11/12/2014 Morning Comments

Good Morning,

 

Outside Markets as of 7:00am: Dollar Index up 0.0490 at 87.5800; Euro down 0.00020 at 1.24650; S&P’s are down 7.25 at 2029.25; Dow futures are down 64.00 at 17,505.00; 10-yr futures are up 0.32%; Gold down $2.10 at $1160.90; Copper is up $0.50 at $303.80; Crude Oil is down $0.67 at $77.27; Heating Oil is down $0.0097 at $2.4590; Paris Milling Wheat is up €3.75 at €174.75/MT.

More Russian military equipment moving into Eastern Ukraine this morning, and Ukrainian forces are said to be readying themselves for combat.  Currency moves in recent days would certainly warn against a continued deterioration in economic conditions of both countries as the Ukrainian Hryvnia fell to new lows against the Dollar at $15.8817. The Russian Ruble hit $46.39 this week, also a new record low.  The IMF has attempted to intervene, but an increasing number of analysts have suggested Ukraine may have to default on its sovereign debts and restructure.  The implications would have far-reaching effects, especially to its farming sector.  The 30-yr mortgage climbed slightly in the latest week and is now sitting at 4.02%, just up from the 1-1/2 year low set the week of October 24th at 3.92%.

Pockets of flurries around the Midwest, but no concentrated moisture event seen the next 3-days.  The next bout of precip should fall as snow beginning Friday into Saturday for the WCB and Central Plains states.  Totals are expected to remain fairly light, although heavier totals will be seen in KS where as much as 0.30” of water equivalent is forecast.  That snow will be needed given the cold temperatures facing the nation’s winter wheat this week.  The image at the bottom of the page shows the minimum temperature forecast for tomorrow morning with below zero expected across the Northern Plains, while single digits get down into KS.  20’s are seen for SRW country.  Note the snow cover map shown yesterday with no snow cover for anything south of South Dakota, and no snow cover on anything in the SRW belt as well.  Extended maps keep a drier, cooler bias in place the next 15-days.

 

It’s hard to describe the volatility witnessed in soybeans and soymeal yesterday, let alone try to explain or analyze it.  The buying interest has remained through the evening session, however, and the complex is one again leading us higher this morning.  There appears to be several elements at work, including Brazilian soybean planting and export expectations out of South America, a speculative community with an interest in getting long soybeans and especially soymeal, government estimates and the aforementioned railroad performance.  There is no doubt soybeans and meal are helping to pull grains along for the ride, however, the maps shown the last two days do raise concern about the winter wheat crop in the United States.  Along with several other exporting countries being down y/y on production, there are at least a few reasons for wheat to remain elevated.  This is still a soy complex show.

For starters yesterday, Brazil’s state forecaster, CONAB, issued their latest Brazilian soybean crop estimate of 90.5MMT, down from 90.6MMT previously.  This compares with the USDA’s latest estimate of 94MMT, which is 128mbu larger.  Add in the fact Brazilian soybean planting progress released yesterday showed 46% planted vs. 59% last year and 60% average.  Progress is picking up markedly, having jumped 24% in the last week alone now that rain has finally started to arrive.  Still, however, it isn’t likely that Brazil will have the export offerings in January and February they did last year which allowed them to record export loadings the first 3-months of the year.  To be more specific, Brazil exported 222,000MT of soybeans in January, 4.262MMT in February and 7.750MMT in March for a combined total of 12.234MMT.  This would compare with 7.45MMT in 2012/13.  While some of the improvement was likely infrastructure, it looks as though export offerings will be reduced off of last year during JFM.  Using a bit of artistic license, it isn’t difficult to axe 3.0-3.5MMT off of exports out of Brazil which equates to 110-130mbu.  This is likely some of the increased strength of the US export program this year.

Before straying from South America too far, it is worth noting Brazilian and Argentine corn plantings which are also running a bit behind schedule.  Brazil has planted 66% of their crop as of 11/7 vs. 54% the week before and 85% in 2013.  Argentine corn planting progress was estimated at 35% complete vs. 34% the week before, 37% in 2013 and 57% average.  Argentina has not begun reporting soybean planting progress, although progress is said to be occurring.

Switching to premiums, soymeal premiums just aren’t breaking which is a large part of the catalyst for higher prices.  The Surface Transportation Board will update its weekly railroad performance after the close, and the details will be scrutinized.  Still, Gulf offers were pegged at +80Z for Nov/Dec going home last night.  This despite the fact South American premiums have dropped $20-25/MT over the last week.  The job of spreads in times like these is to rally to the point cash selling takes place and premiums cool.  That isn’t happening in the US, but is certainly is in SAM.  FOB Brazilian soymeal pellets were pegged at +15/18Z last night vs. +38Z a week ago.  Argy pellets were seen at +19Z vs. +29Z a week prior.  It still doesn’t work to bring SAM soymeal into the US apparently, because it seems nothing will cool the insatiable demand for meal in the US.  The SMZ/SMF is firmer this morning at +18.50, up +2.00.

The last note on the soy complex, it is interesting that the updated readings of the Optimism Index from Sentiment Trader showed soybeans still well in pessimistic territory at 28% despite the $1.70 rally off the lows.  The chart below illustrates the still negative light being painted by this sentiment indicator.  COT data shows the soybean fund short being covered almost completely as of Friday, and will certainly be covered by this Friday’s data, but for whatever reason, this measure is still reading negatively towards soybeans.

Switching to wheat, and as covered above, the US winter wheat crop is facing the coldest temps of the season without much snow cover in either wheat belt.  Winterkill is incredibly difficult to assess until the grain breaks dormancy next winter, but that doesn’t mean people won’t speculate toward the effects.  Add in the fact CIF-SRW bids improved 5c yesterday to +105Z for Nov/Dec and the incredible strength witnessed in the WZ/WH spread, and lift under wheat futures isn’t difficult to come by.  Funds are short and might be rolling some of their position to March, but index funds are rolling via the GSCI and that would add spread pressure, so simply a roll isn’t explaining the strength.  Trade to -2.50c overnight is the highest trade since March 20th, but no big changes to deliverable stocks or cancellations of delivery tickets to mention.  There are more vessels showing up in the PNW lineup to load wheat or wheat/combo boats, although this is an ancillary factor. Unlike corn, wheat actually has firmer cash and spreads to its credit, on top of a managed fund short position.  This shouldn’t go unnoticed by corn traders.

Lastly, thought it worth pointing out the remaining 44 delivery tickets of ethanol were canceled out of Argo, IL last Friday, leaving zero outstanding.  This helps to partially explain the spread strength in ethanol futures, as well as the outright futures appreciation.  Ethanol margins remain the best since mid-September and are adding a bit of support under corn futures.  Weekly production and stocks will be watched closely this morning.

