Afternoon recap from CHS Hedging's Tregg Cronin 2-27-2013

Feb 27

Outside Markets as of 2:00: Dollar Index down 0.256 at 81.607; NYMEX-WTI up $0.16 at $92.79; Brent Crude down $0.81 at $111.90; Heating Oil down $0.0388 at $2.9929; Livestock markets are mixed with cattle up and hogs down; Softs are firmer led by Cotton which is up 3.35%; Gold down $22.60 at $1592.90; Copper down $0.0085 at $3.5745; Silver down $0.445 at $28.875; S&P’s are up 24.75 at 1516.75, Dow futures are up 200.00 at 14,060.00 and Treasuries are weaker.

Taught classes this morning, and in meetings this afternoon, so just a few comments on cash and spreads with some articles below worth a look through.

Markets continuing their rallies today on lack of farm gate movement, still firm cash markets, export business, rebounding ethanol production and most likely some light profit taking in the wheat pits. The close wasn’t incredibly strong, and May corn failed to close above the vaunted $7.00 level. $7.01 kick starts technical buying. Ethanol production continues to see a rebound in weekly production, poking back above 800,000bbls/day for the first time in seven weeks. Stocks declined slightly, but remain rather large. The improvement in margins has gotten plants back open, and the basis reflects their desire to get corn bought. Still lots of ethanol plants in IL/IA paying +50K or more for trains, but the demand seems to be for AMJJ. Truck corn might be a bit weaker at some. Wheat’s discount to corn is starting to perk up the interest of a lot of feed lots both in the US and abroad. Japan was in for SRW as feed wheat, the first time in quite a while. KS/CO feed lots interested in HRW. SRW working into southeast markets. Isn’t whacking corn basis severely yet, but likely isn’t far off.

PNW spring wheat basis firming up with cash guys calling it up 20c vs. two weeks ago. Doesn’t appear to be the guys who sold the Chinese business two weeks ago, so hard to tell if it is covering business already on the books, or if this is fresh demand. To-arrive bids over Chicago not showing much life this afternoon, so would assume we have plenty of wheat to put out any fire. A basis selling opportunity seems to be right around the corner on wheat. Lots of wheat left on farm. MWH/MWK rallied late, closing up 0.75c to -9.00c, but traded all the way into -7.50c as guys bought the spread instead of pumping up basis any further.

Dr. Michael Cordonnier said he expects Brazilian yields to fall as harvest progresses, not rise. Deutsche Bank was in the news putting the Brazilian soy crop at 79-80MMT, by far the lowest in print and well under the USDA’s 83.5MMT. Two cargoes to China for 12/13 and two cargoes to unknown for 13/14. Fits with the business bantered about late last week. The export pace we’re on is unsustainable. Brazilian basis levels continue to fall, but this seems to be tied to importers refusing to pay up because they won’t get beans no matter what they pay, so why bid it? Lineups on soy grow every day as you can see below. Total soy and products lineup is 9.467MMT vs. 8.643MMT last week. Corn lineup is 1.194MMT vs. 1.464MMT last week.

Shouldn’t be any deliveries against March corn or soybeans, but there are 1,882 March Chicago Wheat delivery certificates on the street, and these could see deliveries potentially. Wouldn’t think there would be any spring or winter deliveries considering the basis is firm enough and works by 15-20c to load wheat out.

Deutsche Bank Says Brazil Soybean Crop May Be 79-80 Million Tons

2013-02-27 07:23:31.183 GMT

By Claudia Carpenter

Feb. 27 (Bloomberg) -- Brazil’s soybean crop for 2012-13

may be 79 million to 80 million metric tons and corn 70 million

to 71 million tons, below the U.S. Department of Agriculture

estimates, Deutsche Bank AG said.

Competition for soybeans to export in Brazil is “fierce”

as crushers and hog and chicken industries also want supplies,

Christina McGlone, an analyst at the bank in New York, said in a

report dated yesterday. The USDA’s estimates are 72.5 million

for corn and 83.5 million tons for soybeans.

Supply is limited at ports because of delayed plantings,

late harvesting due to wet weather, new trucking regulations,

unrest with port workers and vessel line-ups, she said. That may

spur demand for U.S. supplies for now, she said.

China Buys U.S. Corn as Mold to Hit Local Supply, Yigu Says (1)

2013-02-27 07:32:25.332 GMT

(Updates price in fifth paragraph.)

By Bloomberg News

Feb. 27 (Bloomberg) -- Feed mills in China, the second-

biggest corn consumer, will probably order more U.S. grain on

concern that domestic supply won’t meet demand before the fall

harvest, researcher Yigu Information Consulting Ltd. said.

