12/29/2014 Morning Comments

Good Morning,

 

 

Outside Markets as of 6:20am: Dollar Index down 0.0550 at 89.9730; Euro up 0.00250 at 1.22100; Russian Ruble is off 4.08% at 59.17159; S&P’s are down 3.25 at 2081.25; Dow futures are down 30.00 at 17,982.00; 10-yr futures are up 0.20%; The Nikkei closed down 0.50% at 17,729.84; The DAX is down 0.67% at 9,855.72; The IBEX-35 is down 1.62% at 10,311.70; Gold is down $2.20 at $1193.10; Copper is down $0.20 at $281.20; Crude Oil is up $0.66 at $55.39; Heating Oil is up $0.0193 at $1.9035; Paris Milling Wheat is up €0.50 at €201.50/MT.

Greece is once again grabbing financial headlines this morning after the Greek Prime Minister announced plans for an early general election next month after parliament rejected his candidate for president, throwing the country’s international bailout into question.  Recent opinion polls point to a victory for the radical leftist Syriza party, which wants to wipe out a big part of Greece’s debt, and cancel the terms of the bailout with the European Union and IMF.  Also making headlines this morning was the Russian Ruble heading back towards 60:1 with the US Dollar Index after the economy began shrinking in November for the first time since 2009.  The Russian Economic Development Ministry reported the economy shrank by 0.5% in November compared with a year earlier, and also the Central Bank’s foreign reserves dropped below $400 billion for the first time since August of 2009.  The US Dollar Index is holding right under fresh 8-year highs set on December 23rd.

Patchy snow moving across NE, IA and SD this morning, but otherwise the Midwest is fairly quiet.  The focus this week will be the plunge in temperatures with the freeze line extending all the way to the border of Mexico the next 3-4 days before moderating slightly.  The obvious concern will be the amount and location of snow cover.  The map below from NOAA shows snow cover as of this morning with portions of HRW and SRW country exposed to the looming cold snap.  The next map shows the expected minimum temperature for New Year’s Eve Wednesday.  On the international front, drier weather will move into N-Brazil the next 7-days, but soil moisture is plentiful after a beneficial December.  Southern Argentina is also expected to turn drier over the next week.  Will revert back with soil moisture tables when they are updated later today.

 

Mostly firmer markets led by wheat in our last trading week of 2014.  Plenty of Russian chatter on the tape this morning, and the aforementioned forecast for US wheat areas will also keep traders anxious despite the fact damage or lack thereof won’t be known until March.  Traders are also going to be using the remaining 3-days of 2014 to square positions, which as of the last COT data put funds still short a bit of wheat, long corn and flat soybeans.  According to financial website FinViz.com, the best performing commodity of 2014 was Coffee which is up 52.3% on the year, followed by feeder and live cattle, up 29.0% and 22.3%, respectively.  Crude Oil was obviously the worst performing commodity, down 43.6% on the year.  Chicago Wheat is currently up 1.9% on the year, corn down -1.8% and soybeans off 18.2%.  The performance of these commodities need to be kept in mind in regards to possible sector rotation of managed funds as well as fund rebalancing by passive long instruments.

Beginning first with Russia, the economic new mentioned above is obviously providing the backdrop for a country which is already seeing economic activity shrink compared with a year ago, something which wasn’t expected to happen until 2015.  This mentality makes the need for additional tax revenue, and a slowing of domestic inflation, all the more pertinent which they announced late last week.  Russia intends to add a duty on grain exports beginning February 1 to June 30 which will be 15% of the price per tonne, plus €7.5/MT, with a minimum rate of €35/MT.  According to the Deptuy Prime Minister of Ag, farmers were currently receiving around €225/MT selling to the export market and €160/MT selling into the domestic market, which creates a spread larger than the proposed €41.25/MT levy, although transportation costs of any kind are not being reflected.  Either way, Russia is still participating in international tenders with the intention of shipping more grain before February 1.  On Thursday Egypt’s GASC said it will receive 120,000MT of Russian wheat for the shipping period January 21-31.

Even with slowed grain exports Feb 1 forward, Russia still looks set to export a sizable amount for 2014/15.  Through December 28th, Russia has exported 20.4MMT of grain, up 30.1% from a year earlier.  Of that amount, 15.97MMT was estimated to be wheat, 3.1MMT of barley and 1.07MMT of corn.  The USDA is currently using 22MMT of wheat exports for Russia in their balance sheets, with most analysts trimming that total by 2-3MMT due to expected measures to slow export flows.  It is important to remember the combined supply of Ukraine and the EU-27 is around 16-17MMT larger than a year ago, supply which will make filling the short-fall in Russian trade easily met.  US wheat remains more expensive than either of the two previously mentioned origins, despite the basis weakness witnessed the past 10-days.

The most recent COT data will be released Tuesday afternoon, but a few observations from last week’s data which covered the week ended 12/16 are worth sharing.  First off, the buying by funds continues to be all short-covering, not fresh buying.  The net long position held by managed funds totaled +181,683 contracts, the largest since 5/13/14.  While building that net long position, however, the fund gross short position has dropped to the lowest level since mid-May while the gross long has held relatively steady.  In wheat, producers sold copious amounts of both HRW and SRW according to COT data with the gross commercial short position rising to -72,293 contracts of HRW, the largest since 7/1/2014.  In the case of SRW, the gross commercial short is now -199,685 contracts, the largest since February 5th, 2013.  End users on the other hand, have kept their positions stable while funds continue to cover shorts.  The point of the aforementioned is to highlight the fact commercials are selling to the funds which are simply covering existing short positions of both wheat and corn.  Sustainable bull markets can’t be fed short-covering forever.  In the FWIW category, funds have moved to a record net short position in sugar, while commercials now retain the smallest net short on record.  Sugar prices remain in a long-term downtrend, but are still above lows witnessed in mid-September which were the lowest prices since May 2010.

Just a brief note on corn end user margins with the most recent leg of the rally.  Margins ,as estimated by www.rjomrt.com, declined notably for ethanol, broilers and hogs last week, while cattle futures jumped due to the feeder/live spread.  Importantly, ethanol margins declined to $1.12/gln vs. $1.34/gln last week and $1.43/gln last year.  Broiler margins were estimated at 75.18c/lb vs. 77.27c/lb last week and 71.44c/lb last year.  Hog crush was calculated at $94.54/hd vs. $101.44/hd last week and $98.94/hd a year ago.  Cattle margins were pegged at $40.81/hd vs. -$6.51/hd last week but $132.44/hd last year.  The decline in margins by 3 of the 4 major end users of corn, with cattle still sharply negative, is cause for concern, especially when ethanol, hogs and cattle have now slipped below a year ago.  This should be a factor in basis and futures positions moving into 2015.

 

Bottom line: Despite a fair amount of news on the tape, volumes should remain depressed as we close out 2015, and prices reverting to range bound trade.  Cash basis is weak for both corn and wheat, signaling the US farmer has done a good job of moving length to the funds on the rallies, and highlighting how full the system is with grain.  The ramp up to the January 12th WASDE repors will begin shortly, and a pick up in volatility is sure to emerge as desks become more fully stocked after the New Year Holiday.

 

Good Luck Today.

 

Snow Cover 12-29 Min Temp 12-29

 

Tregg Cronin

Market Analyst

Tregg.Cronin@halocommodities.com

www.halocommodities.com

@5thWave_tcronin

 

 

COMMODITY TRADING INVOLVES RISK AND MAY NOT BE SUITABLE FOR ALL RECEIPIENTS OF THIS EMAIL. Neither the information presented, nor any opinions expressed, constitutes a solicitation for the purchase or sale of any commodities. The thoughts expressed in this email and basic data from which they are derived are believed to be reliable, but cannot be guaranteed due to uncertainty about future events and complexities surrounding commodity markets. Those acting on the information are responsible for their own actions.

 

 

 

12/18/2014 Morning Comments

Good Morning,

 

Outside Markets as of 6:05am: Dollar Index down 0.0910 at 89.0420; Euro down 0.00210 at 1.23160; Aussie Dollar is up 0.94% at 0.81350; The Russian Ruble is down 0.36% at 61.3734; S&P’s are up 21.50 at 2035.75; Dow futures are up 182.00 at 17,536.00; 10-yr futures are down 0.22%; The Nikkei closed up 2.32% at 17,210.05; The DAX is up 2.03% at 9,738.54; The Russian MICEX is up 5.93% at 1,497.62; Gold is up $13.10 at $1207.60; Copper is up $1.35 at $288.40; Crude Oil is up $1.14 at $57.61; Heating Oil is up $0.0288 at $2.0373; Paris Milling Wheat is up €6.50 at €205.25/MT.

Several key points in outside markets worth pointing out including the language from yesterday’s December FOMC meeting, which appears to be supporting equities around the globe today.  In the recently released minutes, the Committee effectively replaced the “considerable time” phrase on maintaining current rates with “patient.”  The inflation language hinted of disinflationary forces extending beyond oil, and Fed Chair Yellen said the FOMC does not plan to process with a 2004-like “measured pace” for rate increases.  Also grabbing headlines this morning is the Vladimir Putin end-of-the-year press conference in which the president of Russia stated the current economic situation could persist for up to two years.  He also stressed the central bank should have halted foreign exchange interventions to support the ruble sooner, effectively promoting capital controls.  Earlier, more decisive action this week might have made this week’s big interest rate hike unnecessary said the Russian leader.  Putin also said Russia must diversify its economy beyond oil, something he has said he was going to do many times in his 15-years of power.

Snow showers moving across the central corn belt with a more wintry-mix affecting mid-South states.  Heavy precip seen affecting the entire Atlantic coast at the tail end of next week, but the Midwest and WCB looks to be fairly dry the next 7-days.  Extended maps from NOAA continue to point towards a cooling trend in the 6-10 with precip working towards above normal for the entire Midwest.  Temperatures continue to cool throughout the 8-14 with precip maintaining above normal status, implying a blast of winter weather over Christmas looks likely.

