Overnight Highlights from CHS Hedging's Tregg Cronin 1-29-2013

Outside Markets: Dollar Index up 0.052 at 79.802; NYMEX-WTI up $0.13 at $96.56; Brent Crude down $0.06 at $113.38; Heating oil up $0.0023 at $3.0639; Livestock markets are all taking a bit of a breather this morning; Gold up $8.70 at $1661.60; Copper down $0.0025 at $3.6590; Silver up $0.265 at $31.040; Softs are mixed although Cotton is up over 1.0%; S&P’s are down 4.75 at 1492.00, Dow futures are down 29.00 at 13,803.00 and Treasuries are firmer.

Quietly weaker equity markets around the globe overnight, although Australia’s main equity index continues to show strength.  Last night it tacked on another 1.11% and is trading at the highest levels since mid-2011, not too different from the DJIA or S&P.  Main financial headlines would include Ford beating earnings’ estimates by reporting Q4 EPS of $0.31/share vs. the $0.25 estimate.  Revenues were a beat by more than $3 billion.  Other notable earnings this morning will include Polaris, Pfizer, Harley-Davidson, Valero and the Canadian Pacific Railway.  Overnight, India’s central bank cut its benchmark rate to revive growth as inflation there cools.  United States Bakery is in talks to buy Hostess bread brands for $29 million.  Case Shiller Home Price Index later today seen up 0.7% m/m.

Precip in the last 24 hours was heaviest in SD/ND/MN/WI/MI where totals as high as 1.0” fell north of Madison, WI.  This storm continues to work east this morning bringing more rain to WI/MI, but a separate system is tracking across OK this morning with watch-boxes present.  KS is also seen getting some rain.  Most of the accumulation in the southern plains will take place in the eastern part of the state where 0.50-1.00” is possible.  The 5-day forecast keeps a heavy system in place over AR/MO/IL/MS/TN and surrounding areas where as much as 2.50” is seen dropping.  This should aid in keeping river levels adequate and the STL River Gauge below is seen rising through Feb 1 because of it.  NOAA’s extended maps showed a stark change to recent model runs, bringing in much above normal temps for TX/OK/KS/NE in the 6-10 while precip looks more normal.  This would be interesting considering all of KS was 70+ degrees yesterday.  The 8-14 shows a similar looks.  Follow the link below to see the maps.  They’re worth the look.  South American maps don’t look a whole lot changed this morning, although S-Brazil is looking wetter in the 6-10.  The 1-5 day continues to call for precip across 2/3’s of the Argentine growing areas.  Around 1/3 will still be subject to moisture stress as we head into February.

http://www.cpc.ncep.noaa.gov/products/predictions/610day/index.php

Slightly better trade overnight across the major Ag markets as markets attempt to add to yesterday’s late rally.  Several analysts much smarter than myself were questioning the spark for yesterday’s rally, and probably the additional gains overnight at that, because there didn’t seem to be a ton of new developments in the last 36 hours.  Some cited the WCB drought, others a pickup in corn export inspections and some the fact China continues to take US purchased corn.  More than anything, it appears all of our major grains are locked in ranges, and will continue there until fresh news comes in.  One thing is certain, the longer we coil up inside ranges, the larger the break out should be when it comes.  Brazil’s biggest soybean state of Mato Grosso is 7.1% harvested vs. 2.8% a week ago and 5.8% a year ago.  Brazil’s soybean lineup is picking up with 3.4MMT as of yesterday.  This along with 1.3MMT of meal and 2.8MMT of corn totals 7.5MMT, an all-time record for February.

Headlines overnight included Dr. Michael Cordonnier cutting hit Argentine soybean production estimate 1.0MMT to 52.0MMT, bringing his estimate in-line with Oil World, but 2MMT below the USDA.  Two oil barges struck a railroad bridge near Vicksburg, MS yesterday backing up more than 300 barges on either side of the bridge.  Cleanup is thought to continue until Thursday and should limit barge traffic.  Could possibly put a bit of strength in ETA soybean barges.  According to Agriculture & Agri-Food Canada, the Canadian wheat harvest in 2013/14 will climb 4.8% to 28.5MMT thanks to larger acres.  The USDA’s Foreign Ag Service said Russia’s wheat exports will be 11MMT for 12/13 vs. the 10.5MMT currently forecasted by the USDA.  Several southern plains states released winter wheat condition ratings yesterday afternoon.  KS’s wheat crop was rated 20% Good/Excellent vs. 24% on Dec 30.  OK was seen at 5% G/E vs. 11% in December, and only 22% of the state’s wheat was being used for grazing vs. 36% on average.  NE reported 8% G/E vs. 14% in December, and SD reported 3% G/E, unchanged from the end of December.  South Dakota’s report did make mention of better snow cover since the last report.  Definitely going to need spring moisture.  The KWN/WN is currently trading at +57.75c.

Open interest changes yesterday included wheat down 1,350 contracts, corn up 4,650, beans up 5,740, meal up 6,180 and soy oil up 3,510 contracts.  Corn continues to see solid gains in open interest, suggesting managed funds are still interested in re-entering that market.  Chinese markets were steady/better overnight with beans up 0.25c, meal down $0.30, soy oil down 22c, corn up 1.25c, palm up 1 and wheat down 4c.  Malaysian Palm Oil re-opened after its holiday and saw a 1.23% rally with the April contract closing up 30 ringgit at 2,475.  Paris Milling Wheat is up 0.40%. Rapeseed is up 0.68%, Corn up 0.32%, UK Feed wheat up 0.02% and Canola is unchanged.

ADM Marshall, Chicago 25’s, Hereford and PNW corn basis was all a bit firmer yesterday based solely on posted bids.  PNW beans, however, looked to be down at almost every export house by a good 5c.  The CH/CK is inverted by 0.50c this morning.

Call things better to start as we continue to chop inside ranges.  Two-sided trade again today wouldn’t surprise anyone, and with no real data releases set for today, a breakout doesn’t look likely.  South American weather, weekly data sets and farmer movement remain the focus.  Keep an eye on new crop ’13 prices as we head into the insurance pricing period.  There are a lot of producers who are not at all comfortable with the prices they’d have to sell today if they had to, even if they are concerned about dryness in the WCB.

Trade as of 7:00

Corn mixed

Soy up 1-2

Wheat up 1

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

www.chshedging.com

CHS Hedging, Inc.
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