5/13/2014 Morning Comments

Good Morning,

 

Outside Markets as of 6:00am: Dollar Index up 0.1750 at 80.0760; Euro is down 0.00460 at 1.37080; S&P’s are up 3.00 at 1895.50; Dow futures are up 27.00 at 16,682.00; 10-yr futures are up 0.04%; The Nikkei closed up 1.95% at 14,425.44; The DAX is up 0.66% at 9,766.79; The IBEX-35 is up 0.17% at 10,585.20; The Russian MICEX is up 1.35% at 1,393.83; Gold is down $3.50 at $1292.30; Copper is down $0.95 at $314.00; Crude Oil is up $0.70 at $101.29; Heating Oil is up $0.0153 at $2.9338; Paris Milling Wheat is unchanged at €204.25.

Asian and European equities are firmer this morning after the DJIA hit new, all-time record highs yesterday. Economic data out last night from China included April Industrial Output which was up 8.7% y/y vs expectations for a gain of 8.9%, while Jan-April Hosing sales were down 9.9% on the year.  In the US today we will see April retail sales which are expected to be up 0.4% m/m, adding to the increases of 0.8% and 1.2% in February and March, respectively.  Russian energy company OAO Gazprom is now giving Ukraine until June 2 to pay for June supplies or Ukrainian gas supplies will be turned off.  Ukraine already owes Gazprom $3.5 billion for fuel delivered since 2013.  If Russia shuts of natural gas shipments to Ukraine, then about 15% of Europe’s gas will be shut off because of its travel through Ukraine.  The Dollar Index is hitting 80.1050 this morning, the highest level since April 8A band of showers extending from E-TX to S-WI is making its way East this morning, but after this system exits the eastern corn belt tomorrow, a fairly open week of weather will be seen across the Midwest.  This should be the best opportunity for the lagging west and northern plains to catch up in terms of planting progress.  The next system for the WCB and Northern Plains isn’t seen until Sunday/Monday, although temperatures this week are still expected to remain unseasonably cool.  6-10 and 8-14 day maps from NOAA suggest a slowly warming trend with temperatures moving from below normal to normal and above normal in the south, while precip will be below normal for much of the central and southern Midwest.  The Northern Plains will remain the one areas which continues to see above normal precip in this 6-15 day time frame.  FSU dryness remains on the world radar.

 

Turnaround Tuesday for most of the Ag markets with firmer prices in the early going, despite a price bearish crop progress report.  The crop progress report out yesterday afternoon didn’t disappoint with corn planting progress jumping nationally from 29% to 59% thanks to huge progress in NE/IA/IL/IN/OH.  The largest weekly change was in IA where farmers planted 47% of their intended corn acres last week.  As was expected, MN/ND/WI/MI remain the notable laggards with ND at just 3% planted vs 33% average and MN at 31% vs 62% average.  SD made decent progress in the southern half of the state with 52% planted statewide vs 25% last week and 43% average.  There is still around 35 million acres of corn left to plant.  Soybean planting progress advanced 15% last week to 20% complete vs 21% average.  ND hasn’t made any progress vs 10% average, and MN is 4% planted vs 23% average.  Spring Wheat planting progress was estimated at 34% planted vs 26% last week, 40% last year and 53% on average.  ND remains the only state with serious delays as they have 11% of the crop planted vs 5% last week and 39% on average.  Solid progress should be able to be made later this week.

The winter wheat portion of the crop progress report was also a feature as nationwide conditions slipped another 2% to 31% G/E vs 32% last year.  NE saw its G/E rating slip 10 points to 46% G/E, while OK and KS saw their P/VP rating jump 8 and 10pts, respectively.  Overall winter wheat crop conditions are now below last year and the second lowest of the last 18-years behind 2011.  Oats, Barley and Sorghum planting all made solid gains last week and are now basically caught back up to averages.

Were some interesting observations in Friday’s Commitments of Traders Data worth sharing including the small spec in corn moving to the largest net short position since August 17th, 2010.  The small spec is short -159,481 contracts while the large spec is net long 207,035 contracts, the largest net long since October 23rd, 2012.  Interesting to have the two moving in such opposite directions, and definitely a case of “smart money vs dumb money,” but the question right now is which one is smart and which one is dumb?  In soybeans, large specs sold 35,336 contracts last week, the 6th largest week of net selling on record.  Here too, small specs are now short -56,859 contracts, the largest net short since June 8th, 2010.  Between the buying yesterday and last night, it would appear funds are clawing back some of that position.  In wheat, the one point worth noting is the continued selling by the gross commercial long in Chicago as that group is now down to a gross long of 56,616 contracts, the smallest long since 9/6/2011.  This is significant as the commercial gross long is the entity which actually uses the wheat and they have yet to participate in this rally which isn’t a check mark on the side of the bulls.  In Minneapolis wheat, managed money has moved to a net long of 12,233 contracts, the largest net long since 11/22/11.  Last week alone, their net position jumped 19.7%, thanks to the planting delays in North Dakota.  So far, the fund position looks well placed.

CIF corn bids were firmer by 1-3c Monday while PNW rail bids were largely steady.  CK/CN continues to firm, moving to -2.00c overnight and following the stronger CIF basis.  Keep an eye on the KW/MW spreads after they hit lows of -40.00c last week.  After receiving the production numbers from the USDA it did, there is a chance we’ve seen the lowest HRW numbers of the season already, and spring wheat planting continues to be labored.  That spread can move quickly if given a reason.

Export inspections released yesterday morning continue to support the recent export forecasts released by the USDA Friday.

 

Bottom Line: A little bounce in price today after yesterday’s drubbing in the grains.  The US farmer showed once again how fast he can plant a crop, and why delays up to this point weren’t a reason to get runaway bullish.  Moisture deficits have been cut in the central belt, and the western belt has a fairly open week to get caught up.  Without further weather impetus, the managed fund long in corn might become a bit restless.  Plenty of spring wheat left to plant, and soybeans too.  We need to keep feeding the bull past Friday’s data and so far this week, weather isn’t on his side.

 

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 POST. 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.

5/12/2014 Morning Comments

Good Morning,

 

Outside Markets as of 6:15am: Dollar Index down 0.0530 at 79.8500; Euro up 0.00130 at 1.37580; S&P’s are up 7.25 at 1880.75; Dow futures are up 57.00 at 16,582.00; 10-yr futures are down 0.10%; The Nikkei closed down 0.35% at 14,149.52; The DAX Is up 0.93% at 9,670.87; The IBEX-35 is up 0.54% at 10,543.60; The Russian MICEX is down 0.03% at 1,370.96; Gold is up $7.60 at $1295.20; Copper is up $6.60 at $314.90; Crude Oil is up $0.44 at $100.44; Heating Oil is up $0.0237 at $2.9305; Paris Milling Wheat is down €2.75 at €204.50/MT.

Global equities are mostly firmer to start the week despite renewed tension in Ukraine after Pro-Russian forces in eastern Ukraine declared victory in a disputed referendum Sunday.  The referendum vote for independence was conducted amidst chaotic and sometimes violent conditions, rendering its outcome next to useless, but these facts didn’t provide Ukraine any solace. The political farce increases the chances the US and Europe could unleash another round of sectoral sanctions, but markets don’t seem too concerned today.  The Bloomberg Economic Surprise Index reached a 3.5 month high on Thursday of 0.092, showing better than expected data as of late.  Data points in the US this week will include April Retail Sales (+0.4%), The May Empire Manufacturing Survey (+4.7-6.0), April Housing Starts (+3.7 to 981,000) and Consumer Confidence (+0.4 to +84.5).  John Deere reports earnings Wednesday.

