US, Australia, Canada and France.  Unless something crazy happens and nobody offers any wheat, US wheat should be too expensive on this one again.  Dec 3 deadline.  Jordan issued a tender for 100,000MT.  India said it has shipped 800,000MT this year so far with another 1.3MMT worth of commitments to hit their 2.0MMT quota.  Odds are good another 1-3MMT will be sold from state reserves for export, and needs to be considered in the overall wheat export/import grid.  UK winter wheat planting was reported down 12% to 4.3 million acres due to wet weather preventing field work.  Spring barley will likely take up the slack.  The EU on the other hand, is generally in good condition including France.  There remain some risks to Russian wheat due to above normal temps which could lead to frost damage.  This all from a report by MARS (EU’s Monitoring Agriculture Resources).  Not much change to to-arrive bids with 14.0% exploders at +70/75Z while shuttles are seen at +55Z.  Call the PNW +85Z, but it would take +95Z to buy wheat from the country at any good west spreader.  The national winter wheat condition rating fell 1pt to 33% G/E.  Biggest declines were seen in MO (-6) IL (-3) OH (-3) NC (-6) TX (-9) AR (-11) SD(-2) NE(-3).  The PNW erased some its losses last week with a 22pt jump in OR and 10pts higher in WA.  Odd to see the huge swings.  Emergence is pegged at 88% vs. 90% average.  SD is still only 60% emerged, with MT at 68%.  This is the last crop condition rating of 2012.

Soybeans showed the most strength today, closing with 6-10c gains, although some late bearspreading hit spreads rather hard with the SF/SH closing down 3.75c to +12.00c.  A trade and close of +12.00c is the lowest print and close since March 30^th , 2012.  The weakness in both the bean and corn spreads seems to be tied to the panic on the river.  It looks rather likely the river will be restricted or altogether closed sometime in December, and if/when it does, it will render owning the spread to take delivery useless because one won’t be able to get the grain past St. Louis.  So despite the fact our basis is hot along the river, and the fact we are trading near or above delivery equivalence, we could continue to see the spread get pressured.  The USDA reported another 20,000MT of soybean oil sold to unknown destinations for the 12/13 marketing year.  The current soybean oil sales now exceed the annual USDA forecast for all of 12/13 by 60-80 million lbs, and we have 10-months of the marketing year left.  Soybean oil basis in IL is -300Z, while bean oil basis in Brazil is +100/150Z.  Soybean oil calendar spreads are still running 100-200% of full carry, signifying exporters are basically getting rid of it for free to make room for more oil as the guys crush beans to get the meal.  CIF bids were unchanged in the spot at +100F against no offers.  Dec is +95F.  This puts spot along the IL at 6.4c below delivery, but above delivery by 5-13c through February in Zone 3.  That’s supportive, and March is sitting around 19.5c above delivery, implying the SF/SH might be getting a little cheap.  Celeres reported soybean planting at 74% complete in Brazil vs. 81% a year ago.  The crop is thought to be 50% sold vs. 39% a year ago.  A big reason behind that has been the weakness in the Brazilian Real which has put more money in the farmers’ pocket per bushel, and has tempered the big correction we’ve seen in the CBOT prices.  Soybean inspections were 45.5mbu vs. 66.8mbu last week and the 19.9mbu needed weekly to hit the USDA’s mark.  Last week was shortened due to Thanksgiving which could account for some of the lighter totals.  Main concerns with South America right now are too wet areas in Argentina.  German milling wheat trading into Brazil should speak to the idea Argentina’s received too much rain.  This needs to be monitored, but it doesn’t seem to be setting off any alarm bells just yet.  No one is really axing production numbers anyway.  As big of a problem as the rain could be, if Argentina’s government defaults, it could be as big of a problem or worse.

Sláinte.

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

www.chshedging.com

CHS Hedging, Inc.
The Right Decisions for the Right Reasons

Overnight Highlights 11-26-2012 from CHS Hedging's Tregg Cronin

Outside Markets: Dollar Index up 0.034 at 80.270; NYMEX-WTI down $0.52 at $87.76; Brent Crude down $0.42 at $110.98; Heating Oil down $0.0094 at $3.0677; Gold down $0.80 at $1750.50; Copper up $0.0065 at $3.5345; Most currencies are weaker this morning aside from the Yen; Softs are mixed, led lower by Coffee; S&P’s are down 7.00 at 1398.50, Dow futures down 56.00 at 12,905.00 and Treasuries are firmer, up 0.42%.  

European equity markets are softer this morning as are US equity futures.  Chatter in most financial outlets centers around ongoing discussions over Greek bailout terms and the increase in Black Friday shopping.  Sales over the 3-day haul were said to be up 12.8% over last year which is in-keeping with the consumer optimism as of late vs. the more pessimistic nature of businesses.  Also of note, Argentina’s 5-yr Credit Default Swaps surged another 924bp overnight to 4,047bp (See chart below).  It is looking increasingly likely they will default which could end up leading to a jump in export taxes.  For comparison purposes, the cost of insuring Spanish debt is only 320bp vs. Argentina’s 4,047bp.  US economic data today will include US Chicago Fed Index seen at 6.2.