Snow and rain in northern China have increased moisture in

farmers’ unsold grain, making it more vulnerable to mold and

less suitable as animal feed, said Feng Lichen, the general

manager of Yigu, which runs China’s biggest corn information

portal. Some mills are securing shipments from the U.S., the

biggest exporter, for deliveries later this year using newly

issued import permits from the government, as the cost of U.S.

corn has dropped, he said.

China’s purchases may help stem an 18 percent decline in

Chicago prices from a record in August. The U.S. crop will be an

all-time high following the worst drought in seven decades, the

U.S. Department of Agriculture said on Feb. 22. Chinese mills

bought at least 120,000 metric tons from the U.S. last week, the

first purchases this year, two executives with direct knowledge

of the matter said on Feb. 22. U.S. corn exporters sold 127,000

tons to unknown buyers last week, the USDA said.

“China’s corn shortage this year may widen to 5 million

tons from a previous projection of 2 million tons,” Feng said

by phone on Feb. 25 from Dalian in northeastern China, the port

city in the country’s biggest corn-growing region. “The crops

are just too wet, so as soon as the weather warms up next month,

mold will grow,” he said.

China Harvest

The most-active contract on the Chicago Board of Trade has

lost 6.9 percent this month and was at $6.93 a bushel at 3:37

p.m. in Beijing.

Traders are quoting prices between 2,220 yuan ($356) and

2,250 yuan a ton for September shipments of U.S. corn, including

freight costs, Zhang said. Futures for September delivery closed

at 2,433 yuan a ton on the Dalian Commodity Exchange.

The USDA had said on Feb. 9 that China’s harvest in the

marketing season from Oct. 1 rose to a record 208 million tons,

cutting possible imports to 2.5 million tons from last year’s

5.23 million tons.

Purchases by feed mills may have totaled more than 200,000

tons since last week, Cherry Zhang, an analyst at Shanghai JC

Intelligence Co., said Feb. 25. Buyers will proceed cautiously

on concern that U.S. prices may drop more, she said.

COFCO Gets $4.8 Billion Funding to Expand China Grain Processing

2013-02-27 05:10:27.984 GMT

By Bloomberg News

Feb. 27 (Bloomberg) -- COFCO Corp., China’s largest grains

trader, said it will receive 30 billion yuan ($4.8 billion)

financing from China Development Bank Corp. to boost processing

and shipping of grains and oilseeds.

The state-owned company will receive the money over the

next five years and use it to ensure the supply and safety of

grain and cooking oil, and for rural financing ventures to

promote development in farming areas, the Beijing-based company

said in an emailed statement today.

COFCO is the parent of Hong Kong-listed China Agri-

Industries Holdings Ltd., the country’s second-biggest soybean

processor, and China Foods Ltd., the second-largest cooking oil

supplier.

Egyptian Wheat Stockpiles Will Satisfy 123 Days of Consumption

2013-02-27 11:28:12.198 GMT

By Abdel Latif Wahba

Feb. 27 (Bloomberg) -- Egypt has 3 million metric tons of

domestic and imported wheat in stockpiles, enough to meet

consumption for 123 days, the cabinet said.

Inventories of domestic and imported sugar are about

290,000 tons, sufficient to satisfy 71 days of local demand, the

cabinet said today in an e-mailed statement. The government has

142,000 tons of domestic and imported food oil on hand, enough

to meet consumption through the middle of May, it said.

Russia Grain Stockpiles to Fall to Record Low by July 1: SovEco

2013-02-27 09:42:13.246 GMT

By Marina Sysoyeva

Feb. 27 (Bloomberg) -- Russian state grain stockpiles may

fall to 600,000-700,000t by July 1, SovEcon General Director

Andrey Sizov says at Grain Producers’ Union in Moscow.

* Russian winter crop losses seen at 12%, Sizov says

* Russian grain, legumes exports reach 14.3mt so far in season

from July 1, Sizov say

* Russian grain, legumes exports seen at 500,000 tons in Feb.

* NOTE: 6.5% of winter crops failed to sprout or were weak at

the end of February 2011; harvest was 94.2mt that yr, Sizov

said

China Soybean Inventory May Decline to 4m Tons, Grain.Gov Says

2013-02-27 02:11:32.122 GMT

By Bloomberg News

Feb. 27 (Bloomberg) -- China’s inventory of soybeans may

fall to 4m metric tons by end-March from 5.2m tons as of last

week, Grain.gov.cn said in an e-mailed report.

* Arrival shipments may be about 7m tons in Feb.-Mar., lower

than 8.66m tons a year ago, it says

* Shipments may rise starting from April as supplies from

South America increase, it says.

U.S. Corn Export Sales Seen Declining in Week Ended Feb. 21

2013-02-27 18:49:24.476 GMT

By Jeff Wilson

Feb. 27 (Bloomberg) -- U.S. export sales of corn probably

fell in the week ended Feb. 21 from a year earlier, while

soybean-meal and soybean-oil sales rose, based on a survey of

five analysts by Bloomberg News. Estimates for sales of wheat

and soybeans ranged from below to above a year earlier.

