Overnight Highlights 6-7-12 - from Country Hedging's Tregg Cronin

Below are the Overnight Highlight's from Country Hedging's Tregg Cronin

Outside Markets: Dollar Index down 0.226 at 82.095; NYMEX-WTI up $0.78 at $85.70; Brent Crude up $0.30 at $100.94; Heating Oil up $0.0043 at $2.6760; Livestock markets are mostly firmer; Gold down $15.90 at $1616.90; Copper down $0.0015 at $3.3775 (but rallying); The Yen is weaker but all other major currencies are firmer; All of the softs are up, led by Cotton which is up 4.7% after being limit up yesterday; S&P’s are up 9.25 at 1324.75, Dow futures are up 60.00 at 12,479.00 and Treasuries are flat.

A host of economic data overnight with the most important being the People’s Bank of China moving to cut their benchmark interest rate by 25bp to 6.31% with their one-year deposit rate at 3.25%.  This is the first time China’s central bank has reduced rates since 2008.  This seems to be the responsible thing to do with growth still at 8.1% to prevent a harder economic slowdown than economists were forecasting.  Across our other pond, the Bank of England chose to leave its bond-buying program on hold and leave the key lending rate at a record low 0.5% where it has been since March 2009.  The decision was a close one with economists expecting the minutes of the meeting to show support for additional monetary easing.  Weekly jobless claims for the US at 7:30 CDT.

Rains in the last 24 hours were confined to N-TX and OK as well as some scattered showers in ND, W-SD and W-NE.  Radar returns this morning show the system in TX/OK as well as some rains working across SW-MN and ND.  Rains the next 5-days will finish up in TX, but also see 1-2” amounts fall across spring wheat areas of the US and Canada.  Overnight weather maps look to have a wetter touch this morning with the 6-10 still showing showers for a good swath of  the WCB.  This rain is expected to bring 0.50-0.80” with broad coverage Monday and Tuesday, although follow up rains later on in the week are being downplayed.  The 11-15 is putting rain in most of the upper-Midwest, although confidence is low.  70’s and 80’s should be the norm for Sunday to Friday, although heat is back by Sunday.

Grain markets are adding to their impressive gains from yesterday with additional strength this morning.  Interestingly enough, the soy complex is leading the way higher but seemed to do so around 4:00am, well before the news of China cutting interest rates hit newswires.  Basis is really firming, especially off the PNW where one major commercial elevator is thought to be caught short on some basis with limited supplies left in the country to cover it.  Corn basis is also getting hot with interior locations paying at or above record levels.  There are two schools of thought about remaining grain supplies in the country: 1) the farmer has the grain and is being very patient marketing it, or 2) he doesn’t have it and basis is reflecting it.  Both have implications for the June 29^th stocks reports.

The CNGOIC was out last night estimating June soybean imports at 6MMT, but also saying May and June imports likely exceeded 12MMT.  They are still forecasting crop year imports, which began on Oct 1, at 58MMT vs. the USDA at 56MMT.  In other export news, Japan bought 100,190MT of feed wheat and barley, and issued a tender for another 320,000MT for shipment by Sept. 30.  Taiwan bought 48,750MT of US milling wheat from Toepfer at prices ranging from $255.80-331.82/MT FOB.  Grades were DNS, HRW and WW.  In a state reserve auction, China sold just 13,902MT of soybeans out of a total of 600,000MT offered.  This is a big slow down from last week now that imported beans are near the same price, but domestic bean quality is much poorer due to the beans being from 2008.  South Korean flour mills are seeking 23,000MT of US origin milling wheat for Aug-Sep shipment.  Lastly, Japan bought 180,537MT of US, Canadian and Australian milling wheat.  The US share constituted 61,701MT while Canada sold 80,431MT.  Ukraine upped spring grain planted area by 17.1% thanks in large part to winter kill damage of wheat.  Much of the increased acres are thought to go to corn.

Open interest changes yesterday included wheat up 6,360, corn up 1,180, soybeans up 6,950, meal up 2,830 and oil up 3,570.  All of that is supportive given the firmer board yesterday.  Volumes look a bit light on the corn, but heavy on soybeans and wheat which again is a supportive input.  Chinese markets were mostly firmer last night with soybeans up 5.50c, meal up $5.50, oil up 47c, corn up 1.25c and wheat down 1.75c.  For the week, soybeans are up 29.50c so far.  There seems to be growing concern in the North China Plain, where they are harvesting wheat and grow a lot of their soybeans, about persistent dryness.  It is difficult to get an accurate assessment of Chinese growing conditions, but a forecast of record grain production for the 5^th straight year seems a bit of a stretch.

Call things better today given the friendly macro environment, the firm cash markets and tightening spreads.  Export sales this morning could offer a bit of pause because corn isn’t likely to best expectations.  We had no daily sales announcements, and basis hadn’t really began firming up prior to last Thursday’s cut off.  Next week could be a different story.  The other one to watch will be soybeans as week after week of more sales than needed will keep downward pressure on old crop soybean carryout estimates.

Trade as of 7:05

Corn up 4-7

Soy up 18-22

Wheat up 3-5      

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

Overnight Highlights from County Hedging's Tregg Cronin 6-11-12

Below are Overnight Highlights from Country Hedging's Tregg Cronin.

Outside Markets: Dollar Index down 0.322 at 82.178; NYMEX-WTI up $0.87 at $84.98; Brent Crude up $0.86 at $100.33; Heating Oil up $0.0235 at $2.6956; Gold up $0.30 at $1590.40; Copper up $0.0625 at $3.3460; All major currencies are firmer; Softs are all higher; S&P’s are up 6.00 at 1334.75, Dow futures are up 61.00 at 12,636.00 and Treasuries are slightly weaker.  Worth noting, Dow futures were up as high as 91, and most everything is hitting their lows as I write at 6:30.