Pretty dry the last 3-days, although some snow was seen in WY/MT.  Looks like another dry week this week with the exception of some rain in the MS-Delta and across the PNW.  NOAA’s extended maps do look like a warm up is on the way, however, with above normal temps seen in the 6-10 centered over the southern plains.  Precip should remain below normal for HRW states, however.  The 8-14 holds better chances for above normal precip.  Dry in Argentina over the weekend, although some rains did fall in S-Brazil.  A system is seen Wednesday and into Thursday for Argentina and S-Brazil to the tune of 0.50-1.50”.  Coverage over Argentina is seen at 80-90%.  More rain is seen in Argentina early next week and will remain an area of concern.  Brazil looks to be in real good shape.

Receiving a nice bounce in the grains overnight, rising steadily through the European open.  Encouragingly, corn has managed to push back above the $7.50 level for both December and March corn, and January soybeans are trading right at resistance of $14.28 ¼.  Trade above, and a close above that level will be technically positive, and could signal a near term bottom.  Supportive inputs seem to be more optimism about US grain and oilseed exports, which we saw better evidence of last week, and a real lack of farmer movement as price remains below marketing objectives.  While weather in South America remains mostly beneficial, the threat of a too-wet Argentina and a potential default is probably also keeping traders cautious about putting the SA crop “in the bag.”

Overnight headlines included Iraq issuing a tender for 50,000MT of wheat with a bidding deadline of Dec 3.  All major origins are open, including Kazakh, Russ and Romanian.  Jordan is tendering for 100,000MT of wheat with a deadline of Dec 11.  We also heard news Germany has been sending wheat cargoes into Brazil and the UK due to quality issues with the UK and Argentine wheat crops.  This needs to be monitored, and speaks to the torrential rainfall in Argentina.  India said it is considering fresh wheat exports to clear stockpiles ahead of new crop harvest.  State grain companies have already contracted to ship 1.3MMT with a quota of 2MMT.  800,000MT has been shipped already.  India is definitely helping bridge the gap.  Major grain handler CBH said Western Australia production is seen at 8.5-9.3MT with around 50% of it harvested to date.  Haven’t seen an update on river gauge levels in STL, but most still looking for restrictions on the river by Dec 15.

Open interest changes Friday included wheat down 5,120 contracts, corn up 800, soybeans down 100, meal down 370, and oil down 630.  Very quiet day Friday despite option expiration.  We missed closing above $7.50 basis December corn, the largest area of open interest.  Chinese markets were very quiet overnight with beans unchanged, meal up $1.60, oil up 66c, corn up 3.75c, palm up 74c and wheat up 0.75c.  Malaysian Palm Oil was up 37 ringgit at 2,432.  Paris Milling wheat is up 0.47%, Corn up 0.39% Rapeseed up 0.16%, UK feed wheat up 1.01% and Canola is up 0.63%.

Call things firmer to start the week with more traders excited about the prospect for improved US exports in coming weeks.  Would caution getting too optimistic, considering over half of the export sales last week was Japan in a much talked about purchase.  Other destinations need to step up as well, and we still aren’t connecting on much swing wheat business in the Middle East.  Where is Egypt…?

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

www.chshedging.com

CHS Hedging, Inc.
The Right Decisions for the Right Reasons

Overnight Highlights from CHS Hedging's Tregg Cronin 12-3-12

Outside Markets: Dollar Index down 0.335 at 79.872; NYMEX-WTI up $0.50 at $89.41; Brent Crude up $0.67 at $111.91; Heating Oil up $0.0165 at $3.0772; Gold is up $8.30 at $1721.20; Copper up $0.0120 at $3.6615; All major currenencies are trading firmer led by the Brazilian Real which is up 1.14% (Brazilian manufacturing data accelerated at the fastest level in 2-years); S&P’s are up 5.75 at 1420.25, Dow futures are up 50.00 at 13,058.00 and Treasuries are weaker.   

The feature in financial markets overnight has to be the sharply better equity markets in Europe.  At current, Spain is up 1.00%, Italy up 1.44% and France up 1.01% after the Italian/German 10-yr bond spread narrowed to less than 300bp for the first time in eight months.  Borrowing costs for Portugal, Italy and Spain are 10-16bp lower this AM.  This was after Chinese manufacturing data came in above 50.0, the contraction/expansion level.  This didn’t help Asian equities, however, with the Shanghai Composite dropping 1.03% and the Hang Seng down 1.19%.  Chinese equities remain near the lowest levels since Jan of 2009.  Eco data in the US today will include ISM Manufacturing (51.3), Construction Spending (+0.40%) and total vehicle sales for November (14.80 million).

