Overnight Highlights from CHS Hedging's Tregg Cronin 1-31-2013

Outside Markets: Dollar Index Dollar Index up 0.019 at 79.300; NYMEX-WTI down $0.34 at $97.59; Cattle markets are firmer; Gold down $9.10 at $1672.40; S&P’s down 3.00 at 1492.25.

Mixed financial markets around the globe overnight with equities in Asia near unchanged, but Europe is under pressure this morning.  The IBEX-35 is down 1.81%, FTSE MIB -0.80% and the CAC-40 is -0.94%.  The Portuguese 10-yr treasury yield is up 16.4bp to 6.081%, and Forex markets are fairly quiet.  Headlines of note include Germany’s unemployment rate falling to 6.8% from 6.9%, Shell and Deutsche Bank missing earnings estimates.  A big day for earnings with AM reports coming from Potash of Saskatchewan, Time Warner, Dunkin’ Brands, Dow Chemical and Xcel Energy.  Economic data on tap includes Initial Jobless Claims (350,000), Employment Cost index (0.5%), Personal Income & Spending (+0.8% & +0.3%) and the Chicago Purchasing Managers Index (50.5).

Precip the last 24 hours pushed East into Appalachia and the East coast where totals of 0.50-3.00” fell.  Parts of the ECB picked up additional moisture to the tune of 0.10-0.50” in OH/IN/IL.  Most of the central and WCB were dry.  Snow is falling in the ECB this morning while the WCB and southern plains are dry.  Nothing doing on the 5-day forecasted precip map aside from 0.40” seen in the Northern RR-Valley.  Warm up still seen beginning Feb 5^th through the 9^th with above normal temps in the entire Midwest, while above normal precip is seen for the majority of the corn belt including East River SD/ND/NE.  Plains are seen normal, but better chances for TX in the 8-14.  See link.  River should also be in good shape.  Second link.  The attachment details the next 48-hours in SAM which is the best chance for rainfall the next 10-days in the dry areas of Argentina.  Best totals look like 0.50”.  Forecasters talking rains at the tail end of next week, but little confidence is being given.  Map below shows yesterday’s highs.  90’s in Argentina.

http://www.cpc.ncep.noaa.gov/products/predictions/814day/index.php

http://water.weather.gov/ahps2/hydrograph.php?wfo=lsx&gage=eadm7

A little bit of profit-taking overnight as would be expected after the impressive gains witnessed yesterday.  The overnight headlines don’t offer a lot of market moving information, aside from the fact US exports of corn and wheat continue to be outdone by other origins.  Weekly sales this morning could prove interesting.  Not much expected from corn (120-400) or wheat (300-625), although beans have quite the estimate range (250-900).  The main focus is still South American weather, and great attention will be given to Sunday night and Monday morning weather maps.  The highs for the week are probably in until more weather detail is released.  The poor ethanol data released yesterday grabbed a lot of headlines.  The slowdown might be working, however, as estimated margins have improved to +$0.10 vs. +$0.06, and are said to be the highest since September.

Other headlines of note overnight included Iraq issuing a tender for 50,000MT of wheat with a bidding deadline of February 17^th.  All major exporters were included and results will be scrutinized closely.  South Korea bought 110,000MT of feed wheat from India overnight, and was also said to have bought 55,000MT of European origin corn.  That is an unusual connection, but NGMO specs were said to have been a consideration.  Also of interest, the Russian Ag Minister was quoted as saying Russia should move to lower the grain duty in imports.  Russian domestic milling wheat prices rose to new record last week, above 2008 records.  Not much change to SAM weather maps to speak of.  A lot of corn and soybeans were sold yesterday, and it was evident in basis and spreads yesterday.  Export bids on both fell, as did several crush plants.  $7.40/50 and $15.00 will prove difficult levels to trade above with eager producer selling.  Palm Oil rose to its highest level in 3-months on speculation Malaysian stocks will ease from record levels in coming weeks.

Big jump in open interest yesterday in corn of 21,010 contracts, which makes over 50,000 contracts in the last 5-sessions.  Wheat was up 1,580 contracts, beans up 13,690, meal up 7,720 and soy oil was up 7,320 contracts.  These are huge jumps in the soy products and confirms the trend followers are getting on board and fresh speculative money is entering our market.  Chinese markets were better with beans up 0.25c, meal up $7.20, soy oil up 69c, corn up 0.75c, palm up 61c, and wheat up 3.50c.  Malaysian Palm Oil was up 47 ringgit (1.87%) to 2,557.  Paris Milling Wheat is up 0.10%, Rapeseed up 0.78%, Corn up 0.21%, UK Feed wheat unchanged and Canola is down 0.21%.

Look for weaker trade today as we consolidate the recent gains.  Farmers leaned into the market in a big way yesterday, and cash and spreads should buckle a little bit in response.  How the market swallows up what moved will tell us a lot about the expectations for a continued rally.  Open interest is signaling markets want to go higher.  Weekend weather maps will be key.

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

www.chshedging.com

CHS Hedging, Inc.
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