Rain over the weekend and more rain this morning across Midwest growing areas as fieldwork is pretty much at a standstill from one of the corn belt to the other.  Over the weekend, multiple states saw 1.0”+ totals fall with a big portion of KS receiving solid rainfalls and milder temperatures.  W-NE even saw snow last night and this morning.  Rainfall the next 5-days will be heaviest in the eastern corn belt where totals as high as 1.5-3.0” is expected to fall.  The WCB will be a bit drier, but still has chances of intermittent showers through mid-week.  No real heat to speak of like many states would like to see, although temps in the southern plains will moderate nicely with the highest temperatures in TX the next 5-days in the 80’s to lower 90’s while KS sees mainly 60’s with a few low 70’s.  In driving from C-SD to the Twin Cities over the weekend, definitely a lot of planting and fieldwork left to accomplish.  ND/SD/MN is in need of heat and a lack of rain for about 7-10 days to get caught up.  Below normal temps remain the feature through the 6-15 day period for the upper-Midwest.  Precip is mixed.

 

A wild overnight open for wheat last night which saw a 22c range within the first 15 minutes of trade thanks to better than expected rainfall in KS over the weekend, milder temperatures this week and the realization from Friday’s USDA data the world isn’t running out of wheat even if the US crop is small.  Corn and soybeans have seen both sides through the evening with USDA data still being digested by market analysts.  The one theme resonating with the trade, however, is Friday’s data was very heavy on forecasts and rather light on reality.  Weather is the most important feature moving forward, which is why tonight’s crop progress report will be a focus for corn, bean and wheat planting.  US corn planting progress is expected to be near 55-60% complete tonight vs 55% on the 5-yr average thanks to huge progress in the central belt before the rains.  Bean planting is expected between 15-20% vs 23% avg.

Wasn’t a great deal of weekend news besides the Ukraine situation and the concern over a disruption of exports.  Again, to-date, there has been no disruptions to trade flows to speak of.  While much of the WASDE data has already been analyzed, there are a few points worth sharing.  Obviously the big headline surprise was 13/14 corn ending stocks at 1.146bbu vs the average trade guess of 1.314bbu.  The USDA took the very aggressive stance of increasing exports 150mbu to 1.900bbu.  While doable, the burden of proof is now squarely on the market as sales need to average 12.5mbu a week and shipments need to average 41mbu a week.  Over the last 33-years, only 5-years saw shipments average over 40mbu from May-August.  It should be noted, however, commitments and shipments to this point are tracking 2009/10 pretty closely, a year in which we saw exports eventually total 1.979bbu.  The bump in ethanol production of 50mbu is also going to need weekly production to average 929,000bbls/day vs the previous 3-month average of 901,000bbls/day.  With feed left unchanged, it feels as though the old crop corn balance sheet got as bullish as it possibly could which begs the question of what’s left to rally us further?  World corn ending stocks of 187MMT are the largest since 1999/00.  Hard to argue with the 14/15 balance sheet too much at this point, although few analysts are using the USDA’s record setting yield of 165.3bpa, instead opting for something closer to 163.0 which shaves 150mbu.

One other note on corn, as has been noted in this space as of late, corn basis really isn’t reflecting the tightness illustrated in the balance sheet which is one more reason to be skeptical of the new S&D numbers producing another round of new highs.  Keep an eye on the CN/CU and CU/CZ for clues as well.

On wheat, the winter wheat production number obviously stole the show, coming in at 1.403bbu, 65mbu under the average trade guess.  KS production was estimated at 260mbu, the smallest state-wide crop since 1996 and the third smallest crop since 1968.  The projected 14/15 carryout of 540mbu would be the smallest since 2007/08, although many are taking issue with the 170mbu feed/residual estimate considering the 10-yr average on wheat feeding is 198mbu and wheat/corn spreads are hitting multi-year highs.  In the world picture, supplies are more than adequate so far, although a lot of growing weather remains in front of the market.  The troubling thing for a lot of folks is the fact the winter wheat production number was such a bullish surprise, but spreads didn’t react in-kind.  The KWN/KWU traded weak Friday and overnight, pushing down to -5.25c this morning.

The USDA did what they had to in order to make the soybean balance sheet work thanks to record imports of 90mbu.  This will prove a tall task over the next four months, with several analysts slow to adopt the USDA’s large import forecast.  Nonetheless, this week will see April NOPA crush which will give us a clue as to whether the USDA’s crush forecast of 1.695bbu is low or high.  Exports at 1.600bbu are probably still too low considering commitments are near 1.640bbu and widespread cancelations have yet to take place.  On new crop, almost no one is comfortable with the USDA’s current yield assumption of 45.3bpa.  The current record yield occurred in 2009/10 which was 44.0bpa.  Since 2009, not a single year has been over 44.0bpa, let alone 45.0bpa.  Nonetheless, supplies have the potential to swell dramatically if all of the 81.4 million planned acres actually get planted.  Combined with large SAM production, world soybean ending stocks are set to hit 84.2MMT in 14/15, which would be a 29.0% stocks/use ratio, both of which would be new all-time records.

On the export front, US corn remains the cheapest world FOB supply through July by $2.76-3.94/MT under both Brazil and Argentina.  Brazil is the cheapest source in August by $4.72/MT.  DDGs exports in March totaled 1.2MMT, a new all-time record with China accounting for 50% of the total.  Despite the cancelations of US corn, China seems to be replacing it with DDGs and sorghum.  Still need feed grains it would appear.

KCBT wheat basis was sharply weaker on the rally Friday with all protein grades lower by 5-23c.  The discount of 13.0% HRS to 13.0% HRW is now $0.46/bu which is the largest discount since 1995.  This should start to resonate with world buyers such as Brazil and Nigeria, although it takes time for world flour mills to switch grinds just like it does US mills.  More chatter about European wheat working into Mexico and the US over the weekend with those supplies around $30-40/MT cheaper than US replacement.  US supplies are definitely small, but there isn’t much else for wheat bulls to hang their hats on right now with bearish charts, cheap global supplies and wheat/corn spreads sitting at historic lows.  The break overnight seems to suggest the rally is running out of steam without further impetus.

 

Will take a closer look at COT data and charts tomorrow, but suffices to say specs still loaded up in the grains yet selling their position in soybeans.

 

Bottom Line:  Weaker trade to begin the week as traders realize the Friday print in US wheat production might have factored in a worst-case scenario, planting progress isn’t as far behind as it was a couple weeks ago and specs remain quite long in the grains.  Weather is still the most important factor right now, and provided the crops get planted, moisture isn’t a bearish feature long-term.  The ebb and flow of soybean imports and exports will also remain a headline grabber.  Technicals are looking heavy for many contracts to start the week.

 

Good Luck Today.

 

RFC 5-12

 

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 POST. 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.

 

 

5/9/2014 Morning Comments

Good Morning,

 

Outside Markets as of 6:00am: Dollar Index up 0.2220 at 79.5800; Euro down 0.00550 at 1.37970; S&P’s are down 2.75 at 1869.50; Dow futures are down 19.00 at 16,491.00; 10-yr futures are unchanged at 125’ 03.5; The Nikkei closed up 0.25% at 14,199.59; The DAX is down 0.26% at 9,582.47; The IBEX-35 is down 0.96% at 10,489.20; The Russian MIXEX is up 0.59% at 1,371.52; Gold is up $1.10 at $1288.80; Copper is up $0.85 at $307.10; Crude Oil is up $0.37 at $100.64; Heating Oil is up $0.0153 at $2.9355; Paris Milling Wheat is down €1.50 at €206.50/MT.

Eco data out overnight showed Chinese inflation easing in April to 1.8% in a mixed message for investors  The drop in inflation gives the Chinese Central Bank more room to ease monetary policy and stimulate the economy if necessary, but it also underscores the slowdown in domestic demand.  An article out yesterday highlighted the President of the European Central Bank’s comments in his presser yesterday.  Essentially, Mario Draghi said the capital flight out of Russia and into the European Union has been close to $220 billion, nearly four times the level admitted by the Kremlin, since the insurgency began.  This has in effect pushed up the demand for safe haven assets like the Euro and sovereign bonds like those of Spain and Italy, whose yields have hit record lows this week.  That one needs a minute to sink in.  In recent days, Putin has softened his stance towards Ukraine and the amount of capital fleeing Russia is probably a big part of that.  It also means the economic contraction for Russia later this year could be even worse than forecast.  This could affect financing for every corner of their economy.  Stay tuned.