Precip over the weekend was limited to WY/MT and some scattered precip in the ECB-NorthEast.  The 5-day forecasted precip map is showing some moisture in the Midwest for the first time in quite a while.  States along the MS-River from STL south and also those along the OH-River north will see anywhere from 0.25-1.4” over the 5-day stretch.  See map below.  Dry areas of the plains and WCB will continue to be missed.  NOAA extended maps are turning a bit more generous with precip, showing above normal precip for all areas East of the MS-River and north of I-80.  Temps above normal.  “The Argentine growing regions will see another round of unwelcome, heavy rains fall this week and then there are some signs that the pattern might be changing to one that is drier.  The bottom line is rains this week will continue to cause delays in summer crop planting and quality issues with winter wheat. Things in Brazil are in pretty decent shape in most cases.”  –John Dee

Positive trade in the grains all night, but accelerated to the upside about the time of the Dalian open at 8:00 CDT.  Dalian markets did see firmer closes on everything, but not to the extent that we find out markets up this morning.  Looking at weekend news flow, the support looks derived from Egypt’s GASC finally buying US wheat, the heavy rains in Argentine growing regions forecast this week and the steady demand for US soy and products.  We’ve also seen commodity funds turn a bit more friendly the space, even if not all corners of the Ag space.  Hedge funds increased bullish bets on commodities (all commodities, not just grains) by the most since August, jumping long positions by 9.8%.  Obviously some see China’s economy bottoming and the fiscal cliff finding resolution.

Over the weekend, Egypt’s GASC bought 400,000MT of wheat for delivery between Jan 15-Feb 10.  Of that total, 165,000MT was US-SWW at $335.87-337.39/MT and 115,000MT was US-SRW at $348.89-351.49/MT.  These are on a FOB basis.  Egypt also bought 60,000MT of Romanian wheat at $362.04/MT and 60,000MT of French at $359.89/MT.  The US absolutely had to participate in this tender, and it did, so now the question becomes what other destinations will the US turn competitive for?  It’s a good start but much more business needs to get done.  In other export news, Israeli groups are tendering for 115,000MT of corn in addition to some barley and feed wheat.  Shipments begin Jan 20.  Canada will update production estimates later today and Deutsche Bank thinks wheat will be revised slightly larger.  Australian grain handler CBH says Western Australian receivals have been 5.5MMT so far, or around 61% of the estimated total.  Lastly, Ukraine and China signed a memorandum of understanding with China’s COFCO to buy corn from Ukraine.  No sales have yet been signed.

Open interest changes Friday included wheat down 9,220 contracts, corn down 8,090, beans down 3,330, meal up 5,990 and soy oil up 4,630.  Looks like some pretty heavy liquidation considering the losses witnessed Friday, but much can be attributed to ongoing December liquidation and month end.  There were 1,939 re-deliveries in Chicago Wheat overnight, 246 corn and 1,616 soy oil.  In Minneapolis, there were 329 re-deliveries after 600 on FND.  When it’s all said and done, most of the corn should fine strong hands.  The St. Louis River gauge was quoted at -2.2ft this morning, with the expectation it will drop to -4.0ft by Dec 14.  -5.5-6.0ft would halt navigation.  Chinese markets o/n saw beans up 9.25c, meal up $6.40, soy oil up 71c, corn up 2.50c, palm up 87c, and wheat up 4c.  Paris Wheat s up 0.74%, Rapeseed up 0.26%, Corn up 0.79%, UK Feed wheat unchanged and Canola up 0.39%.

Call things better as demand is beginning to pick up in wheat, it remains steady on soy and the products and corn supplies remain a question mark.  The River will continue to be a negative effect toward price, but world importers still need our grain.  Soybeans would do themselves a favor to break out of their current downtrend which they are bumping up against this morning.  Keep in mind we’re between Thanksgiving and Christmas, and no substantial progress has been made on the Fiscal Cliff.

Trade as of 7:10

Corn up 6-10

Soy up 14-18

Wheat up 7-10   

  

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

www.chshedging.com

CHS Hedging, Inc.

Afternoon Recap from CHS Hedging's Tregg Cronin 12-3-12

Outside Markets as of 1:15 CDT: Dollar Index down 0.350 at 79.857; NYMEX-WTI up $0.16 at $89.06; Brent Crude down $0.37 at $110.86; Heating Oil down $0.0042 at $3.0565; Cattle firmer and hogs weaker; Gold up $6.40 at $1719.10; Copper up $0.0075 at $3.6560; S&P’s are down 3.25 at 1411.50, Dow futures are down 34.00 at 12,974.00 and Treasuries are softer.

Financial markets gave back most of the morning gains after weaker than expected readings off the ISM-Manufacturing survey which shoved us back below the boom/bust level of 50.0 for the first time since July.  Many were quick to cite Hurricane Sandy for the disruptions, but details seemed to suggest it had more to do with uncertainty generated by the fiscal cliff than the super-storm.  The new orders component and the employment index did drop, but the production index actually rose.  If Sandy had forced widespread closures, the production index also would have dropped.  There was little for comments from Washington DC which might have been a good thing.  The dollar index remains under pressure, trading at the lowest levels since October 31^st.  The continuous commodity index was up 0.50% today to 574.28.