The big news of the weekend, and what helped most financial markets to gap higher last night, was the news Spain had agreed to seek EU bailout aid to the tune of 125 billion euros to help its ailing banking sector.  In exchange, the EU finance ministers agreed to not attach any new conditions on Madrid other than its current commitments.  This morning’s trade seems to say we realize the bailout will help, but Europe still isn’t fixed.  A story in the WSJ this morning said 100 billion is the size of the bailout, but 368 billion is the size needed to fund itself for the rest of the year.  The data calendar is empty in the US today, so watch breaking news headlines for short-term direction in the outsides.

Rains in the last 24 hours fell in IA/MN/ND with the heaviest amounts around Omaha and W-IA as well as north of the Twin Cities in MN.  Localized areas of 1.0”+ seem to be the heaviest.  The 3-day weekend totals also saw SD and MT receive nice rains, although some damaging hail did fall in NC-SD on Saturday evening causing some localized damage to corn and wheat.  This morning, there is a system tracking across N-MO/E-IA/S-WI/N-IL.  The system is breaking apart somewhat as it moves across IL.  5-day forecasted precip turns fairly dry in the central belt after today’s storm with the most notable precip falling in the eastern Dakotas and most of MN with around 0.50-1.50” expected.  TX-FL should also see a sizable rain event.  Things will be mostly dry the balance of the week in the central corn belt.  Temps will be in the 70’s this week and 80’s and low 90’s by the weekend.  Some riding is expected to produce below average precip in most of the Plains and Midwest with temps around average to below in the east.

After a decent jump at the open last evening, corn prices are falling under modest pressure as new crop corn leads the way lower on the rain event in IA.  While this rain doesn’t say a lot for conditions in IL/IN/OH, “as goes IA so goes the corn belt.”  It should be noted conditions turn much drier the next 10-days following today’s blip, and given corn is beginning to tassel and even silk in S-IL/S-IN, moisture will be critical the next 15-20 days.  Obviously the outside market conditions are playing a role with investor confidence still in shambles.  It is worth noting, however, Friday’s COT report showed large specs net short the corn market (-6,400 caks) for the first time since June of 2010.  Additional length was also pared in Soybeans and meal, and funds are record short soy oil at -53,300 contracts.

Import data from China was released overnight, showing Jan-May soybean imports were 23.43MMT, up 20.7% from a year earlier.  May imports were 5.28MMT, up 16% from a year ago and 8% from April.  Russian wheat prices have been trending higher over the past week, up 3.0-3.5% as the Black Sea Region looks to be dry for the next week with quite warm temps as well.  FC Stone said they estimate the Russian wheat crop at 50MMT.  Otherwise, markets will probably trade a bit cautiously ahead of tomorrow’s June WASDE report.  Corn estimates for old crop averaged 821mbu on corn, 189mbu on soybeans and 753mbu on wheat.  These would all be modest cuts.  There don’t seem to be a lot of people thinking the USDA does anything to corn yield for 12/13 just yet.

Open interest changes during Friday’s session included a drop of 8,515 wheat, 5,484 corn, 74 beans and 750 oil.  Soy meal was up 2,209.  The almost unchanged open interest in soybeans would suggest a decent shift in ownership.  Spreads and basis were mostly firmer on Friday which might suggest specs sold to commercials.  Chinese markets were firmer overnight with soybeans up 16.25c, meal up $8.20, oil up 93c/lb and corn up 3.50c.  Corn basis on Friday was firmer across almost every demand sector, which should keep July well bid at/around $6.00.  Farmers won’t move corn until they can receive prices similar to what they got the last time they sold: $6.30-6.50.  Soybean basis is also firmer, remaining well above delivery equivalence.  Spreads should find support.

Call things a bit mixed to begin with as the rains across S-MN and IA and progressing into the central corn belt are enough to keep the new crop contracts in check, but old crop will find a bid until physical starts moving.  While the crops look good in areas, it is by no means uniform across the belt, and we still have to get to August before we see any new crop bushels.  Wheat feeding is a pipe dream now, and the USDA’s 166bpa yield is also looking a bit lofty.  Crop conditions tonight at 3:00 CDT.

Trade as of 7:05

Corn steady/ 3 lower

Soybeans up 1-5

Wheat up 4-8

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

Overnight Highlights from Country Hedging's Tregg Cronin 6-12-2012 USDA Report day!

Below are Overnight Highlights from Country Hedging's Tregg Cronin

Outside Markets: Dollar Index down 0.101 at 82.414; NYMEX-WTI down $0.19 at $82.53; Brent Crude down $0.43 at $97.57; Heating Oil up $0.0058 at $2.6415; Livestock markets are mostly firmer; Gold down $5.70 at $1589.80; Copper down $0.0135 at $3.3315; The Yen is weaker but all other major commodities are firmer; Cocoa, Milk and Cotton are all firmer; S&P’s are up 3.50 at 1310.50, Dow futures are up 49.00 at 12,431.00 and Treasuries are softer.

Asian stocks were weaker while European indices are stabilizing this morning following yesterday’s meltdown in the US.  Heading into the 4:15 close yesterday, the Dow posted a huge outside reversal lower to settle off 142 points.  Bond yields for both Spain and Italy continue to quietly work higher, creeping near or above the 6.5% mark, but still below the unsustainable 7.0% level.  Overnight, UK industrial production posted its 14^th monthly fall, down 1% in April compared to the same month a year ago, while it was unchanged from March.  In the US today, we’ll get May import prices followed by the Federal Budget at 2:00 EDT.  The Dollar Index is still in a short term downtrend, but the intermediate and long terms trends are arguably still up.

Rainfall in the last 24 hours was heaviest in MO/AR/MS/AK/GA/SC which all had areas receiving 0.50-1.0”.  The heart of the corn belt also saw rains with IL seeing a general 0.25-0.50” although a few spots in SC-IL did see 1.0”.  IN was almost completely dry while OH saw anywhere from a trace to 0.50”.  Storms are moving across the southern plains and Dixieland this AM.  5-day forecasted precip maps are showing heavy rains impacting places NW of a line from Kansas City to Green Bay with areas in IA/NE/MN seeing as much as 2.9” the next several days.  The southern plains will also be seeing sizable chances of rain, but everything SE of that line will be dry, including MO/IL/IN/OH/MI.   The European model is holding out chances for 0.50-1.00” to fall in the OH-River Valley towards the beginning of next week, but other models are more timid.  Temps should mainly be in the 70’s and 80’s with a few 90’s.  The 11-15 is putting a disturbance in the central/southern corn belt, but a bit far out to get much confidence.  Weather remains unsettled for the central belt.