 

Bottom Line: LaSalle Street is lined with people who have tried to call a top in soybeans and meal, so I’m not sure one wants to step into that business yet.  The trends are up on all applicable scales and until futures and spreads break cash, it looks like the path of least resistance will continue to be up.  Winter weather and its effect on wheat will need to be monitored this week, even if damages won’t be clearly assessed for months.  Corn has very little driving force right now, and is simply along for the ride.

 

Good Luck Today.

 

NOAA Min Temp 11-12 Soybean Optix 11-11

 

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.

11/11/2014 Morning Comments

Good Morning,

 

Outside Markets as  of 6:30am: Dollar Index up 0.0760 at 87.8890; Euro down 0.00030 at 1.24220; S&P’s are up 3.50 at 2037.50; Dow futures are up 28.00 at 17,581.00; 10-yr futures are down 0.06%; The Nikkei closed up 2.05% at 17,124.11; The DAX is up 0.31% at 9,380.91; The IBEX-35 is up 1.24% at 10,400.50; Gold is down $4.60 at $1155.20; Coper is down $2.45 at $299.55; Crude Oil is down $0.19 at $77.22; Heating Oil is down $0.0218 at $2.4475; Paris Milling Wheat is up €0.50 at €170.75/MT.

Mostly better equity markets this morning after the S&P 500 hit a fresh record high during yesterday’s session, and there is little economic data to focus on today.  Earnings season rolls on this week, but many companies have already released results and of those which have, 80% have beat earnings estimates and 60% topped sales predictions according to Bloomberg.  Volatility in the Russian Ruble continues with the country on the brink of a financial crisis according to some pundits.  The Ruble continues to sit at record lows against the US Dollar as sanctions from Western countries take full effect.

The first major winter storm continues to roll across the Upper-Midwest and Great Lakes this morning with a considerable amount of snow having already fallen yesterday across the Dakotas and Minnesota.  The map at the bottom shows snow depth as of this morning.  The frigid cold which accompanied the snow looks to remain in place the next 15-days with some areas in MN and the Dakotas not rising above freezing the entire time, marking the longest streak during the month of November in decades.  Following the current moisture, the Midwest looks to be mainly dry the next 7-days, and extended maps from NOAA keep that trend in place through November 24th.  Above normal precip will be seen in the Rockies West.  The cold weather and recent snow will likely slow the movement of grain, and could bring an early close to the upper-Mississippi River.

 

Tepid overnight markets following yesterday’s USDA report which saw high volatility in the moments directly following the report’s release.  After the dust had settled a bit, corn maintained strength throughout, carrying wheat along with, but the soy complex eventually succumbed to selling pressure and closed down double digits. There isn’t much for follow through selling pressure this morning which looks to be the market acknowledging the fact that while supplies of soybeans and meal are plentiful at year end on paper, the nearby pipeline is hardly well stocked.  Coupled with the fact US farmers aren’t in a hurry to sell anything through year end, plus the recent cold snap across the Midwest, and support isn’t hard to find under cash and spreads.  Yesterday didn’t change the narrative of big paper supplies, but near-term logistics are playing as big of a roll as anything.

Before digging into the meat of the report, a couple quick notes worth sharing.  First off, the CME Group raised spec and hedge/member current and initial margins on soymeal by another 25% after yesterday’s close.  This followed the CME Group’s 33% hike on October 29th.  The rise in volatility hasn’t gone unnoticed, so it will be interesting to see if this causes any additional margin related selling.

Secondly, I think it’s worth noting the sharp declines in rail freight the past couple of weeks, despite the fact rail road performance hasn’t improved.  Spot BNSF equipment going home last night was bid around $200/car through December vs. $1500/car a week ago and $3000/car a month ago.  UP freight was bid $100/car last night, $200-$500 a week ago and $1200/car a month ago.  According to the Surface Transportation Board’s weekly performance report from last week, the BNSF had 6,793 grain cars on outstanding order, the majority of which are in North Dakota. This was an increase w/w from 5,950 cars.  The UP’s car orders increased from 6,289 2-weeks ago to 8,845 cars, despite the fact rail freight went down. The logical connections would seem to be crude oil below $80/bbl is finally starting to impact power demand out of the Bakken.  The cheaper freight costs will weigh on destination basis a bit, but so far isn’t causing a sharp downturn.  The cheaper car costs should eventually make their way to the farmer, but until performance improves, elevators will still have a difficult time taking advantage.  Eastern railroads still have considerable backlogs and the winter weather won’t help.

 

Now on to the report.  For a November WASDE, the report actually offered some deviation from trade estimates, especially with corn.  The USDA cut the national average corn yield by 0.8bpa to 173.4bpa, leaving harvested acres unchanged at 83.1 million, which dropped production by 68mbu.  At 14.407bbu, the crop is still a record by 482mbu over last year.  In addition, corn demand was increased by a net 5mbu by way of an increase in ethanol demand (+25) and a decrease in FSI (-20), which combined with the supply cut dropped ending stocks by 73mbu to 2.008bbu.  The USDA’s ending stocks came in around 120mbu below the average trade guess which marked the 8th time in the last nine years the USDA has published corn production under the average trade guess.  Analysts will now more than likely be penciling in another small cut to the national corn yield for the final production report in January.  The troubling thing for the corn market has been exports.  Export demand the last several weeks has slipped notably with total commitments now down 12% from a year ago while the USDA is currently penciling an 8.7% decline y/y.  Exporters need to start selling corn, or the balance sheet risks giving back any supply cut by way of reduced demand.  Many analysts are using an export figure around 1,550-1,600mbu vs. the USDA’s current 1,700bmbu.

While still on the subject of corn demand, it is worth pointing out the surge in ethanol spreads as of late.  The front-month ethanol spread closed trade at +0.122c for the ACZ/ACF, a fresh contract high and up sharply from trade around even money in late-September.  The entire forward curve of the ethanol market has rocketed sharply higher as stocks levels have declined, but comes despite the continued energy sector selloff.  There is likely some export business occurring, not to mention the poor railroad performance is sure to be impacting the movement of finished product to refiners.  The bid under ethanol prices and spreads should keep margin structures solid for ethanol plants, but the RBOB/Ethanol spread has narrowed to its slimmest spread since April at just 18.0c/gln.  The RFS needs to be met, but demand above and beyond those requirements needs to be monitored via that spread.