A rather uninspiring close today with corn giving up 8c gains to see the front-end of the curve close down 1-2c.  The deferred contracts did manage to close in positive territory, pushing a bearspread bias on the day.  Slower than expected export shipments, weakness in wheat, softening cash markets after last week’s movement and still no strong stopper on the 246 December deliveries all seemed to be factors.  Export inspections were just 9.6mbu, the second-lowest shipment total of the marketing year and well short of the 24.1mbu we need to ship each week to hit the USDA forecast.  Total shipments to date are 208.3mbu, down 48% from a year ago.  Worth noting, China took 2.01mbu off the PNW, an encouraging sign to see them keep taking our corn.  Farmer hedging today slowed quite dramatically considering these prices were available last week after some better movement early.  Despite the lack of movement, cash corn basis seemed to back off today.  CIF bids were indicated at +78H, off a few cents from Friday as the push seems to be about getting soybeans south of Cairo before corn.  Once the river closes in mid-December, corn will have to move to the Gulf by rail, or go to Hereford, the PNW or possibly the Atlantic.  An article from Bloomberg said farmers could see freight costs double as things need to move by rail instead of barge, or because the barges have to be loaded so light in order to avoid grounding in the low areas.  Other newswires said the US Army Corp of Engineers intends to speed rock blasting between Thebes, IL and Grand Tower, IL on 13% of the river rocks will begin January 3^rd.  This could allow light loaded barges to make it through the affected area.  Parties are still petitioning the President to release more water out of the MO-River, but no word on that yet.  Midday bids off the PNW looked a bit weaker as well with +100/108H bid for Dec/Jan.  +110/113H is available for Feb/Mar, but the majority of corn isn’t actually working to the PNW, but instead being spread to another domestic destination.  Most ethanol production margin calculations remain rather negative.  In export news, an Israeli firm is tendering for 115,000MT of corn for Jan 20 shipment.  COFCO (China’s state reserve buyer) and Ukraine have continued their talks about Ukrainian corn working into the country.  Most still seem to think Ukraine could ship their first cargo in December.  Supportive to corn is the ongoing rains in Argentina which are prompting acreage shift ideas from corn to beans.  Heavy rains will continue this week, but most see a drier pattern in the 6-10.  Brazil’s vessel lineup to load corn was seen at 1.942MMT vs. 1.593MMT a week ago.  Brazil’s corn planting progress is seen at 86.3% vs. 94.3% a year ago according to Celeres.  The summer crop is forecast at 37.1MMT and the winter crop at 38.5MMT.  One note of the COT report, commercial gross longs (end users) saw their position drop 67,286 contracts, or 16.1%, to 364,511 contracts in the latest week.  The specs have continued their buying, but that’s a big drop by the guys who actually use the corn.  March corn looks as though the $7.15-7.75 range will continue for the foreseeable future.  Farmers sell at the top and end users buy at the bottom.  Looks like selling straddles and strangles could be a safe bet, kind of like ADM has been doing as of late.

Wheat had a very similar session to corn, rallying overnight and early, only to give up gains and close lower despite some weekend tender business, dry HRW-wheat areas and more rain in Argentina.  Wheat bulls finally saw the export business they’d been waiting for when Egypt decided to buy 165,000MT of US-SWW at $337/MT FOB, and 115,000MT of US-SRW at $348-351/MT.  As supportive as Egypt taking US wheat was the fact the offerings from France and the Black Sea were somewhat limited.  Egypt did buy one cargo each from France and Romania.  While this is certainly supportive, it’s the higher pro wheats such as US-HRW which is so badly behind the pace needed to hit the USDA’s export forecast.  It would be very encouraging to see Iraq move on some US-HRW in its current tender, but based on the last trades, that might be a tall order.  Bottom line is it looks like importers are coming for US wheat now, but will need to continue to do so in order to keep prices elevated.  Australia’s harvest is moving past the halfway mark, especially in W-Australia where it is 61% complete.  Export inspections totaled 14.2mbu today, above last week’s 8.1mbu but below the 23.8mbu needed weekly to hit the USDA’s mark.  While not a new feature, interesting to note the cash spread on the spot floor in Minneapolis and KC.  12.0% HRW was quoted at +85/100H today, so using the offer side would put it at $10.06.  14.0% HRW was quoted at +82H which would put it at $10.13.  If these two classes of wheat are nearly the same price, but one offers you 2.0% more protein content, which would you rather own?  Would imagine mills will try working in more HRS were applicable.  COT data out Friday offered a couple interesting observations.  First, the net long position held by the funds in Kansas City wheat dropped to 26,735 contracts, the smallest since the week of June 26^th.  This despite commercial gross longs having been buyers for the past 5-weeks.  On the other side of the coin, Chicago wheat saw a big drop by the commercial gross longs (end users) last week.  That group shed 69,647 contracts (36% of their position) in the latest week.  This while specs bought roughly 10,000 contracts.  In Minneapolis wheat, funds pushed their net long position to 8,433 contracts, the largest since April 24^th.  Some very different actions across the three wheat exchanges.  Dry forecasts remain for the southern plains the next 10-15 days.  This should be a back burner issue for the near-term, but will be a talking point nonetheless.  A little discouraging to see us get the business we wanted and sell off, whereas all fall we rallied every time Egypt or a big importer bought wheat from a competing nation because they were that much closer to running out…