Precip patters continue to be mostly favorable in Brazil, and especially Argentina, with the most recent 10-days percent of normal precip shown for Brazil.  Some lingering dryness still exists in far NE-Brazil, but the heart of the growing region has watched soil moisture respond and push above normal.  Forecasts have also been deemed favorable with ample moisture expected the next 10-days.

 

A choppy, firmer overnight session broke lose about 1:30am this morning with wheat rallying as much as 30c before peaking at 3:00am on confirmation Russia was actively trying to restrict exports by “using all informal instruments to restrict grain exports” according to a Reuters article issued this morning.  This felt like a classic “buy the rumor, sell the fact” in which the rallies of the past week, which have boosted wheat by 70c, would sold off on the official news Russia was constricting export flows, but the market seems more concerned with where the 3MMT shortfall in current Russian commitments might get filled from.  Russia will continue honoring existing contracts with Egypt, Turkey and Armenia, although the country’s total wheat exports are well short of the 22MMT the USDA currently has Russia slated as selling.  Interestingly enough, Paris wheat prices are actually outpacing US wheat prices both today, and on the broader move in general, a sign of where the export business might actually shift to.  Paris Milling wheat is up 3.5% today vs. Chicago up 2.24%, and Paris is trading at the highest level since May 9th with Chicago at June highs so far.  Paris is only a $9-10/MT premium to US at current.

A couple of key points worth noting on wheat technically as technicicans will be falling over themselves to point out a possible exhaustion tale given wheat is currently 14c off its overnight high.  At the overnight highs, March Chicago wheat pushed through the 61.8% retracement of the 7.76-4.80 selloff at 6.62, a level it is currently flirting with this morning.  The surge helped defer a potential bearish divergence in momentum, but a sloppy close today will put one right back on the table.  To confirm such a divergence, March wheat would have to trade back down through the 12/2 highs at $6.12, something which looks highly unlikely this week anyway.  On-Balance-Volume is trending higher, daily volume is an up-trend, but open interest is still declining, implying the majority of the buying is still short-covering, not fresh long positions being initiated.  Chicago wheat has very little for outright technical resistance until at least the $7.00 area, given the precipitous fall from the $7.75-May highs.  Trade up to the former, or even the latter, should not surprise from a purely technical standpoint.  Managed fund shorts should be close to covered, so fresh buying will have to occur at some point.

Switching back to fundamentals, CIF NOLA SRW premiums continue to hold firm, suggesting not enough physical wheat is moving within the US to cool basis.  CIF NOLA bids as reported yesterday held firm at +105/–H for Dec, +110/125H for Jan and +100/120H for Feb.  The firm basis would imply spreads have not yet inverted enough, and futures have not yet rallied enough, to bend premiums lower.  However, given the overnight moves in both, cash traders will want to remain especially watchful for SRW bid weakness.  In the overnight session, WH/WK pushed to +0.75c, while WK/WN hit +11.00c at its zenith.  At some point, commercial players will have enough incentive to move hedged length, regardless of how precious SRW quality might be this year.  Worth remembering that total SRW wheat stocks in delivery warehouses are up 14.0% y/y, but deliverable grades of SRW are down 15% while off-grade stocks are up 374% as of Tuesday.  This is contributing to the perceived tightness in the domestic SRW market, and probably why commercials up to this point haven’t moved to extinguish the basis and spread fire.  We will have to see if today’s inversions and rallies do the trick.

On the domestic front, commercial handlers suggest that spring wheat moved well on the rally yesterday, and is expected to do so again today.  Spot floor values in Minneapolis were mostly weaker yesterday with 14.0% pro down 50c to +180/200H.  To-arrive bids have been weak for the last 7-days, and aren’t expected to firm with spreads moving inside of 4.0c overnight on the MWH/MWK and MWK/MWN.  KC spreads also got off the floor and joined the party, and with such overt spread strength on all three major wheat classes, additional basis weakness should be expected as this is the very job of spreads when cash markets are either demanding stem or trying to push it away.  There is no shortage of wheat inside the United States, and basis is likely to reflect that very soon.

Worth noting, wheat doesn’t just have to move in the US to help alleviate the Russian situation.  Cash sources are reporting this morning that FOB Argentine 12.5% pro wheat traded at $255/MT and a cargo of 12.0% pro traded for $253.50/MT, compared with TX-Gulf HRW at $301.85/MT FOB and PNW-HRW at $287.15/MT.  Those prices reflecting the rally would probably be called $255-260/MT as 12.0% protein today.  Also, Australian farmers are said to be leaning into the wheat rally with additional old crop sales as well showing interest in new crop sales when/if Chicago futures allow for $300/MT Dec 2015-Jan 2016.  FOB India wheat remains saleable around $270/MT FOB+ with total supply thought around 2.5-3.0MMT, or very close to expected Russian shortfall.  Quality considerations will be high with Indian stem, but the point to all of the aforementioned is the world is not short, even if Russian exporters suddenly became so.

As mentioned earlier this week, one other consideration to monitor is wheat/corn spreads which have added 7-10c again overnight.  In the past, 270-280c/bu has blunted most all KW/C spreads, but KWH/CH is currently trading at +282.50c after hitting an overnight high of +291.75c.  July currently sits at +267.50c which the high trade since May before moderating slightly.  W/C had been no different with the +220.00c area, but has blown past that to the +249.00c area basis WH/WC.  Wheat wasn’t working into feed channels anyway, domestically, but surely will not after this rally.  Seasonally, corn tends to gain on wheat well into spring, although seasonals are only as good as the specific year one happens to be in.  Either way, wheat/corn is a negative undertow towards the wheat rally moving forward.

The focus is wheat today, so won’t detract from that, but worth noting CIF NOLA soybean premiums continued to leak lower yesterday despite the board drifting lower.  Given the cash weakness, one would surmise a slowdown in export activity is just around the corner, or possibly even on tomorrow’s sales report.  SAM farmers are rewarding a weak currency and favorable growing conditions to date with key developmental weather set to begin in FH-Jan.  Corn basis stabilized yesterday, but also worth noting the new record weekly ethanol production of 990,000bbls/day set last week.  Impressively, stocks actually declined 91,000bbls to 17.659 million barrels, thanks in part to a big bounce back in weekly gasoline demand.  Four out of the last five weeks have seen weekly gasoline demand above both last year and the 5-year range.

 

Bottom Line: Impressive overnight strength in wheat and row crops, but whether markets can hold these levels throughout the session will be key.  Watching for basis weakness in any of our markets as a sign of additional farm gate movement will also be important for determining commercial backing.  Markets got particularly excited in 2010 during the Russian export situation, but that ordeal ended as fast as it began.  Remember to reward a market which has just put a substantial run back into the farmers’ pockets.

 

Good Luck Today.

Brazil % of Normal 12-18

 

Tregg Cronin

Market Analyst

Tregg.Cronin@halocommodities.com

www.halocommodities.com

@5thWave_tcronin

 

 

COMMODITY TRADING INVOLVES RISK AND MAY NOT BE SUITABLE FOR ALL RECEIPIENTS OF THIS EMAIL. Neither the information presented, nor any opinions expressed, constitutes a solicitation for the purchase or sale of any commodities. The thoughts expressed in this email and basic data from which they are derived are believed to be reliable, but cannot be guaranteed due to uncertainty about future events and complexities surrounding commodity markets. Those acting on the information are responsible for their own actions.

 

12/17/2014 Morning Comments

Good Morning,

 

Outside Markets as of 5:20am: Dollar Index up 0.1600 at 88.2850; Euro down 0.00290 at 1.24660; Russian Ruble is up 0.43% at 68.2095; S&P’s are up 10.25 at 1981.50; Dow futures are up 75.00 at 17,145.00; 10-yr futures are down 0.13%; The Nikkei closed up 0.38% at 16,819.73; The DAX is down 0.67% at 9,500.21; The IBEX-35 is down 1.06% at 9,975.50; Gold is up $3.30 at $1197.60; Copper is down $0.60 at $285.25; Crude Oil is down $0.95 at $54.97; Heating Oil is down $0.0116 at $1.9484; Paris Milling Wheat is up €2.00 at €197.00/MT.

The fun in Russia continues as some forex brokers have suspended transactions involving the ruble as record price swings crimp liquidity.  Banks including Goldman Sachs are rejecting requests for some ruble-denominated cash-raising transactions according to the WSJ.  Bloomberg had an excellent piece overnight talking of how Russia needs to adjust to this new era of lower oil prices, instead of having the administration and Russian Central Bank cause market distortions with lending rates and forex purchases which have the potential to make the situation far worse.  In the US today we will see the November CPI which is expected to fall to +1.4% y/y from +1.7% in October.  Excluding food and energy, the measure is expected to be unchanged from October at +1.8%.  The plunge in oil prices should keep the headline number low over the next several months.

Fairly wide open Midwest this morning with the next major front moving in to the Delta the next 3-days and bringing totals up to 3.50” in LA.  The moisture should stay south of the central plains and southern Midwest.  Otherwise fairly dry until moisture starts to turn up in the 6-10 over the Northern Plains and Great Lakes region.  Temps are expected to remain normal/above during the 6-10, but the 8-14 sees a big cold front move in late in the period to bring below normal temps over the central/west corn belt and northern plains.  Moisture is expected to remain above normal throughout the 6-10 and 8-14, so some snow showers appear likely.  As the map below suggests, not much to find blatantly wrong with South American weather at the moment.  The switch to January will amplify the importance of favorable conditions.