Wide band of showers stretching from WI/MI to LA this morning bringing soaking regions to almost every inch of the corn belt.  Map below shows radar returns for the last 48 hours with pretty much all field work coming to a stop across the western corn belt.  A fairly open day today will occur for areas west of the showers this morning, but more rain moves back in Sat-Tue for most of the region before a drier bias is seen late next week.  The second map below shows soil moisture percentiles with much of ND/SD/MN sitting in the 90th percentile in case there was any doubt about how full our profile was.  The upper-Midwest and Northern Plains could do without additional moisture right now, which NOAA’s extended maps suggest.  However, their cooler bias on temperatures remains during the 6-15 day period.  By May 15th-20th, the topic of switching corn varieties to shorter-day numbers will be common.

 

Mixed markets as traders await the 11:00am USDA reports, although the wheat market isn’t wasting time extracting some premium with most contracts down 7-10c.  There was some decent rainfall across eastern portions of the HRW growing regions, but the driest parts in the west received next to nothing.  What could be impacting wheat futures even more is talk in the market yesterday afternoon of the possibility of European wheat working into the US-East Coast and US-Gulf.  As has been mentioned here multiple times, US wheat has priced itself out of all major importing destinations, but it appears now we have almost priced our way into imports which would make it seem the market has gotten ahead of itself in its mission of rationing out demand.  We haven’t even harvested a bushel yet, so to push our domestic market to the point of importing wheat from Europe would be a bit too far, too fast.  Couple this with the massive put buying in Chicago wheat, the put/call ratio in July options up 10% m/m, the lack of commercial buying and the deliveries at all three wheat exchanges and you’ve definitely put a chink in the wheat armor.  Might also be some anxiety about the winter wheat production number from the USDA at 11:00am.  It wouldn’t unlike the USDA to take a measured approach in reducing the crop over the next couple of months, so bulls should remain flexible.  World numbers will also be a focus and could squash any bullish US inputs.

A quick note on global weather, one private forecaster put out a piece yesterday talking about the growing chances for ridging to take place in the Volga Valley in Russia and parts of eastern Ukraine.  Their timing isn’t definite, but they talked about the chances 2-weeks out and into June holding a bias for drier and warmer weather over FSU wheat growing areas.  To-date, FSU weather has been pretty favorable, but that period would be key development time leaving wheat vulnerable.  A ways out to have a lot of confidence, but just know it’s being discussed.

The other big news yesterday was the continued strength in the CIF corn market which has pushed afloats to +70N, FH-May to +65N and LH-May to +62N.  This has put delivery Zones 1-4 at or above delivery equivalence by 1-11c/bu.  The demand pull from the river remains strong, and with farmers farming, enough bushels aren’t headed there to satiate demand.  This should support the CK/CN at -3.00c, and probably doesn’t make a guy want to get real bearish CN/CU or CN/CZ.  There is still very little definition to Black Sea maize, and Argy maize remains rather expensive on a relative basis.  PNW basis sank further yesterday, so no overt demand showing up off the left coast just yet.

Plenty of chart indicators out there suggesting topping action in wheat.  Hard to want to throw out any specific targets in front of a high volatility report like the one this morning.  Charts will be revisited this weekend with further guidance.

There were 131 KC wheat deliveries overnight bringing the month-to-date total to 304.  139 in Chicago wheat, 94 soybean, 7 corn, 378 oil and 19 soymeal.

 

Bottom Line:  Not much else to cover until 11:00am.  Planting progress made big jumps before the rains this week and should be close to averages by Monday for most of the corn belt.  Acre switching and PP talk will increase if the Northern Plains remains wet until this time next week.  Main focus of today’s reports should be old crop corn and soybeans, winter wheat production and new crop demand numbers.  Basis remains a mixed bag on corn, and the US is close to pricing itself into imports.  Lots of moving parts so review marketing levels early and often.

 

Good Luck Today.

 

RFC 5-9 Soil Moisture 5-9

 

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.

5/8/2014 Morning Comments

Good Morning,

 

Outside Markets as of 5:50am: Dollar Index down 0.1130 at 79.0890; Euro is up 0.00250 at 1.39400; S&P’s are up 0.25 at 1874.50; Dow futures are up 19.00 at 16,487.00; 10-yr futures are down 0.04%; The Nikkei closed up 0.93%; The DAX is up 0.44% at 9,563.21; The IBEX-35 is up 0.76% at 10,493.30; The Russian MICEX is down 0.42% at 1,357.74; Gold is up $3.00 at $1291.90; Copper is up $0.40 at $303.65; Crude Oil is down $0.41 at $100.38; Heating Oil is down $0.0131 at $2.9144; Paris Milling Wheat is off €0.75 at €206.50.

Global equities are mostly better this morning after improved Chinese trade data, and comments from Fed Chair Yellen suggested low interest rates will continue until the US job market is healthy.  China’s exports in April rose 0.9% from the previous year following a 6.6% decline in March, and imports grew slightly after a contraction in March.  Russian President Putin is also on the tape this morning with a slightly softer tone on the confrontation with the West, something stocks were taking at least brief solace in.  Putin has endorsed plans for fresh elections in Ukraine, and called on pro-Russian militans in eastern Ukraine to delay referendums on autonomy.  In the US today, unemployment claims are expected to decline 19,000 to 325,000, just offsetting last week’s 14,000 claim jump.

A busy radar this morning with systems strung out across the southern plains, western corn belt and Great Lakes.  Portions of central-TX and SW-OK saw some decent rains in the last 24 hours with heaviest totals measuring an inch near OKC and just west of Abilene, TX.  Otherwise fieldwork is expected to be impacted across SD/ND/MN/NE today with more disruptions occurring in IA/WI/IL/MO as the storm tracks East later today and into tonight.  Precip totals for the next 3-days will be heaviest in MO/IL where as much as 2.90” could fall (MO).  The entire corn belt should be impacted at some point the next 7-days, although dry areas of SW-KS/Panhandle-OK/N-TX look to receive little to no moisture.  The Eastern halves of OK/KS/TX should see solid moisture prospects.  NOAA extended maps remain the same: below normal temps for the entire Midwest, but below normal precip as well.

 

Mixed bag overnight with grains softer and the soy complex firmer after slightly better than expected rains in the southern plains as well as stronger than expected Chinese import data for the month of April.  The totals which fell yesterday and overnight in OK/TX were seen as better than estimates, and should help at least some of the withering HRW crop.  Chinese customs data for April showed soybean imports up 40.7% y/y to 6.5MMT, and Jan-Apr imports were up 41.2%.  This is obviously due to Brazilian imports getting off to a stronger start than last year with fewer transportation issues, but the strong imports are also the reason for the cancellations/defaults as Chinese stocks at ports remain oversupplied.  Nonetheless, soybeans which are already in the country won’t be canceled or sent back, so the data is supportive in-and-of-itself.  Corn was quiet, awaiting fresh data today and tomorrow.

On the basis front, corn continues to trade very heavy at destination rail markets.  PNW corn shuttles slipped further yesterday with nearby and June bids now sitting around +88/90N vs +95/98N a week ago.  This weakness, caused by free-falling rail freight prices, is now weighing on other rail markets like Hereford, TX and California as their remains too much corn in the upper-Midwest if there is no west coast program.  Some perspective is necessary, however, as over the last 30-days, PNW corn shuttle bids have dropped from around +122K to +88N (+94K), or around 34c.  Yet rail freight has dropped from around $2200/car a month ago to tariff this week, or the equivalent of around 55c/bu.  So in effect, basis should have appreciated roughly 20c based on where elevators can sell corn and buy freight today.  The problem arises from elevators not knowing where they could buy freight the last 30-days, and the rail market dropping faster than anyone could adjust their positions.  The system is trying to get cleared of distressed shuttles on the market right now, but once it does, some basis strength could be seen.  PNW is still the cheapest source of corn for Asian importers.  CIF bids largely steady w/w at +58K.