Switching gears to soybeans, the USDA increased the national average yield by 0.4bpa to 47.5bpa, kept harvested acres unchanged at 83.4 million, which inflated total production by 31mbu to 3.958bbu.  The production increase was offset by a 10mbu increase to crush (1.780bbu), and a 20mbu increase to exports (1.720bbu).  The supply and demand changes perfectly offset to leave carryout unchanged at 450mbu, which was above the average trade guess of 442mbu.  The supply changes are what they are, but I believe the demand estimates are still too low.  Starting first with crush, the USDA made a change in the right direction, but given the record soymeal export commitments of 6.270MMT, record crush margins, and solid poultry and pork feeding margins, it is quite conceivable crush pushes closer to 1.800bbu.  This level was achieved in both the 06/07 and 07/08 crop years despite much smaller soymeal exports and crush margins much lower than achievable this year.  Poor logistics may limit crush activity during the first quarter, so it will be imperative logistics smooth December forward.  On exports, even with the increase to 1.720bbu, we have still sold 76% of the marketing year projection, above last year’s record level of 74%.  In addition, we’ve shipped 28% of the projected total, up from last year’s 26% for this week.  Add in the fact the delayed Brazilian planting season will limit export offerings during January and February, and the US program should keep chugging along.

Wheat changes were minor with harvested area being dropped 100,000 acres to 46.4 million, while the national average yield was reduced 0.1bpa to 43.7bpa.  This cut supply by 10mbu to 2.785bbu and with unchanged demand estimates, cut carryout by a like amount to 644mbu.  This is still up 54mbu from last year, but the second smallest since 2007/08.  More focus was probably given to the world changes which saw world wheat production reduced 0.2% from October to a still record 719.9MMT.  Changes of note included Australia’s production being cut 1MMT to 24MMT, although this is still 1-3MMT too high according to boots on the ground.  Kazakhstan was also reduced by 0.50MMT to 12.0MMT, but this was offset by an increase in the European Union to 155.4MMT.  Still plenty of wheat in the world, but quality remains a challenge as does getting wheat where it needs to be.  Similar to corn, US wheat exports remain at risk for a cut on the next WASDE report despite no change today. Export sales in two of the last three weeks have missed the level needed to hit the USDA’s current marketing year objective, and last week’s sales of 9.8mbu were the smallest in nine weeks.  The trend needs to change, even though basis at the Gulf and PNW doesn’t suggest any untoward change to export pull.  Spread strength during Monday’s session was a feature at all three wheat exchanges with the WZ/WH jumping +2.75c at the high to -9.00c, which was the highest trade since April 3rd, 2014.  The KWZ/KWH and MWZ/MWH both posted outside reversals higher, engulfing Friday’s trade for a positive close.  It is unclear at this juncture if this spread strength was one-off or not, but bears watching in coming sessions.

Crop progress was also reported yesterday afternoon with the USDA pegging corn harvest at 80% vs. 82% a year ago and 80% on the 5-year average.  Given the snowstorm which has moved into the upper-Midwest and Great Lakes, little to no progress is likely to be made through next Monday.  Of the states impacted by the winter weather, WI still has 50% of its corn left to pick which is 18% behind average.  ND is 73% harvested vs. 70% average, MI at 43% vs. 63% average, and IN at 71% vs. 80% average.  Most other states are close to average progress, but again little headway is likely to be made the next 4-5 days.  Soybean harvest was estimated at 90% complete vs. 90% a year ago and 91% average.  States lagging averages include IN at 85% vs. 92% average, KY at 64% vs. 80% average and MI at 85% vs. 91% average.  Winter wheat planting was listed at 93% complete vs. 93% average, with IL still lagging at 84% complete vs. 91% average.  Emergence was put at 83% vs. 79% average with IL at just 52% vs. 74% average.  Most other states were near average.

 

Bottom line: Quiet choppy markets look like the order today as we continue to monitor basis and spreads for an improvement in export demand for both corn and wheat.  Farmers have been reluctant sellers, and while eventually bearish, can prop things up in the short-term.  South American growing weather is improving, even if export offerings will be limited until February.  Lots of supply on paper, but dislocation remains an issue.  Volumes are likely to remain depressed through the end of the year with no major fundamental inputs from the USDA until January.

 

Good Luck Today.

 

Snow Depth 11-11

 

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.

 

11/7/2014 Morning Comments

Good Morning,

 

Outside Markets as of 6:15am: Dollar Index up 0.0160 at 88.0240; Euro up 0.00050 at 1.23950; Russian Ruble off 3.8-4.0% to fresh all-time record lows; S&P’s are up 1.25 at 2029.00; Dow futures are up 14.00 at 17,518.00; 10-yr futures are down 0.10%; The Nikkei closed up 0.52% at 16,880.38; The DAX is down 0.31% at 9,348.59; The IBEX-35 is down 1.18% at 10,141.10; Gold is up 0.90 at $1143.50; Copper is down $0.05 at $301.70; Crude Oil is up $0.28 at $78.19; Heating Oil is up $0.0158 at $2.4745; Paris Milling Wheat is down €0.50 at €165.25/MT.

The focus of financial markets this morning will definitely be the October employment report which is expected to show job creation of 232,000 and an unchanged unemployment rate of 5.9%.  Wednesday’s ADP private payroll report showed 230,000 jobs gained, and was slightly stronger than the market’s estimate of 220,000.  Job growth since February has averaged 237,000 which is better than the pre-recession period of 2004-2006 which showed a monthly average of 184,000.  The unemployment rate is still 0.9% above the average level of 5.0% seen from 2004-2007.  Of course, the unemployment rate is skewed a bit as the labor force participation rate has continued to drop, hitting a fresh 36-3/4 year low of 62.7% in September.  The smallest proportion of people are currently in the workforce since 1978.

Fairly open Midwest weather this morning with the exception of s few scattered showers and flurries in ND/MN.  Some moisture will move back into the Northern Plains on Monday, possibly as snow, with MT/SD seeing the best chances of precip around 0.20-0.50”.  This same system will work east and north later in the week to impact the Great Lakes region with heavier precip once it gets that far.  Otherwise, most areas of the Midwest are expected to remain dry the next week which will aide in the final wrap up of harvest.  The plunge into winter looks like it is locking into place in the extended maps, however, with sharply below normal temps seen for everything east of the Rocky Mountains.  The trend will remain in place through November 20th.  Dry weather is expected to accompany the cold temps, so no snownami’s just yet.

 

Mixed Ag markets this morning as we get set to tie a bow on another trading week which will see several commodities bring their weekly winning streaks to a close.  For the week-to-date, December corn is down 7.5c, December Chicago wheat is down 17.0c and January soybeans are down 16.25c as the past 5-week rally is consolidated.  Wheat has gone from a follower for most of the last week to ten days to the price weakness leader the last couple of sessions as world values continue to undercut US prices.  There are plenty of issues with wheat around the globe, but winter wheat in the northern hemisphere is going into dormancy, and will take a back seat to row crops the next several months.  Southern hemisphere produces are beginning harvest, but reports suggest supplies won’t be quite as small as originally feared.  Milling wheat vs. non-milling wheat will continue to be a cash market function.