Grains are trading in similar fashion to the way they closed yesterday with corn weaker, soybeans and wheat firmer.  This is definitely the feeling in the trade heading into the USDA reports that we could get something bearish on corn (even though the average estimates point towards cuts to carryout), while soybeans and wheat could receive supportive numbers.  The breakdown in the outside markets late yesterday helped knock us off our intra-day highs as did the storms which rolled through the central and western corn belt.  When IA gets rain, people assume the entire crop just got better.  Last night’s FOB comparative (attached) does illustrate some concern on the corn side of the ledger.  Without freight, our corn price is $30-40/MT over Argy and Brazil, and probably worse on Ukraine.  Fortunately, our soybean prices remain very competitive with Brazil, and while Argentina is better by $4-9/MT, their ongoing labor disputes make the issue much less black and white and is currently slowing grain to the ports.

Data from Australia continues to confirm a robust export program, as the Australian Bureau of Statistics said the country shipped 2.36MMT in April, the second largest amount of wheat moved in a single month over the last nine years.  This was up 15% from March and 40% y/y.  Dryness in W-Australia is still a concern for winter grains being seeded at present.  South Korean mills bought 23,800MT of US-DNS, SW and HRW for Aug 15-Sep 15 shipment from LD.  Prices were $247-324/MT FOB.  From Beijing, China’s 2012 wheat output is expected to fall 1.63% from last year to 109.5MMT as rainfall during flowering and disease cut yields.  This is in stark contrast to the CNGOIC which said output would rise 2.02% to 120.3MMT.  Crop conditions fell much more than analysts expected last night in the US.

Open interest changes saw liquidation in about everything with wheat down 2,010, corn down 10,270, soybeans down 130, meal off 1,730 and oil down 7,260.  Soybeans continue to show very little open interest change which would suggest ownership is continuing to change hands.  While weaker yesterday, spreads have been on a firming trend and basis remains above delivery equivalence, implying commercials have a reason to own soybeans.  FWIW, crop scout Dr. Michael Cordonnier cut his national corn and soybean yields last night thanks to sharper than expected declines in the national condition ratings.  He is now 161bpa on corn and 43.0bpa on soybeans.  He also made the comment soils are drier now than they usually are the 3^rdweek of August based on an 11-year soil moisture index.

Average estimates for this morning’s report are 11/12 carryout on corn at 828mbu, soybeans 197mbu and wheat at 757mbu.  12/13 ending stocks are seen at 1,740mbu (down 140mbu) on corn, 147mbu on soybeans and 728mbu on wheat (down 7mbu).  Winter wheat production is seen being trimmed slightly.  Argentine production should see cuts on both corn and beans while Brazil is expected to rise a bit.  Trade will be open at 7:30 in both the pit and electronic when the numbers are released.  More at 7:30 CDT.

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

Morning Highlights for Monday June 18 2012 from Country Hedging's Chris Steinhoff

Crude oil is down 70 cents…gold is $5.50 lower, silver is 30 lower…Greece situation is still quite fluid but they did have elections…Who is next inline for a bailout??? Nikkei , Hang Seng and Shanghai were firm…Dow, Nasdaq and S&P futures are lower…

Corn…rains are light in Indiana and the forecast doesn’t look real good this week..meanwhile the ECB looks very good in many areas

                …some ECB corn will begin pollination soon and some of that corn is under stress

                …weather is becoming critically dry in parts of the ECB

                …last Friday Informa raised their acres to 96.759 million.

                …farmer movement is slow, but at some point the inverse will disappear

                …keep hearing reports of small ethanol plants shutting down until margins improve…...corn origination is difficultn

Old crop trading up 5, new crop trading up 10

Beans…mainly higher overnight as dry corn weather = dry soybean weather

                …higher on the Greek election? Sure let’s go with that.

                …China demand? Seems to be kinda slow lately, as they try to sell reserves

                …informa acres guess is 75.959

                …supplies are tight in SA too

Trading 10 to 15 better…

Wheat…US SRW and HRW harvest moves forward adding to US supplies

                …there are scattered concerns throughout the world like Argentina, Aus, Russia etc etc

                ..Iraq bought some wheat over the weekend, but not from the US

                ..india and iran are in talks for some wheat business

Trading 3 to 8 higher…

Christopher Steinhoff
Market Analyst
800-328-6530
651-355-6558
651-355-3723 fax

www.countryhedging.com

Overnight Highlight's from Country Hedging's Tregg Cronin 6-14-2012 Firm markets to start

Below are the overnight highlight's from Country Hedging's Tregg Cronin

Outside Markets: Dollar Index up 0.035 at 82.093; NYMEX-WTI up $0.12 at $82.74; Brent Crude down $0.21 at $96.92; Heating Oil up $0.0018 at $2.6127; Hogs are firmer and Cattle are mostly weaker; Gold up $1.90 at $1620.00; Copper down $0.0010 at $3.3390; The Yen and Loonie are firmer while all other major currencies are firmer; Cotton is better, but most of the softs are weaker; S&P’s are up 0.75 at 1316.25, Dow futures are up 11.00 at 12,512.00 and Treasuries are a bit weaker.

Headlines on financial websites read something like this today: “Spanish Crisis Deepens.”  Yesterday, Spanish government bonds saw their yields rise to euro-era records during auctions for 10-year debt.  The yield hit 6.96%, dangerously close to levels considered unsustainable, following a report which said Spanish housing prices fell 12.6% in the first quarter.  Moody’s became the latest rating agency to downgrade the country, all of which increases the odds a bailout won’t be far away.  The terrible housing market in Spain is what makes their situation larger and potentially more serious.  Obviously this is in addition to the fact Greece will hold her latest round of elections Sunday which likely aided in the selloff yesterday afternoon.

