2/12/2015 Morning Comments

Good Morning,

 

Outside Markets as of 5:50am: Dollar Index down 0.3150 at 94.6720; Euro up 0.00340 at 1.13410; Canadian Dollar is up 0.71% at 0.79580; S&P’s are up 8.00 at 2073.75; Dow futures are up 69.00 at 17,901.00; 10-yr futures are down 0.28%; The Nikkei closed up 1.85% at 17,979.72; The DAX is up 1.61% at 10,925.69; The IBEX-35 is up 1.93% at 10,564.90; Gold is up $4.90 at $1224.50; Copper is up $4.45 at $258.55; Crude Oil is up $1.28 at $50.12; Heating Oil is up $0.0255 at $1.8396; Paris Milling Wheat is unchanged at €185.75/MT.

A ceasefire was agreed to end weeks of intense fighting in eastern Ukraine after all-night talks between leaders from Germany, France, Ukraine and Russia.  The accord was struck after 18-hours of non-stop negotiation, putting into place the ceasefire beginning February 15th.  The IMF also announced early Thursday, Ukraine will receive a $40 billion bailout package to stave off default.  This didn’t seem to help the Ukrainian Hryvnia which jumped another 2.69% today to 26.7000:1 against the US Dollar.  The Russian MICEX equity index rallied 2.47% on the ceasefire news.

The weekly EIA energy inventory report did not disappoint this week, seeing crude oil rise by another 4.87 million bbls to 417.93 million, another new record going back to 1982.  Inventories are now 15.6% above a year ago, and 16.8% above the 3-yr average.  The inventory building isn’t likely to slow anytime soon, considering the EIA showed in their latest drilling productivity report that crude oil production should rise over 66,000bbls/day during the month of March.  Crude spreads are certainly confirming the larger inventories and set back in flat price with CLH/CLJ dropping to -0.95c yesterday, the lowest on a closing basis in the contract’s history.  Would seem bottom pickers will be fighting an uphill battle for the foreseeable future, and the Congressional Budget Office sees crude oil prices falling well into 2016.  This will undoubtedly be a negative undertow for Ag prices in a general sense.

The Brazilian Real fell to a fresh 10-yr low yesterday of 2.9116, and was the lowest on a closing basis since November 2004.  Analysts are expecting zero growth for Brazil in 2015, and state-owned oil company Petrobas remains roiled in scandal.  The company was valued at $310 billion in 2008, making it the world’s fifth largest company, but now has a valuation of $48 billion thanks to recent corruption scandals.

Extended maps from NOAA last evening suggested the cold temps in the east overtaking the above normal temps in the west as a cooler bias blankets almost the entire country by the middle of next week.  Important will be how cold the temps actually get, and what the degree of snow cover is during the cold snap, especially as some of the HRW has broken dormancy with the well above normal temps from last week.  According to Commodity Weather Group, the concern area for the cold snap will encompass about 6% of the soft red wheat acreage and 9% of the hard wheat acreage, or around 7% of the national winter wheat crop.  An important piece to remember is this is February 12th, not March 12th.  Each time we go through a massive temperature swing like this, the wheat seed loses more of its winter hardiness, leaving it susceptible to full winter-kill.

 

Better markets this AM across the Ag sphere as most of our contracts appear to be trading inside triangle formations, which could be pre-empting a breakout in one direction or the other.  Based on the direction of trade before the consolidation period began, it would suggest soybeans are readying for a breakdown while corn and wheat are preparing for another leg higher.  Cash soybean trade is supporting the soy complex as the transition to SAM supplies is proving less than smooth, while weekly demand figures for corn continue to suggest strengthening demand.  The wheat market is likely gaining some traction on the looming cold snap, and combined with well-known conditions in Russia and Ukraine, is likely enough for bears to give pause.  Export sales on tap this morning with corn and wheat sales in focus to prove their updated export figures.

CIF NOLA soybean premiums have been on the move this week, trading especially firm for ETA slots (+95H) as well as for Feb and Mar (+85/80 & +72H, respectively).  There seems to be a couple of factors present supporting the firm basis; to wit, cheap ocean freight, and a delayed Brazilian soybean harvest due to slow planting last fall.  The aforementioned basis combined with applicable barge freight is putting Zone 3 cash 4.5-18.5c above gross delivery equivalence, which is rallying SH/SK to boot.  At the highs yesterday, the SH/SK rallied to -2.25c, the highest trade since June 27th.  Normally, strong premiums combined with strong calendar spreads should beget a futures rally.  This time, however, it doesn’t feel as though soybeans have an upside function to perform given the calendar constraints before Brazilian soybeans take the reins.  Also, the Brazilian Real dropping to a 10-yr low will continue to promote farmer replacement sales, even if the US farmer holds tight to his remaining supplies.  It looks as though exporters are taking advantage of freight parity to cram a few extra boats in before the door closes.  Any further delays to Brazilian shipping, and well then we can talk.

Weekly ethanol production surprised a bit with a bump in production to 961,000bbls/day, up 13,000bbls/day and above the new “needed” level of 930,000bbls/day.  Ethanol stocks rose by 149,000 bbls to 21.135 million bbls, the highest since June 2012.  Weekly gasoline demand continued to plummet, however, dropping for the 3rd straight week, and falling below the corresponding week from 2014.  Weekly gasoline demand since the beginning of the 14/15 corn marketing year has been averaging 2.3% above a year ago, while ethanol production is averaging 5.7% above a year ago.  Ethanol exports are obviously playing a role, with Sept-Dec exports up 16% y/y, but ethanol stocks since the beginning of January are up 17%.  Continued ethanol exports will be needed to prevent a glut of ethanol should gasoline demand continue to drop.

Wheat spreads continue to be a focus with front-month calendars rising to the strongest levels in weeks yesterday.  The WH/WK jumped to +2.75c yesterday, the firmest trade since April 1st, 2014, while the MWH/MWK firmed to -0.50c, the highest trade since 5/15/14.  The MWK/MWN also jumped to the highest level since 12/18.  Basis bids could be called steady/better, but nothing alarming.  CIF NOLA SRW bids firmed by 4c to +85H, getting back to where they were last week.  HRW export bids are unchanged, although the spot floor bids were up by 4-8c yesterday.  No real change to HRS or DNS bids to speak of.  I want to continue respecting the firm calendar spread trade in regards to flat price, until or unless basis breaks.  The quality trade within our wheat markets has been apparent for some time, and could be the impetus for the spread rally.  Still, the shift in ownership from the funds over to the commercial end user, without any corresponding sales from the farm gate level, keeps me from betting bearish wheat in the near-term.

Export sales estimates put wheat at 300-650TMT, corn at 600-1,100TMT, soybeans at 300-550TMT, meal at 150-300TMT and soy oil at 10-20TMT.

 

Bottom line: Our markets are consolidating into rather tight ranges which could be warning of a breakout in the coming sessions.  Corn is proving the demand it needs to, the transition to SAM supply has been uneven at best and the wheat market has to deal with another cold snap in the US.  Traders are anxious to look ahead to 15/16, and next week with the USDA Outlook Conference, they’ll get that chance.  New crop corn supplies aren’t as plentiful as many would think unless we have 90 million acres and a 166bpa+ national yield.

 

Good Luck Today.

 

CPC 6-10 2-12 CPC 8-14 2-12 Snow Cover 2-12

 

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.

 

 

 

2/11/2015 Morning Comments

Good Morning,

 

Outside Markets as of 6:30am: Dollar Index up 0.0370 at 94.7940; Euro up 0.00020 at 1.13190; Brazilian Real off 1.02% to 2.8649; S&P’s are down 2.50 at 2059.75; Dow futures are down 29.00 at 17,764.00; 10-yr futures are up 0.11%; The Nikkei closed down 0.33% at 17,652.68; The DAX is down 0.32% at 10,719.00; The IBEX-35 is down 0.84% at 10,412.20; Gold is up $2.70 at $1234.90; Copper is up $2.00 at $257.15; Crude Oil is down $0.14 at $49.88; Heating Oil is down $0.0128 at $1.8199; Paris Milling Wheat is down €1.25 at €183.75/MT.

Greece continues to make headlines as their bailout is set to expire at the end of February, causing political leaders to scramble to find a solution or spark another round of secession talk.  In the East, President Putin will travel to Minsk to negotiate a truce in Ukraine as Russia signaled a deal is likely and France said discussions are focused on the degree of autonomy for rebel-held eastern regions after 10-months of fighting.  The weekly EIA report is due later this morning and traders are looking for a +3.75 million bbl rise in crude oil inventories, a 500,000 bbl decline in gasoline inventories and a -1.5 million bbl decline in distillate inventories.  The EIA’s latest drilling productivity report suggests crude oil production will continue to rise in March, despite drilling rigs being at the lowest level since December 2011, highlighting the productivity gains as old wells come offline.

Looks as though the upturn in moisture suggested by NOAA’s extended maps will take place according to the 7-day forecasted precip map below.  Early to mid-next week will see shower and possibly snow activity increase in the southern plains up through the OH-River Valley.  The continental divide of temperature remains in place during the 6-10 and 8-14 with above normal out west and below normal temps out east.  Moisture chances will drop for the Great Lakes in the 8-14 while the southern plains should continue to see precip chances.