 

After a solid performance yesterday, wheat prices are once again commanding floor leadership as the uncertainty in Russia rages on.  Row crop markets have turned much more two-sided as of late with corn refusing to trade through Monday’s highs, and soybeans trading back down into the middle of the last 2-month range.  South American growing weather is taking over as the central focus in the soybean market now that NOPA crush and the Chinese frame contract signings are behind us.  Bulls can readily point to strong demand indicators, although bears have the largest US and World carryout levels on record in their back pocket.  With sloppy cash basis for both corn and soybeans, it looks as though the farmer is readily selling to the managed funds who are buying grains for whatever reason one wants to use.  Low volume the next couple weeks can excacerbate moves in our markets.

There were several headlines yesterday for corn and beans worth getting out of the way, the first of which was Syngenta telling Reuters and Bloomberg China had approved Agrisure Vipterra (MIR-162) for import.  A US government spokesperson said they had not received official notification from China for approval of imports for this trait, yet.  Syngetna said it will make an official announcement when it receives official documentation.  It seems this is a foregone conclusion, especially when cash traders suggest up to 15 cargoes of US-DDGs have already been booked for 2015 arrival.  Thinking the approval will re-open corn exports to China is near-sighted, however, as China still has to manage through massive domestic stocks and inventory rotation.  It does mean the US could be included once again should China decide to replenish state inventories in coming years.

Yesterday also saw a Chinese trade delegation in Chicago sign “frame contracts” for 1MMT of 2015/16 soybeans, a number which was well below the 2.5-4.0MMT expected by the trade and common in recent years.  This headline was most likely disappointing to algo driven trading programs, but the important thing to remember is frame contract signings transfer no ownership risk from the US to China in either basis or futures.  Essentially, it is a good-faith signing China will continue to buy soybeans from the US.  That seems like a safe bet.  The frame contracts weren’t of consequence when they would “buy” 3-6MMT with them, so they should be of no consequence when they only “buy” 1MMT.

Cash corn and soybean markets continued to take it in the throat yesterday, despite the softer futures market and no real downdrafts in rail or barge freight.  CIF NOLA soybean bids dropped 3-8c depending on the slot from yesterday with Jan barges called +92F, and +85H for Feb.  PNW soybean shuttles were down 3c through LH-Jan with spot bids indicated at +91F.  The Brazilian Real continues to trade weakly, hitting 2.7685 to the Dollar, another new low for the move and the weakest trade since May 2005.  The weak currency has continued to promote South American farm gate selling, especially as their weather conditions look favorable.  Cash corn markets also continue to stink with PNW corn shuttles down another 3c from yesterday to +80/85H for spot, and +86H for Jan vs. +91H yesterday.  HETX values are +65H from spot through May, down 2-5c from yesterday depending on the slot.  ADM-Marshall, MN dropped bids to -41/-40/-32H for Dec/Jan/Feb vs. -38/-28/-26H the day before.  Cash corn and soybean markets are weak, and the front-month spreads are finally reflecting this.  Weaker cash and weaker spreads do not beget firmer futures.  The farmer is selling.

While still on the topic of corn basis, worth noting the margins of domestic users of corn all contracted last week as compiled by www.rjomrt.com .  Spot MN Gross Ethanol margins declined to $1.34.gln from $1.49/gln last week and $1.73/gln 2-weeks ago, compared with $1.49/gln a year ago.  Broiler crush margins declined to 77.27c/lb from 80.65c/lb last week and 72.37c/lb last year.  Hog crush saw margins slip to $94.54/hd from $101.44/hd last week and $98.94/hd last year.  Cattle crush improved marginally, but remains in negative territory at -$6.51/hd vs. -$27.67/hd last week and $123.58/hd last year.  With estimated margins contracting for all end users of corn, it isn’t likely these destinations will be inclined to improve basis in coming days which is what we’re already seeing.  Commercials and end users of corn are not the ones buying this rally; that point needs to be hammered home.

Despite the softer row crop basis, CIF NOLA SRW bids continue to remain firm at +110H for Dec, +110/125H for Jan and +105/125H for Feb despite the board rally and relative spread strength.  By session’s end, we did see some backing off in the incredible bullspread action in SRW, but most spreads remain near even money.  Toledo, OH basis was also reported at +30H yesterday, which is still well above delivery parity and will continue to promote the spread strength.  Based on just the basis, it would appear futures and spreads have not yet done enough to bend premiums, and slow this rally.  Basis should be the leading indicator this rally has lost steam, but that is not the case yet.  Spring wheat spreads remain strong, but winter wheat in KC remains weak on all fronts, and really suggests it wants nothing to do with this rally.

The main headlines from Russia yesterday included the Ag Minister claiming the only measure they were considering at the moment was using intervention purchases to slow wheat exports.  Their plan is to purchase around 3.5MMT of wheat for intervention at 40-50% above current purchase prices.  Even at that increased price of 10,100 rubles ($164/MT), the intervention price remains well below current market value.  It really isn’t any more complicated than China and Russia being two countries who understand the importance of cheap food and a civil population.  If Russia wants to slow exports and maintain adequate domestic inventories, it will do it.  The more concerning thing to this analyst is the fact borrowing costs for farmers, exporters and domestic users are going to be well over 20% in 2015, something which certainly looks unsustainable.  The likelihood of Russia being able to bring record production to the table, weather issues aside, looks incredibly diminished if the farmer is paying $1 out of every 4 or 5 to service his debt costs.

One last note on wheat, while Chicago has been outpacing Paris on the rally, Paris has been blowing away London in similar fashion.  We don’t need to rehash the amount of feed wheat in Europe this year, which had many claiming the Paris contract was more of a feed contract than a milling wheat contract.  Yet, over the last couple of weeks Paris has rallied to $24.73/MT over London on an active continuation basis (adjusted for Pounds and Euros), the highest since September.  If one looks at the spread from a front-month basis (London has very low volume on the front-end of the curve), the spread jumps to $33.0/MT, the highest since November 2011.  Just something to monitor in coming sessions.

 

Bottom Line: Firmer markets out of the gate, led by wheat, with a focus on weekly ethanol production at 9:30am.  Corn basis has been especially weak, and end user margins are implying contraction.  It will really come down to how badly funds want to own paper vs. how much more the farmer wants to sell.  Wheat could use some demand showing up to confirm the Black Sea availability concerns, otherwise it simply headline buying.

 

Good Luck Today.

SAM Weather 12-17

 

Tregg Cronin

Market Analyst

Tregg.Cronin@halocommodities.com

www.halocommodities.com

@5thWave_tcronin

 

 

COMMODITY TRADING INVOLVES RISK AND MAY NOT BE SUITABLE FOR ALL RECEIPIENTS OF THIS EMAIL. Neither the information presented, nor any opinions expressed, constitutes a solicitation for the purchase or sale of any commodities. The thoughts expressed in this email and basic data from which they are derived are believed to be reliable, but cannot be guaranteed due to uncertainty about future events and complexities surrounding commodity markets. Those acting on the information are responsible for their own actions.

 

 

12/16/2014 Morning Comments

Good Morning,

 

Outside Markets as of 5:35am: Dollar Index down 0.5300 at 87.9300; Euro up 0.00720 at 1.25160; Japanese Yen up 1.29%; Russian Ruble off 12.8% to 72.5130; S&P’s are up 2.00 at 1992.00; Dow futures are up 14.00 at 17,202.00; 10-yr futures are up 0.43%; The Nikkei closed down 2.01% at 16,755.32; The DAX is up 0.73% at 9,402.35; The IBEX-35 is down 0.25% at 9,878.90; Gold is down $7.40 at $1200.30; Copper is down $0.30 at $287.55; Crude Oil is down $1.49 at $54.42; Heating Oil is down $0.0597 at $1.9240; Paris Milling Wheat is unchanged at €190.00/MT.

It’s safe to say Russia and its central bank intervention is the main focus for financial markets around the world.  In a surprise move yesterday, the Bank of Russia decided to raise its benchmark lending rate from 10.5% to 17% to stem the Ruble’s freefall.  The day before, the Ruble crashed through 60:1 against the US Dollar before paring losses.  Despite the rate hike, the Ruble crashed through 70:1 this morning, a new record low, and 2-yr government bonds crossed 15% for the first time ever.  More and more analysts are comparing the current situation to the Russian economic crisis of 1998-1999, with many thinking Russia’s economy could contract by 4.5-4.7% next year if oil averages $60/bbl.  Russia’s central bank has opted to raise interest rates for a sixth time this year instead of defending the Ruble with forex purchases, which have drained more than $80 billion of foreign currency reserves, leaving the country with $416 billion, a 5-year low.  Inflation is the real concern with that measure jumping to 9.1% in November, the fastest pace since June 2011.  Raising borrowing costs over 20%, however, is likely to push the country into deep recession.

Some moisture moving into the Great Lakes region as the remnants of yesterday’s storm slowly dissipates.  The Midwest is expected to be mostly dry the next 7-days, although heavy precip is expected to E-TX and the Gulf Coast states including LA/MS/AL/GA with totals exceeding 2.5-3.0” likely.  This area has received its fair share of moisture over the last month, so excess moisture will need to be monitored in some of these SRW producers.  NOAA extended maps keep the same trends in place with still normal/above temps and normal/above precip for the entire Midwest, although temps cool a bit more in the 8-14 to broadly normal.  Still doesn’t seem to be anything wrong with the weather in either Argentina or Brazil, which the soybean market seems to be paying attention to this week.