Soybeans managed a good close, finished up 12-17c, although they were off their highs by around 8c.  Without regurgitating most of the news outlined above, supportive influences continue to be the wet forecasts in Argentina, solid demand on both soybeans and products, and firm basis levels in both the US and SA.  Export inspections in the latest week were 51.1mbu vs. 46.6mbu the week before and the 19.1mbu needed weekly to hit the USDA’s mark.  Interesting to see 2.0mbu destined for China inspected off the Atlantic.  Consolidated Grain & Barge (CGB) sent out an email to customers today saying they will essentially stop taking barges north bound up the river by December 9^th.  Celeres released data today on farm marketings and planting progress with 50% of next year’s crop thought to be sold vs. 40% a year ago.  Plantings were seen at 83% vs. 88% a year ago.  They kept their soybean production outlook unchanged at 79.1MMT, but this is lower than the USDA’s 81MMT.  It was interesting to see the % of average precip totals for South America this morning.  One can definitely see the trouble areas and the really good areas.  Buenos Aires in Argentina is definitely a trouble area with their reporting stations showing 308% of normal precip during the month.  Other regions were anywhere from 158% (La Pampa), 796% (San Luis) down to 15% (Correnties).  Brazil wasn’t as saturated but did have some areas in the south which would have liked to have received more rain.  Most areas there were between 57-88% of normal.  Largest amount of open interest in January soybeans is at the $15.00 strike.  Option expiration is around 20 days away, so keep it on the radar.  One last note on the COT data, funds continued to liquidate their position last week, dropping their net long down to 73,150 contracts, the smallest since February 14^th.  Their positions are following the exact same trajectory as last year before the weather problems started.

6-10 South American weather forecast.  Drying up in the south where drier weather is needed.

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

www.chshedging.com

CHS Hedging, Inc.
The Right Decisions for the Right Reasons

closing grain market comments 12-17-2012 - grains close weaker - beans leave doji on charts - Van Trump & Cronin Speaking at 2012 Grain Marketing Seminar

Markets closed mixed to weaker today after being slightly firmer this a.m.

Corn closed down 6-7 cents, beans closed unchanged, KC wheat was off 8 cents, MPLS wheat was down 7, CBOT wheat was off 6, the US dollar is near unchanged with the cash index at 79.560, crude is up about 60 cents, and the equity markets closed firmer with the DOW up 100 points.

Rather poor performance for the grains today; before the 9:30 bell most of the grains where slightly positive; but once the pit opened wheat came under pressure and then corn followed to the extent that beans closed about 13 cents off of their highs leaving a doji on the charts.  The doji has to be considered a warning sign when you consider beans are now over 1.25 off of their lows from about a month ago.

Today was really a lack luster news day for the grains; which we should expect more of as we move into the end of the year.  The things that will drive us should be demand news, weather (mainly in South America but here in parts of the US as well), macro events and money flow by the funds(fiscal cliff).  The next major report and probable fundamental market changer will be the USDA report on Jan 11^th.  I don’t know that I would look for the grains to be quiet; but I would look for our markets to be thin as we go into the holidays.  Many producers, buyers, and other participates will be in holiday mode for the next couple of weeks. 

Wheat is very over done on the downside; yet we still are not seeing any HRW export business come our way; we really need to find some export demand for our milling quality wheat and until we do the horrible conditions that we presently have with our wheat crop will likely take a back seat.  I have said many times I think wheat has ton’s of potential and I have noticed plenty talking about the 2008 wheat market.  But until we have some demand there is really no comparison.  I remember in 2008 when no one had any wheat left and when we where shipping train after train to the export market.  We have yet to ship a train this year to the export market.  In 2007-2008 we shipped train after train down to the Gulf and later in 2008 the mill market really had to pay up. 

As mentioned news was rather light and likely will be; but we did have export inspections out this a.m.

Corn came in at 15.01; which was slightly above trade estimates but still about 10 million short of what we need on a per week basis to meet current USDA projections.

Beans had shipments of 37 million bushels; which were the smallest since September and below estimates but still well above what we need on a per week basis.  So far we have 40% more shipped this year than a year ago.

Wheat shipments came in a t16.4 million bushel which was the best number we had seen in several weeks; but still short of the nearly 22 million bushels we need per week to meet current projection.

Basis is steady for most of the grains; but I also don’t see many end users looking very aggressively other then bean buyers.  I do get some calls from brokers for corn and wheat from time to time but not much interest from the ethanol plants nor the mills.  Birdseed buyers also look to be very quiet; but orders have picked up.

Railroads are not slowing down supply either which doesn’t help out basis. 

To get basis running we probably need to see some export demand to keep our domestic buyers honest.  On the flip side with producer selling limited to a few bushels to keep the tax man happy I don’t think end users could buy anything without a big jump in the board or a big basis push.  Bottom line is it is a waiting came; longer term unless we get demand I don’t want to get too bullish basis on many of the grains just because producers have strong hands.  I much rather be bullish from demand.