 

Lower overnight markets throughout the evening sessions following weaker closes in all of our markets after the February WASDE report was released.  Traders had a difficult time making up their mind in the 60-minutes following the report’s release, but lower closes were definitive by 1:15pm CST.  The report didn’t really offer any game-changing statistics as pre-report estimates suggested, but carryouts did tighten for corn and beans more than the average trader thought.  At the end of the day, however, global inventories of corn, wheat and soybeans remain plentiful if not burdensome, and this will not materially change until we get into spring planting in the Northern Hemisphere.  The data was not enough to attack our lower boundary, but recent highs might be safe until at least the February Outlook reports. Cash and spreads will once again take center stage in the tug-of-war for supply.

Starting first with corn, the USDA cut feed/residual demand by 25mbu to 5.250bbu, a surprise move to many considering the USDA updates quarterly stocks, and therefore implied feed/residual demand, next month.  Rarely do they take such a move, but their 75mbu increase in ethanol demand for corn to 5.250bbu implies more DDGs production displacing corn in feed rations.  I have an issue with this logic considering at the Gulf this week DDGs are commanding a $70-90/MT premium to whole corn as DDGs exports to China have ramped back up.  DDGs prices have been slowly closing the gap to corn over the last month, but still demand a premium for the by-product itself.  One can also bet that since feed/residual and ethanol demand for corn are equal we will hear the food vs. fuel debate ramp up slightly.  Ethanol production has been running well better than the levels needed, so an increase was certainly warranted, but whether a 75mbu increase was necessary will be apparent in the weeks to come.  Weekly ethanol production is on tap at 9:30am this morning.  Exports were left unchanged to bring ending stocks down to 1.827bbu vs. the average trade guess of 1.879bbu and 1.877bbu previously.

Where the corn balance sheet becomes interesting when plugging in 14/15 ending stocks of 1.827bby is on the 15/16 balance sheet.  Using 88 million planted acres and a trendline yield of 166bpa, production comes in around 13.433bbu for a total supply of 15.286bbu.  Assuming modest growth of 1.5% in feed/residual, unchanged ethanol demand and exports bouncing back to 1.900bbu like 13/14, carryout drops to 1.400bbu, or 10% stocks/use.  The point being, anything less than trendline yield this coming growing season could plunge us right back to a sub-10% stocks/use ratio, which would be historically tight.  Given the aforementioned, corn isn’t likely to challenge recent lows, and should try to buy back a few acres for extra cushion.  Corn has the least ending stocks margin, and will draw the most scrutiny this coming growing season.

On the world front, Ukrainian exports were raised 1.5MMT, Argentine corn production was raised 1MMT with exports raised 1.5MMT and global ending stocks were increased 0.4MMT to 189.6MMT.  Plenty of competition for US old crop corn exports in the weeks ahead.

On soybeans, ending stocks came in at 385mbu, below the 398mbu average trade guess and well below the 410mbu from last month.  Imports were increased 10mbu, crush increased 10mbu and exports raised 20mbu for a total use increase of 35mbu.  The increase to crush was a bit of a surprise considering crush is running at 1% below a year ago through December, and the USDA now expects crush to finish 3.5% above a year ago.  This as hog crush margins have plummeted to near 2-yr lows, SAM meal exports are ramping up, and soybean basis has dropped over the last 3-months.  The increase in imports was also a bit odd considering the heightened supplies this marketing year, although the combination of cheap ocean freight and weak Brazilian and Canadian currencies could steer a few more beans towards the US-SE and OH-River Valley.  Global changes saw Brazilian production cut 1.0MMT to 94.5MMT from last month but Argentina increased 1MMT to 56.0MMT.  Neither country saw exports rise from last month’s combined 54MMT.  Chinese soybean imports were left unchanged at 74MMT and global ending stocks were reduced 1.5MMT to 89.3MMT.

Peaking ahead to 15/16, it’s difficult not to paint a bearish outlook given the general consensus for increased acreage, even though this analyst doubts acreage as high as 87-88 million will occur.  Using 86 million planted acres with a 45bpa trendline yield provides a total supply of 4.220bbu, up from this year’s 4.086bbu total.  Assuming 1.5-2.0% growth in both crush and exports for next year leaves us with ending stocks of 455mbu vs. this year’s 382mbu.  Stocks/use would rise to 12.0% and be the largest since 2007.  Would should realize this is a much more conservative view of next year’s crop than many in the market are currently painting.  Several well respected analysts have soybean carryout for next year rising above 600mbu.  Plenty of weather to get through yet, but soybeans are going to be shooting behind the 8-ball until weather adversity develops.

Fairly quiet day for wheat as expected with imports cut 20mbu and exports cut 25mbu to increase ending stocks by 5mbu to 692mbu.  The cut to imports was long-overdue as Canadian exports of wheat to the US through December were down over 50% from 13/14.  We did import several cargoes of European feedwheat, but nowhere near enough to make up for the Canadian shortfall.  How the weak Loonie influences trade in 2015 will be a focus.  Difficult to argue with the cut to wheat exports given the abysmal picture to-date even if sales have improved in recent weeks.  US wheat exports of 900mbu would be the weakest since 2009/10 and the third smallest program since 1980/81.  By-class changes were a bit more interesting with HRW exports cut 20mbu, SRW cut 10mbu, durum cut 5mbu, and HRS exports up 10mbu  Global changes included Australian exports being cut 0.5MMT to 17.0MMT from last month while Argentine wheat production was increased 0.5MMT to 12.5MMT and exports rising to 6.5MMT by the same amount.  Global wheat ending stocks rose to 197.9MMT, up 1.9MMT from last month and up 10MMT from a year ago.

The weekly deliverable stocks report showed draws in SRW and HRW stocks to the tune of 1.13% and 2.75%, respectively vs. a week ago.  HRS deliverable stocks rose by another 500,000-600,000 bushels, and are a solid 7-8mbu above a year ago which should be putting more pressure on spreads, although quality considerations are present this year.  Corn basis went home with minimal changes at the Gulf yesterday, although PNW premiums continue to inch higher with a reported trade of +110H.  Bids went home last night at +107H vs. +115H offers.  Calendar spreads of all the commodities are trading firmer this AM, bucking the lower futures trend.

Ethanol at 9:30am.

 

Bottom Line: The trade got the numbers it wanted, if not a little better, but funds still seem to be in liquidation mode or interested in building larger short positions.  Keep in mind the massive shift in ownership we saw on last week’s COT data, and the likelihood this trend is still continuing.  Spreads are bucking the weaker futures trend, and I will continue to take my cues from cash and spreads.

 

Good Luck Today.

 

HPC 2-11-15

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.

 

 

 

 

2/10/2015 Morning Comments

Good Morning,

 

Outside Markets as of 6:20am: Dollar Index up 0.2020 at 94.6400; Euro down 0.00160 at 1.13250; S&P’s are up 12.75 at 2055.00; Dow futures are up 99.00 at 17,780.00; 10-yr futures are down 0.29%; The Nikkei closed down 0.33% at 17,652.68; The DAX is up 0.60% at 10,727.84; The IBEX-35 is up 0.96% at 10,464.10; Gold is down 0.43% at $1236.20; Copper is down $4.90 at $253.15; Crude Oil is down $0.47 at $52.40; Heating Oil is down $0.0097 at $1.8632; Paris Milling Wheat is down €1.25 at €186.00/MT.

Greece continues to grab financial headlines this morning s they try to gather support for a bridge gap funding plan, but Germany has been unwilling to compromise on conditions attached to Greece’s bailout.  The Ukraine/Russia conflict also remains on the front-page as President Obama mulls the decision of whether or not to arm Ukraine.  He has confirmed military aid was being considered, but France and Germany are opposed to arming the embattled nation for fear of dragging out the conflict longer.  The EIA reported in its monthly drilling productivity report yesterday that US oil production will grow in March by 66,648 million bpd, which would be the lowest growth in over a year, but still growing m/m.  The sharp drop in oil rigs has only slowed the pace of US oil production growth, but has not yet contributed to a production decline.  Technology and productivity gains are keeping oil production supported.

A wintry mix is moving across the Dakotas and S-MN this morning, which should keep grain movement slow.  The up-turn in moisture is being welcomed with open arms in the upper-Midwest where the drought monitor has expanded over the winter.  7-day forecasted precip keeps moisture heaviest over the Great Lakes.  Extended maps from NOAA keep temperature trends in place with everything west of the Plains corridor seeing above normal temps and everything east of their locked in below normal temps.  Moisture trends are improving as indicated on the maps below, but no concentrated effort in either the 6-10 or 8-14 day.

 

Slightly easier markets this morning following the decent performance yesterday.  Several of our markets are posting interesting technical formations, ranging from the flagging action on soybeans to the inverted head and shoulders pattern on corn.  The market will focus on the updated USDA Supply and Demand report at 11:00am CST this morning, even though market moving changes are expected to be limited.  Still, almost every USDA report offers the market at least one surprise, and there are several which could take place depending on how aggressive the USDA wants to be in front of the March 31 Quarterly Stocks report.  This will also be a consideration with the February Outlook Conference a week from Friday with the first glance at the 15/16 US balance sheets.  Still retaining a sideways/higher bias on corn and wheat with a sideways lower bias on soybeans.

