Overnight Highlights from CHS Hedging's Tregg Cronin 3-20-2013

Outside Markets: Dollar Index down 0.153 at 82.836; NYMEX-WTI up $0.66 at $92.82; Brent Crude up $0.74 at $108.19; Heating Oil up $0.0232 at $2.8879; Livestock markets are weaker; Softs are better; Gold down $3.70 at $1607.50; Copper up $0.0310 at $3.4370; Silver up $0.022 at $28.865; S&P’s are up 8.50 at 1550.75, Dow Jones up 73.00 at 14,461.00 and Treasuries are weaker.

The feature in financial markets this morning is once again Cyprus and the ongoing drama there.  The plan now seems to be evolving to a one-off levy, not on bank deposits, to be paid by the Cypriot citizens which accounts for around 30% of the Cyprus GDP.  So gets around simply taking money out of people’s bank accounts, but still might be met with resistance.  It does, however, get the Russian billionaire’s off the hook.  Whew!  Otherwise global equity markets are faring pretty well with the NIKKEI up 2.03%, the Shang Composite up 2.66% and the IBEX-35 is up 0.77%.  The Euro is positive for the first time in three days with the EURUSD +0.264%.  The GBPUSD is also firmer this morning on BOE comments.  The FOMC is out later today with their rate decision.  Mortgage Apps -7.1%.

Not much for moisture the past 24 hours aside from some light precip in KS.  Quiet radar in the Midwest this AM.  Cold official start to spring with the Twin Cities 5* this morning.  Next moisture looks like Friday in SE-KS/E-OK/AR/MO to the tune of 0.20-1.40”.  Then by Saturday through Monday, another system works into the central corn belt, bringing 0.50-1.05” to E-KS/S-IA/MO/IL/IN/OH/KY/TN and all of the South East including AL/GA/SC.  MN/SD/ND look to be left dry, but this will stall any fieldwork further.  See map below for totals.  No change to 6-10 and 8-14 day outlooks from NOAA with sharply below normal temperatures and well below normal precip.  Cold and dry which again will not aid in dry down through the end of the month.

Continuation of gains witnessed yesterday during the overnight session with May corn back above $7.30 for the first time since February 6^th, while spring wheat is trading comfortably above $8.00 for the first time since the beginning of the month.  It isn’t just wheat and corn, however, as nearly every commodity around the globe is staging a rally this morning from palm oil to gasoline.  The wheat and corn rallies continue to be front-end led which seems to be a product of two things: 1) funds wishing to get either outright long or at least bullspread in anticipation of a bullish stocks report next week, and 2) end user margins on corn are rather profitable which should be bolstering buying power.  Wheat is a big short and must stay with corn for feed, but also US wheat is the cheapest in the world right now, so additional export business is probably occurring to a certain degree.  Soybeans are just seeing some corrective bounce along with commodities in general as cash remains flat/weaker and China absent for additional US stem.

Overnight headlines included wires suggesting the Sunrise Group isn’t the only Chinese trading firm to be canceling Brazilian soybean cargoes, although additional details weren’t available.  India’s trade minister is in talks with Egypt on becoming an approved supplier to the world’s largest wheat importer.  Egypt has the strictest quality standards of any importer, so the likelihood of India displacing more traditional exporters isn’t likely at first, but it does signal a shift in world wheat trade that is important.  Taiwan bought 60,000MT of Argentine corn for May 1-15 shipment at $326.87/MT C&F.  It also bought 58,865MT at $1.2850 over the July board.  Agriculture & Agri-Food Canada said they see grain prices dropping 10-20% in 13/14 on output, rising exports.  They see oilseed production up 5% and wheat up 4.4% with total exports up 0.9%.  Grain Industry Researchers have been comparing Australian soft and hard wheats with that of Saudi Arabia and said the two compare favorably.  See article below.

Open interest changes yesterday saw another huge jump in corn of 23,050 contracts, wheat down 2,500, beans down 6,120, meal down 4,070 and soyoil up 1,900 contracts.  Corn appears to be attracting trend type money with the rising open interest which is a short-term positive.  Liquidation in the soy complex which makes sense considering the relative size of the fund longs there.  Chinese markets were slightly better with beans up 4.75c, meal up $3.80, soyoil down 16c, corn down 1.25c, palm up 1c and wheat up 4c.  Malaysian Palm Oil was up 26 ringgit at 2,441.  There were 135 deliveries in Minneapolis last night.  Paris Milling wheat is up 1.26%, Rapeseed up 0.81%, UK Feed wheat up 1.14%, Corn up 0.77% and Canola is down 0.14%.