It was about a year ago this last weekend that the first bean bull story started as soybeans gapped up one Sunday night.  So far I am not seeing any bull story done there other then planting delays; which isn’t much of one.

As for marketing I have noticed over the past couple of weeks that many advisor’s services have made plenty of sales recently.  I noticed one that is 70% sold in 2013 new crop corn, which to me is a little aggressive.  I also have noticed another has some 2014 wheat sold.  I am not going to make no generic recommendation to have X sold or X not sold as I think that every situation is different with different goals, needs, and risk/reward objectives; but I do think that we should take note that the reason some advisors are making some deferred sales is because levels are historically attractive with good profit returns and there are huge unknowns.  Some of the unknown’s could be extremely bearish should things shake out; such as what happens to corn price should we plant a record amount and have trend line or better yields along with curbing demand?  Some are on record having predicted sub $4.50 corn on the board next year.  I do know that some of the unknowns could also be bullish; so I am not going to preach that the sky is falling and one needs to be aggressive making sales; but I am going to say that sometimes that first little bit of marketing really helps out the average and helps many get comfortable.  Part of risk management can be risk diversification; so don’t be afraid to spread out a little risk here and there at levels that are both profitable and historically good.

If you would like help writing a marketing plan or going over some grain marketing options please give us a call.

Also I want to remind everyone that we have our marketing meetings this week.  Both Kevin and Tregg can give some good information about the markets as well as some opinions on where this thing might be heading.

Grain Marketing Seminar 2012

We would like to invite you to our

free grain marketing seminars:

Dec. 19^th, 2012 – 1:00 pm MST at the

Ambulance Building in Philip, Tregg Cronin Speaker

Dec. 20, 2012 – 10:00 am CST at the Ramkota in

Pierre, Kevin Van Trump and Tregg Cronin will be speaking on the grain markets.  Lunch will be served

Please RSVP for either location by calling

800-658-3670 or 605-258-2686

Overnight Highlights from CHS Hedging's Tregg Cronin

Outside Markets: Dollar Index up 0.305 at 80.155; NYMEX-WTI down $0.36 at $92.76; Brent Crude down $0.28 at $112.19; Heating Oil down $0.0208 at $3.0255; Livestock markets are steady/better; Gold down $10.10 at $1678.70; Copper is down $0.0180 at $3.7180; Silver down $0.157 at $30.840; S&P’s are down 4.25 at 1452.75, Dow futures are down 29.00 at 13,302.00 and Treasuries are slightly better.

A little bit of profit taking evident in the overnight trade with Asian equities closing firmer, but European equities under pressure as the IBEX-35 drops 1.10%.  The Shanghai Composite (China) rose to its highest level last night since June 20^th.  Also worth noting, The Bloomberg Financial Condition Index, which ranks things like equity levels, bond yields, volatility and corporate spreads, rose to its highest level since April of 2007.  Their proprietary Economic Surprise Index is at its highest level since April of 2012.  In other news, it looks increasingly likely Speaker Boehner will retain his position in the House.  China’s service industries expanded at their fastest level in four months, while manufacturing expanded at its fastest level in 19-months.  Mortgage Applications fell 10.4% in the latest week.  Later this morning we will get the ADP Private Payroll data for December which is seen +140,000.  Initial jobless claims are seen at 360,000, up 10,000, and the New York ISM is up at 9:45 (52.5 prev).

No precip in the last 24 hours pretty much anywhere in the continental US.  Virtually nothing seen for the Midwest the next 5-days, although by the middle of next week a better system is seen impacting the southern plains.  Total guesses at this point are seen around 0.7-1.4” for the vast majority of TX, a good chunk of OK/AR/LA and scattered areas in MO/KS.  Things dry up a bit more in the 8-14, and temperatures are seen above normal for the central/east belt throughout.  Late in the period, temps moderate to normal/below in the west.  The forecast sees things to be fairly quiet in most of the Argentine growing regions for the 5-7 days. Some rains will fall in the far northeast (far northern BA, most of Entre Rios and Corrientes) for Friday and the weekend, with totals of .25- .75”, isolated to 1”+. By the middle of next week, a front looks to bring rains of .40-1” to all of the Argentine growing regions. Things will be fairly quiet in the S. Brazil growing regions for the rest of this week and by the weekend rains look to start up and bring totals of .40-1”, isolated to 1”+. More rains are seen for next week in the S. Brazil growing regions as well, early estimates running in the .50-1”+ range. The tropical rainfall in the northern Brazil growing regions looks to run close to average for the next week to 10-days.” –John Dee

Follow through selling in the grains overnight with soybeans down the worst.  The exception is of course wheat, but it shouldn’t come as that much of a surprise. What was probably more surprising was the sharp sell off yesterday.  Wheat was competitive before the selloff, and is even more so this morning.  FOB offers out of the Gulf on US-SRW are seen at $306.90/MT vs. French dlvd Rouen offers at $325.46/MT FOB.  What’s not supportive to wheat is the lack of tender business showing up.  Syria is in for 100,000MT, Iraq is in for 50,000MT, but that’s about it.  In fact, Egypt once again took to the wires last night proclaiming they have enough wheat for domestic use until June 17^th, with their harvest beginning in May.  Soybeans seem to be about SAM weather and index rebalancing.