The average trade estimate on corn ending stocks is 1,879mbu vs. 1,877mbu last month, or essentially unchanged due to rounding.  Best odds for a change on the corn balance sheet would be an increase of 10-25mbu to corn demand for ethanol from their current 5.175bbu target.  Weekly ethanol production has averaged higher than the needed level each week for the past 15-weeks in a row, strongly suggesting the USDA has been light on their demand estimate.  However, production declined notably last week, and margins have come under serious pressure with oil’s demise.  Still, ethanol production should be increased given YTD progress up 4% from the needed pace and 5.5% higher than a year ago through January.  Export sales are likely to receive a punt this week given sales have averaged good enough to hold serve but inspections continue to run a bit light.  The increased competition from Ukraine in recent weeks could also temper the USDA’s resolve for moving the export needle.  Feed/residual should be held steady ahead of the March stocks report.  Unchanged to ending stocks lower by 15-25mbu looks likely but has possibly been priced in over the last week.

Soybean ending stocks are seen at 398mbu vs. 410mbu last month as exports continue to run better than the pace needed for the current USDA estimate.  Total commitments for the marketing-year-to-date account for 94% of the USDA’s marketing year forecast, a new record for early February.  Shipments have also been strong and better than needed.  However, Brazil and Argentina have strong crops coming and discounted prices from current US replacement.  This may give the USDA pause for increasing their current 1,770mbu estimate, even though cash traders report Brazil being unwilling to sell soybeans for export until LH-Mar.  How long the US program hangs on will be the best indicator as to final soybean exports.  Crush-to-date is down around 1% from a year ago while the USDA’s estimate reflects a 2.7% increase y/y.  Meal export sales remain strong as to cash crush margins.  I see no reason to tamper with the estimate this month.  SAM production estimates will be a focus with Brazil estimated at 94.7MMT vs. 95.5MMT last month while Argentina is seen at 55.6MMT vs. 55.0MMT and private estimates as high as 57MMT last month.

Wheat ending stocks are estimated at 689mbu vs. 687mbu last month with the only changes expected to come from the export estimate.  Wheat’s export estimate has been under fire for months now, running well behind the pace needed to hit the USDA’s estimate.  Sales have picked up the last 3-4 weeks, however, although shipments continue to lag.  Total commitments are down 24% from a year ago while the USDA is only calling for a 21% decline y/y.  More concerning is the fact export shipments are down 31.0% from a year ago with only 16-weeks remaining in the year.  Export shipments haven’t hit the level needed in 16-weeks also, keeping the gap to close large. Traders are not anticipating a cut to exports based on the average trade estimate, but one is certainly a possibility.  Global changes could see Australian production cut by another 1MMT to 22MMT, while EU exports could be increased.  Global wheat stocks are still going to be above last year and more than plentiful.  Any bullish implications for the wheat market will be based on Northern Hemisphere conditions when the winter crop emerges completely from dormancy.  In the US, this is already occurring as far north as SD which is a concern.

Export inspections data yesterday was a bit disappointing for grains but strong for soybeans.  Wheat exports of 14.6mbu was below last week’s 15.3mbu and below the 20.2mbu needed to hit the USDA’s export forecast.  Corn shipments were 27.6mbu, below the 34.7mbu needed to hit the USDA’s export forecast and missing the level needed for the 16th week out of the last 17.  Cumulative exports total 616.8mbu, up 2.3% from a year ago, but some big shipments occurred in 13/14 the next 5-6 weeks.  Soybean shipments totaled 54.6mbu, blowing away the 11.5mbu needed weekly to hit the USDA’s export forecast with total shipments running 17.7% above a year ago.  The USDA’s current export estimate implies a y/y increase of 7.4%.

One more note on spreads, wheat spreads made new highs for the move in several contracts, adding credence to the strength in flat price the last week.  The WH/WK hit +0.50c yesterday, the highest trade since 12/18 with heavy volume thanks to ongoing GSCI roll.  The MWH/MWK hit -1.50c yesterday, the highest trade since May 2014 before easing overnight.  Interestingly enough, basis bids didn’t firm to any notable degree yesterday, although reported offers were up by 5-6c at the Gulf.  The increased inquiries for US wheat in the last week, along with the well discussed quality issues in the US-SRW, will keep the meager supplies of quality milling wheat at a premium.  Cash basis along the OH-River Valley is now 28-35c above gross DVE for #1-SRW in February vs. 21-29c above a week ago.  March slots are 30-37c above DVE vs. 25-32c above a week ago, so complexion is definitely firmer.

 

Bottom Line: Let’s get the USDA report out of the way so we can go back to monitoring cash and spreads.  Likely to be some headline risk, although grains don’t appear ready to give back their hard work of the last week over the February WASDE.  In the larger picture, soybean supplies in both the US and globe are plentiful, and grains are dependent upon spring/summer weather for moving outside of current ranges.  Respect the trend.

 

Good Luck Today.

 

6-10 Precip 2-10 8-14 Precip 2-10

 

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.

 

2/9/2015 Morning Comments

Good Morning,

 

Outside Markets as of 6:15am: Dollar Index down 0.0500 at 94.6440; Euro down 0.00010 at 1.13220; S&P’s are down 12.00 at 2041.00; Dow futures are down 96.00 at 17,686.00; 10-yr futures are up 0.15%; The Nikkei closed up 0.36% at 17,711.93; The DAX is down 1.72% at 10,659.70; The IBEX-35 is down 2.22% at 10,338.00; Gold is up $7.30 at $1241.90; Copper is down $0.10 at $258.45; Crude Oil is up $1.19 at $52.88; Heating Oil is up $0.0232 at $1.8623; Paris Milling Wheat is down €0.50 at €187.75/MT.

European equities are under pressure this morning as new Greek PM Tsipras showed little sign of backing down in a standoff with international creditors.  Greek 3-yr notes saw yields rise 366bp to 21.66%, the largest increase since March 2012.  Weak economic data out of China is also keeping bourses on the defensive as a data dump last night showed imports during January fell almost 20% from a year earlier while exports dropped 3.2% from a year ago.  Imports of iron ore totaled 78.57MMT, down 9.5% from December.  Imports of coal dropped 38% from December to 16.78MMT, less than half the level in January 2014.  Crude oil continues to bounce on ideas the bottom is in as drilling company Baker Hughes released updated rig counts Friday which showed 1,456 rigs drilling as of 2/6, the smallest since March 5th, 2010.  Crude oil drilling rigs totaled the smallest since December 2011.  Inventories remain record large, however, and production isn’t expected to drop noticeably until later on this spring or early summer.

Winter weather on both of the coasts, but not much happening in the Midwest to begin the week.  Precip will develop the next 24-48 hours in the Northern Plains, however, bringing a mix of rain/snow to ND/SD/MN/MT with heaviest totals around 0.50”.  Otherwise not a lot of change in NOAA extended maps with well above normal temps in the west and well below normal temps in the east.  Precip patterns keep moisture confined to MT/ND/SD/MN/IA/WI/IL/IN/OH while everything south of those states stays below normal on precip.  Most areas in the southern plains made it through January in good shape, but drought conditions continue to slowly increase in the Dakotas/MN which will need to be monitored as spring gets closer.

 

A two-sided overnight session after a firmer open last night with grains and the soy complex coming off a strong performance last week.  Whether one wants to look at technicals or fundamentals, it looks increasingly likely wheat and corn have found some intermediate term bottoms.  The shift in ownership from funds to commercials during the last week was readily apparent on COT data, farmers had no part in length transference, and major importers of both grains choked up on the bat noticeably.  Soybeans still appear to be living on borrowed time with what look to be monster crops coming out of Braz/Argy, but the nail isn’t in the coffin just yet.  The USDA will release the February WASDE on Tuesday morning, but neither the average trade guesses nor recent price action would suggest anything game-changing is laying in waiting.

Beginning with tender business, global importers of wheat made a splash last week with Taiwan, Thailand, Saudi Arabia, Japan and Egypt all buying wheat with the first four buying at least some US.  GASC bought French and Romanian, but newswires were abuzz with Egypt possibly tapping a $100 million grant to purchase US wheat, although the total would only amount to around 13-16mbu, depending on pricing.  It also seems unlikely commercials would have the confidence to sell that size of business in old crop slots given well discussed quality issues of this year’s SRW crop.  Still, the fact so many major importers stepped up to the plate speaks volumes.  Speaking of volume, trade activity also picked up at all three exchanges this past week with total volume rising to the highest since at least mid-December and in the case of KC wheat, the highest since mid-November.  Add in the decline in winter wheat conditions, although those have probably stabilized since Monday, and there was plenty of fodder for bulls to stake out “bottoms.”  $4.90 basis WH looks as though it should act as solid support, especially given the proximity to the Sept/Oct lows.