Rain in the last 24 hours was confined to two areas in the US with ND/SD/MN/MT seeing rains as well as places in TX.  Looking at the rainfall maps, it looks like the two dry areas in ND (SW and SE) should have received some nice 0.25-1.00” rains.  Totals in S-OK and TX looked similar.  The system in the northern plains is moving into N-MN at the moment and is expected to bring severe weather to the Twin Cities tonight and tomorrow.  The 5-day forecasted precip map shows heavy rains on a line from S-NE to the UP of MI with totals across IA and WI as high as 3.8-4.0” while the Dakotas/KS/MO/MN should also see good rains.  N-IL should see some measured precip, but the storms don’t look to get into the driest areas of IN/OH.  NOAA maps are looking a bit less warm and a bit less dry today with normal weather forecast in the 6-10 and 8-14.  Private models generally agree with rainfall amounts and placement in the 6-10, although push moisture into the S-Midwest for the 11-15.  The better chance of rain next week for IL/IN/OH will keep prices under pressure.

Grains are bouncing a bit overnight while the soy complex is fairing about like it did late in the session yesterday.  The impressive cash markets won’t seem to let corn die a slow death into July delivery with the type of premiums being paid along the river, at ethanol plants, off the west coast and in feed lots.  Unfortunately, with World FOB prices being what they are, the hefty basis levels aren’t helping our corn get any more competitive with Brazil, Argentina or Ukraine.  Luckily, domestic demand remains firm enough, and producer selling slow enough to support things.  Weekly ethanol production continues to motor along, beating expectations and grinding more corn than we need to.  The liquidation in the soy complex seems speculative and tied to the shaky outsides.

From China, we see the government sold 17,922MT of soybeans from reserves in an auction of about 600,000MT.  The sales are a bit higher than last week’s, but the demand for these old, poor quality beans is apparent, especially given US and SA beans are price competitive.  India said overnight they will allow 2MMT worth of wheat exports from government reserves, but at no less than $228/MT FOB, or around $6.20 bu.  Also from New Delhi, the Indian government approved increases in the minimum purchase prices for rice, soybeans and corn, a move which is sure to keep food inflation high.  Overnight, Taiwan bought 47,050MT of US-DNS at a price of $333.94/MT FOB as well as some HRW at $301.35/MT FOB.  Japan bought 147,118MT of wheat from the US and Australia, but mostly US.

Open interest changes during yesterday’s session included an increase of 6,441 wheat and 4,025 soybeans.  Corn was down 1,585, meal off 1,038 and oil down 7,482 contracts.  Chicago wheat closed almost unchanged which is interesting given the big O/I increase.  Corn looks like short-covering in the July as people blow out ahead of delivery.  Chinese markets were down sharply with soybeans off 20.50c, meal down $6.40, oil off 107c, but corn was unchanged.  The Reuters commodity wire carried a couple stories worth noting last night.  First, the scramble for US corn has heated up, pushing CIF basis to the highest price in a month.  They also said estimates from 15 analysts polled have dropped the US national corn yield 3% to 161.5bpa vs. the USDA’s current 166bpa.  Argy has slowed soy crush.

The firm cash markets looks like they’ll be enough to propel us higher today, at least in the grain markets.  It should be noted, however, outside markets appear to be easing, and tensions will remain high as we head into the weekend and prepare for Grecian elections.  The speculative length is still in the soy complex, and when they liquidate it will be felt their first.  Specs are near flat or even a bit short corn, and back to being sizable shorts in Chicago wheat.  Weather remains a big driver, and right now it looks more favorable.

Trade as of 7:10

Corn up 7-8

Soy down 2-5

Wheat up 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

Overnight Highlight's from Country Hedging's Tregg Cronin

Outside Markets: Dollar Index up 0.110 at 82.819; NYMEX-WTI down $0.11 at $90.02; Brent Crude down $0.45 at $106.02; Heating Oil down $0.0098 at $2.8797; Gold up $0.80 at $1620.00; Copper down $0.0025 at $3.4235; The Yen, Loonie and Aussie are firmer while the other major currencies are weaker; Cotton is weaker while the rest of the softs are better; S&P’s are down 4.00 at 1378.50, Dow futures are down 23.00 at 13,009.00 and Treasuries are a bit firmer.

While not as impressively so as last week, financial markets are better for the most part this morning with borrowing costs in Europe steady to slightly easier, equities on a firm note and overall optimism heading into this week’s European Central Bank meeting as well as the Federal Reserve’s FOMC meeting.  Investors are under the general impression the ECB will take action of some sort while the FOMC could opt to continue monitoring conditions.  Euro-area economic confidence dropped to 87.9 in July from 89.9 in June, the lowest since September of 2009 and below estimates.  The US economic calendar is light today with just the Dallas Fed Manufacturing Survey out mid-morning.

Rains in the last 24 hours fell mainly in NE and along the MS-River.  Totals in S-NE were as high as an inch in some places although coverage on the state was about 50% with most areas seeing lighter totals.  MN/IA/MO/IL saw scattered precip between 0.10-0.40”.  Additional rain is moving across NE and into IA/MO this morning.  NOAA forecast maps keep the majority of the Midwest dry this week with the best precip in the SE-US.  By Thursday, rains are seen falling in E-SD/W-MN/NW-IA with the heaviest totals in SD and around 1-2.00” for the weekend.  Temps warm back into the mid/upper 90’s this week for the majority of the central corn belt.  Omaha will be 97-101* this through Friday.  Extended maps are showing chances of rain in the central/east corn belt during both the 6-10/11-15, but this was on the wetter GFS maps which have been overly optimistic the last 30-45 days.  The euro model sees rain in IN/OH/KY/TN while the WCB would be dry.  NOAA sees hot and dry during the 6-14 day.

Generally disappointing rains over the weekend in IA got the markets up and running overnight with soybeans leading the surge higher with gaps posted on daily charts.  The weather forecasts for IA/NE are not conducive to setting and filling soybean pods with little to no rain the next 10-days during crucial development stages.  Last week, the markets were under the idea with some rain, we could stabilize this crop around 38-39bpa.  With current forecasts, it will be tough to keep the national average from heading towards 35-37.  December corn also posted new contract highs at $8.17 ¼, busting through what was stiff resistance.  This really is all about weather and determining how small our supply actually is.  Once that is accomplished, we can focus on the demand we are rationing.