Soybeans and soymeal have bounced back from their early week weakness, thanks in part to still stout domestic and export premiums on soymeal.  As this week’s round of rail transportation statistics from the surface transportation board has shown, rail performance is improving slightly, but is still atrociously bad.  The two railroads in question are the CSX and Norfolk Southern, with average grain train speeds improving on the CSX to 18.0mph from 15.4mph the week before.  Dwell times on the CSX worsened, however from 22.8 hours for grain trains to 24.8 hours, and is by far the slowest segment on their system.  The Norfolk Southern saw train speeds slow from 17.7mph to 17.3mph, but saw dwell times improve from 63.29 hours to 51.23 hours.  However, their grain train dwell times at 51 hours are three times longer than for coal, six times longer than for ethanol and twice as long as all other trains on their system.  There remains a 1,385 car deficit to fill agriculture orders on the Norfolk Southern.  Until we see these performance measures improve markedly, support should remain under premiums and spreads, and therefore futures.

In the export sales report yesterday, we did see cancellations of 306,800MT out of the unknown destinations category, although this offset new sales to put net sales for the week at -123,600MT.  Much more than a few cargoes will have to be canceled before this year’s meal sales slow enough to be on pace with last year’s, and before it will help ease the incredibly tight domestic situation.  Soybean sales on the other hand continue to surge with another 1.610MMT sold which were above market expectations, and puts the three week average at 61.7mbu.  Total commitments are now up 7% from a year ago vs. the USDA expectation for just a 3% increase which should mean a bump on the November WASDE.  US exporters have already committed 77% of the marketing year projection, and we’re just 7-weeks into the marketing year, which is a new record high.  Plenty of support for soybeans at $10.00.

The wheat sales continue to disappoint, and is undoubtedly part of the futures weakness.  Sales at just 9.8mbu were below expectations and marks the lowest sales in nine weeks.  Even more troubling is the fact June-October wheat export sales have averaged just 15.8mbu which is the lowest average weekly sales total through the first five months in the last 30-years.  Weak currencies in the EU and Black Sea are contributing to the solid export sales out of that region, even if quality is less than desired.  The US is struggling with demand to routine customers, let alone to the swing destinations of MENA which are the sales which make or break an export program.  Without a pickup in export sales, coupled with what should be a total lack of a feed wheat program given corn supplies, wheat ending stocks look like they’re set for an increase in coming months.  This aside from the fact we are importing feed wheat supplies from the UK.

One other note on wheat, much has been made of the poor conditions with which Russian wheat is entering dormancy after bouts of dryness and now cold temperatures.  It should be noted, however, that plantings are up sharply from a year ago which should offer at least some buffer.  Russian winter wheat seedings were reported at 16.4 million hectares vs. 14.5 million at this time last year.  The 13% increase in plantings should be enough to offset winterkill fears until we can better assess crop quality next spring.

 

Bottom Line: Not much else to discuss as we await updated balance sheets on Monday.  Trade expectations are looking for a tighter soybean carryout on higher demand, while corn is seen with a higher carryout due a slight yield bump.  Hard to argue with either, although the trade has a history of overestimating corn production on the November WASDE.  With harvest drawing to a close, cash markets and spreads will be relied upon for keeping grain moving, a job which could prove difficult with a farmer unhappy with the price.  Funds are much less short than they were 3-weeks ago.

 

Good Luck Today.

 

CPC 6-10 11-7 CPC 8-14 11-7

 

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.

 

 

 

11/5/2014 Morning Comments

Good Morning,

 

Outside Markets as of 6:20am: Dollar Index up 0.5830 at 87.5670; Euro down 0.00780 at 1.24820; Japanese Yen down 0.95%; Aussie Dollar down 1.42% at 0.85930; S&P futures are up 10.00 at 2015.00; Dow futures are up 73.00 at 17,378.00; 10-yr futures are down 0.11%; The Nikkei closed up 0.44% at 16,937.32; The DAX is up 1.28% at 9,284.06; The IBEX-35 is up 0.96% at 10,251.90; Gold is down $26.10 at $1141.60; Copper is down $4.20 at $297.65; Crude Oil is down $0.04 at $77.15; Heating Oil is down $0.0070 at $2.4357; Paris Milling Wheat is down €0.25 at €168.75/MT.

The midterm elections helped usher in a full Republican-led Congress last evening, setting the stage for a showdown during President Obama’s last two years in office.  Republicans now command a 52-45 majority in the Senate, and retained their majority in the House 235-157.  US markets seem mostly amiable to the new government.  Crude oil hit fresh lows for the move yesterday, touching $75.84 before recovering.  The threat of Saudi Arabia continuing to sell its crude oil at a discount to US consumers threatens to keep prices depressed for some time.  In the US today we’ll see the October ADP employment report which is expected to show an increase of 220,000, strengthening a bit from the 213,000 gain in September.  Friday’s full employment report is expected to show a 232,000 gain and an unchanged unemployment rate of 5.9%.

Moisture moving across the Northern Plains this morning with flurries/snow along the Canadian/ND border and showers in S-ND/SD.  Another wide band of showers is moving east across the southern plains and mid-south region, stretching once again this morning from TX to S-OH.  The map at the bottom of the email shows precip returns for the week-to-date with the entire state of TX receiving a general 1.00” rain which should benefit recently planted HRW, although may be delaying the last bit of fall harvest.  Rains will continue in the aforementioned areas the next couple of days, but the central and western cornbelt should be mainly dry after this morning, allowing for a quick wrap up of harvest.  Temperatures still look to cool off markedly beginning November 10th for the Midwest with much below normal temps.  Moisture will remain normal/below.

 

More follow through selling led by the soy complex, and chiefly soybeans, this morning, adding to the week-to-date losses.  After adding 66c last week, January soybeans are down 52c in the three days to this morning as the capitulation type buying witnessed last week gives way to a bit of farmer selling, a bit of large spec selling and an overall setback ahead of the November WASDE reports which are expected to increase supply for both corn and soybeans.  Interestingly enough, and as noted yesterday morning, spreads aren’t onboard with a large scale puke of the recent soy complex gains, even if flat price charts might suggest otherwise.  The SMZ/SMF is trading at +17.70 this morning, well up from yesterday’s low print of +14.10.  The SF/SH is softer this AM, off 0.50c to -5.25c, and off from its Friday spike of -1.75c, yet there are still no deliveries against the SX, which suggests commercials still don’t see an excessive amount of soybeans in the country.  How much farmer selling takes place on the remaining 1/3 of the corn crop and 15% of the soybean crop will be critical to spread and basis direction going forward.  Farmers have done a pretty good job of not selling excess inventories during harvest, so far.

Rumors continue to swirl about US meal cargoes being canceled or switched to South America with the number though to be around 5-6.  No cancelations have been reported in the USDA’s daily reporting system, and basis levels at the Gulf and domestically don’t suggest widespread cancellations either.  As noted above, meal spreads have witnessed a correction, but not one consistent with large scale export cancellations.  Export sales tomorrow morning will be scrutinized closely for any smaller tonnages which may have been switched or canceled.