Corn business was also solid last week with weekly export sales almost doubling the needed pace at 33.3mbu, and marking the fourth straight week of hitting the target level.  Getting a lot of chatter in regards to corn business continues to be cheaper Ukrainian maize supplies, however.  Ukrainian FOB supplies are said to be offered between $172-177/MT FOB for Feb/Mar delivery vs. $177-178/MT FOB US-GX and $192.02/MT FOB PNW.  In addition, ocean freight has been flat on its back with time charter rates dropping to the lowest levels since at least 2012, offering Ukraine a $5/MT ocean freight advantage in SE-Asia.  Lastly, the Ukrainian Hryvnia dropped to 25.2500:1 against the US Dollar last week, the lowest price on record.  Combine all of the aforementioned, and Ukraine maize should continue to compete directly with US stem until SAM supplies come online in later this summer.  Granted, the precipitous pace at which the Hryvnia has fallen likely speaks to larger economic concerns, but for the time being, should keep grain flowing.

Friday’s COT data offered many interesting insights, the largest of which was found in the wheat markets.  The chart below shows the gross commercial long position in KC wheat which pushed to 59,677 contracts, the largest since 1/11/2011.  By contrast, the net short position held by fund traders rose to 18,527 contracts, the largest net short since 7/16/2013.  In SRW, the gross commercial long rose to 101,379 contracts, the largest since 2/11/2014, while the fund short rose to 54,515 contracts, the largest since 10/28/2014.  In Minneapolis, the gross comm long jumped to 33,598 contracts, the largest since 1/29/2008.  Funds hold a small net long in Minneapolis.  The point of this paragraph is to highlight the massive shift of ownership from funds over to end users as prices grabbed around fall lows.  These turning points are when owernship changes hands to this kind of degree.

In corn, the gross commercial long also jumped to 451,374 contracts, the largest since 11/19/2013 as the funds whittled their net long down to 68,064 contracts, the smallest net long since 10/21/2014.  Soybeans saw activity slow from recent weeks as funds bought back some of their net short position to leave them net short -57,329 contracts.  Commercials remain net long 20,877 contracts, which is still a rarity when looking over the last 7-8 years.

 

Bottom Line: Grains have given back some of their overnight gains, but last week’s performance should still be looked upon with optimism given the host of fundamental and technical factors contributing to the strength.  Traders may be a little cautious ahead of tomorrow’s USDA report, but market moving details should be limited.  More traders are optimistic crude has bottomed, and Dollar strength has slowed.  Ownership has changed hands for the time being, and spring insurance pricing is also underway.  Plenty of reasons to stay vigilant for better pricing opportunities.

 

Good Luck Today.

 

HRW Gross Comm Long 2-9

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.

 

 

 

2/5/2015 Morning Comments

Good Morning,

 

Outside Markets as of 6:25am: Dollar Index down 0.0750 at 93.9160; Euro is up 0.00070 at 1.14300; S&P‘s are up 14.00 at 2044.00; Dow futures are up 97.00 at 17,665.00; 10-yr futures are up 0.06%; The Nikkei closed down 0.98% at 17,504.62; The DAX is down 0.13% at 10,897.22; The IBEX-35 is down 0.64% at 10,510.10; Gold is down $3.90 at $1260.60; Copper is down $5.10 at $254.00; Crude Oil is up $.70 at $49.15; Heating Oil is up $0.0179 at $1.7845; Paris Milling Wheat is up €1.25 at €187.75/MT.

The incredible volatility in crude oil continued yesterday with spot month futures dropping $4.60/bbl by the close to erase the previous day’s $3.48/bbl gain and more.  www.sentimentrader.com published an article last night looking at the volatility in crude oil compared to other major bottoms in crude in the past.  Over the last 30-days, crude oil has witnessed three days with 3-standard deviation moves (7%).  This is well short of the major bottoms witnessed in 2008 and 1986 in which they saw 11 and 10, respectively.  Still, this sort of whipsaw activity is consistent with a larger degree bottom, although still probably premature to conclude that as the case.  Crude oil inventories in the week ended 1/30 rose by 6.33 million barrels to 413.06 million barrels, much higher than the +3.70 million barrel build estimate.  Stocks at 413.06 million barrels are another new record going back to August 1986.

The band of snow heading towards the East coast and dumping snow along the way looks to finally be dissipating over the Atlantic.  Moisture the next 3-days will be confined to the Dakotas/MN/MT and the Canadian Prairies.  Although, with the warmup on tap, uncertain as to how this moisture will fall.  The temperature dichotomy will remain in place the next 15-days with above normal temps west of the MS-River and below normal temps east of there.  Moisture will also be a mixed bag with much below normal in the US-SE, but above normal over the Great Lakes and Northern Plains.  Hard to find a forecaster who doesn’t call current weather in SAM nearly ideal so expect crop ideas there to hold or get larger.  Corn conditions in Argentina are said to be excellent.

 

In a similar fashion, although much less volatile, one could say the grain markets are exercising very choppy trading behavior which can be consistent with a near-term bottom.  All three of the major Ag commodity markets have posted reversals from the previous week, or have taken out the previous week’s highs, some of which have occurred at major Fibonacci retracement and progression levels.  More than anything, it feels as though our markets are still subject to money flow in the near-term while price tries to find the sweet spot of where the US/SAM farmer turns a palms out seller, and where the natural consumptive demand rests.  US corn has a ton of competition into Asia from Ukrainian maize, US wheat is not close to connecting on MENA business and the trade flows have slowly, but surely, shifted from the US to SAM on soybeans.  When the aforementioned happens, we turn inward.  Ethanol grind is still strong while livestock margins have slipped notably.  Domestic wheat basis remains strong, although tied more to protein and quality considerations.  Soy crush margins are strong and meal basis is above delivery equivalence.  All of the above looks like a holding pattern to this analyst.

Ethanol production in the week ended 1/30 finally saw the pullback many have been waiting for with per day production pegged at 948,000bbls/day vs. 978,000bbls/day the week previous.  This is the lowest production total since early November, but importantly, still well above the 908,000bbls/day needed to hit the USDA’s 5.175bbu corn demand for ethanol estimate.  Despite the pullback in production, stocks continued to climb, which may be the more important headline.  Stocks rose 355,000bbls to 20.986 million barrels, the highest since June 2012.  Fortunately, RBOB has moved backed to a premium over ethanol for spot month out through August.  At 6c a gallon for spot month and 28-29c a gallon through the rest of the curve, some discretionary blending might actually come back to the ethanol sector which is what the stocks situation needs badly.

StatsCan also released their stocks of principle field crops as of December 31, 2014 yesterday, coming in at or slightly above expectations.  Total wheat stocks as of 12/31 totaled 24.818MMT, down around 13.5% from 2013 but right in line with expectations of 25MMT.  Stocks of canola totaled 11.1MMT vs. the average trade estimate of 10.7MMT, but down from last year’s 12.4MMT.  Stocks at 11.1MMT would still be the second largest on record.  Nothing here to really move the needle, and I think the larger theme to focus on is the continued lack of Canadian wheat exports to the US through December.  Through Dec, exports to the US are down over 50%, despite many thinking the weak Loonie would support increased movement south.  This will have to be monitored in coming months to gauge export velocity as it relates to total US imports.

CIF NOLA SRW premiums continued to ease yesterday, but barge freight slipped faster, keeping delivery economics well above gross DVE.  The upper and lower-OH River Valley remains 18-26c above DVE for Feb, 23-30c above for Mar, 25-32c above for May and 3-10c above for July.  FOB Toledo rail bids were whispered around +30/35H and Chicago around +20/25H, both above gross DVE.  Still no reason to turn bearish WH/WK or WH/WN at current levels given aforementioned basis bids.  The index fund bearspread roll will get underway tomorrow, so be aware of drive-by weakness from index flows.  A lot of chatter yesterday about Egypt agreeing to use $100 million in US grant money to buy American wheat, with payment made in Egyptian pounds.  None of it was enough to get algos going, and obviously CIF NOLA premiums didn’t exhibit any undue influence.  Seemed to be a lot more confusion about the article than clarity, especially given suspect quality of this year’s old crop SRW.  Some posited it will be for new crop slots, others suggested US-HRW could be in the mix.  Will continue to watch headlines for any change.

Another feature worth pointing out has been the continued downward assault on hog crush margins.  Board spreads hit contract lows for the G, J, N and Q contracts yesterday, and the chart below shows front-month rolling hog crush at the lowest levels since April of 2013.  As one will notice in the chart, much better hog crush margins have been present for much of 2014, and odds are high integrated hog feeding operations took that opportunity to forward hedge.  Many think attractive margins were locked in out through June 2015.  This should minimize the impact of the reduced margin structure, but it is still important to keep in mind for forward projections.

Export sales out momentarily.  Wheat seen at 250-650TMT, corn at 700-1,150TMT, soybeans at 200-600TMT, meal at 120-300TMT and soy oil at 5-20TMT.

 

Bottom Line: Our markets seem to be settling into a tighter range, exhibiting the choppiness commonly associated with at least an intermediate term bottom.  Farm gate movement has been better this week, but by no means heavy.  Many think the US farmer is behind the 8-ball on marketing, but as of February 5th, he doesn’t seem to be any big hurry to change that situation.

 

Good Luck Today.

Hog Crush 2-5

 

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.