Beijing announced it will auction 400,000MT of soybeans from state reserves on Thursday.  Wires said state soybeans are around 10% cheaper than imported beans.  The government has sold 1.1MMT of state reserves soybeans since April, and have around 10MMT of reserves left according to CNGOIC.  This is the function of this market: get China to dip into reserves.  India’s monsoon rainfall was 21% below the long-term average as of Sunday.  Russian milling wheat was up 0.3-0.6% last week while feed wheat was up 1.3%.  Crop conditions on this afternoon’s USDA report are likely to show another 1-3% drop on corn while beans could possibly stabilize.  One of Australia’s largest grain handlers is forecasting Western Australian production down 40% at 9-11MMT vs. 15MMT LY.

Open interest changes had corn down 7,800 contracts, beans down 15,590 and meal down 3,050 on Friday.  Wheat was up 1,010 and soy oil was up 3,500.  Chinese markets rallied sharply overnight with soybeans up 61.75c, meal up $19.70, oil up 122c, corn up 7.50c and wheat up 8.50c.  Paris Milling Wheat is up 2.72%, Rapeseed up 1.85%, Paris corn up 2.34% and UK Feed Wheat is up 3.09%.  Basis going home on Friday was generally under pressure, especially spring wheat which is going to have values rivaling winter wheat if it’s not already there.  The better than expected yield and quality is putting the buyer in the driver seat.  Don’t expect a firm basis tone in the wheat market until export demand picks up or Canada finishes their harvest in Sept/Oct.

Call things better today as crops are still getting smaller, financial markets have an optimistic tone and demand hasn’t slowed enough on anything to warrant a top.  Output prices are climbing just as fast or faster than input prices for end users of corn and meal, making this rationing job one of historic proportions.  Scale up put protection or sales in areas where production is better known should be on the decision block.

Trade as of 7:15

Corn up 19-22

Soy up 29-38

Wheat up 14-18

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

overnight highlights from Country Hedging's Tregg Cronin 8-15-2012

Below are overnight highlights from Country Hedging's Tregg Cronin

Outside Markets: Dollar Index up 0.261 at 82.744; NYMEX-WTI down $0.37 at $93.08; Brent Crude down $.25 at $113.78; Heating Oil down $0.0011 at $3.0335; Cattle are firmer and Hogs weaker; Gold down $7.40 at $1592.00; Copper down $0.0125 at $3.3520; All major currencies are firmer this morning; The softs are all firmer except for Coffee, although Sugar is on the lows this morning. S&P’s are down 2.25 at 1399.25, Dow futures are down 20.00 at 13,112.00 and Treasuries are weaker.  

Asian and most European equities were lower overnight, although there is some optimism in London this morning. U.K. jobless claims unexpectedly fell in July as did one measure of unemployment, obviously tied to the pickup in hiring surrounding the Olympic games.  Jobless-benefit claims fell 5,900 to 1.59 million vs. estimates for a gain of 6,000.  The jobless total fell to 8.0% from 8.1% in the second quarter.  However, Britain’s economy shrank 0.7% in the second quarter, so context needs to be included.  The BOE voted unanimously to keep their bond-purchase target unchanged this month.  Economic data in the US today includes the CPI, Empire State Mfg Survey, Industrial Production and the Housing Market Index.  Borrowing costs for the PIIGS are lower this morning.

Rainfall in the last 24 hours was confined to N-TX where areas around Ft. Worth and Dallas picked up 0.50-1.00” while portions of OH/KY/WV/PA received scattered amounts.  NE/S-SD also saw some light totals.  There are some scattered systems on the radar this morning including a heavy a storm in N-TX as well as rain moving across MT/ND.  The next 1-2 days will see rains impact most of MN and a portion of IA with chances around 0.20-0.60”.  IL/IN/MI also have good chances of picking up 0.50-1.00”.  Following the next two days’ worth of rain, the Midwest should be mostly quiet.  Tue-Sun will see heavy rains across almost all of TX, however, with localized amounts as high as 3.50”.  The extended maps from NOAA look cool and dry through the end of August, while private maps are trying to remain more generous with rains across the Northern Plains in the 6-10 and southern plains in the 11-15.  Australia will see around 0.20-0.60” for South Australia and NSW by the end of the week, but coverage will be limited.

In a repeat of yesterday, Ag markets are riding a bounce from the overnight session as US traders fill offices.  What will be interesting is whether we can hold gains through the session today, or see them erode and lead to sharp losses like those of Monday and Tuesday.  Forgive me for sounding like a broken record, but our markets are having a difficult time gaining traction as the market shifts from one completely focused on supply to one more concerned with demand.  Now that the weather has shifted to a more favorable pattern, supplies have likely finished getting smaller, even if we aren’t sure how small they actually got in the first place.  One thing is for certain, however, and that is the tone of the farmer has turned much more optimistic with some thinking they can still pull this off.

Headlines from last night included the China National Grain and Oilseed Information Center forecasting corn production at a record 197MMT, up 2.2% y/y.  Several articles did note the crop could get smaller, however, due to a severe infestation of army worms.    They maintained their wheat forecast at 118MMT, even though most privates are well below that level.  Also from China, pork imports from the US are expected to rise 29% this year following a 30% increase in LH-2011 according to the Beijing Orient Agribusiness Consultant Ltd.  Imports from the US will account for 2% of China’s annual pork consumption this year.  Total imports could reach 620,000MT according to BOABC.  Following that story was another which said the China Yurun Food Group Ltd, the country’s second largest meat supplier, reported a 93% decline in FH-2012 profits as hog prices plunged.  The combination of a slowdown in economic growth as well as the increase in production costs are being blamed.