Pretty thin newswires overnight, which should further highlight the selling pressure is coming from managed money players.  Scattered headlines included Credit Suisse saying corn prices have peaked for the marketing year and wheat has the most upside of any farm commodities.  “High corn prices have rationed demand.”  The USDA’s Foreign Ag Service raised Brazil’s soybean output to 83MMT vs. USDA’s last official guess at 81MMT.  They see exports climbing to 39MMT from 32.1MMT a year ago.  Farmers in Argentina have sown 80% of the soybean area and 75% of the corn area.  Concerns exist about the delayed planting and eventual yield potential.  Deutsche Bank AG said the US hog supply is signaling the USDA may have to raise its domestic use assumptions for corn and meal use as animal feed.  One other story said Australia is facing its most wide-ranging heat wave in more than a decade as 80% of the continent is hit by temps above 104 degrees.  Harvest is obviously complete down there, but noteworthy nonetheless.

Open interest changes yesterday included wheat up 6,220 contracts, corn up 16,400, beans up 2,860, meal down 80 and soy oil down 3.  Not delicious to see wheat, corn and soybean open interest pop that much with futures down as hard as they were.  Likely we saw fresh shorts enter the market.  The lack of open interest changes yesterday in meal and oil show unwinding of spreads, and a fair amount putting oil/meal spreads on instead of meal/oil.  Deliveries overnight included 9 meal and 2,754 soy oil.  Chinese markets were once again closed, but will re-open tomorrow.  Malaysian Palm Oil was down 27 ringgit to 2,474.  Paris Milling Wheat is down 0.10%, Rapeseed down 0.11%, Corn down 0.52%, UK feed wheat down 0.48% and Canola down 1.12%.

Lower to start, but wouldn’t be surprised to see some intra-day pop.  Ethanol and exports will be delayed until tomorrow morning, and will be released concurrently with the monthly employment report.  The Dollar Index strength is a pressure point as is the ongoing index fund rebalance (including front-running and tail-running).  Demand has become stale, and weather in South America looks about as good as one can ask for with early beans already being harvested in northern Brazil.  The Bulls’ next hope has to be the Jan 11 reports, and those feel like they’re a month away.

Trade as of 7:05

Corn down 4-7

Beans down 12-15

Wheat mixed: SRW -1/HRS +4

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

www.chshedging.com

CHS Hedging, Inc.
The Right Decisions for the Right Reasons

Afternoon Recap from CHS Hedging's Tregg Cronin for 1-3-13

Financials

Outside Markets: Dollar Index up 0.291 at 80.136; NYMEX-WTI up $0.04 at $93.16; Brent Crude down $0.19 at $112.28; Heating Oil down $0.0221 at $3.0242; Livestock prices are firmer led by cattle; Softs are quite a bit weaker following yesterday’s losses; Gold down $14.60 at $1674.30; Copper down $0.0255 at $3.7105; S&P’s are down 2.00 at 1455.00, Dow futures are down 13.00 at 13,319.00 and Treasuries are selling off at the 1:00 hour.

Equities were incredibly quiet today with most focusing on the new Congressional members bring sworn in.  Speaker Boehner retained his leadership position, so the same guys will be in charge for the debt ceiling fight in a couple months.  Treasuries broke hard when the latest FOMC meeting minutes were released.  The cause seemed to be comments from several committee members suggesting asset purchases (government treasuries) should be cut or halted well before the end of 2013.  Treasury bonds are down 0.73%.  The Dollar Index really rallied in the last hour the grains were open pushing up 500 ticks.

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Corn

Two-sided trade, but mainly lower as corn flirted with filling its gap again today, falling short by 1.75c.  The bright side of corn continuing to chop “down here,” is that it’s losing downside momentum, and seems to be trying to build a base from which to rally off.  The reasons behind the selloff haven’t changed: no export demand, spill over pressure from soybeans, nearly ideal South American weather and uncertainty ahead of the Jan 11 reports.  Personally, I think there are reasons to be optimistic corn prices coming out of the Jan 11 reports, but right now the trends are down and the managed money is behind that trend.  Oddly, open interest did rise 16,000 contracts during yesterday’s sell off, a technical negative.  Corn closed above its 200-day moving average which is at $6.83 5/8.

The Buenos Aires Cereals Exchange posted its weekly publication, showing corn planting at 82%, 2% behind a year ago.  Corn planting area was left unchanged at 3.4 million hectares.  The exchange was quoted as saying corn growth has been healthy.  The USDA is still pegging their corn crop at 27MMT, while many privates are between 22-25MMT.  Another article made note of the reduced traffic down the Miss.  Through the week ended Dec 29, 325,625MT of grain moved by barge, down 26% from the week before.  Obviously this was a holiday shortened week, but only 199 grain barges moved on the river, a small figure.  Ethanol and export data will be delayed until tomorrow.  Farmer movement was very light today as most wait for a bullish report on Jan 11.