Switching gears to wheat, there was a Reuters article yesterday talking about the jump in open interest in Chicago wheat puts off the July options.  Below I’ve posted a chart which shows the July Chicago Wheat $7.00 puts (Black and Green) vs. July wheat futures (Red and Green) with open interest for the $7.00 strike in the bottom pane.  As one will notice as price continued to rise on futures, and the price of the puts continued to drop, open interest climbed dramatically, going from 1,875 on April 7th to 7,057 this morning, an increase of 376%.  Similar increases were witnessed by the $6.90 strike.  In addition, the put/call ratio for July has gone from 134.80% a month ago to 145.80% last night.  This pessimism seen in the options market suggests doubts about the rally continuing dramatically higher.  As noted earlier this week, Commercial longs are at the lowest level since December 6th, 2011.

There were an additional 23 HRW deliveries by ADM last night in Hutchinson, KS bringing the MTD total to 173.  Corn saw 16 deliveries last night, but none by house accounts.


WASDE Discussion

Tomorrow will see the May WASDE released with old crop balance sheets updated and the first look at the 14/15 marketing year.  Corn will, and should, receive the most attention.  On the old crop portion of the balance sheet with the average trade guess looking for carryout to come in around 1.314bbu vs 1.331bbu last month.  I think carryout could drop further than the average trade guess as exports will see a bump higher of 25-50mbu, and it wouldn’t be unreasonable to see higher ethanol, although the USDA may choose to wait another month based on status quo production data recently.  Export sales have averaged 39mbu over the last 3-months, and 27mbu over the last 4-weeks.  We only need to average 5mbu the rest of the marketing year to hit the USDA’s current 1.750bbu estimate.  Exports during May-Aug the last 10-years have averaged 23mbu.  An increase looks likely.  With strong margins and the driving season right around the corn, ethanol production could see a further seasonal advance in coming weeks.  Feed and Residual should hold steady.  On the new crop balance sheet, the USDA’s February Outlook yield of 165.3bpa looks high considering the slightly delayed start and the difficulty of hitting record yields at any point the last 5-years.  If one adjusts yield lower by 1-2bpa, and bumps demand slightly, we’re already staring at near a 10% stocks/use ratio for 14/15, on-par with 13/14.  Hard to see corn price breaking under this scenario until June/July weather is upon us.

The old crop soybean balance sheet should see a further increase in exports based on recent shipments, so a 10-15mbu jump there wouldn’t be unexpected.  The USDA will have a difficult time bumping crush as well considering imports will have to be raised to cover the increased exports, and it seems a bit too early in the marketing year for them to resort to a negative residual.  Imports through March have totaled 23mbu, but will obviously pick up with the Brazilian program underway.  All told, old crop soybeans could see carryout hold steady to drop 5-10mbu.  On the new crop side, the USDA will increase acres from their Feb outlook number to 81 million to relect the March Plantings report.  If they hold their February yield at 45.2mbu, supplies jump notably.  Here again, 45.2bpa, a new record, looks high considering the previous record yield of 44.0bpa in 2009/10 and the fact no year since 2009 has been over 44.0bpa let alone 45.2.  In addition, record acreage will rely on fringe acres which won’t have the yield potential as those in IA/IL/IN.

Wheat changes on the old crop balance sheet will be minimal.  On the new crop balance sheet, the focus will obviously be on the USDA’s first assessment of the winter wheat production.  The issue is whether they will take a measured approach to reducing the crop or slash it to a Wheat Quality Council Tour type number?  As much focus should be on the harvested acreage percentage as this can sway production nearly as much as yield from estimates.  It should be noted, the USDA has tended to come in above trade estimates as of late with production higher than the average trade guess in 4 of the last 5 years and in 7 of the last 9.  Over the last 9-years the average trade miss has been around 38mbu.  It should be noted, and the USDA is likely to reflect this, the world production is ample and growing.


 

Bottom Line: Markets should remain in ranges today as we await updated balance sheets tomorrow.  The highs and lows are likely in for the week, although export sales will obviously be a focus this morning.  Corn basis remains weak, as does wheat, despite the strong futures performance.  Continue monitoring cash markets as a signal for underlying demand.  Managed Money is comfortable in grains right now, but the May report can be high-risk.

 

Good Luck Today.

 

July CGO Wheat options 5-8

 

 

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.

 

Good Morning,

 

Outside Markets as of 6:00am: Dollar Index up 0.0200 at 79.1200; Euro down 0.00040 at 1.39280; S&P’s up 1.00 at 1865.50; Dow futures are up 9.00 at 16,369.00; 10-yr futures are up 0.08%; The Nikkei closed down 2.93% at 14,033.45; The DAX is down 0.14% at 9,454.44; The IBEX-35 is down 0.58% at 10,420.00; The Russian MICEX is up 1.37% at 1,336.65; Gold is up $3.20 at $1,311.80; Copper is down $1.45 at $304.25; Crude Oil is up $.81 at $100.31; Heating Oil is up $0.0099 at $2.8976; Paris Milling Wheat is down €2.25 at €213.25/MT.

Mixed to weaker equity markets this morning with sharply lower Asian shares after tech starts became the downside leader Tuesday.  During Tuesday’s trade, Twitter fell 18%, adding to heightened tension in Ukraine and the seemingly empty promises made by the West in the face of a defiant Russia.  Adding to the complexities is the Euro trading near the highest levels since 2011, which is combating the easy money measures taken by the European Central Bank to kickstart the EU’s economy.  Money fleeing out of the Black Sea region is finding a home in Europe as a safer destination.  Western companies are finally starting to see negative effects from the slowing Russian economy.  To wit, France’s Societe Generale (SocGen) bank has taken a €525 million write down on Russia, dropping its net profits in Q1 13% y/y.  CRB-Index still trading near the highest levels since mid-2012.

Scattered showers moving into the WCB this morning with fieldwork expected to be impacted in SD/ND/MN/WI, while the storm will move East tomorrow and Friday to shut things down in IA/MO/IL and the rest of the eastern corn belt.  The map below shows the 7-day forecasted precip map and is pretty self-explanatory.  The majority of the Midwest will see soaking rains which will be welcome for some areas wrapping up planting.  For the Northern Plains, this will slow things further and keep acre switching decisions on the front-burner.  Eastern HRW areas will receive decent rains later this week, but dry western and south-west areas look to remain dry.  In the 6-10 and 8-14 day outlook, NOAA keeps the below normal temp bias in place over the Midwest for the duration.  A below normal bias for precip accompanies it, however, so a week out looks more favorable for completing spring work.

 

Slightly easier tone overnight after the solid gains posted in wheat and corn.  Wheat markets had been rallying on declining crop prospects in the southern plains, but maps like the one below have now thrust Minneapolis wheat to the forefront over planting delays.  Minneapolis led strength yesterday, however, spring wheat acres probably aren’t in jeopardy just yet.  Last year was a record or near record slow seeding pace for North Dakota and the majority of Canada and yet record crops were achieved in Canada and bumper crops in North Dakota.  The real risk is declining corn acres in ND and N-MN.  A strong argument can be made we’ve already lost corn acres in the North, but it’s hard to judge whether the market is picking them up elsewhere?  One must remember there are 2-3 million acres of Prevent Plant in IA/S-MN/SD/ND which weren’t accounted for in the February Outlook Conference.

Lots of wheat data points out yesterday including draws in KCBT delivery stocks of 3.118mbu w/w, which are also down 28.207mbu y/y.  Chicago wheat delivery stocks fell 943,000 bushels w/w, and are down 10.343mbu y/y.  Minneapolis stocks saw a slight build.  KCBT protein scales were also slightly firmer for ord’s (+9c), 13.0’s (up 4c) and 14.0’s (+25c).  Call spring wheat proteins mixed from last week.  A weather special from a private forecaster chronicled the vastly improved wheat growing areas in Australia from just a few weeks ago.  Australian farmers are in planting season right now, but chatter of declining Australian crop prospects due to the expected El Nino weather pattern have been incessant as of late.  KC wheat is now trading a $12.81 premium to Paris Milling Wheat, the largest premium since July 2012.