2/4/2015 Morning Comments

Good Morning,

 

Outside Markets as of 6:25am: Dollar Index up 0.1780 at 93.7780; Euro down 0.002870 at 1.14620; S&P’s are down 7.00 at 2035.00; Dow futures are down 34.00 at 17,538.00; 10-yr futures are unchanged; The Nikkei closed up 1.98% at 17,678.74; The DAX closed down 0.19% at 10,870.55; The IBEX-35 is down 0.33% at 10,563.40; Gold is up $6.60 at $1266.90; Copper is up $1.05 at $259.20; Crude Oil is down $1.62 at $51.42; Heating Oil is down $0.0246 at $1.8219; Paris Milling Wheat is up €1.25 at €187.75/MT.

Crude oil is once again grabbing headlines after a 7% move Tuesday to follow up its 8% move on Friday, both of which helped Brent crude move into a bull market for 2014.  Investors are hoping oil has found a floor after a 60% freefall, but based on crude oil carloadings, inventories at Cushing, OK, and the productivity from new wells replacing legacy wells, it might be premature to think supplies have peaked in the US.  Another fly in the ointment of crude oil is the fact calendar spreads haven’t rallied anywhere close to what flat price has.  Front month CLH/CLJ is trading at -0.85c this morning, up from its low print of -1.03 on 2/2, but only 0.03 up from its low close of -0.88c the same day.  Back month crude spreads have rallied even less.  Crude oil is certainly entitled to some bounce, having suffered one of the worst selloffs in recent memory, but definitively concluding crude has bottomed could prove to be risky.  The weekly EIA inventory report is expected to show a 3.0 million bbl increase in crude oil inventories.  Current oil inventories have risen 21.3 million bbls (5.5%) since the beginning of the year to a record high of 406.727 million bbls.

A band of snow moving across the central plains this morning, bringing accumulation to WU/CO/NE/IA and expected to bring snow to the Great Lakes and ECB as well.  The upper-Midwest has built back a little bit of snow cover, with most areas north of KS/MO/KY having at least some protection as of this morning.  Temps will be rising into the weekend for much of the Midwest, however, putting much of that snow cover at risk once again.  The map below shows high temps for Friday with Saturday and Sunday to see similar temps.  The ridge of high temps is cut off with the snow cover as areas around the Great Lakes with more abundant accumulation will remain colder.  Would imagine we will start to hear about wheat breaking dormancy once again in the southern plains in coming weeks.

 

Mixed markets this morning following the sharp rallies across the entire Ag complex yesterday.  The severity of the rally certainly had fund activity written all over it, especially as basis continues to muddle along which wouldn’t imply robust consumer demand.  Farm gate movement did pick up a bit yesterday, but still nothing above a “5” on the old 1-10 scale according to most cash traders.  Usually, the least complicated approach proves to be the most appropriate, and in the case of grains, funds were toting the largest shorts in beans since mid-September, the largest shorts in wheat since mid-November and the smallest net long in corn since late-October.  Add in an impressive day from crude oil as well as technical considerations, and we had the makings of an abrupt covering-type rally.  Most important will be how the natural seller, farmers, follow the rally?  It is widely expected the US farmer still owns 60% of the US corn crop, either on the farm or in Delayed Pricing programs.  Soybeans it is thought less to around 30-40%.  Combine slower than expected farmer selling in SAM, and there remains ample supply to throw at a rally.  Vigilant watching of basis and spreads here will prove wise.

Taking care of a bit of house-keeping from yesterday, Egypt’s GASC bought 300,000MT of French and Romanian wheat for Mar 1-10 shipment.  The average price of the purchase was $236.25/MT C&F.  There was no US-SRW offered in the tender, no Russian and one Ukrainian boat.  CIF NOLA SRW premiums didn’t show a lot of change yesterday, going home offered +95H for Feb/Mar against bids around +75H which could be called softer than Monday.  Corn and soybean premiums also held ground yesterday, indicating what supply was moving wasn’t making it to the river or the west coast.  Going home, CIF NOLA corn premiums were bid +58/59H for Feb/Mar and +55H for AM which could be called steady.  PNW corn shuttles went home +102/103H bids against +106H offers for Feb/Mar.  The PNW continues to look like a situation where export business was conducted when the PNW was the cheapest FOB corn supply in the world, which was also right before the board slid 40-50c/bu.  There appears to be a short, whether reseller or outright export, which is trying to cover considering the FOB spread with the Gulf now in place.  CIF NOLA soybeans went home +90H for Jan, +78/80H for Feb, steady.

Spreads did pop on the rally yesterday with the CH/CK rising to -7.50c overnight, the highest trade since 1/22.  Chicago wheat spreads were firmer, continuing their trek higher since putting in lows on 1/28.  At its zenith yesterday, the KWH/KWK hit -0.75c, the highest trade since 12/1.  MWH/MWK also joined in the party, hitting -2.00c at the highs yesterday and this morning, the highest trades since last May.  Hard wheats are certainly correcting sharply against Chicago, which appears to be warranted given the strength Chicago has been exhibiting much of the winter.  As noted in yesterday’s comments, wheat/corn spreads are by no means cheap at current levels relative to history, but considering the correction already witnessed, these inter-market spreads look ripe for profit taking.  W/C and KW/C still near the lows on a weight-adjusted basis.

Before switching away from wheat, worth noting the changes in deliverable stocks yesterday.  Minneapolis saw another nice bump in Duluth with supplies now at 20.025mbu vs. 19.544mbu last week and 16.180mbu last year.  Combined supplies in MPLS/DUL now total 25.935mbu, up  32.8% from a year ago at this time.  This makes the spread strength a little more peculiar, although protein spreads continue to suggest a shortage of premium milling wheat in the country.  SRW total wheat stocks fell 791,000 bushels last week to 58.683mbu which would compare with 48.516mbu last year at this time.  Deliverable grades fell 867,000 bushels to 38.434mbu, however, which is around 6.5mbu lower than a year ago.  Milling grade supplies continue to drop while non-deliverable grades hold to build.  HRW supplies fell 905,000 bushels on the week to 44.430mbu vs. 59.681mbu a year ago.

Domestic margins for corn end users as complied by www.rjomrt.com mostly fell last week with gross ethanol margins calculated at $0.68/gln vs. $0.73/gln last week and $0.91/gln last year.  Broiler crush was estimated at 74.93c/lb vs. 78.01c/lb last week and 72.59c/lb last year.  Hog crush fell to $70.55/hd vs. $75.30/hd last week and $128.87/hd last year.  Cattle crush remains negative at $55.96/hd vs. $60.04/hd last week and $129.91/hd last year.  Crush margins in C-IL remain positive.

Weekly ethanol production will be released at 9:30 this morning with a lot of focus on the continued decline in estimated margins.  It seems most market observers are waiting for ethanol production to decline along with margins, much the same traders are waiting for crude oil production to decline along with price.  Production last week at 978,000bbls/day was well above the 909,000bbls/day needed while stocks increased to 20.631 million barrels.

 

Bottom Line: A little back and fill for row crops after the largest rallies in weeks.  It doesn’t seem like the US farmer is engaged at these prices just yet, but how long the gains hang around could have a lot to say about that.  Monitoring weekly demand statistics along with basis and spreads should give us the clearest view of where price is headed.  South American farmers have been slow sellers as well recently, but have a mountain of grain to throw at the market in coming weeks/months.

 

Good Luck Today.

 

High Temp 2-4

 

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.

 

2/3/2015 Morning Comments

Good Morning,

 

Outside Markets as of 6:15am: Dollar Index down 0.0710 at 94.4390; Euro up 0.00060 at 1.13560; Aussie Dollar down 1.75% at 0.76490; S&P’s are up 9.00 at 2026.00; Dow futures are up 70.00 at 17,369.00; 10-yr futures are down 0.30%; THE Nikkei closed down 1.27% at 17,335.85; The DAX is up 1.20% at 10,958.05; The IBEX-35 is up 2.25% at 10,560.00; Gold is up $4.00 at $1280.90; Copper is up $8.85 at $257.85; Crude Oil is up $1.53 at $51.10; Heating Oil is up $0.0479 at $1.8054; Paris Milling Wheat is up €2.00 at €185.00/MT.

A surprise rate cut by the Reserve Bank of Australia sent stocks there to a near-seven-year high, but continued pummeling of the Aussie Dollar sent it to the lowest level since May 2009.  RBA cut its benchmark interest rate by 0.25bp to a record low 2.25% in an attempt to revive the economy which is being hit especially hard with the fall in commodity prices.  A particularly interesting article from www.sentimentrader.com took a look at correlations with the VIX “fear gauge” and found that Interest Rates and the US Dollar currently have the largest negative correlation with the index, a sign that traders deem these two markets to be more important than most others at the current time.  The interest rate:VIX correlation stands at -0.80 and the Dollar:Vix sits at -0.44, both the most extreme of the last two years.

Fairly quiet Midwest radar this morning with the exception of some snow moving across MT and ND.  There will be several rounds of precip moving across the upper-Midwest the next several days with heaviest amounts seen in MT/ND/MN to the tune of 0.50-0.70” of moisture.  Many of these areas of the upper-Midwest have entered drought status on the latest drought monitor, so some precip relief is needed.  Extended weather maps look to remain fairly steady the next 15-days with normal/above precip for the upper Plains and Great Lakes while a drier bias holds for the southern plains and US-SE.  Temps will remain normal/above in the west and normal/below in the east.  Hard to call SAM weather anything but favorable.  Harvest as of Monday in Brazil was estimated at 6% vs. 3% a week ago.

