Overnight Highlight's 1-22-13 from CHS Hedging's Tregg Cronin

Outside Markets: Dollar Index down 0.175 at 79.861; NYMEX-WTI down $0.07 at $95.44; Brent Crude up $0.34 at $112.06; Heating Oil up $0.0298 at $3.0823; Gold up $2.50 at $1689.40; Copper up $0.0035 at $3.6830; Coffee and Cocoa are getting beat up this morning; S&P’s are down 1.50 at 1477.50, Dow futures are down 18.00 at 13,557.00 and Treasuries are modestly weaker.

Equities have turned mostly lower overnight after the supportive news out of the Bank of Japan last night seems mostly priced in already.  The Bank has moved to an open-ended monetary easing policy, targeting a 2% inflation target.  The reason equities aren’t rallying and the reason the Yen is higher not lower is because the language said they may not add additional stimulus.  The JPYUSD is down 1.128% and the JPYEUR is off 0.911%.  German ZEW investor confidence rating rose to 31.5, the highest in 2 ½ year. Israeli president Benjamin Netanyahu looks like he is heading for a 3^rd term.  CME Group was raised to hold vs. sell at Berenberg.  Commodities as an asset class rose to the highest level in three-months as tracked by the S&P GSCI Index of 24 raw materials.

Light snow across the upper-Midwest over the weekend, but limited to 0.10-0.25” of moisture.  Bitter cold is obviously the subject of the weekend weather, but the most severe temps don’t look to be impacting any major wheat production areas, at least none that are totally exposed.  Temps look to warm up by mid-week and be in the 20’s for the Upper by the weekend.  5-day forecasted precip shows some noticeable amounts along the OH-River, but nothing for the WCB.  Extended maps look more favorable for precip in the corn belt, but the southern plains wheat areas remain dry the next 15-days.  Precip was limited and called disappointing for dry areas of Argy over the weekend.  The next 10-days will see a continuation of the dry pattern there with the only rainfall seen Thur/Fri with totals under 0.30” on 60% of the belt.  Next best chance is in the 11-15, but confidence is low.  Temps don’t look overly threatening.  Brazil looks like it is in good shape, although there are concerns in S-Brazil, mainly Rio Grande Do Sul.  Not a problem, but noteworthy.

Sharply better out of the gate last night and extending rallies this morning in all of the major Ag markets, but the strength is undoubtedly in the soy complex.  Disappointing weekend rainfall in SAM as well as so –so forecasts for improvement are lighting the fire, and obviously the pared back positions by the funds in most of these Ag markets is leaving room for them to run.  Speculators did add around 4.3% to their total commodity positions which now stand at 682,521 contracts, the largest gain since November 27^th.  The other glaring thing this morning is the amount of wheat business conducted over the weekend, yet the US had almost no participation in any of it.  Most of the newswires are focusing on the dry US plains, not the poor old crop demand.  Up on one, down on the other.

Japan issued a tender overnight for 118,787MT of US, Canadian and Australian wheat for Mar-Apr.  Bangladesh bought 50,000MT of optional origin wheat at $332.48/MT C&F for Feb/Mar shipment.  This wouldn’t have been US.  South Korea’s NOFI bought 60,000MT of wheat in a private deal at $322.50/MT C&F from either SAM or India.  Tunisia bought 50,000MT of milling wheat and 75,000MT of durum, said to be European origin although US-SRW might have been competitive.  UAE bought 20,000MT of Aussie wheat at $389/MT C&F.  Kuwait bought 22,000MT of Canadian wheat at $399.50/MT C&F and 40,000MT of SAM corn at $327.50/MT C&F.  A day after saying they could lift their import tax on wheat, Russian officials said they aren’t ready to lift the 5% import duty.  Import totals would only be around 100,000MT some have estimated.  YTD Canadian wheat imports total 8.18MMT vs. the 5-yr average of 7.06MMT.  See chart below.  Chinese corn imports in December were 265,877MT vs. 384,234MT on November and 569,908MT a year ago.  Sinograin, the state reserve manager in China, procured 37.47MMT of grain in 2012 under orders from the government.  JP Morgan cut its forecast for soybean prices, citing SAM crops.  Soybeans will average $13.90 in 2013, peaking at $15 in Q1.

Open interest changes Friday included wheat up 2,150 contracts, corn up 5,200, beans up 4,040, meal up 5,840 and soy oil down 1,900.  Volume was moderate in almost everything.  Chinese markets were mostly firmer overnight with the exception of the grains.  Beans overnight were up 0.25c (13c since Friday), meal up $2.20 ($3.30), soy oil up 16c (89c), corn down 1.25c (-2.50c), palm up 29c (64c) and wheat down 7.50c (-13.50c).  Malaysian Palm Oil was up 45 ringgit to 2,465, and is up 65 on the week.  Paris Milling Wheat is up 0.50%, Rapeseed up 1.02%, Corn up 0.10%, UK feed wheat 1.25% and Canola is up 1.10%.  The Italian Durum contract had its first day of trading with 30 contracts of volume.  It closed at €299/MT, or $10.82/bu vs. the US DTN National Durum Index at $7.82/bu.

Call things better to get going today as we still don’t know what kind of shape the SAM crops are in, even though anyone claiming a disaster is most likely reaching a bit.  Still the big fund shorts in soy oil and Chicago wheat will underpin, and corn stocks are still at near-record lows, or are projected to be anyway.  Short-term trends are up, and that’s the only way to play these markets until we stall at an overhead level of resistance or farmer selling opens up which has been notable absent.

Trade as of 7:15

Corn up 2-5

Soy up 15-18

Wheat up 3-5

Tregg Cronin
Market Analyst
800-328-6530
651-355-6538
651-355-3723 fax

www.chshedging.com

CHS Hedging, Inc.
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