Open interest changes in yesterday’s session included a drop of 4,400 wheat, corn down 7,720, soybeans down 2,750, meal up 960 and soy oil down 3,270.  Some decent liquidation yesterday as markets reversed course.  Chinese markets were up last night with beans 22.75c higher, meal up $8.30, soy oil up 1c, corn up 3.25c and wheat up 11.50c.  Paris Milling wheat is up 0.69%, Rapeseed up 0.05%, UK feed wheat unchanged, Paris corn up 0.50% and Canola up 0.55%.  RJO’s domestic margin recap showed value added margins improving on ethanol, poultry, hogs and cattle.  Should be noted, however, that poultry and hog crush margins are near multi-year lows while cattle is above the 5-year average.  In talking with one of our exporters yesterday, it sounds like the bean business to China last week will end up totaling around 1.4MMT vs. the 500-600,000MT which was reported in the daily reporting system.  Look for sales tomorrow to be big.  Also, there is a vessel in C-Brazil waiting to load grain which is set to discharge in Wilmington, NC on 8/24.

Call things better today as it looks like we might actually hold together for a change.  Wheat has had its biggest three day losing streak in over a year and can afford to bounce just a bit.  Soybeans have shown no signs of demand rationing whatsoever with improved crush, strong export sales and firm basis levels both on exports and domestically.  Look for beans to regain some of its losses the balance of the week.  Weekly ethanol production will be released at 7:30 and should show another uptick.

Trade as of 7:05

Corn up 3-4

Beans up 7-14

Wheat up 5-7

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

8-14-2012 Overnight Highlight's from Country Hedging's Tregg Cronin

Below are overnight highlight's from Country Hedging's Tregg Cronin

Outside Markets: Dollar Index down 0.048 at 82.390; NYMEX-WTI up $0.30 at $93.02; Brent Crude up $0.13 at $113.73; Heating Oil up $0.0138 at $3.0321; Cattle are firmer, while hogs are weaker; Gold up $0.90 at $1610.50; Copper up $0.0145 at $3.3735; The Yen is weaker, but the other major currencies are firmer; Cocoa, Sugar and Cotton are all trading better; S&P’s are up 3.00 at 1405.50, Dow futures are up 27.00 at 13,164.00 and Treasuries are offered this morning.  

World equity markets are firmer today as economic data from Europe showed the core countries aren’t slowing as much as feared.  Both the French and German economies slowed less than forecast in the second quarter with France unchanged vs. -0.1% estimated and Germany +0.3% vs. a +0.2% forecast.  While those two avoided a larger slowdown, Italy and Spain are back in recession and the entire euro-area GDP dropped 0.2%.  Portugal’s economy declined -1.2%, its seventh straight quarter of contraction. The rating agency Moody’s did drop the outlook on German credit to negative from stable, but retained its Aaa rating.  Also worth noting, Greece sold €4.06 billion worth of 13-week bills with a yield of 4.43%, up from 4.28% at the end of July, a negative sign.  Yields are mixed in Europe this morning with AAA rated nations higher and PIIGS lower.  Economic data of note in the US today will include the Producer Price Index, Retail Sales and Business Inventories.  Also, The Volatility Index on options on the S&P 500 hit a 5-year low of 13.70%.  All is well.

Rains in the last 24 hours were confined to the ECB including IL/MI/OH while additional rains also fell in the Mid-south and South as KY/TN/MS/AL also picked up rains.  IN & OH saw totals in the north as high as 0.50-1.00”, but coverage was less than 15% for those totals.  Most areas were dry.  The radar currently shows rains moving across OH and KS, which will be welcome news to wheat farmers.  The 1-3 day forecasted precip map will keep the Dakotas dry, while NW-IA/MN/N-WI/MI/N-IN and a separate system in OK/AR/N-TX should bring sizable rainfall.  The upper-Midwest storms should drop 0.40-1.00” in most areas while the Southern Plains should bring over an inch to the entire state of OK & AR.  By Fri-Sun, the WCB will be dry, while storms are possible SE of a lien from Tulsa to Toledo.  Private 6-10 day maps stay on the dry side while the 11-15 holds better chances in the West.  NOAA stays dry and has temps well below normal throughout.  Indian rains are improving and there is no notable shift in the Australian forecast.

Grain markets are letting loose a relief bounce overnight, but it doesn’t look to be much more than that.  Condition ratings came in as expected on soybeans and corn, and harvest progress on wheat remained above normal.  Wasn’t much more to last night’s crop progress report than that as the crop remained ahead of schedule on development.  The only deliveries in the soy complex overnight included 167 soybean oil, no meal and no beans.  One can make the argument yesterday’s sell off was needed as it’s still difficult to quantify what the turn to favorable weather is doing for the soybeans.  The uncertainty alone is enough to keep this market two-sided near $16.00.  Corn doesn’t want to break much, and shouldn’t, while wheat lacks the fundamental demand story to push higher.

Headlines from last night included Japan tendering for 70,865MT of milling quality wheat, all from the US.  The total included 46,115MT of DNS.  NOPA is set to release member crush statistics later this morning with the market looking for crush near 131mbu, although some estimates are as high as 134mbu.  More Russian chatter overnight as well with SovEcon estimating the crop at 40.5-42.5MMT (USDA was 43 on Fri) while Agritel is pegging it at 41.3MMT.  SovEcon also said yields in the Volga district were half yr-ago levels.  Their estimate of the Urals area was near half as well (2.4-2.7MMT vs 5.0 LY).  Their Siberia estimate was 7.2-7.7MMT vs. 9.8 LY.  Agriculture and Agri-Food Canada said earlier today Canadian wheat production, including durum, may rise to 26.7MMT vs. 25.261MMT a year ago.  Wheat excluding durum is estimated at 22MMT vs. 21.089 last year.  Canola is pegged at 15.7MMT vs. 14.165MMT previously.  Lastly, the Australian Bureau of Meteorology said climate indicators remain close to El Nino thresholds.  The Central Pacific continues to warm.