 

A bit of turnaround Tuesday action in our grain markets led by row crops which find themselves up over 1.0% heading into the 7:00 hour.  All of our markets remain in downtrends to varying degrees, and need substantial upside progress to flip trends higher.  It appears as though wheat and corn especially are searching for the level which incites consumer demand above and beyond passive buying to cover spot needs.  Despite corn being off 45c from the December highs and wheat off $1.70, managed funds still seem ready and willing to shed corn length and engage wheat shorts.  Index funds have finally ceased their sell-commodities program, but until crude oil can mount a sustained rally, we shouldn’t expect that demand to return.  February can be an especially slow month for commodity news, aside from the spring insurance pricing period.  Otherwise traders will be looking forward to the February 20th USDA Outlook Conference at which the USDA gives us their first guess about the 2015/16 balance sheet.  It does feel as though next year’s crop will be the next opportunity for our markets to really break from current ranges.

Several states released crop progress reports yesterday afternoon, and going into the reports there was a fair amount of concern given precip patterns during the month of December.  The first map below shows the percent of normal precip for the month of December in KS/OK/TX/SE-CO.  As one can see, there were notable moisture deficits in OK and the TX-panhandle.  Fast forward a month to the end of January, however, and much of that deficit appears to have been erased with favorable moisture patterns across TX throughout Jan.  CO reported winter wheat conditions at 38% G/E and 14% P/VP.  KS wheat conditions were seen at 46% G/E and 14% P/VP. OK wheat conditions were estimated at 41% G/E and 13% P/VP, while TX was seen at 42% G/E and 16% P/VP.  Spring wheat and oats planting was said to be finishing up in S-TX.

Wheat/corn spreads hit fresh contract lows yesterday for the WH/CH through WZ/CZ contracts, while KWK/CK through KWZ/CZ also hit fresh contract lows.  On a front-month continuous basis, W/C is at the lowest levels since mid-July, while KW/C is at the lowest levels since July 2013.  When looking at history, W/C typically trades in a range between 50c and 150c, with the exception of 2007/08 and 2011/12 when W/C moved outside of this band for an extended time period.  So given that band, W/C at +123.75c is still near the upper level of that band despite the $1.25 move off the highs.  However, W/C also hasn’t traded below $1.20 since July-2013 either, and seasonally W/C begins to strengthen by the end of February.  Managed fund positions could have much to do with that spreads trajectory and their willingness to extend current positions will guide the spread.

Export inspections data released yesterday morning showed wheat shipments at 14.5mbu vs. the 19.8mbu needed, corn shipments at 26.0mbu vs. 34.8mbu needed and soybean shipments at 62.4mbu vs. the 12.1mbu needed.  The biggest surprise was obviously the torrid pace soy shipments continue to run at despite the world transitioning to SAM supply in another 30-days.  Shipments now total 1.376bbu, up 18.8% from a year ago while the USDA marketing year forecast stands at 1.770bbu.  This 77.7% shipped percentage is extremely impressive and might suggest the USDA’s export forecast is still a bit too low.  Many private forecasters are carrying 1.800bbu in their balance sheets, but shipments and cancellations during February will give us a better clue than anything as to the USDA export potential this year.

Corn basis continues to work its way higher, probably a sign of slow farm gate selling more than anything.  PNW corn shuttles went home bid +102/103H, up 2-3c from a week ago and likely a reseller short trying to cover positions after the dearth of farm selling.  CIF NOLA corn barges went home bid +58/62H for Feb, +59/62H for Mar and +54/57K for AM.  Call these up 2-3c from Friday’s levels.  Columbus and Evansville 90’s seem to be grouped around option-price bids and +6/8H for offers.  Decatur, IL is bid +8H, up 4c from Friday.  Given the PNW’s lack of competitiveness with the Gulf, poor ethanol crush margins and slack livestock margins for cattle and hogs, would characterize above basis strength as lack of farm gate replacement until proven otherwise.  Regardless, keep eyes on the CH/CK at wider than -9.00c, especially as the index funds get set to roll H length to K this week.

GASC tendered for Mar 1-10 shipment overnight with results expected later this morning.  Interestingly, GASC lowered the moisture content ceiling to 13.0% with no allowances to 13.5%, which might limit French availability.  In addition, GASC specs call for max 1.25ppm vomi, something US-SRW will have a difficult time meeting.  How the tender shakes out will be interesting, especially with the almost certainty Russia and Ukraine won’t be participating.  Separately, StatsCan will release grain stocks as of Dec 31, 2014 tomorrow morning.  Average trade estimates are looking for all-wheat stocks to fall 13% to 25MMT, which would be the second largest supply at the end of the year since 1996.  Canola stocks are estimated at 10.7MMT, down 14% from the previous year.

 

Bottom Line:  Our markets are probably owed a firmer day following the bludgeoning witnessed the last several weeks.  Basis and spreads aren’t indicating our markets have run into robust consumer demand, so be wary about calling bottoms just yet.  Farm selling has slowed to a trickle, but it’s hard telling how far we are from panic induced selling.

 

Good Luck Today.

AHPS Dec 2-3

AHPS Jan 2-3

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.

 

 

1/29/2015 Morning Comments

Good Morning,

 

Outside Markets as of 6:40am: Dollar Index up 0.1700 at 94.9400; Euro down 0.00030 at 1.13110; Aussie Dollar down 1.94% at 0.77750; S&P’s are up 8.00 at 1999.25; Dow futures are up 80.00 at 17,1780.00; 10-yr futures are down 0.18%;  The Nikkei closed down 1.06% at 17,606.22; The DAX is up 0.25% at 10,738.06; The IBEX-35 is up 0.35% at 10,494.00;  Gold is down $16.30 at $1269.60; Copper is down 2.12% at $242.70; Crude Oil is up $0.09 at $44.54; Heating Oil is up $0.0039 at $1.6132; Paris Milling Wheat is down €0.50 at €187.00/MT.

The largest market mover this morning would be the Aussie Dollar which finds itself down over 2.0% as investors expect the Reserve Bank of Australia to cur borrowing costs at their February 3rd meeting.  Currently, swap traders see 66% odds RBA cuts rates, which drove the Aussie Dollar to a low of 0.77530, the lowest trade since July 2009.  The kiwi was also down sharply with the expectation New Zealand’s central bank would also cut rates in tandem with RBA.  Otherwise the focus remains solely on energies with crude oil inventories once again rising larger than expectations.  In the week ended 1/23, crude oil inventories rose 8.87 million barrels, over twice the average estimate, to 406.73 million barrels, the largest in EIA records going back to August 1982.  The Financial Times said it’s the largest crude oil inventory for this time of year in over 80-years.  However big inventories may be, it does not yet look as though the energy sector is done going down, which will in turn keep pressure on commodities as a whole.  Well-read market analyst Dennis Gartman told a crowd the US Dollar Index is in the third inning of a nine inning rally.  Take that for what it’s worth.

Wintry mix moving across the ECB and Great Lakes region this morning, but the WCB and Plains region remains quiet.  Moisture will move into TX by Sunday, with the almost the entire state receiving 0.50-1.30” in total moisture.  This system will stretch up into OK and SE-KS before making its way east to bring precip to the Delta and US-SE.  The central and western corn belt as well as the Northern Plains should be mainly dry the next week with a slight chance of precip late this weekend.  Totals should be minimal.  Dry bias for the Midwest remains in place the next 15-days, while temps slowly work towards below normal status, especially in the East.  Weather forecasters continue to see very little to complain about in South America, which likely means crop ideas there are holding to getting larger.

 

Another day, another red screen.  Grains are once again lower, following yesterday’s sizable losses and pushing many contracts one step closer to revisiting Sept/Oct lows.  Export inquiries have picked up for wheat, and one large scale importer even called for a major international tender, but until US wheat begins connecting on business, or even has firmer basis to support the idea of additional business, markets are going to struggle.  The chart below from Bloomberg illustrates wheat’s biggest problem as traders watch US export share drop to the lowest level in at least three decades.  Corn demand has actually remain strong over the last several weeks, but the variables of lower energy prices and a stronger dollar continue to undercut US grains.  Competitor exports also remain priced to move, eating into US market share when normally we are the world’s chief supplier.  It is clear managed and passive money longs aren’t excited about owning the Ag space, when volatility and opportunity remain higher elsewhere.  Without a value proposition besides “things are cheap,” commodities could continue to struggle to find paper demand.

Weekly ethanol production continues to grab attention, namely because of the relentless production rate despite margins which are generally perceived as poor.  To wit, weekly ethanol production declined 1,000bbls/day to 978,000bbls/day in the week ended 1/23, well above the 909,000bbls/day needed to hit the USDA’s corn demand for ethanol forecast.  Stocks continue to build, up 244,000bbbls to 20.631 million barrels.  The one facet the ethanol market doesn’t have timely data on is exports, although it would seem unlikely exports are keeping production strong given the Dollar index strength and the still building stocks levels.  Stocks are at the highest levels since December of 2012.  Ethanol calendar spreads have mainly remained in a downtrend with the ACG/ACH hitting -0.021 yesterday, a new contract low, before recovering above January lows.  Ethanol remains at a small premium to RBOB for February and March, but an 17-18c discount for April-July, possibly highlighting the market’s ideas of when the ethanol supply glut may ease.  As long as ethanol remains at a premium to RBOB, discretionary blending should remain almost non-existent.