 

Follow through selling pressure in the soy complex, and those losses seem to be dragging grains down too after their impressive gains yesterday.  With the FSA acreage update out of the way, December NOPA crush behind us and reduced holiday trade volume, the soy complex seems to be refocusing on the fact South American weather remains nearly ideal, and crop ideas there are growing, not declining.  Soybeans could find some support on whatever “frame contracts” get signed as part of the dog-and-pony show with the Chinese delegation taking place today in Chicago, but most traders understand by now that these contracts transfer no risk.  A little back and fill trade on corn amidst weaker basis from every corner of the US is probably warranted, but wheat seems as though it wants to maintain strength as long as Russia sits up the proverbial creek.  Regardless of whether Russia keeps exporting wheat or not, the idea of 20%+ borrowing costs for businesses and farmers during the 2015 growing season is more than enough to raise concerns about production potential.  Hard wheat contracts have yet to post the upside breakout Chicago wheat has.

Yesterday saw NOPA member-crush data published for November which was generally “disappointing” at 161.211mbu vs. the average trade guess of 165.4mbu, which would have set a new all-time crush record.  November was still up from October’s 158.0mbu, and above last year’s 160.1mbu, marking the largest November crush on record.  The more interesting data from the update was the average soybean oil yield, which came in at just 11.10lbs/bushel, down sharply from October’s 11.42lbs/bu.  The 11.10lbs/bu seen in November would be the lowest November in five years, and the 2nd lowest of the last 13-years.  Oil yield in Oct/Nov is usually a good indicator or oil yield for the marketing year, and suggests the USDA is overstating their yield by 0.10-0.15lbs/bu.  Soybean oil stocks were pegged at 1.005 billion pounds vs. 1.156 billion pounds on the average trade guess, 966 million pounds last month, and 1.486 billion pounds last year.

Worth mentioning the softening nature of board crush spreads with Jan hitting 113.8c/bu yesterday, the lowest trade since October 23rd.  The same is true for the March and May spreads, but July hit 67.0c/bu yesterday, the lowest trade since August 20th.  The great soybean shortage from the fall of 2014 finally appears to have passed, with meal getting into the domestic and export slots it needs to.  It should be noted, however, that 75-115c/bu are still attractive crush margins, with cash margins likely to be higher still.  Nothing telling crush plants to slow down, but maybe just not crush as hard.

A quick note on export inspections yesterday, wheat and corn were generally as expected to slightly disappointing while soybeans continue to run strong at 66.9mbu.  The 66.9mbu compares with the 21.1mbu needed weekly to hit the USDA’s export forecast, but would be the smallest shipments in 9-weeks.  Soybean exports of 939.4mbu already account for 53.3% of the entire marketing year forecast, 3.5 months into the year.  Sorghum exports also continue to run strong at 8.6mbu vs. the 3.5mbu needed weekly, and totals 99.3mbu shipped for the marketing-year-to-date.  Sorghum exports are now up 171.5% y/y, and account for 43% of the marketing year total.  Within wheat, did want to point out the 32,400MT of SRW lifted off the St. Lawrence Seaway and the 24,301MT of SRW lifted off the Atlantic Coast destined for Mexico.  Not sure as to the depth of that program, but it is noteworthy.

Switching back to basis, it’s safe to say corn doesn’t have any support outside of the paper buying going on in Chicago.  CIF-NOLA corn bids finally stabilized by last night with spot barges indicated at +46/48H, Jan at +50/54H and Feb at +56/61H.  Compare these with week ago numbers for spot at +58/63H, +63/67H JFM and +59/63K for AM.  PNW corn shuttles continued to sink yesterday as well with DJF pegged at +88/91/92H vs. +90/94/95H going home on Friday.  Could continue to show cash markets which are trading weaker, but suffices to say we’re weaker from one end of the country to the other.  The buying is fund driven, and can remain that way for some time.  Important to remember funds are acquiring length from the farmer, but commercials aren’t participating in the buying.  Corn spreads are finally relaxing a little, but not overt weakness or strength just yet.

Impressively, no weakness yet detected in CIF NOLA SRW premiums with those steady at +110H for Dec/Jan, despite a firmer board and nearly inverted spreads.  Grain Marketing 101 says once basis rallies, it is the job of spreads and the board to rally high enough to bend premiums lower.  So far, despite spreads and the board doing that exact thing, basis has not yet broken.  Onward and Upward it would appear.  Nothing from the technical arena hurting Chicago wheat either with a clear breakout above December 2nd highs, trading through the 200-day moving average, through the 50% retracement of the 7.35-4.66 selloff at 6.00 and no divergence in daily momentum.  Watching the buildup of fund positions will be important, but as of yet, technical traders have to like Chicago wheat.

One last note about inter-market spreads, MWH/WH and MWK/WK are now inside 15.0c/bu, which would be well under most long-term averages.  On a front-month continuous basis, that spread has its 100 and 200-day moving averages up around 55-65c/bu.  In addition, KWH/WH and KWK/WK inside 25-26c/bu compare with their long-term averages around 70-80c/bu over the last 100-200 days.  Seasonally, late-Dec usually sees hard wheat rally sharply on soft wheat well into the new year, and could be offering inter-market hedging and trading opportunities with these spreads currently sitting well under long-term averages.  SRW has the positive technicals and fundamentals at the moment, and these could continue.  Yet, keep a close eye if these spreads continue trading one-sided as one can always deliver KC against Chicago, and MPLS in KC.

 

Bottom Line:  Wheat is leading floor strength again today, as well it should given the turmoil affecting Russian markets.  While immediate impacts to exports might not be witnessed, economic calamity can affect future production.  Corn is entitled to some back and fill trade after its run-up and the weak cash throughout the US, while soybeans are slowly coming to grips with growing SAM production.  Still not to January, but no weather problems in January will likely mean a retest of fall lows sometime in Q1-2015.

 

Good Luck Today.

 

Russian Ruble 12-16

 

Tregg Cronin

Market Analyst

Tregg.Cronin@halocommodities.com

www.halocommodities.com

@5thWave_tcronin

 

 

COMMODITY TRADING INVOLVES RISK AND MAY NOT BE SUITABLE FOR ALL RECEIPIENTS OF THIS EMAIL. Neither the information presented, nor any opinions expressed, constitutes a solicitation for the purchase or sale of any commodities. The thoughts expressed in this email and basic data from which they are derived are believed to be reliable, but cannot be guaranteed due to uncertainty about future events and complexities surrounding commodity markets. Those acting on the information are responsible for their own actions.

 

12/15/2014 Morning Comments

Good Morning,

 

Outside Markets as of 6:40am: Dollar Index up 0.1360 at 88.4990; Euro down 0.00210 at 1.24380; S&P’s are up 15.25 at 2012.50; Dow futures are up 118.00 at 17,374.00; 10-yr futures are down 0.25%; The Nikkei closed down 1.57% at 17,099.40; The DAX is up 0.21% at 9,615.07; The IBEX-35 is up 0.79% at 10,224.90;  Gold is down $9.30 at $1213.20; Copper is up $0.35 at $293.75; Crude Oil is down $0.10 at 57.73; Heating Oil is up $0.0252 at $2.0452; Paris Milling Wheat is up €0.75 at €189.50/MT.

Equity markets are recovering and rallying this morning after crude oil pared gains from setting a fresh low of $56.25/bbl.  The early crude losses were tied to additional comments from OPEC about being willing to let the price of crude drop to $40/bbl if necessary to defend their market share.  The Russian Ruble weakened to below 60 vs. the US Dollar this morning, the weakest level on record.  A bevy of economic data will keep investor focus today including the Empire Manufacturing Survey (12 vs. 10.6 previous), Industrial Production (+0.70% vs. -0.10%; Capacity Utilization (79.40% vs. 78.90%) and the NAHB Housing Market Index (59 vs. 58).

A large system bringing wintery mix to the WCB and central Midwest is working its way north and east, albeit slowly, with warmer temperatures making for slick conditions.  Temperatures across the Midwest will remain above freezing with temps in IA/IL/IN/OH over 50 degrees in many places.  With the moisture falling today as rain, ground pile condition could become an issue in coming weeks, depending on future weather.  After this early week system dissolves, the majority of the precip the next 7-days will be confined to E-TX and the Delta where heavy rains are currently forecast.  Precip returns look to be turning up in the extended maps with the entire contiguous US turning to above normal precip, while temps are expected to be normal to above.  It is highly likely wheat in the southern plains is either out of dormancy or will be in coming days which will need to be monitored closely.

 

Firmer prices at the overnight open and continuing that trend this morning as wheat and corn push to new highs for the move and the highest prices in several months.  At $4.11, March corn is now trading at the highest level since July 10th, while March Chicago wheat tries to put a defiant breakout above the December 2nd highs of $6.11 ¾.  Until trading above and closing above that level, a false breakout is in place, and hard wheat contracts aren’t close to posting new highs.  Corn has a lot of supportive factors supporting the higher prices, except cash which remains the concerning aspect of the rally.  Wheat continues to be mainly driven by fears of reduced Russian wheat export flows and skyrocketing inflation tied to a weak Ruble.  At the very least, managed funds seem content owning grains vs. the rest of the commodity sector which continues to be pummeled week in and week out.

Before digging into the supportive factors, I think mentioning the cash market weakness witnessed late week in corn is pertinent.  As the board rallied, most major destinations of corn fell precipitously.  Going home Friday, CIF NOLA corn barges could be called +48H for Dec and +54H for January after trading +54H and +58H on Thursday, respectively.  In addition, the CIF bids have a 6c carry out to February.  Off the PNW, corn shuttles eased to +90/94/95H on Friday for Dec/Jan/Feb vs. +98/100/103H the week before.  Hereford, TX values saw similar declines for the same slots.  Destination ethanol plant basis was also weaker, down 2-4c at both ADM-Marshall, MN and ADM-Cedar Rapids, IA vs. the previous week.  It looks rather clear the farmer sold corn to the managed funds, but the question remains who will be there to buy when the funds stop if export interest is declining on the rally?