The U.S. Department of Agriculture is scheduled to release

its sales report at 8:30 a.m. tomorrow in Washington.

U.S. Export Sales

Estimate Range Feb. 14, 2013 Feb. 23, 2012

Corn 125,000-400,000 361,826 689,959

Soybeans 300,000-700,000 (119,526) 549,108

Soybean Meal 125,000-300,000 236,132 40,016

Soybean Oil 10,000-30,000 28,872 4,769

Wheat 350,000-900,000 699,257 414,070

U.S. Exporters Sell Soybeans to China, Unknown Destinations

2013-02-27 14:00:00.2 GMT

By Patrick McKiernan

Feb. 27 (Bloomberg) -- The sale of 120,000 metric tons to

China is for delivery in the 12 months starting Sept. 1, and the

sale of 120,000 tons to unknown destinations is for delivery

before Aug. 31, the U.S. Department of Agriculture said today in

a statement.

Corn Spread Surges on Tight Pre-Harvest Supply: Chart of the Day

2013-02-27 00:00:00.5 GMT

By Jeff Wilson

Feb. 27 (Bloomberg) -- Tightening U.S. corn inventories

will triple the spread between May and July futures in Chicago

as buyers scramble for pre-harvest supplies, according to Water

Street Solutions Inc., a researcher and farm-marketing adviser.

The CHART OF THE DAY shows futures for May delivery on the

Chicago Board of Trade will surge to a premium of 45 cents a

bushel over the July contract, compared with 15.75 cents

yesterday, based on a forecast by Arlan Suderman, the senior

market analyst at Peoria, Illinois-based Water Street Solutions.

The spread would match the peak between the contracts last year,

when the worst drought since the 1930s sent prices to a record.

While the government said Feb. 22 that U.S. farmers will

boost output by 35 percent this year as yields return to normal,

that grain won’t reach buyers for another six months.

Inventories before the harvest will be the lowest relative to

demand since 1974, U.S. Department of Agriculture data show.

“U.S. corn supplies are forecast tighter than they were a

year ago,” Suderman said in a telephone interview yesterday

from Wichita, Kansas. “It’s all about rationing the reduced

supply from last year.”

Demand for corn used as livestock feed and to make ethanol

has probably accelerated after prices tumbled to a seven-week

low of $6.8075 on Feb. 25, Suderman said. The USDA said last

week that domestic pork and poultry output in 2013 will rise 0.7

percent. A government mandate calls for refiners to use 13.8

billion gallons of ethanol this year, up from 13.2 billion last

year. Corn prices have tumbled 18 percent since reaching a

record $8.49 on Aug. 10 as output rose in South America and

prospects improved for a rebound in U.S. production this year.

“There is a real concern among consumers that the U.S.

won’t have many bushels left before the harvest,” Suderman

said. “The spread will widen now to slow demand and maintain

adequate inventories before the harvest.”

Brazil Daily Soy Shipments From Major Ports: Summary (Table)

2013-02-27 15:26:16.581 GMT

By Dominic Carey

Feb. 27 (Bloomberg) -- Following is a table detailing scheduled soybean

shipments for vessels berthed, arrived or expected at major ports in Brazil,

according to SA Commodities in Santos, Brazil:

===============================================================================

Feb. 27 Feb. 26 Feb. 25 Feb. 22 Feb. 21 Feb. 20

2013 2013 2013 2013 2013 2013

===============================================================================

------------------------# of Ships-------------------------

Soy total 164 162 156 157 150 149

Soybeans 124 123 116 116 108 109

Soybean oil 1 1 1 0 0 0

Soybean meal 12 12 12 13 15 14

Soy meal pellets 27 26 27 28 27 26

------------------------Metric Tons-------------------------

Soy total 9,467,669 9,298,669 9,067,308 9,250,123 8,785,072 8,643,572

Soybeans 7,459,979 7,358,979 7,068,068 7,099,068 6,676,518 6,643,018

Soybean oil 5,000 5,000 5,000 0 0 0

Soybean meal 533,989 533,989 533,989 633,804 651,303 603,303

===============================================================================

Feb. 27 Feb. 26 Feb. 25 Feb. 22 Feb. 21 Feb. 20

2013 2013 2013 2013 2013 2013

===============================================================================

Soy meal pellets 1,468,701 1,400,701 1,460,251 1,517,251 1,457,251 1,397,251

Brazil Daily Corn Shipments From Major Ports: Summary (Table)

2013-02-27 15:26:06.668 GMT

By Dominic Carey

Feb. 27 (Bloomberg) -- Following is a table detailing scheduled corn

shipments for vessels berthed, arrived or expected at major ports in Brazil,

according to SA Commodities in Santos, Brazil:

============================================================================

Feb. 27 Feb. 26 Feb. 25 Feb. 22 Feb. 21 Feb. 20

2013 2013 2013 2013 2013 2013

============================================================================

Ships scheduled 24 27 28 27 26 32

Metric tons 1,194,631 1,337,631 1,372,631 1,308,923 1,248,923 1,464,903

============================================================================

Egyptian Wheat Stockpiles Will Satisfy 123 Days of Consumption

2013-02-27 11:28:12.198 GMT

By Abdel Latif Wahba

Feb. 27 (Bloomberg) -- Egypt has 3 million metric tons of

domestic and imported wheat in stockpiles, enough to meet

consumption for 123 days, the cabinet said.

