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.
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…
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.
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.
Tregg Cronin
Market Analyst
800-328-6530
651-355-6538
651-355-3723 fax
Market Analyst
800-328-6530
651-355-6538
651-355-3723 fax
CHS Hedging, Inc.
The Right Decisions for the Right Reasons
The Right Decisions for the Right Reasons