Informa Economics was out yesterday with their latest assessment of the US row crops, pegging the US corn crop at an average yield of 174.4bpa vs. the USDA in October at 174.2.  Total production is seen at 14.493bbu vs. the USDA at 14.475bbu.  Their soybean yield is 47.9bpa vs. the USDA last at 47.1bpa with total production seen at 3.991bbu vs. the USDA at 3.927bbu.  Worth noting, and like the average trade guess, Informa over the last 10 years has been above the USDA’s November projections on corn 9 times and below just once.  On soybeans, Informa has been above the USDA 8 times, even once and below once.  So based on their track record alone, USDA could be coming in a bit below average trade estimates.  In their state-by-state data, Informa sees Illinois at a new state record of 202bpa, besting last year’s 200bpa, while IA is seen at 183bpa vs. 185bpa last year.

In their World Crop report, Informa had several interesting changes including in wheat where they saw Argentina’s wheat crop down 900,000MT to 12.6MMT, Kazakhstan down 300,000MT to 12.2MMT and Australia down 1.9MMT to 22.0MMT.  Informa left Russia unchanged a 60MMT vs. private estimates around 57-58MMT, and increased EU-28 by 724,000MT to 154.7MMT and China by 700,000MT to 125.6MMT.  For the coming growing season, Informa increased Argentina by 500,000MT to 56MMT and Brazil by 500,000MT to 93MMT despite most private analysts moving the other direction.  Corn changes included EU-28 production rising 1.484MMT to 72.5MMT which would be a new record and in-keeping with the overall trade, while Brazil for the coming growing season was decreased 900,000MT to 69.7MMT.

Sticking with the global view, South American planting progress was updated yesterday and continues to show widespread delays in Brazil.  As of 10/31, Brazil was 22% planted vs. 12% last week, 44% last year and 46% average.  Relative to averages, the states most behind include Parana, Mato Grosso, Sao Paulo, Minas Gerais and Santa Catarina.  Brazilian corn planting progress was pegged at 54% complete vs. 46% last week and 77% in 2013.  Argentine corn planting progress was reported at 34% complete, vs. 31% in 2013 and 52% average.  Argentina has yet to report on soybean planting progress.  Brazil has been battling dry weather which has kept farmers from planting, while Argentina has been battling excessive moisture which has also been impacting wheat quality.  Brazil weather has straightened out, and should allow progress in coming weeks, but should limit export availability for 2-3 weeks after last year.  This will be important for export loadings out of the US as well as basis and spread strength.

Switching to corn, the weekly end user margin recap from www.rjomrt.com shows mostly steady profitability in the last week with estimated spot ethanol margins seen at $0.97/gln vs. $0.98/gln last week and $1.32/gln last year.  Broiler crush margins are seen at 84.42c/lb vs. 85.89c/lb last week and 67.09c/lb last year.  Hog board crush margins are seen at $111.95/hd vs. $116.06/hd last week and $104.03/hd last year.  Cattle board crush remains abysmal at $1.32/hd vs. $93.31/hd last week and $139.14 last year.  The 5-yr seasonal cattle crush sits up at $160.00/hd highlighting how high feeder cattle prices are relative to live cattle prices as well as the rally in corn prices the last 4-5 weeks.

One last note on wheat, it was interesting when looking through deliverable stocks data to see a decent draw in Chicago deliverable grades, down 1.04mbu on the week to put total stocks at 9.00mbu vs. 10.040mbu last week and 10.757mbu last year.  Keeping track of deliverable grades in SRW wheat this year will be very important given the higher percentage of off-grade supplies and the premium milling wheat should carry.  This will undoubtedly have an effect on calendar spreads, especially supplies in Toledo and NW-OH which have Laker access.  The WZ/WH has risen the last several sessions to an o/n high of -11.25c, the highest trade since 10/17.  The WH/WK has seen a similar response.

 

Bottom Line:  Hard to argue with the weaker price action this week as markets calm down a bit from the panic led buying last week.  Rail transportation hasn’t improved markedly in the east, although the BNSF and UP have seen cheaper rail costs which are indicative of improved performance. Unfortunately, however, there is no export corn program off the west coast to take advantage of.  The November WASDE will be important, although farmer movement on the last 25-30% of the crop could be just as important.  Commodities as a whole are facing an undertow that will affect Ags.

 

Good Luck Today.

 

RFC 11-5

 

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.

 

 

11/4/2014 Morning Comments

Good Morning,

 

Outside Markets as of 6:25am: Dollar Index down 0.1590 at 87.1440; Euro up 0.00250 at 1.25190; Russian Ruble is off another 1.25%; S&P’s are down 3.25 at 2007.75; Dow futures are down 17.00 at 17,268.00; 10-yr futures are up 0.20%; The Nikkei closed up 2.73% at 16,862.47; The DAX is up 0.35% at 9,283.95; The IBEX-35 is down 0.20% at 10,353.20; Gold is up $1.80 at $1171.60; Copper is down $1.20 at $305.30; Crude Oil is down $2.22 at $76.57; Heating Oil is down $0.0510 at $2.0668; Paris Milling Wheat is down €3.00 at €169.00/MT.

The focus this morning has to be on the energy sector which finds most of its components down over 2.00% after a report from Saudi Arabia said the kingdom is cutting its prices for customers in the US in an attempt to stifle shale oil development.  Oil analysts have said this doesn’t bode well for OPEC as Saudi Arabia’s decision to keep prices low will hurt the economies of other countries inside the cartel, and could raise animosity towards the nation.  At the lows this morning, crude oil touched $75.84/bbl, the lowest spot trade since October 4th, 2011.  The chart in yesterday’s commentary highlights the breakeven price for a barrel of crude oil at various shale plays around the United States.  The market is estimating today’s September US trade deficit to expand slightly to -$40.2 billion from -$40.1 billion in August.

Large band of showers stretching from W-TX to N-IN this morning, and bringing soaking rains to areas in between.  The 5-day forecasted precip map is shown below with heavy rains expected the next 3-4 days across TX/OK/AR and parts of the mid-south.  This may impact very late corn harvest in TX and late soybean harvest in AR/MS/TX, but shouldn’t push far enough north to really impact the central corn belt.  Extended maps from NOAA suggest a cooling trend for the Midwest with well below normal temps during the 6-10 day and 8-14 day periods.  Could be our first legitimate cold snap of the season.  Precip looks as though it will remain on the below normal side for the majority of the Midwest.