Spread activity has been singing a different tune than the basis, however, with most calendar spreads hitting multi-month highs.  The CH/CK hit -8.00c overnight, tying the highest level since 9/16/2014.  The CK/CN traded to -5.75c, tying the highest levels since 6/10/2014.  The CN/CU hit -2.75c on Friday, the highest trade since 7/9/2014, while the CN/CZ hit -9.75c, the highest level since 7/18/2014.  Suffices to say spreads are going with futures, but basis is singing a different tune.  Monitoring spread direction in coming days to see if they continue to trade firmer with futures or begin to weaken with basis will be key to short-term direction in the corn market.

Another supportive feature to corn and soybeans has been the ongoing FSA acreage debate.  This morning saw the most recent revisions released, and will do nothing but stoke the fire until updated acreage tables are released from NASS on the January WASDE.  This morning’s update showed corn planted acreage at 86,132,494 vs. 85,691,021 million last month, with prevent plant rising to 1,605,941 from 1,593,803 last month.  For comparison purposes, the USDA is currently using a planted acreage estimate of 90,885,000 million acres which creates a discrepancy of 4,752,506 acres.  This discrepancy is smaller than the 5,700,000 acre spread after the November FSA update, but still looks notably wider than the past several years.  The 2011-2013 spread between FSA and NASS in November was around 3.6-3.8 million acres vs. the 5.7 million this year.  More analysis is needed to see the spread differences for the December update which I will dig into this week.  Either way, it keeps the debate alive and well for a possible acreage reduction on the January WASDE.

This week could also see movement from China on the approval of US-DDGs for import, which is what price seems to be suggesting will take place.  US-DDGs prices have rallied $30-35/ton over the last 3-weeks on ideas China will approve US-DDGs containing the GMO trait MIR-162.  A lot of questions as to whether they will approve full corn exports, especially since it sounds likely Ukraine will default on some or all of the 1.1MMT it owes China.  The Chinese approval process is convoluted, complicated and opaque.  Trying to discern when and how China may approve certain traits for import isn’t likely to yield many results.  Instead, focusing on price and basis should provide the necessary transparency.

Commitments of Traders data released Friday showed sizable fund buying in corn of 30,867 contracts, pushing their net long to 171,690 contracts.  The concerning thing, however, is the fact all of this buying continues to be short covering as evidenced in the chart below.  The gross short position held by funds shrank to 132,255 contracts, the smallest since May 13th, 2014, while the gross long has remained relatively steady the last 6-weeks.  Farmers sold corn to the funds last week, with the gross short for commercials rising by 263,000,000 bushels.  End users aren’t participating in the buying with the gross long position holding around 325,000 contracts for the last 3-weeks.  Funds covered their net short position in soybeans to put them around steady, while the short-covering continued in Chicago wheat to cut their short to -26,626 contracts, the smallest position since May 27th.  The demand for paper by the funds is apparent, but the US farmer has plenty of length to sell them.

 

Bottom Line: Prices have relaxed in the last hour, well off the overnight highs.  It is looking likely two-sided trade will be the order of the day, and the firming energy markets and firm Dollar Index aren’t helping the grain story.  Some sector rotation has likely been occurring, so firmer energy prices could mean a draw of fund money from the grain room.  Keep track of cash markets as they could already be signaling a topping out of futures prices.  Time will tell.

 

Good Luck Today.

NonComm Positions 12-15

 

Tregg Cronin

Market Analyst

Tregg.Cronin@halocommodities.com

www.halocommodities.com

@5thWave_tcronin

 

 

COMMODITY TRADING INVOLVES RISK AND MAY NOT BE SUITABLE FOR ALL RECEIPIENTS OF THIS EMAIL. Neither the information presented, nor any opinions expressed, constitutes a solicitation for the purchase or sale of any commodities. The thoughts expressed in this email and basic data from which they are derived are believed to be reliable, but cannot be guaranteed due to uncertainty about future events and complexities surrounding commodity markets. Those acting on the information are responsible for their own actions.

 

 

12/12/2014 Morning Comments

Good Morning,

 

Outside Markets as of 6:40am: Dollar Index down 0.3120 at 88.3510; Euro up 0.00570 at 1.24420; Russian Ruble is off 1.90-2.1% at 57.5373; S&P’s are down 8.50 at 2022.50; Dow futures are down 87.00 at 17,487.00; 10-yr futures are up 0.31%; The Nikkei closed up 0.66% at 17,371.58; The DAX is down $1.14% at 9,750.43; The IBEX-35 is down 1.22% at 10,304.90; Gold is down $2.50 at $1223.10; Coper is up $1.45 at $293.55; Crude Oil is down $0.71 at $59.25; Heating Oil is down $0.0152 at $2.0462; Paris Milling Wheat is up €3.75/MT at €188.00/MT.

Two pretty big headlines seem to be driving outside markets this morning.  The first of which is oil cracking through $60/bbl for the first time since July 10th, 2009.  Should $58/bbl support not hold, it is rather conceivable oil could push lower down to the $50/bbl handle.  Neither the Saudi’s or US shale players seem to be giving off signs they are responding to the lower prices with significantly scaled back production, indicating both sides are prepared to go to battle over market share.  As has been mentioned previously, Russia seems to be the major producer feeling the most pain given sliding oil and a collapsing Ruble. Underlying all of this was the IEA stating crude oil demand growth will be 900,000bbls/day in 2015, 230,000 less than previously estimated to 93.3 million.  Also grabbing attention was China’s factory output sliding to 7.2% in November from 7.7% in October.

Quiet Midwest radar this morning as much of the Midwest is slated for  warmup today and into the weekend.  Temps today and tomorrow are forecast to get into the 50-60’s for a broad swath of the Midwest, with mid-40’s as far north as ND.  Given the temps with the forecasted precip, it is quite conceivable some of the HRW in parts of the central and southern Midwest could break dormancy and begin growing again.  This is a positive for establishment, provided a quick cold snap doesn’t set back in following the warm temps.  Snow cover will be non-existent by the weekend, but temps the next 15-days look to be above to much above normal, limiting any threat of winterkill.  To sum up South American weather, most commentators suggest it is nearly ideal for recently planted crops.  As we flip the calendar to January, weather watching will heat up once again.

 

Ag prices look as though they want to close the week on a positive note with wheat and corn prices leading the complex higher by 1.5-1.7%.  The board move is interesting considering the drubbing cash corn and soybean markets have witnessed the past couple of days and week.  In addition, the market also watched US-SRW miss out on the GASC business by a wide margin, followed up by mediocre weekly export sales.  Still, the SRW continues to maintain a firm basis structure, with strong spreads to back that up.  While this may be a money flow issue in corn and soybeans, wheat at least has the cash market to support firmer prices.  It isn’t likely the US farmer is going to watch $4.00 futures March-forward pass by for too long, and cash sources suggest Brazilian farmers leaned into the rally yesterday with farm gate sales of their own.  The Brazilian Real at the weakest level since 2005 contributed to this also.

Starting first with cash corn markets, basis set back throughout the day with closing bids last night indicated at +52/54H for Dec, +56/58H for Jan, +59/62H for Feb and +61/64H for March.  Compare these with +54H Dec, Jan at +58H, Feb +63H offer and Mar +61/63H from just yesterday morning.  The weaker basis throughout the day wasn’t just freight related as it had been as prompt IL-River barge freight held throughout the day near 500/510% from 475% on Tuesday evening.  Corn spreads have been on the firm side, notably CZ/CH, although weaker trade today wouldn’t surprise given the 75 deliveries posted last night.  With cash significantly discounted to gross delivery parity, these deliveries are not a surprise.  CIF NOLA bids aren’t the only ones weaker as PNW rail bids went home last night at +95/98/98 for D/J/F vs. +98/100/103H a week ago.  HEXT markets could be called steady to weaker.  Destination ethanol plant basis is also weaker w/w with Cedar Rapids at -24H vs. -20H a week ago and ADM Marshall at -34H vs. -32H a week ago.  It looks as though the US farmer has been moving corn, and cash isn’t supporting the futures move.  Caveat emptor.

Soybeans have watched a similar scenario unfold with bids weaker in both North and South America yesterday on the recovery.  Cash sources suggest FOB Paranaguan basis was down 7c on soybeans, $4 on soymeal bids.  As mentioned above, the Brazilian Real pushed to 2.66 overnight, easily the highest trade since May 2005.  Same sources also suggest Brazilian corn basis following soybeans as well, so significantly weaker currency helping to bend the entire SAM premium structure lower.  When corn and soybean premiums are arching lower on both sides of the equator, it is definitely cause for traders to reassess underlying futures movement.  Technical complexion may be positive and turning more so, but underlying physical markets holding up a yield sign needs to be taken into consideration.

Wheat markets have had their fair share of headline risk the last week beginning with the Egypt GASC tender which saw them purchase 60,000MT French and 120,000MT Russian around $263/MT C&F.  Russia offered 7 cargoes ranging from $251-262/MT FOB, so no shortage of offers.  FOB CIF NOLA SRW offers were around +182H, and nowhere close to being competitive.  On top of that, newswires reported Argentina was getting set to offer out another 1.5MMT of export licenses to commercial traders which should continue satisfying what should be larger Brazilian demands due smaller crop size.  Then later, rumors began circulating about the Russian Ag Minister talking of raising wheat intervention prices to reduce exports and replenish state inventories.  No export ban was suggested, but again, more measures to slow and complicate trade flows.  A couple of considerations: 1) until Russian offers stop leading the pack in major international tenders, one can’t assume any of this headline risk is grabbing hold.  2)  Russian flour prices are said to be at the highest level since summer 2010 on weak ruble.  These prices could be more important to keep track of than headline risk from political figures or others.  3) Until US offers began grouping with the pack a bit better in major international tenders, can’t assume US supply close to being tapped.  Wheat will continue to be an emotion-based trade, but at the end of the day, firm basis and firm spreads beget firm futures.  Wheat is the lone commodity with this setup.