Open interest changes yesterday included wheat down 4,320, corn down 930, beans down 3,770, meal down 940 and soy oil down 2,760.  Chinese markets were down swiftly last night with beans down 18.75c, meal down $6.40, soy oil down 58c, corn up 3.25c and wheat up 0.75c.  Malaysian Palm Oil was down 13 ringgits at 2,858 (Oct).  Paris Milling Wheat is up 0.29%, Rapeseed down 0.05%, UK feed wheat up 0.82% and Canola up 0.03%.  CIF corn barges traded down to the lowest level since January yesterday as the market is having a difficult time swallowing the early Southern Plains harvest hitting the market.  This will keep pressure on the CU/CZ which is 0.25c weaker at -9.75c overnight.  ND elevators continue to take bids from the Chicago/beyond market due to PNW issues and ECB shortages.

Call things better to start with on a turnaround Tuesday-type bounce, although some intra-day selling wouldn’t surprise.  The forecasts are less threatening, cash markets and spreads are on the defensive because of early Southern-harvest, and conditions are stabilizing across the crops.  ND has about 1/3 of their spring wheat to harvest yet while Canada’s haul is just getting ramped up.  Markets feel like we’ve got the supply side threats priced in for now and the focus is rapidly shifting to demand. 

Trade as of 6:55

Corn up 5-6

Soy up 8-15

Wheat 5-8  

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

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

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.
The Right Decisions for the Right Reasons

Overnight Highlights from County Hedging's Tregg Cronin 10-16-12

Outside Markets: Dollar Index down 0.371 at 79.369; NYMEX-WTI up $0.33 at $92.19; Brent Crude up $0.28 at $115.50; Heating Oil up $0.0039 at $3.2130; Livestock are quietly mixed; Gold up $7.60 at $1743.60; Copper up $0.0130 at $3.7245; The Yen and Loonie are getting sold this morning; The softs are bouncing rather sharply this morning with Cotton, Cocoa, Sugar and Coffee all up 1.1-2.8%; S&P’s are up 6.75 at 1442.25, Dow futures are up 59.00 at 13,419.00 and Treasuries are weaker.      

Equity markets are bouncing around the globe this morning, most likely catching up to the strong finish in the US yesterday afternoon.  Most economic data received yesterday was positive, and there seems to a bit better optimism from consumers, at least that’s what the underlying theme of the data seems to suggest.  Today’s data points in the US will include the Consumer Price Index, Industrial Production and the Housing Market Index.  The CPI is expected to show a 0.50% gain m/m, and up 0.2% less food and energy.  This measure, at least, continues to agree with the Federal Reserve’s recent policy initiatives.  Tonight will see the second Presidential debate in New York which will be a town hall format covering both domestic and foreign policy.

Not much for measureable precip in the last 24 hours.  There are some scattered showers over N-MN/N-WI.  The next 48-hours will see more moisture fall from LA to MI with totals expected in the 0.25-1.21” range.  Most The precip will be mostly east of the MS river.  N-MN and up into the Canadian Prairies should also see some solid amounts.  5-day totals should be generous, and the PNW also looks to finally see rain.  Areas along the Pacific in WA/OR could see between 2.0-5.0”.  ID will also see some showers.  Pretty split through the belly of the country on NOAA’s extended maps.  Below normal precip in the southern plains, above in the Great Lakes and far-northern plains for the 6-10.  Similar set up in the 8-14.  No discernible changes to either South America or Australia.

Moderate relief bounce overnight in all of the Ags with soybeans clawing back about half of what the lost and keeping their nostrils above the $15.00 mark.  Nothing in the overnight wires to point to directly, so we’ll attribute the bounce to being “oversold.”  There was talk of China snooping around for 3-5 cargoes of soybeans yesterday, but this is commonplace.  Remember, China imports 60MMT, which is just over 1MMT every week.  Assuming they spread it out evenly, that’s almost 2.5 Panamax vessels every single day of the week, including Sunday.  China shopping for soybeans is no reason to get excited.  Of the three major commodity markets, wheat holding the bottom end of its 12-week range (HRW & HRS) seems to be the most constructive thing about yesterday.

The China National Grains and Oils Information Center released update production forecasts overnight with corn at 201MMT, up from 197MMT last and up 4.26% y/y.  Wheat was seen at 118MMT, unchanged from the last guess and up 0.51% y/y.  Soybean production was estimated at 12.8MMT, down 0.2MMT from last month and -11.63% y/y.  FWIW, very few private estimates have China’s wheat crop anywhere near 118MMT, but are closer to 110MMT.  This on top of the rumored purchase of 300,000MT of Canadian spring wheat yesterday.  Also of note, Japan issued a tender for 128,144MMT from the US and Canada.  All but 28,068MT will come from the US.  A wire story also said Japan bought 250,000MT of corn from Ukraine at $1.10 over the December CBOT board.  The cargoes were said to be for Nov-Dec shipment.  Also from Ukraine, grain stocks as of Oct 1 were 19.4MMT, down 11% y/y.  Ukraine grain exports are up 73% y/y July 1-Oct 15 to 6.64MMT.  The ministry said exports will slow appreciably through the end of the year.

Open interest changes yesterday included corn down 6,124 contracts, wheat down 607, soybeans up 1,213, meal up 1,104, and soy oil up 4,421.  Corn is still seeing long liquidation, somewhat of silver lining, while the soy complex appears to be adding fresh shorts almost daily.  Open interest continues to steadily increase in soy oil which is likely to be noncommercials.  Chinese markets were a bit firmer last night with soybeans up 8.75c, meal down $1.00, soy oil up 75c, corn up 4c, Malaysian palm oil up 2 ringgit at 2,435 (Dec), Paris Milling Wheat is up 0.19%, Rapeseed is up 0.47%, Corn up 0.31%, UK feed wheat up 0.05% and Canola is up 2.20%.  Canola’s demand prospects still look incredibly strong, and after slightly smaller supplies, fits with it putting a growing premium over soybeans..

Not much really stood out about the crop progress report with corn harvest heading down the homestretch at 79% complete.  Notable progress remains in OH at 31%, MI at 36%, PA at 41% and WI at 54%.  On soybeans the stand outs are OH at 38%, KS at 40%, TN at 33%, SC at 7% and KY at 42%.  Much of these are double crop beans, however, and national progress remains 13% ahead of average.  Winter wheat emergence in the northern plains remains a big concern.  SD is at 11%, MT at 25%, ID at 33% and OR at 24%.  Too dry.