A lot of discussion over upper-Midwest corn basis and a lack of program off the PNW as of late.  PNW corn shuttle bids continued to sink late Tuesday with bids of +90N and even down into the 80’s common.  Corn bids are following rail freight lower with spot BNSF cars trading at tariff this week for the first time in 9-months.  This has several implications: For one, the lack of strength in premiums and declining rail freight reiterates the lack of a program present as demand pull would be lifting both.  The lack of reliability in rail and the railroads snubbing of grain exporters pushed the majority of business to the Gulf.  In the process, however, PNW corn boats are now enjoying a $6-7/MT discount to Gulf boats destined for Japan.  Whether this will incite any Japanese/SE-Asian business remains to be seen, but the cheapest source of corn for export is back to being the West Coast.

A quick note on soybeans, chatter during the session yesterday said the Chinese government has plans to auction off 3MMT of soybeans from state reserves later this month.  There were rumors this would take place earlier in May, but never did so remains to be seen whether this auction happens or not.  In addition, there was talk there could also be corn and sugar auctioned off, but tonnages were not mentioned.  Lastly, cash traders not distressed Brazilian soybean boats are now trading into southern Ohio crush plants in limited quantities.  March Census soybean import data showed only 1.1mbu of soybean imports during the month, however, bringing MYTD imports to 23mbu with the majority coming from Canada.  Many think soybean imports will be increased Friday on updated WASDE balance sheets.

A more in-depth discussion of Friday’s balance sheet numbers will be in tomorrow’s comments.

 

Bottom Line:  A little easier markets today even though grains are sitting on weekly gains.  Ethanol production data at 9:30 should underscore the solid margin structure in the industry and leave no doubt about that line-item in the corn balance sheet.  Wheat is in the discovery phase of trying to figure out how small the crop is, how much demand we need to ration and how big world supplies actually are to cover any short fall.  Soybeans are caught between incoming imports, tight balance sheets and uncertain acres.  Clear as mud.

 

Good Luck Today.

 

HPC 5-7

 

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.

 

 

5/5/2014 Morning Comments

Good Morning,

 

Outside Markets as of 5:45am: Dollar Index down 0.0130 at 79.5000; Euro up 0.0001 at 1.38710; S&P’s down 7.25 at 1867.25; Dow futures are down 60.00 at 16,387.00; 10-yr futures up 0.13%; The Nikkei closed down 0.19% at 14,457.51; The DAX Is down 1.36% at 9,425.71; CAC 40 is down 1.11% at 4,408.76; The Russian MICEX is down 0.96% at 1,292.36; Gold is up $11.80 at $1314.70; Copper is down $1.00 at $306.00; Crude Oil is up $0.47 at $100.23; Heating Oil is down $0.0019 at $2.9204; Paris Milling Wheat is up €2.50 at €217.75.

 

Global equity markets are kicking off this week on a lower note following weaker than expected manufacturing data out of China.  The HSBC Index of Chinese manufacturing rose by 0.1 point to 48.1 in April, below estimates of 48.4 and the preliminary level of 48.3.  Readings below 50.0 point towards economic contraction.  Fed chair Janet Yellen will speak before the Joint Economic Committee of Congress Wednesday, and 74 companies of the S&P 500 report earnings this week.  So far 68% of the companies have exceeded earnings estimates, beating the 63% long-term average.  The situation in Ukraine didn’t get any better over the weekend, and President Obama and German Chancellor Merkel on Friday gave Russia a deadline of the Ukrainian elections on May 25th to back off on Ukraine or they would launch “stage three” sectoral sanctions against the Russian economy.

Scattered precip falling across several of the Great Lakes states this morning after weekend moisture fell in MT and upper-Midwest.  Zero moisture fell south of I-70, and temperatures yesterday in many spots in OK/TX hit 100*.  Wichita, KS broke its record for earliest date hitting 100* by almost a month according to several weather gurus.  100’s will be present in TX again today with widespread mid to upper-90’s in OK/KS.  The 90’s/100’s will be present through Tuesday before moderating slightly.  Most of the corn belt will see 70’s and 80’s with fairly open weather until the next batch of moisture moves into the upper-Midwest Tuesday into Wednesday.  Fieldwork will then be impacted in the western corn belt mid-week before rain moves into the central belt Thursday-Saturday.  Big progress should be made until then.  Extended maps looking drier for much of the Midwest.  Eastern HRW areas have chances of moisture later in the week, but dry western and southwestern areas look to miss the majority of this week’s precip.

 

Sharply higher out of the overnight gate led by wheat markets as Chicago jumped 25c at the highs before easing to hold 10-12c gains this morning.  After freezing temps Thursday/Friday in the southern plains, wheat country saw temps soar over 100* this weekend to effectively scorch whatever crop was still left. The map below from NOAA shows how many days areas in OK/TX have gone without significant rain, and it pretty much tells the story.  In addition, tensions over the weekend in Ukraine suggest the fighting is nearing one of Ukraine’s major grain-export ports of Odessa which had been the fear all along.  Financing is also said to be harder to come by for Ukrainian farmers, but that will be more of a concern for corn and sunflowers.  The market was also armed with the KS wheat tour results which showed the state’s crop at 260mbu, the lowest production estimate since 1996.  The average yield was estimated at 33.2bpa, the lowest since 2001.  All of the wheat contracts have now broken above their March highs, and several have left gaps on daily and intra-day charts.  Close only charts won’t look as impressive considering how far off the highs we’re currently trading.

The aforementioned are all supportive reasons for the wheat market, although there are several bearish factors working against wheat right now as well.  For starters, Friday saw wheat deliveries at all three major exchanges including 135 KC wheat by ADM and Cargill.  Minneapolis continues to see deliveries and re-deliveries with no strong commercial stopper.  Domestic basis levels have been declining as wheat futures continue to rally, in-keeping wheat deliveries and showing physical wheat has softening demand even if paper wheat is in high demand.  World production areas are also enjoying very favorable weather as evidenced by the fact US wheat futures continue to gain on Paris Milling Wheat while Europe enjoys good growing weather.  KC wheat has now overtaken Paris by $7.03/MT, and is trading at the largest premium to Paris since October.  This has in effect made US wheat uncompetitive to Egypt as well as Latin America.  We will also get grain stocks data as of March 31st from StatsCan today which analysts think will show all wheat at 21.5MMT, the largest since 1994 and up 49% from last year.  Also, wheat/corn spreads are hitting new life of contract highs with KWZ/CZ pushing over $3.50/bu last night.  This should effectively reduce wheat feeding to 0, and be reflected in updated balance sheets later this week when WASDE unveils their first 14/15 marketing year estimates.  Lastly, several traders have expressed doubt about the current demand estimates for the world balance sheet.

Weekly crop progress reports will be watched closely this afternoon with 5-yr average corn planting progress estimated around 40%.  Seems like the market is looking for something around 25-30% thanks to the wet weather last week.  Despite that, the market doesn’t seem real concerned about the US farmer getting the corn planted given his ability to plant corn quickly.  The delays in spring wheat seeding in ND/N-MN also seem to be hinting at ideas of more soybean acres there, but time will tell.  Commitments of Traders data released Friday showed large specs back to being net long 200,543 contracts of corn, and have erased their net short position in Chicago wheat to flat there.  Worth noting, on the wheat rally, the gross commercial long (end users) have sold wheat, taking their position to long 57,256 contracts, the smallest since 12/13/2011.  Not very comforting when the “smart money” isn’t panicking and buying wheat.

Soybean market still grappling with ideas of distressed Brazilian soybeans trading into the US-Midwest.  Based on cash traders quotes, Brazilian soybeans shouldn’t yet be working in IA/IL/IN crush centers by about 20-40c depending on ocean freight quotes.  Still, between what’s landed and in the lineup, total imports on the books to date look like something around 420,000MT, or about 15mbu.  The USDA is likely to take marketing year soybean imports up another 10-20mbu to continue making the balance sheet work.  Export inspections data will be watched closely today to make sure we’re still on track to hit the USDA’s objectives.