Inventories of domestic and imported sugar are about

290,000 tons, sufficient to satisfy 71 days of local demand, the

cabinet said today in an e-mailed statement. The government has

142,000 tons of domestic and imported food oil on hand, enough

to meet consumption through the middle of May, it said.

Ethanol Rin Credits Jump to Record 51 Cents, Blue Ocean Says

2013-02-27 19:23:28.99 GMT

By Mario Parker

Feb. 27 (Bloomberg) -- The value of Renewable

Identification Numbers, or RINs, for corn-based ethanol in the

U.S. rose to a record 51 cents, according to Blue Ocean

Brokerage LLC in New York.

Grain Terminal Cites Sabotage, Declares Lockout

2013-02-27 19:40:18.596 GMT

By STEVEN DUBOIS

Portland, Ore. (AP) -- A Pacific Northwest grain terminal

owner imposed a lockout on longshoremen Wednesday after saying

an "independent former FBI investigator" determined a union

leader sabotaged company equipment at the height of contentious

labor problems in December.

United Grain Corp., part of the Japanese conglomerate

Mitsui & Co., said nonunion replacement workers will operate its

Vancouver, Wash., export terminal for "indefinite" period. The

company said it fired the union leader, whom it described as a

member of the bargaining team of Local 4 of the International

Longshore and Warehouse Union but did not name.

"Deliberate attempts by an ILWU leader to damage equipment,

disrupt operations and put co-workers at risk cannot be

tolerated," United Grain CEO Gary Schuld said Wednesday.

The union called the company's allegations unfounded, and

locked-out longshoremen immediately picketed outside the

terminal.

"United Grain and its Japanese owners at Mitsui have failed

to negotiate in good faith with the men and women of the ILWU

for months, and instead chose to aggressively prepare for a

lockout, spending enormous resources on an out-of-state security

firm," ILWU spokeswoman Jennifer Sargent said in a statement.

"Mitsui-United Grain has fabricated a story as an excuse to do

what they've wanted to do all along, which is to lock workers

out instead of reach a fair agreement with them."

Late last year, the company was among Northwest terminal

owners who declared an impasse on labor negotiations and imposed

a contract that included new, management-friendly workplace

rules.

Columbia Grain said the sabotage occurred Dec. 22, days

before the impasse was declared. In one case, someone shoved a 2

-foot-long metal pipe into a conveyor, causing it to shut down,

the company said. In another, a vandal damaged a gear box with a

mixture of sand and water.

The company, in a letter sent to the union, said an

"impartial and independent" former FBI investigator determined

the union leader was the culprit following an investigation that

included interviews, surveillance tapes and other evidence.

No charges have been filed, but Schuld said the

investigator's report will be turned over to law enforcement

More than a quarter of all U.S. grain exports move through

nine grain terminals on the Willamette River and Puget Sound.

The contract dispute initially involved six of those terminals

that operate under a single collective bargaining agreement with

the ILWU: United Grain, based in Vancouver; Columbia Grain,

based in Portland; Louis Dreyfus Commodities, which has grain

elevators in Portland and Seattle; and Temco, which has

elevators in Portland and Tacoma, Wash.

United Grain has the largest storage capacity of any West

Coast grain export facility with more than 7 million bushels of

storage, according to the company's website.

The U.S.-owned Temco broke away from the alliance in early

December and negotiated separately with the union. They

announced a five-year agreement Wednesday.

"It's no coincidence that Mitsui-United Grain has chosen to

throw out unfounded charges by an unnamed 'investigator' just

days after the union membership ratified an agreement with

Mistui-United Grain's American competitors," Sargent said.

The pro-management terms implemented in December eliminate

some employee perks and grievance procedures while giving

employers more discretion in hiring and staffing decisions.

Management, for example, can expand shifts to 12 hours, if

needed, and use elevator employees to help load ships.

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

www.chshedging.com

CHS Hedging, Inc.
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Afternoon RecapCHS Hedging Inc

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Afternoon recap from CHS Hedging's Tregg Cronin 2-27-2013

Closing Comments 2-27-2013

Overnight Highlights from CHS Hedging's Tregg Cronin