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