 

Bottom Line: Firmer grains and oilseeds to begin the week as traders continue to grapple with a shrinking US wheat crop, but an increasing world crop.  Corn planting is occurring when and where it can, and enough progress is being made to keep the market from hitting the panic button just yet.  Soybeans remain tight on old crop, but might be picking up acres in the north thanks to the weather.  A wise trader once said “farmers should like $6 corn, $8 wheat and $12 beans.”  Well we’ve got two of the three on the board right now.  Stay nimble.

 

Good Luck Today.

 

Days SInce Rain 5-1

 

 

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 POST. 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.

5/1/2014 Morning Comments

Good Morning,

 

Outside Markets as of 5:45am: Dollar Index down 0.0240 at 79.4500; Eurp is up 0.00050 at 1.38750; S&P’s are up 1.25 at 1879.25; Dow futures are up 10.00 at 16521.00; 10-yr futures are down 0.06%; The Nikkei closed up 1.27% at 14,485.13; The Russian MICEX is up 0.09% at 1,306.01; Gold is down $12.00 at $1283.90; Copper is down $4.35 at $302.95; Crude Oil is down $0.51 at $99.24; Heating Oil is down $0.0196 at $2.9085; Paris Milling Wheat is closed.

Much of Europe is closed today due to the May Day Holiday. Delivering those baskets is serious business.  Mixed bag of global news otherwise with China’s April purchasing manager’s index rising a touch to 50.4 from 50.3 in March, and remained above the 50.0 contraction/expansion line.  Portugal is set to exit its three-year €78 billion bailout without an emergency backstop which is a remarkable turnaround for a country who six months ago seemed destined for a second bailout.  The IMF approved a $17 billion load for Ukraine over the next two years in a solid stamp of approval by western nations.  In the same breath, the IMF cut the Russian 2014 GDP forecast to 0.2% from 1.3% in 2013 thanks to capital outflow of $100 billion.  Further sanctions could put the nail in the recession coffin.  Weekly jobless claims in the US are expected to drop 9,000 to 320,000.  Also on the economic docket today are ISM Manufacturing Index for April (54.3), March Personal Spending (+0.6%), March Personal Income (+0.4%) and April total vehicle sales (16.2 million).

Light shower activity in MN this morning, otherwise the Midwest is mostly quiet.  Mostly dry weather will occur in the Midwest the next two days before a light system impacts SD on Saturday evening with totals expected around 0.10-0.20”.  The system looks to park over the upper-Midwest Sunday-Tuesday bringing shower activity to ND/SD/MT with the heaviest totals in MT.  The light band will extend from SD through S-MN to IL/IN/S-OH.  Additional precip is being shown by NOAA this morning moving in Tue-Thur focused on the same areas: MT/ND/SD/ but impacting MN/WI as well.  Totals will be heavier with the mid-week system.  The entire 7-day precip forecast is shown below.  Should this confirm, spring wheat planting will fall further behind averages.  6-10 and 8-14 day maps show more of the same with below normal temps for the northern plains, above normal for the lower Midwest and above normal precip for the entire Midwest.  The real question is how much planting progress can occur in between showers to make the moisture a positive rather than a negative?  Current forecasts should remain mostly favorable for price, especially the acres in question in ND/N-MN.

 

Weaker Ag markets to begin the month of May, led by beans down 10c on the front end following five straight days of.  Despite the constant barrage of market chatter over ongoing soybean imports from South America, the soy complex has been able to weather the storm fairly well as crushers remain armed with solid cash crush margins in the central corn belt.  In addition, CIF bids have actually appreciated this week with spot bids sitting around +68/70K vs +65/66K a week ago.  Traders will also be watching today’s export sales report for any cancelation activity, although nothing in cash markets or spreads the last week would suggest widespread cancellation activity.  Grains are also taking a breather this morning with both corn and wheat sitting on marginal gains for the week.  Weather forecasts remain supportive for both markets with too cool and wet in the Midwest for planting, and zero moisture forecast in the southern plains the next 7-days.  Many areas will hit 90* this weekend south of I-70.

Day 2 of the Kansas Wheat Tour produced an average yield of 30.8bpa on 271 stops vs. last year’s 37.1bpa.  Mark Hodges, executive director of Plains Grains, estimated extreme drought will limit OK wheat production to 66.5mbu on an average yield of 18.5bpa vs last year’s 105mbu crop.  If true, one analyst said this would be the first time the OK wheat crop had been below 70mbu since 1957.  Day 1 of the KS wheat tour produced an average yield 21% below last year while Day 2 was 17% below last year.  The production data so far is certainly supportive of recent KC futures gains, although it should be pointed out the crop is about 2-weeks behind average on development which can lead to more ambiguity of production guesses.  Either way, the news flow supports new contract highs in KC/CHI and KC/MW, and seasonal strength in wheat is also strong during May.  Charts are supportive, and there doesn’t seem to be a reason to step in front of this market just yet, although incremental sales on the rally when marketing targets are obtained is solid risk management.

Export sales estimates for this morning peg corn at 350-725TMT old, 150-625TMT new; wheat at 100-425TMT old, 200-450 new; soybeans at -250/+100 old, 200-450TMT new, meal at 50-190 old and 0-100 new.  Soy oil is seen at 0-50TMT old and 0-20TMT new.  Lots of confusion about the corn export program and the lack of strength in basis for upper-Midwest elevators.  At current, the vast majority of the current export program is occurring out of the Gulf, not the PNW.  This is due in large part to the unreliable rail service (and expense) as well as the Chinese program which continues to get canceled week after week.  This has created an excess amount of corn in the upper-Midwest with a lack of homes.  The few ethanol plants north of I-90 have been able to source all the corn necessary, and railroads have been reluctant to move corn East to the corn belt or south to Gulf, not wanting to congest the situation further.  This leaves elevators unwilling to bid for corn, and farmers holding old crop waiting for basis appreciation which hasn’t yet happened.  Until the central/east cornbelt shows signs of needing corn, or an export program develops off the PNW, corn basis looks to remain weak for the current time frame.

Ethanol production data remained solid yesterday at 898,000bbls, down from 910,000bbls/day last week but right at the level needed to hit the USDA’s marketing year forecast.

Deliveries overnight included 9 corn, and 113 Chicago wheat.  Minneapolis sees 143 re-deliveries and 106 fresh deliveries.  All of the re-deliveries in MPLS are Seg accounts, not commercials, as are the stoppers.  No big sponsors in MGEx.

 

Bottom Line: Export sales should help set the tone, although markets are due for a corrective day considering the strength witnessed this week.  All of the grain markets remain in uptrends with charts looking strong.  Weather forecasts are supportive to price for both wheat and corn, and the soybean market appears comfortable with the amount of soybeans currently pointed at the US.  Considering a lot of the soybeans won’t arrive until June or later, it is imperative basis and spreads remain stout to encourage remaining bean supplies to head to the crush plants.  Nothing as of yet to suggest managed funds are willing to abandon well entrenched long positions in the Ag markets with so much growing weather still in front of the market.  Weather forecasts will continue to be the focal point.

 

Good Luck Today.

 

HPC 5-1

 

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 POST. 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.

 

4/30/2014 Morning Comments

Good Morning,

 

Outside Markets as of 6:15am: Dollar Index down 0.1180 at 79.6910; Euro is up 0.00380 at  1.38480; S&P’s are down 1.75 at 1870.00; Dow futures are down 5.00 at 16,462.00; The Nikkei closed up 0.11% at 14,304.11; The DAX is off 0.07% at 9,579.99; The IBEX-35 is down 0.26% at 10,434.00; The Russian MICEX closed down 0.34% at 1,300.37; Gold is down $6.80 at $1292.20; Copper is down $2.05 at $307.25; Crude Oil is down $1.25 at $100.03; Heating Oil is down $0.0167 at $2.9468; Paris Milling Wheat is unchanged at €214.75/MT.

More political rancor out of Russia this morning as President Vladimir Putin is threatening to retaliate for further economic sanctions against Russian companies and citizens.  Experts think Putin could make life difficult for western companies operating in the country.  This comes as Kiev appears to be losing control over the pro-Russian militants in several of its eastern cities.  Still no impact to Agriculture shipments or sowing of spring crops.  FOMC meeting today with another $10 billion expected to be tapered from the Federal Reserve’s bond buying program.  This would scale the program down to $45 billion per month.  This morning will see the April ADP employment report which is expected to see 210,000 jobs added by private companies in April, up from 191,000 in March.  Weekly EIA inventory report is expected to show crude oil inventories up 1.1 million bbls to a new 26.5 year high.