 

Weaker prices again this morning as Ag markets see follow through pressure after yesterday’s whipsaw session which ultimately left row crops lower and wheat unchanged to better.  Soymeal is certainly under pressure, as are soymeal calendar spreads, but soybeans and corn are weaker than meal at this hour which begs the question whether this is recently added longs puking or whether this is the meal tightness actually being resolved?  Ramp up to the November WASDE begins this week with private estimates being kicked out each day, and the general consensus seems to be towards a slight bump in soybean and corn production.  History is worth paying attention to as it shows USDA actual corn production coming in below the average trade guess in 7 of the last 8 years, despite the tendency for USDA to raise corn yields in November after raising them in both September and October.  On soybeans the results are much more mixed with USDA soy production being higher than the average trade guess four times out the last eight years, lower three times and unchanged once.  USDA’s estimate of demand for the November WASDE relative to final demand on corn has been very mixed, but they have consistently underestimated soybean demand on this month’s report.  Over the last seven years, six times the USDA’s November soybean demand estimate has been too low, and this year looks like it could be as well.

Crop progress out yesterday afternoon with corn harvest coming in at 65% vs. 71% last year and 73% on the 5-year average.  This was about 5% ahead of expectations, although northern tier states have plenty of crop to harvest yet.  ND is 48% harvested, MI 31%, OH 52%, PA 51%, WI 33% and a host of states right around 60%.  Soybean harvest was estimated at 83% complete vs. 85% last year and 83% on the 5-yr average.  States with significant progress left include MO at 64%, KY at 51%, NC at 30%, OH at 72%, IN at 73% and MI at 71%.  The rains this week could hinder late soybean harvest efforts.  Winter wheat conditions were unchanged at 59% vs. 63% a year ago with HRW states generally seeing declines while SWW states saw improvements.  SWW conditions in the PNW remain sharply below a year ago with WA at just 26% G/E vs. 80% and OR at 39% vs. 73% last year.  Still the US winter wheat condition index remains above both the 5-yr and 10-yr averages thanks in large part to decent HRW conditions which have been lacking more years than not.  IL/IN/MO still have a fair amount of acres left to seed at 69%, 82% and 56% planted, respectively.  IL is only 36% emerged vs. 62% average.

While old news this morning, worth noting the record shattering export week for soybeans with 101.8mbu shipped in the week ended October 30th, besting both expectations of 68-77mbu and beating the single week record of 87.8mbu from last year.  Shipments to China came in at 78.6mbu, and were being loaded out of every possible port of the United States including the PNW, US Gulf, Atlantic Coast, North Texas, East Gulf coast and St. Lawrence Seaway.  Shipments for the marketing year to date now total 404.5mbu, up 17% from a year ago and leave ample room for the USDA to increase their soybean demand estimate.  Corn and wheat shipments were below expectations, but almost had to be given the sole focus on shipping soybeans at this time.

As noted above, meal spreads are seeing weakness this morning with the SMZ/SMF off $1.60 at $14.90, and well off the 10/29 highs of $26.10.  There continue to be no soybean deliveries against the November contract, and the SX/SF has kissed even money this morning in response.  The SF/SH jumped to -1.75c yesterday, but has backed off to -5.00c this morning.  Not much change to Gulf or PNW soybean bids yesterday, although corn bids off the PNW continue to ease lower with spot shuttles showing +82Z while December sits at +90Z and January at +102H.  An 8c carry in destination export values for one month’s time isn’t bullish.  HETX values remain depressed as well at +75Z spot and +80Z for December.  Shuttle freight reflects same with BNSF and UP cars less than week ago values.  The drop in oil price should slow demand for cars out of the Bakken and help keep freight costs lower.

 

Bottom line: Charts have taken on a negative tone in wheat and soybeans, while corn hasn’t done a significant amount of chart damage yet.  Specs have done a large amount of buying in Ags as of late, and may have pushed the largest amount of short covering we’re going to see.  Focus will shift to the USDA estimates next week, even if it isn’t going to be the final word on corn or soybean supplies and demand.  Producers have been given a big marketing opportunity during gutslot harvest.  Has it been used?

 

Good Luck Today.

HPC 11-4

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.

 

 

11/3/2014 Morning Comments

Good Morning,

 

Outside Markets as of 6:40am: Dollar Index up 0.2320 at 87.1490; Euro down 0.00300 at 1.25000; The Yen is off 1.25% and the Russian Ruble is down 3.40%; S&P’s are down 3.75 at 2007.75; Dow futures are down 38.00 at 17,273.0; 10-yr futures are up 0.07%; The Nikkei closed up 4.83% at 16,414.00; The DAX is down 0.56% at 9,274.86; Gold is down $0.10 at $1171.50; Copper is up $1.80 at $306.50; Crude Oil is up $0.34 at $80.87; Heating Oil is up $0.0127 at $2.5236; Paris Milling Wheat is up €0.25 at €172.50/MT.

Two sided equity trade around the world last night as Asia opened up sharply higher, led by the Nikkei, on the still surprising news the Bank of Japan will expand its monetary stimulus efforts by 10 trillion yen.  Stock have slipped lower, however, as data showed manufacturing data in the Eurozone slipped lower in October to 50.6 from an initial estimate of 50.7.  Of the countries in the poll, Ireland performed the best with a reading of 56.6, while France was among the worst performers with an index reading of 48.5. Dollar strength is a feature this morning with the basket rising to 87.4000 at the overnight highs to set a new high for the move and highest trade since June 7th, 2010.  Aiding in the Dollar strength is the Yen getting fleeced, and while not in the Dollar Index basket, the Russian Ruble is touching all-time record lows against the Dollar as well around 43.23 on capital flight tied to Western sanctions.

A band of showers is moving across South Dakota this morning with rain and snow mix, while NE/IA/MN/ND see scattered activity.  The next 3-days should see heavy rain activity fire up in the southern plains and southern Midwest down into the Gulf states with totals as high as 2.50” in OK, parts of TX and AR.  Some of this storm will reach up into the ECB, but the central and western belt should be mainly dry the next week.  Weekend NOAA maps are very divergent on temperature as split right down the middle of the continent we have much above normal temps to the west and below normal temps to the east.  The entire lower 48 should be on the below normal side for precip bit the temperature anomaly hangs around through the 8-14 day.

 

Weaker from the overnight open in the Ag markets as we begin the month of November.  At times, wheat tried to be independently positive, but the weight of row crops appears to be proving to much, even though Paris Milling Wheat is firmer this AM.  The real focus this week is going to be the tail end of harvest and the accompanying yield reports, cash soymeal and soybean basis, and the technical follow through after the five week winning streak corn, soybeans and wheat have posted.  As discussed last week, the support for the complex rally has its origins tied in the rail freight market, and those difficulties are unlikely to be fixed overnight.  Couple this with slow farm selling through the end of the year, and the heightened price environment could persist a bit longer.  There is plenty of supply, but available supply is an entirely different animal.  Private estimates for the November WASDE will also be out this week.