One may notice there wasn’t much discussion of the December WASDE in my first comments in a week.  The reason for this is the changes the USDA made were not enough to alter the fundamental structure of any of our markets.  Importantly, next week will see the last revision of FSA planted acres prior to the January WASDE.  If the spread between NASS and FSA acres remains unusually wide as it was last month, there will be growing speculation an acreage cut is forthcoming on the Jan WASDE.  This could be supporting some of the money-flow related buying we’ve seen this week.  That update will be available Dec 15 in the early morning hours.  Stay tuned.

 

Bottom Line:  This analyst always has respect for cash and futures moving in opposite directions, especially when said futures buying is coming on the last day of the week.  Keep monitoring cash markets for clues to futures direction, but today the buy buttons are getting hit more frequently than the sell buttons.  Wheat has plenty of headline risk to take prices higher, but the lack of export business is notable.

 

Good Luck Today.

Hi Temps 12-12

Tregg Cronin

Market Analyst

Tregg.Cronin@halocommodities.com

www.halocommodities.com

@5thWave_tcronin

 

 

COMMODITY TRADING INVOLVES RISK AND MAY NOT BE SUITABLE FOR ALL RECEIPIENTS OF THIS EMAIL. Neither the information presented, nor any opinions expressed, constitutes a solicitation for the purchase or sale of any commodities. The thoughts expressed in this email and basic data from which they are derived are believed to be reliable, but cannot be guaranteed due to uncertainty about future events and complexities surrounding commodity markets. Those acting on the information are responsible for their own actions.

 

12/5/2014 Morning Comments

Good Morning,

 

Outside Markets as of 6:20am: Dollar Index up 0.20 at 88.8820; Euro down 0.00180 at 1.23500; Russian Ruble is up 1.20% to 53.7201; S&P’s are up 2.50 at 2074.50; Dow futures are up 28.00 at 17,918.00; 10-yr futures are down 0.06%; The Nikkei closed up 0.19% at 17,920.45; The DAX is up 1.27% at 9,976.58; The IBEX-35 is up 1.55% at 10,784.00; The Shanghai Composite closed up 1.32% at 2,937.65; Gold is down $4.90 at $1202.80; Copper is up $1.95 at $293.40; Crude Oil is down $0.38 at $66.45; Heating Oil is down $0.0108 at $2.1069; Paris Milling Wheat is down €0.50 at €185.75/MT.

All eyes are on the jobs report at 7:30am in which investors expect more than 200,000 jobs to be added for the 10th straight month.  This would keep the unemployment rate at 5.8%.  The second reading of euro-area GDP was released this morning as well, showing Greece as the best third quarter performer out of the 14 countries that released data with 0.7% growth.  Italy, Cyprus and Austria posted negative economic growth during the quarter.  While US equities have been strong as of late, so too has the Shanghai Composite which is trading at the highest levels since May 2011 after a particularly impressive fall.  Expectations for further economic stimulus is said to be behind the most recent surge, but it does help combat the “China is headed for a death spiral” crowd.  Crude Oil is currently up $0.25/bbl on the week which would be the second winning week in the last ten.

Pretty substantial moisture system moving across the southern plains and southern Midwest this morning, working its way north and east towards the Great Lakes and ECB.  The Midwest is going to be pretty quiet the next 7-days once this current system passes through, and then the above normal temps/below normal precip kicks in for the following 10-days.  Extended maps from NOAA show much above normal temps for the 6-10 and 8-14 centered right over the WCB and Northern Plains.  Precip will error on the below normal side, so it may give farmers in WI and MI a chance to finish the remaining corn acres.   South American growing areas remain in favorable condition with average to above average precip expected the next 7-days.  Argentina actually needs below average precip for a spell to finish planting which it looks like it will get.

 

Modestly lower Ag markets as we look to close out another week with corn down 2c week-to-date, soybeans off 8.75c and Chicago wheat up 6.0c.  Not any real market breaking information since yesterday, although notable features include weak corn basis across most all demand centers which could be implying better movement from the farm on yesterday’s rally.  US wheat continues to be uncompetitive on the global stage, but that hasn’t stopped cash and spreads from firming, and deliverable certs from being canceled.  Today’s COT report will be of great interest to see if index funds followed up last week’s big selling with a similar week this week.  There is growing evidence that index funds could be notably absent in commodities during 2015 which would remove the passive long vehicle from our space.  The December WASDE should be a sleeper, but average trade guesses are below.

Beginning first with deliveries, there were 40 re-deliveries of corn last night, 177 redeliveries of KC-HRW, 5 oats and 33 Ethanol.  Prior to the deliveries, there were another 50 SRW delivery certificates canceled in NW-OH last night, leaving just 164 certs outstanding, or 820,000 bushels.  Given where the domestic and CIF NOLA markets are trading, there shouldn’t be any SRW deliveries, and the remaining certs could be canceled and loaded out.  At current, there is less than half of one panamax registered for delivery.  The aforementioned has helped drive WZ/WH to +15.00c, and is also helping to keep WH/WK firm.  Aside from the stab high to -3.50c on 12/2, the WH/WK is trading at the highest level since May and looks as though it is going to pick up right where WZ/WH is leaving off.  -5.00c is no great shakes, but it is worth keeping an eye on in coming weeks.  All delivery locations are above delivery equivalence for Dec-Mar.    CIF NOLA SRW basis also firmed 5c for Dec/Jan/Feb last night to +110/115/115H.  First basis, then spreads, then futures….  HRW delivery certs also declined 100 in Hutchinson, leaving 576 left outstanding.

As mentioned above, corn basis was notably weak going home last night with CIF NOLA corn off 1-5c for Dec/JFM/AMJJ with those markets indicated at +60/67/60H last evening.  CPI in Chicago is off 10c from a week ago at -12H.  PNW corn shuttles for JFM were weaker and are off 2-3c to +103/105/108H with a notable cash carry.  HETX is off the same and indicated at +82/84/86H.  Barge freight had been sloppy most of the week, dragging on basis, but the moves last night look more farm gate related?  PNW bean shuttles were firmer going home last night at +126F for NDJ, up 1-3c.

A couple quick statistics on export sales from yesterday, with the latest week’s commitments, Sorghum sales now stand at 4.618MMT, up 219% y/y.  Further, the 4.618MMT accounts for 78.9% of the USDA’s entire marketing year projection of 230mbu.  In fact, we sold more sorghum than we did wheat last week, despite wheat’s marketing year sales objective being four times what sorghum’s is.  The only other commodity with than kind of sales on the books would be soybeans with commitments already on accounting for 84.6% of the marketing year estimate.  Both sorghum and soybeans should see an upward revision to these estimates on either the December or January WASDE.  The difference between the two is sorghum could be flirting with a negative carryout by year’s end while soybeans have room in the balance sheet for demand to expand further without inciting panic.

As mentioned earlier this week, index fund selling was the second largest on record last week amidst crude oil’s slaughter and big customer redemptions.  There is growing concern investors could shun commodity indices even more in 2015 given only Ags have put in back-to-back losing years since 2000.  Several negative backdrops have already surfaced in 2014 and don’t look to be going anywhere in 2015.  Those would include the crude supply glut related to the shale explosion, weak Russian economic growth and probably a recession during Q4-2014/Q1-2015, and growing global supplies of both corn and soybeans.  While intra-year returns have occurred, the Bloomberg Commodity Index is on pace for its 3rd consecutive year of negative growth.  Several global equity indices hitting multi-year or all-time highs don’t help the diversification story either.

 

Bottom Line:  Not looking for much in the Ags to close the week.  Despite the back and forth of negative and positive headlines, wheat markets still have a lot of underlying positives including deliverable supplies, cash and spreads working for it.  Soybeans aren’t ready for the death blow yet with the entire South American growing season ahead, and corn looks range bound depending on farmer movement and end user interest.

 

***I will off markets Monday-Wednesday as I travel to Chicago to present at the DTN Ag Summit Marketing University.  No commentary will be posted during that time frame, although will be responding to markets on Twitter.***

 

Good Luck Today.

WASDE Estimates 12-5

 

Tregg Cronin

Market Analyst

Tregg.Cronin@halocommodities.com

www.halocommodities.com

@5thWave_tcronin

 

 

COMMODITY TRADING INVOLVES RISK AND MAY NOT BE SUITABLE FOR ALL RECEIPIENTS OF THIS EMAIL. Neither the information presented, nor any opinions expressed, constitutes a solicitation for the purchase or sale of any commodities. The thoughts expressed in this email and basic data from which they are derived are believed to be reliable, but cannot be guaranteed due to uncertainty about future events and complexities surrounding commodity markets. Those acting on the information are responsible for their own actions.

 

12/4/2014 Morning Comments

Good Morning,

 

Outside Markets as of 6:50am: Dollar Index down 0.0370 at 88.9260; Euro up 0.00050 at 1.23160; S&P’s are up 1.75 at 2074.25; Dow futures are up 15.00 at 17,912.00; 10-yr futures are unchanged; The Nikkei closed up 0.94% at 17,887.21; The DAX is up 0.51% at 10,023.72; The IBEX-35 is down 0.02% at 10,873.20; Gold is down $6.90 at $1201.80; Copper is up $2.45 at $289.65; Crude Oil is down $0.53 at $66.85; Heating Oil is down $0.0122 at $2.1212; Paris Milling Wheat is down €2.50 at €184.50/MT.

Tepid global equities overnight as central banks opted to leave benchmark lending rates unchanged and President Putin tries to shift blame from himself to “evil speculators” for his country’s economic woes.  Unemployment claims in the US today are expected to drop 18,000, partially reversing the last three weeks’ rise of 35,000.  Unemployment claims are also 47,000 above the 14-1/2 year low of 266,000 posted in the week of October 10th.  This Friday’s employment report is expected to show a payroll increase of 230,000 after yesterday’s ADP private payroll data showed an increase of 208,000 which was slightly below expectations at 225,000.