Quieter radar returns this morning as most of the heavy storm systems exit the Midwest.  Scattered precip is still falling in E-ND/MN/WI.  The Midwest will see drying the next 3-days before precip begins moving back into the western corn belt and northern plains by late weekend/early next week.  Precip amounts should be heaviest in the Dakotas and MT with portions of C-ND seeing up to another 1.0” by next week.  Interesting maps from NOAA yesterday with the 6-10 showing a split right through the heart of the US with below normal temps north of I-80 and above normal temps south of there.  Precip is expected to see a similar pattern with above normal to the north and below normal to the south.  Essentially, cold and wet for corn growing areas and hot and dry for wheat areas.  About the opposite of that wanted by farmers.  KS temps will see 32* for lows and 90* for highs all in the next 5-days.

 

Mostly weaker trade this morning across the major Ag markets led by wheat as it back and fills following the solid rally witnessed yesterday.  News flow out of the Wheat Quality Council Tour remains supportive with Day 1 results showing a tour average yield of 34.7bpa, the lowest in a decade and compares with 43.8bpa last year and 53.4bpa in 2012.  Total KS production is being estimated at 299mbu according to a Bloomberg survey of analysts and would compare with 319mbu in 2013 and 378mbu in 2012.  Yields are expected to get worse as they move west and south.  Precip maps for the next 7-days show almost nothing south of NE, but all other major wheat producers in the world are enjoying favorable growing weather.  One of the other concern areas in the world was the Black Sea, but the map below shows forecasted precip the next 15-days there.  Also, charts are taking on a rather bullish tilt this last week.  On a monthly-continuation basis, Chicago wheat looks like it’s confirming a bullish divergence in monthly momentum, something that hasn’t happened since June of 2012 when prices rocketed towards $9.00 on the Midwest drought.  Both Minneapolis and Chicago are showing a possible inverted head and shoulders pattern which has many upside targets over $1.00 higher.  More confirmation will be needed in weeks and months ahead, but the US production situation isn’t improving and charts are really looking supportive.

Divergence occurring in corn basis this week with rail corn bids continuing to soften with weakening rail freight while CIF bids keep marching higher.  PNW, Hereford-TX and over Chicago markets are all weaker this week, while CIF is up 1-2c.  This is keeping local corn basis in the upper-Midwest weak without much hope for strength by the time producers need to make room before wheat harvest.  Ethanol plants are getting all the corn they need without having to pay up for it, and the strong export pull is occurring out of the Gulf, not the PNW which is supporting CIF bids.  Difficult situation for where the corn crops were some of the strongest last fall.

First Notice Day today for May futures with 144 Chicago Wheat being delivered out of the 253 certs registered for delivery.  There were also 2,596 soybean oil.  In an impressive sign, 64 soybean certificates were canceled last night with 1 barge placed for load out at ADM-Hennepin.  This left 1 certificate outstanding, and is a show of commercial support for the SK/SN spread.  Soybean supplies in the interior are still tight and will remain that way until SAM imports make a difference.  Cash traders said there are 420TMT of SAM soybeans in the lineup for the US.  There were 0 corn deliveries, but 453 Minneapolis wheat deliveries by Louis Dryfus.  437 were in Duluth, but there were no strong commercial stoppers which is why the MWK/MWN puked as bad as it did yesterday.  The quantity totals right around two Laker sized boats, so unsure if LDC canceled part of a Laker program due to slow ice thaw?

 

Bottom Line:  A little back and fill trade today wouldn’t be unreasonable after the rallies we’re on in all of the major grains.  Wheat charts are flashing a breakout, soymeal is hit new contract highs, soybeans are back at the upper-end of their range and corn remains in a strong up channel.  Charts are bullish, and most of the weather related chatter in the US is supportive.  Still, moisture in the corn belt long-term isn’t bullish and the drought monitor is slowly deteriorating in the Midwest.

 

Good Luck Today.

 

FSU precip 4-30

 

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 POST. 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.

 

4/29/2014 Morning Comments

Good Morning,

 

Outside Markets as of 6:30am: Dollar Index down 0.0230 at 79.6630; Euro is up 0.00050 at 1.38570; S&P’s are up 6.25 at 1872.25; Dow futures are up 48.00 at 16,445.00; 10-yr futures are down 0.23%; The Nikkei closed down 0.98% at 14,288.23; The DAX is up 1.12% at 10,415.60; IBEX-35 is up 0.92% at 10,415.60; The Russian MICEX closed up 1.07% at 1,313.08; Gold is down $8.70 at $1290.30; Copper is down $0.55 at $308.75; Crude Oil is up $0.60 at $101.44; Heating Oil is up $0.0143 at $2.9588; Paris Milling Wheat is down €0.50 at €214.50.

Mostly better global equity markets this morning with much chatter related to the fresh sanctions put on Russian companies and individuals by the US, although debate rages whether the sanctions were hard-hitting enough.  17 companies and seven Russian officials were targeted, although the US stopped short of announcing sector-wide sanctions, preferring to keep those in their arsenal.  Archer Daniels Midland announced Q1 earnings this morning of $0.55/share, up from $0.46/share a year ago, but slightly missing analyst estimates.  Corn processing operating profit increased $64 million on strong results from ethanol, and oilseeds earnings were also solid thanks to firm margins at its soybean crush facilities.  Transportation and Ag Services were the weak links.  The Financial Times ran a story this morning about investors returning to passive long index vehicles in 2014.  The link can be found here: http://www.ft.com/intl/cms/s/0/cf516ab4-ced9-11e3-8e62-00144feabdc0.html?ftcamp=crm/email/2014429/nbe/USMorningHeadlines/product&siteedition=intl#axzz30H3T3gmz The negative correlation from equities are making Ag markets a sought after space.

More moisture falling this morning across the Midwest with rain in the central belt and snow storms in the west.  Models this morning continue pointing towards a wet week with very little fieldwork expected until next week.  The latest 5-day forecasted precip map is shown below.  NOAA maps continue to park below to much below normal temps across the Midwest during the 6-14 day period.  This pushes cooler than average temperatures out to May 12th which will remain a concern for uniform emergence of corn seeds.  At the end of the day, however, rain in Iowa isn’t bullish longer-term, especially when some of the WCB states were still showing various stages of drought.

 

Mixed markets following yesterday’s gains by most contracts, although wheat is under light pressure thanks to the systems moving across KS this morning which weren’t expressly forecast.  Headline grabbers include comments from the KS wheat tour currently working its way across KS and N-OK.  The executive director of Plains Grains, Inc. said the non-irrigated wheat is toast in S-KS/N-OK.  Yesterday’s crop progress reports were also of great interest with the national winter wheat index seeing a 1% decline to 33% good/excellent.  SRW and SWW mostly improved while HRW declined with the largest decline seen in MI where the crop dropped 8pts.  KS fell 3pts G/E and saw its P/VP go up 5pts.  HRS planting remains slow with 18% planted vs 11% last year but behind the 30% average. SD is progressing normally, but ND and MT are slower than average.

Corn planting progress was pegged at 19% complete vs 6% last week and 28% average.  Next week’s 5-yr average is 40%, and this year shouldn’t come anywhere close to that given the week’s moisture.  Oats planting progress remains woefully slow with just 34% planted vs 46% last year and 63% average.  Emergence is seen at 12% vs 45% average.  Sugar beet planting progress was shown at 16% vs 17% last year and 47% average.  Soybeans were 3% planted vs 4% average.  Last year the US farmer planted 43% of the corn crop in one week, and several analysts continue to point towards July temperature and moisture as far more important than planting date in determining yield.  One would certainly have to agree with that based on last year.  Forecasts do look drier next week, so the panic button is being pressed yet, but better cooperation from the weather is going to be needed.