First on the topic of rail logistics, the Surface Transportation Board recently required all US rail roads to submit weekly performance reports centered around the movement of grains to track the various companies this fall.  As would be expected, the problems lie with two carriers in the east and two carriers in the west.  Beginning first in the east, the Norfolk Southern railroad showed average train speeds for grain units at 17.7mph for the week ended 10/29, which is about in line with the speeds of its other trains.  The dwell times are where NS really falls behind with average dwell times for grain train at 63.29 hours vs. all other unit trains at 44.12 hours and coal trains at 9.09 hours.  On the CSX, trains just don’t move that fast with average train speeds at 15.4mph for the last week vs. 16.2 for coal, 17.9 for crude oil and 17.6 for ethanol.  Dwell times on the CSX for grain trains averaged 22.8mph compared with the NS at 63 hours, but are still high vs. the other unit trains on their system at 19.2mph.  In the West, the BNSF has fairly decent performance indicators with grain train speed at 19.6mph and dwell times around 16.6 hours, but unfilled car orders number 5,950 with trains an average of 12.5 days late on placement.  3,509 of these unfilled orders are in North Dakota.  Train speed and dwell times are much, much lower for Crude Oil.  The CP railroad shows 2,993 car orders unfilled with 2,529 in North Dakota.  Car placements average 1.92 weeks across their system.

The point of the aforementioned is to highlight the serious issues facing grain movement at current and moving forward.  Also, these issues aren’t likely to be resolved in the next reporting week, meaning the support underneath our markets should persist.  What’s likely to manifest itself as we’ve seen earlier this year is higher destination basis and weaker origin basis paid to the farmer as rail freight eats out a bigger spread between the two. Watching soymeal and soybean basis for clues as to improving rail performance will be key in coming weeks.

Switching gears to the wheat market, it would appear the largest global wheat supply estimates for the year have been witnessed.  Late last week, production estimate were starting to be reduced for Russia, Kazakhstan and Australia by both private forecasters and USDA attachés.  In the case of Russia, the 14/15 wheat crop is generally seen down 1.0-1.5MMT from the USD’s latest estimate of 59.0MMT due to an onslaught of wet weather and snow in northern regions.  For the 15/16 crop, 46.5-50.0MMT estimates are being tossed around, well below this year’s crop, as dryness as poor establishment curb winter wheat seeding.  Kazakhstan has experienced similar finishing weather to Russia.  In Australia, boots on the ground are generally grouping the wheat crop around 21-22MMT vs. the USDA’s latest assessment of 25.0MMT.  Throw in the multitude of quality issues around the globe, and one can see how interesting protein and class spreads could get later this winter.  While on wheat, it will be worth watching Ruble weakness as this should continue to make Black Sea wheat more competitive into MENA destinations.  The next GASC tender will be watched closely.

Ethanol calendar spreads have been firming as of late with the ACX/ACZ pushing to a new contract high of +0.095c on Friday, a huge recovery from early October lows around parity.  Ethanol stocks have been drawn down significantly in recent weeks, while production has slowly rebounded due to a better margin structure.  Given static gasoline demand as of late, it likely means ethanol exports are on the up and up, especially as US ethanol prices have slipped below Brazilian sugar ethanol prices.  The improvement in margin structure should keep plants bidding for corn.

 

Bottom line: A little back and fill today as we reassess haves progress this afternoon, as well as the ongoing logistical complications with moving supply from origin to destination. Private yield estimates will be out this week in the ramp up to the November WASDE.

 

Good Luck Today.

 

WSJ Oil 11-3

 

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.

 

 

 

SRW & HRW Delivery Stocks Discussion

In recent weeks, there has been a fair amount of discussion about the forward curve of both the Chicago and Kansas City wheat markets, and calendar spread expectations moving forward.  While market conditions can and will change, the discussion below attempts to shine a bit of light on the subject, hopefully framing the conversation against the correct back drop.

 

Beginning first with SRW, it is worth noting the all-wheat stocks as of September 1st for the major SRW producing states of Illinois, Indiana, Ohio, and Michigan.  As one will quickly notice, the combined wheat stocks as of September 1st for the select states of 173.3mbu are the lowest since 2008, although in line with levels witnessed in the early 2000’s.  Still, wheat stocks are the lowest in six years.  More importantly, however, has been the composition of that wheat as of September 1st.

 

IL-IN-OH-MI Wheat Stocks 10-30

 

It has been widely known the soft red wheat crop experienced difficult finishing weather this past summer, resulting in less than desirable quality in a large percentage of the crop.  But where this has really been visible is with calendar spreads trading at less than 50% of full financial carry for the WZ/WH, WH/WK and WK/WN despite the stocks/use ratio sitting in excess of 50.0% according to the USDA’s latest assessment.  Yet, when digging through the most recent deliverable stocks data from the CME, one gets a clearer picture of just what is sitting in those delivery warehouses.  The first chart below shows total delivery wheat stocks of SRW as of 10/24.  As one will notice, total wheat stocks are on-par with last week and a year ago.  Individual elevators show changes week-to-week and year-to-year, but overall supplies are about even.

Total Delivery Wheat Stocks SRW 10-30

 

The next chart, however, breaks down deliverable supplies vs. non-deliverable supplies, and paints a much clearer picture of what the “supply of last resort” is actually comprised of.  As one can see from the chart below, the amount of deliverable grade SRW in delivery warehouses is down 14.479mbu from a year ago, or 24.4%.  What’s more concerning, however, is the fact non-deliverable supplies are up 16.052mbu, or 275% from a year ago.  Simply put, deliverable supplies meet quality specs and non-deliverable don’t.  If wheat doesn’t make delivery specs, it surely won’t meet milling specs or export specs, resulting in said bushels heading for feed channels or being blended off slowly with good quality wheat.  The higher incidence of vomotoxin in this year’s wheat crop is visible in the composition of delivery warehouse stocks.  Owning delivery warehouse certificates or owning futures spreads becomes more valuable therefore, as acceptable minimums have to be met.  This is not the sole reason SRW bids are firm or spreads have been firm, but it is definitely part of the foundation.

 

Deliverable vs Non-Deliverable SRW 10-30

 

Switching gears to HRW, the next chart below shows combined Kansas/Oklahoma/Texas wheat stocks as of Sept 1.  At 413.4mbu, they are the smallest since 2006, and only above 2006 by 1.2mbu.  They are the second smallest since 1996.  Further, as the last chart shows, deliverable supplies in CME warehouses in Kansas are 26.193mbu below a year ago, or 30.1%.  The CME doesn’t have historical data for deliverable supplies, but I’m assuming it would show a similar situation to Sept 1 stocks.

TX-OK-KS Wheat Stocks Sept 1 10-21

Deliverable Stocks of HRW 10-30

 

In essence, deliverable supplies, like mentioned above, are the supply of last resort.  In both SRW and HRW, deliverable grade supplies are sharply below a year ago.  In the case of SRW, the supplies of last resort contain a larger than normal percentage of non-deliverable wheat.  None of the aforementioned is the sole reason for inverted spreads, basis strength, etc., but it sets the stage against a much different background than most traders realize.  Throw in the fact Europe, Kazakhstan, Ukraine, Brazil and Canada all have quality issues of their own and one can see the supply of milling quality wheat is much different than the global supply of wheat.  This won’t affect futures’ direction, but it will affect spreads and basis.