 

As quickly as wheat seemed to rally, it appears set on giving it back.  Following two-day gains of 43c, March Chicago wheat has now fallen 26c and is on pace for its third straight losing session in a row.  Since the market got excited about potential export restrictions out of Russia, a lot has happened in the wheat markets.  In no particular order, Russia offered wheat in the recent GASC tender, even though they were not awarded the winning business.  LDC delivered 600 contracts against the KWZ, blowing the KWZ/KWH spread out to  -12.25c in the process.  The US and Australian wheat farmer leaned in hard to the rally with fresh sales as evidenced by sharply weaker Aussie basis and softer US domestic markets.  After covering the vast majority of their short position, it would appear managed funds have also filled their bellies with longs at the same time index funds are piling out of commodities due poor YTD performance.  All of the aforementioned helped cap the wheat market, and may relegate us to range bound trade moving forward.  Soybeans breached the $10.00 area, although recovered decently in the last 18-hours.  Corn looks fine as long as it defends the $3.75 area basis March futures.

In the GASC tender announced yesterday, Egypt bought 175,000MT of wheat from Romania and Ukraine for Jan 1-10 shipment.  Average price was $271.24/MT C&F.  120,000MT came from Romania at $260.17/MT FOB and 55,000MT from Ukraine at $257.50/MT FOB.  Russian wheat was offered at $264-264.57/MT FOB, which was the highest European/Black Sea offer, but was still sharply below the lone US offer at $286.55/MT.  The US wheat was 71c/bu above the winning offer, and 41c/bu above the Russian offer.  So despite firm domestic, and even export basis, US wheat continues to lose out on major international tender business.  The idea of potential Russian export restrictions caused futures to rally on ideas of improved US export business, but we’re still 40c above a country which might not be exporting February forward.

Export sales this morning were mostly a positive for row crops, although wheat continues to muddle along.  Corn sales were reported at 1.17MMT (45.98mbu), soybeans at 1.18MMT (43.35mbu), wheat at 319,200MT (11.72mbu), soymeal at 226,800MT and soybean oil at 25,100MT.  Net cancellations of 66,000MT were seen in wheat by Brazil, which should certainly be viewed as a negative.  Quality issues out of South America were another supportive block under wheat, and if that quality driven demand slows we’ve got even more wheat in the states looking for a home.

Adding to wheat’s woes this morning was our neighbor to the North coming out with their latest production estimates which seemed to heap further bearishness on the recent wheat rally.  Statistics Canada pegged all wheat output at 29.28MMT vs. the average trade guess of 27.8MMT and up from last month’s guess at 27.5MMT.  The big jump came from spring wheat which was estimated at 21.221MMT vs. last month’s 19.936MMT.  To say this was a surprise is an understatement.  Canola production also took a decent jump to 15.555MMT from 14.079MMT last month, but still well below last year’s 17.965MMT.  Oats production was up marginally to 2.907MMT from 2.685MMT last report.  One thing to remember with the larger Canadian wheat production and stocks is the quality concerns reported this year.  This may keep US basis from being squashed in the near-term, but still nothing bearish about rising production estimates by Northern Hemisphere producers this late in the game.

 

Bottom Line: 3-days after looking like it had all the ammunition to keep edging higher, wheat is grasping for supportive news.  Technicals aren’t outright bearish, but topping action is present on most contracts.  Soybeans haven’t seen a lot of follow through selling through $10.00, and looks as though a recovery might be underway.

 

Good Luck Today.

 

 

 

Tregg Cronin

Market Analyst

Tregg.Cronin@halocommodities.com

www.halocommodities.com

@5thWave_tcronin

 

 

COMMODITY TRADING INVOLVES RISK AND MAY NOT BE SUITABLE FOR ALL RECEIPIENTS OF THIS EMAIL. Neither the information presented, nor any opinions expressed, constitutes a solicitation for the purchase or sale of any commodities. The thoughts expressed in this email and basic data from which they are derived are believed to be reliable, but cannot be guaranteed due to uncertainty about future events and complexities surrounding commodity markets. Those acting on the information are responsible for their own actions.

12/2/2014 Morning Comments

Good Morning,

 

Outside Markets as of 6:50am: Dollar Index up 0.3180 at 88.2740; Euro down 0.00420 at 1.24370; Russian Ruble down 3.42% at 53.3902; S&P’s are up 5.75 at 2056.50; S&P’s are up 57.00 at 17,812.00; 10-yr futures are down 0.14%; The Nikkei closed up 0.42% at 17,663.22; The DAX is down 0.10% at 9,953.97; The IBEX-35 is up 0.42% at 10,717.70; Gold is down $23.10 at $1195.00; Copper is down $4.45 at $285.35; Crude Oil is down $1.09 at $67.91; Heating Oil is down $0.0286 at $2.1838; Paris Milling Wheat is up €3.50 at €191.75/MT.

Equities are on the slide this morning after the Russian government for the first time acknowledged that the country will fall into recession next year, battered by the combination of Western sanctions and a plunge in the price of the oil it exports.  The economic development ministry revised its GDP forecast for 2015 from growth of 1.2% to a drop of 0.8%.  The Russian Ruble seems to confirm this dire outlook, pushing to 53.3902 this morning, just off the record lows set yesterday.  The Ruble is down 40% so far this year.  According to the Associated Press, Russia has a solid balance sheet with low sovereign debt and sizable forex reserves, but the dependence on oil as a revenue stream has put it at the mercy of international market.  In the US today, November total vehicle sales are expected to edge higher to 16.55 million units from 16.35 million units in October.

Not much to report in the US this morning.  Later this week, precip will move into the southern plains and US-SE, but the majority of the Midwest is expected to remain quiet the next 7-days.  Extended maps keep this trend in place with the central Midwest and US-SE seeing normal to above precip during the 6-10, while the WCB and Northern Plains remain below normal on precip.  A warmup is seen coming during the 6-10 for the entire continuous US with above normal temps seen throughout.  Above normal precip slowly pushes west during the 8-14 with above normal temps holding.

 

While much quieter today than the way we ended yesterday, traders are still trying to get to the bottom of the wheat rally which caught almost everyone off guard.  The 25-30c gains witnessed by the close now marks $1.24 since the lows seen in September, and has March Chicago wheat trading at the highest level since early August.  The difficult thing in the wheat market is sorting out fact from fiction, and there was certainly a lot of fiction flying around yesterday.  The surging wheat market seemed to lift soybeans and corn, when they didn’t really have a lot of reason to do so.  The soft soymeal market on the close yesterday seemed to highlight this better than anything.  Nonetheless, our markets will continue to be especially sensitive to crude oil and overall investment demand for commodities.  The huge index fund selling witnessed during the last week is a major caution flag.

Helping boost the wheat market yesterday were several headlines related to Russian exports, and potential bans or restrictions cutting available supply from the Black Sea.  Prompting the concern over exports is the free fall in the Russian Ruble which has driven up the price of domestic wheat, flour and bread.  Combined with the economic unrest related to the Western sanctions, there is obviously a lot of concern from a political standpoint in Russia.  One thing is worth pointing out at the outset: Russia cannot ban exports in 2014 the way they did in 2010 as they are now a full WTO member, and would face fines for doing so.  Having said that, qualified sources suggest measures being enacted in Russia to slow or complicate Russian wheat exports range from only allowing Russian flagged vessels to execute in the Azov Sea, to implementing increased phytosanitary restrictions in an effort to maintain ‘quality,’ to requiring more documentation at each leg of the transportation system domestically.  Essentially, Russia doesn’t want to deal with rising inflation via bread and wheat prices due to a plunging Ruble, whether the fears are real or not.  By enacting all of these logistical hurdles, Russia could potentially slow the record export program they have in place.  As of last count, Russia still had 8MMT of outstanding wheat sales on the books, which could be put at risk depending on how serious political leaders are about slowing domestic prices.  As always, watching basis will yield more results than anything.

Before turning to the US, there are several other global nuggets to address.  Australia’s USDA, ABARE, released their December crop outlook last evening, cutting their 14/15 wheat crop to 23.2MMT, down 14% y/y.  The cut would compare with the USDA still at 24MMT, but is still above many private estimates in the 22.0-22.5MMT range.  Exports according to the USDA are estimated at 17.5MMT, but this has obviously been reduced by other analysts given the smaller crop size.  Australian basis has actually been weak from its very strong levels witnessed heading into harvest, thanks to an upturn in selling by both the Aussie farmer and exporter.  Wheat paid to the farmer is the highest it has been in quite some time, and Australia has also turned very competitive into SE-Asia.  Given their range of quality in this year’s harvest, Australia could be in the driver’s seat on exports this year, especially with an Aussie Dollar trading at multi-year lows.

Lastly on the world front, the news hedge fund Brevan Howard Asset Management was shutting its commodity fund also seemed to put commodity markets on edge.  The fund had around $630 million under management, and was down 4.3% on the year at the time of the writing, after being down 10.3% in September before a recovery.  The Bloomberg Commodity Index of 22 raw materials has tumbled 10% this year through November amid expanding global supplies.  While having the ability to point exactly to this fund liquidating is difficult to explain price action in any one market, the overall effect on the sector can be negative depending on positions.  This is a good segue into the Commitments of Traders Data which showed considerable selling by index funds over the last week.  As an aggregate position, selling across C,S,W,KW,MW,SM,BO,LH,LC,FC,CT,SB,KC, and CC totaled 68,123 contracts, the second largest week of combined selling going back to 1/2/2007.  While there might not be any direct correlation to the Brevan Howard news, it is a bit concerning.  The data suggests customer redemptions after crude oil fell to the lowest levels in years.  This is a negative for investment in our sector.