Really nothing in basis or spreads to suggest the wheat market has found a bottom.  WH/WN hit -11.00c yesterday, the lowest trade since 12/1, but it should be noted cash is still well above gross delivery equivalence on the river and domestically.  This would suggest current levels might be an opportunity to move hedges forward, even as the downtrend continues.  KWH/KWN hit -6.00c yesterday, the lowest trade since 7/28/14, despite the fact deliverable supplies continue to decline.  W/w, HRW supplies declined 1.30% to 45.335mbu and are down 26.83% from a year ago.  The KWK/KWN at -5.75c would be a new contract low as is the KWH/KWN.  Wheat/corn spreads haven’t let up on the wheat pressure either with KWH15/CH15 through KWH16/CH16 hitting fresh contract lows.  CIF SRW bids were mostly unchanged at +80/81H for spot, unchanged to weaker on the week.  TX-Gulf HRW bids were steady/weaker at +130H.  Saudi Arabia tendered last night for 660,000MT of hard wheat to be shipped for April/May with a deadline on tender offers of January 30th.  US wheat would do well to grab a share of this business.

In a sign we may be nearing a bottom, wheat volume has been especially heavy this week.  Prelim Minneapolis wheat volume yesterday totaled 17,174 contracts, the largest since 2/6/14.  Chicago wheat volume totaled 134,536 contracts, the largest since 12/18.  KC wheat volume at 33,824 contracts was the largest since 12/2 and open interest is at the highest level since mid-November.  Heightened volume with a positive technical signal such as a reversal would be a positive for the wheat markets.  Worth mentioning, March Chicago wheat is nearing the 100% progression of the 6.77-5.74 selloff from 6.03 at 5.01.  Should Chicago wheat find support there, it would argue for at least a near-term correction higher given it would suggest the completion of an ABC corrective sequence, or at the very least the fourth wave correction before a resumption of the downtrend and an eventual fifth-wave lower.

Export sales were mostly favorable with corn sales totaling 1.07MMT for 14/15 and 16,000MT for 15/16 vs. estimates of 800-1,600TMT.  Soybean sales were surprisingly large at 888,200MT for 14/15 and 20,800MT for 15/16 vs. estimates of 200-600MT.  Wheat sales were also decent at 544,400MT vs. estimates of 250-650MT.  Soymeal sales were very strong at 296,500MT vs. estimates of 100-350MT while soy oil sales were a little light at 10,600MT vs. estimates of 15-30TMT.  In soybean sales, China reported increases of 548,900MT with 126,000MT switched from unknown destinations.  The total was up 41% from the 4-week average.  Total soybean commitments now total 1.656bbu, up 6% on the year and accounting for 93.5% of the USDA’s marketing year objective.  Corn sales at 42.1mbu were well above the 18.2mbu needed weekly, taking total commitments to 1.236bbu, unchanged from a year ago despite the USDA’s export forecast calling for an 8.7% decline.  Wheat sales at 20.0mbu were actually the largest in 17-weeks and could be the start of an uptick in business.  4.4mbu of the total was from the unknown category which will lead some to question if the business was Chinese.

 

Bottom Line: Weaker markets but a nice pop from soybeans on the stronger than expected export sales.  Corn and wheat need to show improved demand at these levels or risk further declines, especially as the dollar index continues to push higher.  The month of February can be the longest and slowest month of the year from a fundamental perspective, and the path of least resistance at current seems to be lower.  Market attention will drift to 15/16 as crop insurance prices get set.

 

Good Luck Today.

 

 

Wheat Sales % Global Trade 3

 

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.

 

 

 

 

 

 

1/28/2015 Morning Comments

Good Morning,

 

Outside Markets as of 6:30am: Dollar Index up 0.0690 at 94.0850; Euro down 0.00130 at 1.13670; S&P’s are up 4.75 at 2034.75; Dow futures are unchanged at 17,378.00; 10-yr futures are up 0.04%; The Nikkei closed up 0.15% at 17,795.73; The DAX is down 0.04% at 10,623.82; The MICEX is up 0.47% at 1,681.85; The IBEX-35 is down 1.22% at 10,469.40; Greek equities are down 8.16%; Gold is down $2.30 at $1289.40; Copper is up $1.45 at $247.70; Crude Oil is down $0.66 at $45.57; Heating Oil is down $0.0122 at $1.6280; Paris Milling Wheat is €2.75 at €190.50/MT.

Apparently the Greek elections from Sunday night had a delayed fuse as equity and fixed income markets in that country are being hit hard this morning on fears the anti-austerity party could derail the terms of its financial support from its European partners.  This was of course the fear all along, but apparently it took 72-hours for the news to travel to all parts of the globe.  Greek bonds maturing in 2019 issued just last year at a yield of 5% are now yielding over 13%.  American Petroleum Institute’s weekly inventory estimates showed a massive build of 12.7 million barrels of crude oil last night with Cushing, OK supplies up 2.0 million barrels.  This will keep traders watching the weekly energy inventory data from the EIA at 9:30am CT especially close.  Drilling rigs have been declining, but crude oil carloadings have not with some pointing towards June/July before a slowdown.

Wide open Midwest weather this morning, and finally nothing on the radar over the US-NE, although almost all would agree forecasters missed the mark in a rather big way with this week’s snow forecast.  A rather large band of moisture will be moving through the southern and eastern slices of the Midwest next week, bringing a widespread 0.50-1.50” from TX to PA, although how the moisture falls depend on location.  Temperatures will begin to cool back off in the 6-10 with the Midwest moving back towards below normal temps, but precip will remain below normal for areas west of the MS-River.  No immediate changes in the 8-14.  Much of the nation’s winter wheat is now exposed, so severe cold snap would not be welcome at this time.

 

Weaker prices overnight and continuing this morning as our markets can’t seem to find strength from anything at the moment.  The threat of additional Chinese soybean cancellations, Black Sea maize competitiveness, a strong US Dollar, benign SAM weather, deteriorating domestic margins and a weak energy sector seem to be what traders are focusing on at current.  Technically based traders also have nothing to get excited about with any of our markets as prices continue to leak lower by the day.  While the US Dollar Index card has been played many times since the beginning of the year, it is especially difficult to know how to quantity the strongest US Dollar since 2003 in terms of lost competitiveness with other exporting nations. The equation is not simple algebra, but its implications are real.  Demand is sufficient, but the strong currency is hurting earnings of many US companies and its effects are likely to be felt in our markets for some time.

End users of corn saw their margins stabilize in the last week, but at depressed levels as complied by www.rjomrt.com.  Ethanol margins were listed at $0.73/gln vs. $0.67/gln but down from $0.96/gln last year.  Broiler margins were seen at 78.01c/lb vs. 84.43c/lb last week but above 73.57c/lb last year.  Broiler prices fell swiftly last week.  Hog crush declined further to $75.30/hd vs. $78.41/hd last week and $97.52/hd last year.  Hog margins are now the lowest since May 2013, but it should be pointed out attractive margins were present as far out as December for many months of 2014.  If there is one group of end users who do a good job of locking in margin via hedging it is the hog industry, so margins probably aren’t as bad as implied by the board.  Cattle crush steadied at $60.04/hd vs. $57.68/hd last week and $127.22/hd last year.  C-IL cash soybean crush remains solid at $1.70/bu vs. $1.45/bu last year.

While still on corn, cash traders noted a very heavy tone to Ukrainian maize values yesterday with FOB prices reported as trading around $172/173/MT FOB.  This equates to around +52H, compared with CIF NOLA bids around +52/53H for Jan/Feb.  One must also remember the Black Sea enjoys a ~$5/MT freight advantage to Asian destinations, or around 12c/bu.  This would put landed prices at roughly +40H FOB, or well below CIF NOLA equivalent.  Season-to-date corn export shipments are pegged around 8.6MMT for Ukraine compared with the USDA’s current export forecast of 16.5MMT.  Of the 8MMT left, it is believed 3-4MMT are sold waiting to ship, leaving around 150-200mbu looking for a home at what appear to be distressed levels.  Add in US currency considerations and US stem is on the outside looking in.  Interestingly, PNW corn bids improved last night to +100/100/100H for JFM compared with +95H a week ago.  As of last week, the PNW/Gulf ocean freight spread was reported at $14.18/MT, or 36c/bu which would be +63H CIF NOLA equivalent.  Not sure the basis of the PNW strength, but the CIF NOLA weakness is apparent, and will need to be monitored against export sales in coming weeks.