Many were scratching their heads on the soybean rally yesterday, looking for news to blame the strength on.  CIF soybean bids were up 1-3c yesterday, and FOB Brazilian premiums climbed 10-15c from last week’s distressed sales levels.  The pop in basis levels accompanied chatter on Friday Chinese crush margins have been improving.  This along with comments from Bunge’s CEO suggesting the cancelations and defaults of Brazilian soybeans by Chinese crushers should run its course in the next 2-3 months all supported futures.  In addition, the SK/SN spread jumped 4.5c yesterday ahead of first notice day Wednesday as traders realize the ability to utilize delivery warehouse supplies won’t be available until mid-July once the May goes off the board.  Armed with strong crush margins, the 8.5c spread is a “cheap” cash call against not being able to source soybeans in IL during May and June.  Cash sources reported ADM rolling cash bids from the May to the July at several crush and ethanol plants yesterday.  This too is supportive of the CK/CN and SK/SN.  Any opportunistic or outright bearspreads still in play should be reviewed as FND approaches.  One other note about the stronger US and Brazilian soybean basis is the incredibly weak Argentine soybean basis.  Cash traders are reporting very low protein levels in the Argentine crop which is forcing sizable discounts to get the crop sold.  This could limit Argy meal imports into the US if it can’t meet quality specs.

While missed by this analyst, worth noting the 38 delivery certificates of HRW canceled in Salina, KS on Friday.  This supported the KWK/KWN, and the overall wheat complex.  KC continues to lead the wheat strength on ideas of declining crop production, and this has helped KW/MW and KW/W inter-market spreads hit new contract highs.  In fact, the KWK/WK spread hit +83.00c yesterday which was the highest level for a front-month KC/Chicago spread since November 2011.  Calendar spreads also suggest the KC crop is getting smaller as the KWN/KWU is up 3.5c in the last 11 sessions, and the KWK15/KWN15 is up 15c in the last 2-weeks.  Despite this, when comparing other drought-ridden years, the strength of KC over MPLS and CHI usually doesn’t last until expiration with seasonal weakness setting in for KC as we near harvest.  Keep this in mind for any inter-market hedging decisions.

Several news outlets commented on the declining crop prospects in Syria this year with the worst wheat crop expected in 40 years.  Analysts on the ground aren’t sure if there crop will make 1MMT, a level not breached since 1973 and would compare with 3.5MMT on average.  Drought is the primary driver, but the raging civil war is also preventing supplies and inputs from being sourced by the countries farmers.

Lastly, one source reported GAFTA (Grain and Feed Trade Association) issued an advisory yesterday morning that China’s National Bio-safety committee supposedly approved MIR-162 (Agrisure Vipterra) earlier this month for import.  However, the strain must still pass the Chinese Ministry of Agriculture for full approval which won’t consider the issue until June.  Still a positive step, although it hasn’t stopped China from canceling US bought corn boats.

 

Bottom Line:  Back and fill in wheat as we await more news from the KS wheat tour, while corn and soybeans can remain firm on strong basis and supportive spreads.  The US farmer is either planting or sitting, but he’s not selling grain until more is planted or the moisture abates and grain can be hauled.  Commodities are enjoying a resurgence in investor appetite, and the news flow remains more positive than negative at current levels.  Still, the crop will get planted eventually.  Review marketing objectives and targets early and often.

 

Good Luck Today.

 

HPC 4-29

 

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 POST. 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.

 

4/28/2014 Morning Comments

Good Morning,

 

Outside Markets as of 7:00am: Dollar Index down 0.1360 at 79.6140; Euro is up 0.00250 at 1.38590; S&P’s are up 6.75 at 1866.50; Dow futures are up 66.00 at 16,389.00; 10-yr futures are down 0.06%; The Nikkei closed down 0.98%; The DAX is up 0.77% at 9,473.68; The IBEX-35 is up 0.30% at 10,336.80; The Russian MICEX closed off 0.04% at 1,279.56; Copper is down $0.20 at $309.10; Gold is down $0.50 at $1300.30; Crude Oil is up $0.54 at $101.14; Heating Oil is up $0.0047 at $2.9856; Paris Milling Wheat is down €1.50 at €215.75/MT.

Despite escalating tension over the weekend in the Ukraine/Russia saga, global equities are starting the last week of April on a positive note.  Pro-Russian militants turned to kidnapping over the weekend, with Ukraine mobilizing military forces in an attempt to take back the eastern part of its country.  The Whitehouse has announced a new round of sanctions targeting Russian companies and individuals for the country’s non-compliance with the Geneva agreement.  Unless the course is altered, chances will increase the Russian economy could hit a recession sometime in 2H2014 if capital continues to flee Russian markets.  The Federal Reserve’s FOMC will meet later this week where they are expected to taper another $10 billion from their bond-buying program.

The much anticipated rain event for the Midwest finally began last night with lots of 1.0” totals in MO/IL/IA/MN/SD/ND and lesser amounts in areas between.  Additional precip is expected the next several days for the Midwest, essentially bringing fieldwork to a stop across the corn belt.  Heaviest rain this morning is falling in MO/IL with snow falling in W-ND/E-MT.  6-10 and 8-14 day maps released from NOAA yesterday afternoon suggest a continuation of below normal temps, and in some cases much below normal, for the upper-Midwest.  Precip patterns are mixed, but the maps seem fairly consistent with below normal temps which seems more of a concern than the water.  Uniform emergence when temps remain stubbornly on or below 50* becomes difficult.  As the calendar flips to May, the planting conditions and pace will become more pressing.

 

Firmer to sharply firmer markets overnight led by old crop soybeans now that first notice day is upon us.  Stength is being derived from the Ukraine/Russian tensions, lack of rainfall in the southern plains over the weekend and none in the 7-day forecast and slow planting progress in the Midwest.  This afternoon’s crop progress report will be watched closely with most expecting corn planting progress between 18-22%.  Chatter suggests the number could be higher than expected, but little to no progress will be made this week.  The real concern is the 2-3 million acres analysts are throwing back into the mix from last year’s prevent plant.  The later the calendar gets, the less confident one can be about those be available for corn and soybeans.  The emergence issue is also one the market may pick up on more as we work our way into May.

The Wheat Quality Council Tour begins their observation of the winter wheat crop in the southern plains today, so expect to see a lot of pictures and articles about conditions there.  What will be interesting it their assessment of the freeze event a couple weeks back.  Their timing should be perfect to get a solid handle on any losses, which were expected to be worst in N-TX/S-OK.  KC continues to lead complex strength on conditions, although the rest of the Northern Hemisphere wheat producers are reportedly receiving good growing conditions.  China’s winter wheat crop is said to be in excellent shape.  Paris Milling Wheat is soft in this morning’s trade on the solid crop prospects they have coming.

Soybeans are clawing back last week’s losses as traders realize once May goes off the board, delivery warehouse supplies won’t be assessable again until mid-July.  The South American soybeans we’re importing aren’t working into the central belt crush locations who are still enjoying solid margins.  Cash guys think the US farmer is down to his last 5-10% of the crop in many areas, if not totally sold out already.  The SK/SN is up 3.50c this morning to +7.25c, and to be honest, additional strength back into double digits shouldn’t surprise.  Basis and spreads have more work to do in rationing remaining soybean supplies.  CIF trades Friday also suggest CK/CN shouldn’t see any weakness past -6.00c.  Zone 3 cash basis is trading well above delivery equivalence, making bullspreads look cheap at current values.

Export inspections out mid-morning with another big corn week expected.  Nothing to date which suggests the US won’t hit export targets, although wheat needs a few solid weeks to close out May to make sure the no export reduction takes place.

 

Bottom Line: Expect firmer markets for the duration as traders grow concerned about planting progress, lack of rainfall in wheat areas and the constant fear of disruption out of the Black Sea.  If tensions continue escalating, one would think world wheat importers will hasten their move in diversifying suppliers.  Soybeans supplies remain incredibly tight, and the market doesn’t seem convinced the current amount of South American soybean imports will do the job of alleviating said tightness.  Scales are tipped toward the bulls at the moment.

 

Good Luck Today.

 

4-28 precip

 

 

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.