Elsewhere in the COT data, there was small buying by non-commercials in corn (+4229), small selling in soybeans (-1041) and small selling in Chicago wheat (-2322).  As is usually the case, the COT data is outdated and doesn’t reflect the surge in wheat and the selling in row crops witnessed Friday which could alter the aforementioned positions quite a bit more.  The net short in Chicago wheat by non-commercials totals -36,798 contracts as of 11/25, although this is likely much smaller sitting here today.  Otherwise, I do believe the index fund selling needs to be monitored to see if it is a trend or mirage.  A big upturn in index fund selling and customer redemptions isn’t something our markets want to see by long-only investment vehicles.

As mentioned yesterday, the biggest thing to undermine the wheat market could be the row crop markets which don’t have the headlines or fundamentals wheat does at the moment.  Specifically, it will be worth keeping track of the wheat/corn spreads as they ascent to multi-month highs.  WH/CH is currently sitting at +214.00c, the highest trade since August 7th, while KWH/CH is trading at +271.75c, the highest since September.  Feed demand wasn’t really a driver in the wheat market anyway, but wheat can’t afford to push away any ancillary demand.  Seasonally, wheat tends to decline vs. corn through year end and into the beginning of the year.

Only other thing of note would be the state crop progress reports released yesterday by some of the states with significant harvest left to complete.  Michigan reported corn harvest at 77% complete, up just 8% on the week, while WI was pegged at 78% complete and OH at 93%.  These aren’t market moving statistics, but need to be kept in context when we round the corner to the January WASDE reports.  Hard to believe maximum yield potential is still being achieved at this date given the weather experienced.

 

Bottom Line: A little bit of back and fill today as we consolidate yesterday’s rally.  While headlines grab attention, basis and spreads will tell the ultimate tale in regards to commercial activity.  Corn and soybeans still have a precarious head and shoulders pattern in place, while wheat charts look much better.  Keep downside technical objectives in view the next several sessions.

 

Good Luck Today.

 

Index Fund Selling 12-2

Tregg Cronin

Market Analyst

Tregg.Cronin@halocommodities.com

www.halocommodities.com

@5thWave_tcronin

 

 

COMMODITY TRADING INVOLVES RISK AND MAY NOT BE SUITABLE FOR ALL RECEIPIENTS OF THIS EMAIL. Neither the information presented, nor any opinions expressed, constitutes a solicitation for the purchase or sale of any commodities. The thoughts expressed in this email and basic data from which they are derived are believed to be reliable, but cannot be guaranteed due to uncertainty about future events and complexities surrounding commodity markets. Those acting on the information are responsible for their own actions.

12/1/2014 Morning Comments

Good Morning,

 

Outside Markets as of 6:50am: Dollar Index down 0.2570 at 88.0990; Euro is up 0.00330 at 1.24690; The Russian Ruble is off 4.41% to 52.24660; S&P’s are down 9.25 at 2057.00; Dow futures are down 60.00 at 17,752.00; 10-yr futures are up 0.27%; The Nikkei closed up 0.75% at 17,590.10; The DAX is down 0.39% at 9,941.61; Gold is down $4.50 at $1171.00; Copper is down $1.55 at $283.05; Crude Oil is down $0.04 at $66.12; Heating Oil is down $0.0026 at $2.1586; Paris Milling Wheat is up €2.75 at €187.00/MT.

The volatility continues to be found in crude and currencies with the Russian Ruble down almost 4.50% this morning to new record lows, while crude oil recovered from losses of another $2.28/bbls at the low last night.  While comments from OPEC have been focused towards American shale producers in terms of not adjusting their production quotas, currency fluctuations would suggest Russia stands to lose the most in this war of crude.  Production costs for Russian wells are far above that of Middle East producers, and even existing wells in American shale plays have break evens below current board prices.  There are major concerns the slide in oil prices could push Russia into a recession with Credit Default Swaps at the highest level since July 2009.  Economic data out of China didn’t help crude oil, with their official factory index falling to 50.3 in November, below the 50.5 expected by economists.

Some rain/snow mix moving across the southern Midwest this morning, otherwise quiet in the center north.  Precip will be confined to the central corn belt and east, with the bulk of the moisture occurring next weekend.  Nothing doing for moisture in the Northern Plains the next 7-days.  Extended maps from NOAA continue to point towards a warm up with much above normal temps slated for the mid-section of the country, with above normal temps for everywhere else.  Weekend maps put a band of moisture from TX-NY, covering much of the Midwest, but again, not much for the Northern Plains.  Doesn’t look like any additional severe cold through December 14th.

Weather table data for South America continues to point towards a very well watered Argentina as only three reporting stations are posting less than 100% of normal precip for the month of November out of 17.  The big production areas of Buenos Aires are all between 151-255% of average precip for the month of November, while Cordoba is 116-134%.  Brazil is a bit more of a mixed bag, but is improving over October.  Of the 29 reporting stations, 11 are less than 100% of normal precip for the month of November, but deficits are being erased quickly with the upturn in moisture.  Below is the percent of normal rainfall for the month of November in Brazil.

 

A mixed bag in our markets this morning following the universal weakness seen last night at the electronic open.  Soybeans and meal have recovered nicely from losses up to 14c, which was going to be important to prevent big follow through from Friday’s rout.  Corn and soybeans continue to have a large technical element, with many traders paying attention to the looming head and shoulders patterns in both commodities.  Both are following the script so far, and if the pattern verifies, it could mean beans trading down to $9.21 and corn near $3.50.  The area to be watching in regards to both patterns are the necklines at $10.00-10.03 in soybeans (SF) and corn around $3.75 (CH).  Wheat continues to show independent strength on a host of reasons including Russian production and export concerns, lack of deliveries, spread strength, covering fund shorts and positive chart action.

Wheat markets have been led by spreads the last several sessions, and that continues to be mainly the case this morning.  WZ/WH is back to trading an inversion this morning at +0.25c, up 1.50c on the day, but trading under Friday’s high print of +3.00c.  In addition, WH/WK has pushed back to -5.25c, tying the highest trade since May, and WK/WN has printed -4.00c, the highest trade since late August.  While the hard wheats aren’t as universally strong this morning, SRW continues to tighten spreads and keep domestic and export basis high.  Combine this with 100 delivery receipts being canceled last week, and zero deliveries so far in the December cycle, and there just isn’t a lot of bearish news to want to throw at this wheat market today.  After the close we will get updated COT data which will give us a clue as to how much more short-covering by funds needs to occur.

There were also several notes from Russia last week which newswires reported on to keep things firm.  The first was from SovEcon in which they cut their all-grain forecast for 2015/16 to 86MMT from 90MMT previously, mostly on the back of wheat due to poor establishment and emergence this fall.  This would compare with 104MMT in 2014, but it is important to note planted area for winter wheat was higher y/y.  In addition, several wire stories had comments about Russia possibly using a floating tariff on grain exports in 2015 if the domestic market reaches too high of a price.  This looks less likely, however, as most traders commented this would be a measure of last resort.  The International Grains Council also cut their world wheat production estimate to 717MMT, down 1MMT from last month, but still record large.

While weaker this morning, corn has been receiving some support from the idea planted acres for the 2014/15 crop are still overstated and could see a larger than normal reduction on the January WASDE.  Most traders had dismissed this notion after the October WASDE didn’t show the sort of cuts the monthly FSA updates were implying.  Yet, the spread between official FSA data and the data NASS is using in its tables remains wider than usual for late November.  Bears continue to point towards understaffed FSA offices, and priority being given to the new farm bill as to the latency of getting completed data.  Bulls stress it means additional cuts are still forthcoming.  As of the mid-November FSA data release, corn planted acreage stood at 85.2 million acres vs. the latest WASDE update of 90.9 million.  That is a difference of 5.7 million acres compared with 3.6-3.8 million during 2011-2013.  Acreage changes from October to January are usually pretty small, ranging from the largest drop of 0.4 million acres to a high increase of 0.3 million.  A larger than normal acreage change in the January WASDE could still alter the corn balance sheet, although a 2.0 million acre drop in planted acreage would cut around 350mbu off of available supply.  Expected cuts to exports would eat a large portion of that change, and feed and residual would be expected to change as well.  Nothing which is going to occur today, but something to keep on the back burner.

There were 40 deliveries of corn today, all re-deliveries, and 87 soybean oil.  The corn deliveries could be called especially light considering some of the fears of massive deliveries and where cash markets were trading a couple weeks ago.  The lack of deliveries in both corn and wheat speak to the firming tone in basis.

 

Bottom Line: Our Ag markets aren’t seeing the follow through selling pressure they were last night, although the session is young.  Two-sided trade in the soy complex wouldn’t surprise anyone given the slowly improving logistics in the East as well as the favorable weather pattern over Brazil at current.  Downside technical objectives have been outlined above, and keep them in sight.  Wheat doesn’t have very many bearish factors right now, but weak row crops and a floundering commodity sector in general won’t allow wheat to run too far.

 

Good Luck Today.

 

Brazil 123 1-1

 

Tregg Cronin

Market Analyst

Tregg.Cronin@halocommodities.com

www.halocommodities.com

@5thWave_tcronin

 

 

COMMODITY TRADING INVOLVES RISK AND MAY NOT BE SUITABLE FOR ALL RECEIPIENTS OF THIS EMAIL. Neither the information presented, nor any opinions expressed, constitutes a solicitation for the purchase or sale of any commodities. The thoughts expressed in this email and basic data from which they are derived are believed to be reliable, but cannot be guaranteed due to uncertainty about future events and complexities surrounding commodity markets. Those acting on the information are responsible for their own actions.