CIF NOLA SRW premiums were also weaker yesterday, down 4-9c with Feb/Mar bids now indicated at +81H.  TX-Gulf premiums were also softer, reported off 5c to +130H for Feb/Mar.  KCBT spot floor premiums were firmer for 12.4-13.8% by 4c with 12.0% inverted by 6c at +96/106H.  14.0% pro MGEX was unchanged at +130/145H.  Spot floor movement has been heavier as of late with favorable weather contributing to improved rail movement.  Chicago wheat spreads have been on the defensive with the declining board and premiums aren’t helping.  The WH/WK traded down to -4.25c overnight, the lowest since 1/14.  The KWH/KWK hit -5.75c overnight, the lowest trade since mid-August.  MWH/MWK at -7.75c is the lowest trade since 1/5.  Hard to get excited about firmer wheat prices until some premium strength shows up or spreads can pick a shoulder off the mat.  Even if export inquiries for US wheat have picked up, it’s clear business isn’t being conducted.  No change in the trajectory of wheat/corn spreads.

Weekly ethanol production at 9:30am will be watched especially closely to see if the poor margin structure is finally impacting output.  Last week’s surprising increase in weekly production to 979,000bbls/day measured up in the 10-largest production weeks on record.  Stocks continue to build, however, raising the question of how large the ethanol infrastructure is and how much more can be handled if discretionary blending remains low?

 

Bottom Line: Lower markets as prices continue to search out demand.  Our markets were well-supplied before the Dollar strength, and prices seem to be suggesting lower levels are needed to ensure demand continues unabated.  Continue to watch basis and spreads for clues to bottoming action, but realize world carryouts are at record or near-record levels for all of our commodities.  The currency influence is something we haven’t had to deal with in over a decade.

 

Good Luck Today.

 

HPC 1-28

 

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.

 

 

 

1/27/2015 Morning Comments

Good Morning,

 

Outside Markets as of 6:20am: Dollar Index down 0.1200 at 94.6820; Euro up 0.00160 at 1.12880; S&P’s are down 10.50 at 2043.00; Dow futures are down 117.00 at 17,496.00; 10-yr futures are up 0.06%; The Nikkei closed up 1.72% at 17,768.30; The DAX is down 1.23% at 10,665.62; The IBEX-35 is down 1.51% at 10,534.90; Gold is up $1.80 at $1281.20; Copper is down $3.45 at $250.85; Crude Oil is up $0.02 at $45.16; Heating oil is down 0.0077 at 1.6066; Paris Milling Wheat is down €2.25 at €194.25/MT.

Not a lot of fresh headlines outside of the winter storm overtaking the US-NE, although investors are waiting for a tranche of corporate earnings to be released today including Pfizer, Procter & Gamble, Apple and Yahoo.  Worth noting from yesterday, S&P cut the Russian credit rating to “junk” status, the first time since 2004 as sanctions from the West continue to undercut the world’s largest energy exporter.  The Russian Ruble fell sharply yesterday by as much as 5-6% to near 70:1 to the US Dollar.  Borrowing costs for Russian farmers and exporters should be incredibly high as we enter the 2015/16 crop year.  European shares are weaker this morning as investors continue to debate whether the Greek situation is as negative for the euro-bloc as feared.  The Euro currency stabilized after making fresh lows for the move near 1.1102 this morning.

In the US, focus continues to be on the snowstorm dumping precip on the Northeast.  Elsewhere, the central and northern corn belt as well as the southern plains are experiencing a counter-seasonal warmup which is quickly decimating the countries snow cover.  The latest NOAA snow cover map as of this morning shows zero snow cover from TX to SD and by tomorrow, North Dakota should be almost uncovered.  SRW states like IL/IN/OH/KY received snow over the weekend, and may retain some cover as temps cool off into the weekend.  The forecasted high temp for today shows the extreme highs for January hitting TX to ND, and the next question will be if this pushes any wheat out of dormancy prematurely.  No big cold snap is seen the next 15-days in the Plains, but neither is any notable moisture.  This remains a risk for the HRW crop, but nothing to get alarmed about just yet.

 

Fairly quiet overnight trade in the Ags with most all contracts seeing both sides of unchanged inside 4-6c ranges.  Very, very little news flow related to AGs specifically overnight, highlighting the seemingly aimless chop our markets are carrying out.  The next major fundamental input will be the USDA February Outlook Conference at which time the USDA will issue their first guess as to the 2015/16 balance sheet.  The Congressional Budget Office did release their long-term baseline numbers for budgeting purposes yesterday, in the for-what-it’s-worth category.  Based on their estimates, corn ending stocks for 15/16 total 1.959bbu, soybeans at 498mbu and wheat at 749mbu.  All would be considered comfortable and non-rally warranting, but that’s why we grow and trade the crops.  Wheat is finding a bit of interest at these levels, which could start the stabilization process.

Cash traders have reported increased inquiries for US wheat in the last several days as wheat prices push to the lowest levels since last fall.  A lot of chatter, but so far not much confirmation including Egyptian private mills inquiring about SRW ex-USGX and US-East Coast.  Also, Egyptian privates were said to be asking for offers on US-HRW, especially with HRW trading much weaker than SRW and HRS, although many believe German wheat would intercept any potential hard wheat business out of the states.  In addition, trade rumors report China inquiring about US-SRW ex-St. Lawrence Seaway, although freight differentials not discussed.  Lastly, Brazilian mills were said to be asking for HRW offers, although difficult to comprehend given Brazil’s cancellation of 27,000MT of HRW on last week’s export sales report.  After that cancellation, Brazil had no outstanding wheat sales left with the US and were expected to migrate towards Argentine stem.  On a FOB basis, the US-HRW/Argy FOB wheat spread has narrowed in recent days to +$3.35/MT, although Argentina enjoys an obvious freight advantage.  Wheat futures will need more than export inquiries to stem the tide of falling prices, especially as the US Dollar Index hits the highest levels since 2003.  Still, this is the kind of business the US needs to be conducting given the poor state of current sales and the depressed price levels.

Another feature which might help the wheat market find support is the fresh lows, and contract lows in some cases, being posted in wheat/corn spreads.  WH/CH is currently sitting at +135.75c, the lowest level since January 31, 2014.  Back month WU/CU and WZ/CZ hit fresh contract lows yesterday, as did KWU/CU and KWZ/CZ.  On a front-month rolling basis, W/C is at the lowest levels since last July while KW/C is at the lowest levels since June 2013.  However, on a weight-adjusted basis, W/C is currently at 126% and KW/C is at 134%, neither of which is at risk of pushing wheat into feed rations.  Seasonally, wheat tends to stay weak against corn basis March futures through February, and through March basis May futures.  Still, the massive correction in wheat/corn spreads could be enough to stem the tide for the time being.

A quick note from Friday’s COT data, the Aggregate Index Fund net long continues to drop precipitously as those traders go looking for returns in equities, currencies and energies.  For the week ended 1/20, the aggregate index net long for C,S,W,KW,MW,BO,SM,FC,LC,LH,CC,KC,CT,SB totaled 1,235,558 contracts, the smallest net long since 6/20/2009.  Over the last three-weeks, index funds have sold over 121,000 contracts from these 14-markets.  Hard to argue with considering passive-long commodity funds have posted negative annual returns the last four years in a row.  With the strong Dollar, expectation for rising interest rates in 2015, and well supplies markets from corn to crude, the index fund is having a difficult time expressing a value statement other than “values are depressed.”

Rail corn basis does remain steady/better with corn futures trading sideways/weaker and US producer selling having ground to a halt following the January WASDE.  PNW rail premiums could now be called +98/98/100H for JFM vs. +95H a week ago.  CIF corn bids aren’t nearly as impressive which highlights where recent export business has been conducted from.  CIF NOLA corn bids went home last night +52/58H for Jan, +53/– for Feb and +57/60H for March.  These would compare with +66/71H for Jan, +66/68H for Feb and +61/63H for Mar a week ago.  Corn spreads have been notably weaker over the last week with the CH/CK at -8.25c this morning vs. a high of -7.00c last week.  CK/CN hit -7.75c yesterday after trading to a high of -6.25c last week. The Index Fund bearspread roll will begin next week Friday from March to May futures.

Lastly, worth noting Canadian export data through December as it relates to US wheat imports.  Through December, Canadian wheat exports to the US totaled 392,500MT, down 58.1% from a year ago.  The problem with imports being down that much is the USDA is calling for a 6.5% increase in wheat imports y/y to 180mbu, which would be the highest in at least 15-years.  It is important to remember the US did import several cargoes of European feed wheat early last fall, but the total was thought to be less than 5, or ~11mbu.  Even if the eventual total was 5 panamaxes, this would still leave US imports woefully short of the pace needed for 180mbu on the marketing year.  With the continued strength in the US Dollar, and corresponding weakness in the Loonie, wheat imports could still kick in Q3-Q4, but it is something to take note of as wheat prices continue weaker.

 

Bottom Line: Doesn’t look like a lot of feature in today’s trade, although outside markets are showing quite a bit of weakness with equities off over 1.0% and the US Dollar Index down 0.30%.  Still monitoring basis levels and spreads in regards to weekly demand of our grains, especially as it pertains to the shift in soybean demand from NAM to SAM.  Wheat needs to show stabilization and recovery here, namely HRW, to prevent accelerating losses.  Otherwise, range-bound trade could be the order of the day until we get closer to spring.

 

Good Luck Today.

 

Snow Cover 1-27 High Temp 1-27

 

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.