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.
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