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.
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