Cash markets were quiet today with spot barges offered at +67H.  Feb bids are +63H.  Several ethanol plants were firmer today including Decatur which was up 2c to +9H for trucks.  Rail is still likely well above that.  PNW shuttle bids continue to post +110/114H, but isn’t drawing a ton of interest from upper-Midwest shippers.  Based on basis quotes, would appear any strength is due to lack of movement from farmers refusing to sell these prices.  Export demand still hasn’t surfaced with SAM FOB quotes still under US by $8-10/MT.  Feed/residual demand has the best potential to be higher on the next report.  Total meat production is forecast down 2.2% vs. feed/residual down 9.2%.  Something’s gotta give…

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Wheat

Wheat exhibited the least amount of weakness today and actually managed to trade all three exchanges positive at times.  A very late selloff saw prices slip negative late.  Most market pundits continue to make mention of the fact US-SRW/US-SWW are competitively priced into almost every mill in the entire world where applicable.  In addition, wheat/corn spreads have tightened up to the point of putting wheat into TX cattle yards, again, where applicable.  With that in mind and wheat holding some temporary support, it seemed good enough for a light bounce.  Trends are still down on all applicable scales, but the demand component for wheat seems to be picking up.  Midday model forecasts are putting a fair amount of moisture into the southern plains during the 6-10 day time frame.

The Buenos Aires Cereal Exchange estimated wheat yields at 23% less than last year’s crop, and they also maintained their production forecast at 9.8MMT vs. the USDA at 11.5MMT.  They estimated wheat harvest at 79% complete, 14% behind a year ago.  We’re still waiting on Brazil to source a big slug of US feed wheat or milling wheat, a sign Argentina’s crop really is in dire shape.  Still some miffed about the lack of tender business despite wheat’s break.  Egypt is notable absent, and even our stalwarts like Japan, Thailand, Taiwan and South Korea are not tendering this week.  Like corn, open interest did rise 6,000 contracts, again a technical negative.  KC-HRW held the 50% retracement of the entire 6.64-9.62 rally at $8.13 today, a short-term positive.

Cash markets were quiet with SRW at the Gulf unchanged at +80/90H through March.  HRW was also unchanged at +120/125H.  Minneapolis to-arrive basis did firm 5c yesterday with spot exploders big +70H.  There are more elevators kicking tires for moving spring wheat now that the board has dropped and basis has perked up a bit.  Should wheat decide to rally 40-50c, basis could get sloppy.  Calendar spreads were firm all day long, and definitely preceded the futures rally.  The WH/WK was up 1.25c to -9.50c, the KWH/KWK was up 1.00c to -8.75c and the MWH/MWK was up 0.25c to -10.00c.  All of these spreads are off the lows put in last week.  Wheat/corn spreads tacked on 2-6c after hitting contract lows in a few spots yesterday.  I don’t want to be short wheat/long corn down here.

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Soybeans

Another day of selling pressure, although prices did manage to bounce off the lows into the close with wheat and corn.  Severe technical damage has been done the past few days with little for support seen until the November lows near $13.50.  Favorable weather in Brazil, early harvest of soybeans, the cancelation of 315,000MT of beans by China this morning and ugly looking charts continue to keep a foot on soybeans.  Unfortunately, despite the recent liquidation, funds are still seen carrying around over 60,000 contracts worth of length.  Soybeans seem to be tracking similar to last year when we sold off into the Jan reports only to rally $2 out over the next several months.  Obviously that was because of SAM drought, something we don’t have a problem with this year.

The BACE estimated soybean planting at 85% complete with area unchanged at 19.7 million hectares.  Farmers did not the first signs of soybean disease, almost surely because of the excessive rain during December.  Argentina is expected to see a pickup in the heat next week, but most see it as welcome to help dry up trouble spots.  The only trouble spot in Brazil is in the northeast, and even that only amounts to a few million tonnes that are really in jeopardy.  Even that spot looks to see better chances of rain in the 6-10.  The real concern with South America at this point is logistics and executing the massive corn, meal and soybean program we need them to from Mar-Aug, not the weather.

Cash markets at the Gulf were  unchanged with spot boats at +115H while LH-Jan was +110H.  A notable changed from yesterday has been better transparency on barge freight.  Quotes are available today all the way out the curve with the Illinois seen at 450%/450%/425%/350% for FH-Jan/LH-Jan/Feb/Mar.  For whatever reason, there seems to be more confidence about the river staying open which is odd considering the river forecast and it falling below -5.0ft by Jan 12.  The availability of freight seemed to give shippers a bit more confidence, hence the strength in the spreads today.  The SF/SH was up 3.25c to +16.50c, and the SH/SK was up 0.25c to +8.25c.  The PNW was unchanged at +150/153H.  Crush plants are seen steady/better as beans simply aren’t moving.  Farmers want $14.00 cash.

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

www.chshedging.com

CHS Hedging, Inc.
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