Not a surprise to see a decent bounce today consider the Fri/Mon break.  Most fundamentalists continue to scratch their head at the current sell off given the lack of movement from the farm, firm cash markets and firm spreads.  This seems to point toward value at current flat price levels, so would caution against getting overly bearish “down here.”  On the other hand, liquidation events usually last longer than anybody thinks they can, so no need to a hero…

Trade as of 7:10

Corn up 5-7

Soy up 11-13

Wheat up 7-10  

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

Overnight Highlights from Country Hedging's Tregg Cronin 10-25

Outside Markets: Dollar Index down 0.073 at 79.841; NYMEX-WTI up $0.76 at $86.49; Brent Crude up $1.17 at $109.02; Heating Oil up $0.0241 at $3.0635; Livestock markets are firmer this AM; Gold up $15.50 at $1716.00; Copper is up $0.0010 at $3.5690; The Yen is down 0.44%, but other major currencies are firmer; Softs are rallying at the moment, led by Coffee and Sugar which are both up 1.0%+; S&P’s are up 8.25 at 1413.25, Dow futures are up 61.00 at 13,082.00 and Treasuries are off 0.4-0.7%.    

Financials are mostly positive this morning with equities up and borrowing costs down.  A few data points overnight worth noting: The U.K.’s gross domestic product rose 1% in the third quarter, the fastest growth in five years and helping the UK to exit their double dip recession.  Olympic ticket sales and a surge in services helped the rebound.  Analysts think the UK growth could go back to flat to close out the year.  Also supportive overnight was a Nikkei newspaper saying the Bank of Japan will add to its stimulus policies.  Economic data in the US today will include weekly jobless claims (370,000; -18,000), the Chicago Fed Index (-0.2); Durable Goods Orders (+7.5% m/m) and US Capital Goods Orders (+0.8%).

Since midnight, rains have fallen in the upper-Midwest, dropping 0.25-1.00” amounts across E-NE/E-SD/NW-IA/S-MN/NW-WI.  This system continues to impact the upper-Midwest this morning with 0.75” having fallen in the Twin Cities in the last six hours.  The next 1-2 days will see more rain affect the central corn belt and Great Lakes areas with totals heaviest in WI to the tune of 0.25-0.90”.  This will continue to plague harvest efforts there.  Aside from that, the far eastern corn belt will be impacted by hurricane Sandy early next week.  OH/PA will see the most effect, two of the states lagging the national average in harvest.  No change to NOAA maps with normal/below normal precip for the southern plains and Midwest while below normal temps will be seen east of the Mississippi.  Late in the period, more normal/above temps will creep in over the Rockies and western corn belt.  South America is expected to see above normal precip in the central/southern growing areas while northern Brazil is expected dry the next 3-7 days.

Quiet trade in fairly narrow ranges overnight.  Grains seem unwilling to extend yesterday’s gains as most expect a disappointing corn export sales report, and unless wheat sales are near/above 500TMT, most will view as disappointing.  As of yet, it doesn’t appear corn can maintain strength on just domestic basis levels.  The market needs to see the export market claw back some business to give a sub-700mbu carryout some merit.  Soybeans and products should see another sizable week with soybean sales expected between 600-800TMT.  This will get soybeans back close to 80% of the marketing year forecast already on the books.  Encouragingly, crush basis and meal offers firmed again last night, in-keeping with robust meal export sales and a lack of rationing in domestic livestock operations.

Overnight, Taiwan Sugar Corp bought 23,000MT of US corn and 12,000MT of US soybeans from CJ International.  The grain was bought at $374.68/MT C&F for corn and $652.27/MT C&F on beans.  South American FOB offers remain at least 90c below US offers, or $38.58/MT.  Of particular interest overnight, China only 9.8% of the 398,025MT of soybeans auctioned overnight with an average price of $19.71/bu.  About ¼ of the beans were offered in Inner Mongolia which failed to attract buyers.  This is in-keeping with the recent uptick in soybean exports to China as the government tries to encourage demand of foreign beans at these prices.  Should signal value to US traders…  Japan said last evening they are poised to boost rapeseed imports to a record 2.4MMT this year, up from 2.3MMT in 2010.  Soybean imports may drop 4.6% to 2.7MMT, the lowest in 43 years.  Looks like diversification as opposed to a slowdown in outright demand.  Mexico’s stock exchange will now offer corn futures contracts denominated in pesos that will trade on MexDer, the Mexican derivatives market.  The contract size will be 25MT of yellow corn.  EU grain inspections from the French port of Rouen were up 78% last week to the highest total since March on large barley exports to Saudi Arabia and wheat shipments to Algeria.

Open interest changes yesterday included wheat up 9,890, corn up 5,000, beans up 690, meal up 3,020 and soy oil up 2,850.  Looked like some fresh speculative buying yesterday with the markets firm as they were.  Chinese markets were mixed overnight with soybeans up 6.50c, meal down $1.70/ton, soy oil down 4c, corn up 7.25c, palm up 1c and wheat up 7.75c.  The Chinese Yuan continues to strengthen, firming to 6.24 from 6.25 yesterday.  Malaysian Palm Oil was up 25 ringgit overnight to 2,603, the highest in almost a month on speculation stockpiles in Malaysia will decline now that exports have picked up.  Paris Milling wheat is down 0.75%, Rapeseed up 0.31%, Corn down 0.20%, UK feed wheat up 0.61% and Canola is up 0.42%.

Export sales, or lack thereof, is likely to drive early morning direction.  Demand remains real for the soy complex, but modest to poor on grains.  With barge freight jumping to 750-800% of tariff this week, corn is being stopped by the ethanol plant or feedlot before it even gets to water.  The jump in barge freight is said to be barges moving up the Miss with good quality corn to blend with afla corn.  Continue to pay attention to energy markets as they get sold.  Crude/Corn and RBOB/Corn spreads are at some very weak levels.

Trade as of 7:10

Corn down 1

Soy down 1-2

Wheat down 1-3 

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