Call things better as the Ags benefit from a global risk-on mentality, but also due to the positive fundamental factors at work in corn and wheat.  Spreads are firm, but basis has been mixed as farmers have been selling into the rally heavily on corn and to a lesser extent on wheat.  Another 20-30c rally in wheat would buy a lot in the upper-Midwest, so a defensive basis position as long as futures keep rallying is probably warranted.  Funds have lots of room to buy on both corn and wheat should they decide to.  Farmer orders are probably waiting at $7.40-7.50, so we probably “have to go to where the orders are.”  Corn’s technical picture is good right now.  Soybeans will be the laggard.

Russia, Egypt Yet to Contribute to AMIS Commodity Database (1)

2013-03-20 10:51:52.774 GMT

     (Adds Nigeria unavailable for comment in 10th paragraph.)

By Rudy Ruitenberg

     March 20 (Bloomberg) -- Russia, Egypt and Nigeria are among

the five countries that still need to contribute data to the

Agricultural Market Information System set up by Group of 20

countries to avoid a repeat of the 2007-08 food-price crisis.

     The others are Kazakhstan and Saudi Arabia, David Hallam,

head of markets and trade at the United Nations’ Food &

Agriculture Organization, said in an interview in Geneva

yesterday. Russia was the world’s third-largest wheat exporter

in 2011-12, and Egypt was the biggest buyer of the grain, while

Nigeria is the world’s biggest rice importer, according to U.S.

Department of Agriculture estimates.

     Rice prices surged in 2008, after the Philippines failed to

fill a rice tender following export restrictions by countries

including Vietnam and India. That made other grains more

expensive and helped push global food prices to a record.

     Rome-based AMIS has “fairly complete” data for 18

members, some information from four and “really no useful data

at all” from five, Hallam said. AMIS consists of the G-20

members as well as seven countries that are large users or

producers of farm products.

     “All of the countries we’re working with, there isn’t a

single one saying they won’t collaborate,” Hallam said.

     AMIS was set up to improve data on stocks and production of

corn, wheat, rice and soybeans with the goal of reducing price

swings. To fill in the gaps for countries that haven’t directly

provided figures, AMIS uses publicly available information as

well as data from the International Grains Council and the USDA,

according to Hallam.

                          Data Required

     The five countries have failed to provide data “for a

variety of reasons, technical and organizational,” the FAO

director said.

     “Until we get everybody supplying data which is

comprehensive and up to the standards we want, we’re looking at

another couple of years,” Hallam said. “This whole exercise is

a long-term effort. It’s a similar effort as what was done for

oil, and that took eight or nine years.”

     Russia faces “an organizational issue” and a resolution

may be reached at an AMIS meeting in April, Hallam said.

     The Russian agriculture ministry wasn’t available to

immediately comment when called by Bloomberg today.

     Salisu Na’inna, the spokesman for Nigeria’s agriculture

ministry, wasn’t able to comment immediately when called by

Bloomberg. Saken Kalkamanov, a spokesman for the Astana,

Kazakhstan-based agriculture ministry, wasn’t immediately

available for comment when Bloomberg called his office and

mobile phones.

     Hallam said some countries have been more willing and

capable to provide information on production and stocks than may

have been expected.

     “China is a very active participant,” the FAO director

said. “Ukraine is one of the star performers. Indonesia is in

the top group of providing everything.”

Saudi officials learn the virtues of Australian wheat

2013-03-19 21:50:15.291 GMT

By Caitlyn Gribbin

     March 20 (ABC) -- Grain industry researchers say Australian

wheat is highly suited to producing flat breads popular with

millions of Saudi Arabian consumers.

     The Australian Export Grain Innovation Centre research has

compared the baking qualities of Australian premium white and

Australian hard wheats with samples of Saudi wheat.

     It found the Australian wheat compared favourably to Saudi

samples for flat bread production.

     There's major growth potential for Australia in Saudi

Arabia, with the country aiming for 100 per cent wheat

importation by 2016.

     The wheat research was presented to Saudi Arabian officials

in Perth yesterday.

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

www.chshedging.com

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