Keeping in mind the aforementioned when analyzing the wheat futures and cash markets could prove worthwhile in the weeks and months ahead.

 

 

Good Luck Today.

 

Tregg Cronin

Market Analyst

Tregg.Cronin@halocommodities.com

www.halocommodities.com

@5thWave_tcronin

 

 

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

 

 

 

 

 

10/30/2014 Morning Comments

Good Morning,

 

Outside Markets as of 6:15am: Dollar Index up 0.2220 at 86.2130; Euro down 0.00620 at 1.25880; S&P’s are down 8.00 at 1964.25; Dow futures are down 57.00 at 16,867.00; 10-yr futures are up 0.07%; The Nikkei closed up 0.67% at 15,658.20; The DAX is down 1.39% at 8,956.69; The IBEX-35 is down 2.21% at 10,021.80; Gold is down $19.40 at $1205.60; Copper is down $3.70 at $306.75; Crude Oil is down $0.75 at $81.45; Heating Oil is down $0.0204 at $2.5031; Paris Milling Wheat is up €1.50 at €175.00/MT.

The FOMC coming out with a more hawkish stance than expected is grabbing financial media outlet headlines since the yesterday afternoon announcement, propelling the US Dollar near recent highs for the move.  The main surprise from the FOMC minutes was that the FOMC significantly upgraded its view of the labor market, which effectively means a rate hike will be coming sooner than earlier expected.  The quote from the minutes was “Labor market conditions improved somewhat further, with solid job gains and a lower unemployment rate.  On balance, a range of labor market indicators suggests that underutilization of labor resources is gradually diminishing.”  Unemployment claims this week are expected to rise 2,000 to 285,000.  The US Dollar hit 86.4520 overnight, the highest trade since 10/6 and just below the highs of 86.7460 on 10/3.  Commodities are under a fair amount of pressure this AM.

A small shower moving across S-IA/N-MO, and some flurries in N-MN/WI are all that grace radar screens this morning.  A mostly dry Midwest outside of ND yesterday, and it is expected to remain that way through Sunday before moisture moves into the southern plains and southern Midwest by Monday/Tuesday.  Totals as of this morning, put a general rain across the entire state of OK with anywhere from 0.25-1.50” falling.  N-TX/SE-KS/MO will also see moisture which should benefit recently planted winter wheat with harvest efforts in the final stretch.  Wednesday-Thursday the system moves south and east with the rains intensifying over E-TX/AR/ with totals reaching up to the 2.0” mark.  Should be welcome.  No huge changes to extended maps with above normal temps still forecast the next 15-days while moisture should be below normal in the west and normal/above in the east.

 

After months of negative price action, turning the screens on to green numbers has taken some getting used to.  Strength in the Ag markets was again persistent overnight, although both soybeans and soymeal are well off their overnight session highs.  Wheat and corn are once again going along for the ride this morning, with export sales later this morning watched closely for any demand implications.  As mentioned yesterday, traders continue to try and pin a top on the soy complex, but the underlying reasons for the price strength aren’t going away anytime soon.  The supply of soybeans is as large as it’s ever been, but the eastern corn belt is finding out what the west has known for months/years: the US railroads aren’t equipped to handle the volume they’re trying to.  With back-to-back record harvest, surging domestic crude oil production, and a host of other industry needs all commanding power and freight, their simply isn’t enough power to go around.  Until the bottlenecks straighten out, or enough product gets imported from other origins, the hot cash markets will remain and futures will retain underlying support.

Before wading into anymore analysis, it is worth noting the CME Group did raise margins on soymeal futures by 33% to $2200 initial and $2000 maintenance for specs and to $2000 for hedge/members.  CME Group increases margin requirements during times of increased volatility and drops them in times of depressed volatility.  Occasionally, an increase in margins can spark a bit of a selloff as participants reject the idea of posting more margin for the same amount of positions.  That doesn’t seem to be taking place as of yet, but be aware the CME Group is paying attention to the rally.

A letter passed around yesterday expounded on some of the difficulties railroads such as CSX and Norfolk Southern in the east are having.  Turn times are being characterized as an “operation disaster.”  The BNSF in the west now has 350 unit trains dedicated to crude oil, which is a drain on locomotives and crews.  The bottleneck for trains passing west to east in Chicago is estimated to be around 3-10 days at current.  Most experts think the bottlenecks will persist another 12-18 months.  Lastly, with more ethanol moving by rail than ever before, we continue to add commodities which draw on available power and crews.  BNSF spot equipment stabilized at $1500/car against $2200/offers last night, while UP freight is $500/1400/car.  This has stemmed the PNW premium free-fall, but doesn’t suggest overt demand headed to the west coast either.  In a way, we’re experiencing a small version of the problems ailing China in that cash prices in northern growing areas are incredibly low compared with the record high prices in the south where grains are actually used.  Their problem is moving them efficiently from North to South, which usually winds up with imported grains being cheaper than domestic.  Hello China.

A Reuters article out yesterday afternoon focused on the increased option activity in the Jan soymeal options.  The chart below shows the open interest of various January put strikes compared with December 2014 put strikes from a year ago.  The point of the article and the graphic below is to shows the a) the ramp up in put buying on the rally as processors roll up their bearish protection on the rally, but also b) that producers expect the rally to push beyond December option expiration and are therefore using January protection.  Soymeal on the continuous chart is resting just below its 200-day moving average at 409.60, an indicator it hasn’t been above since January.  November soybeans are tangling with the 38.2% retracement of the 12.79-9.04 selloff at 10.47 with January doing the same at 10.54.  Still no sign of a bearish divergence in momentum on a daily scale.  Board crush margins have rocketed into new record territory with December at 206.8c/bu, followed by January at 158.8c and March at 102.3c.  There just still isn’t anything in cash or spreads which suggest the rally is coming to an abrupt end, although a formal letter isn’t likely to be sent out to all market participants either.

Switching gears to grains, thought it worth making note of the ramped up ethanol production witnessed yesterday in response to the better margin structure the past few weeks.  Weekly ethanol production increased 41,000bbls/day to 937,000bbls/day, the highest in 10-weeks, and well above the needed production level to hit the USDA production forecast.  Stocks also declined sharply, a bit of an anomaly, although also supportive.  Stocks declined 901,000 barrels to 17.039 million barrels, the lowest since mid-May.  Ethanol stocks are down nearly 10% over the last month, yet gasoline demand has been nothing outstanding relative to 2013 and the 5-yr range.  This could mean an ethanol export program has been ramped up, something we’ll have to watch Census data for.

 

Bottom Line: Eyes will be on the 7:30 export sales data for more evidence behind the recent rally, but the fact is animal feeders are armed with handsome margins allowing them to bid for meal they don’t have covered.  The soymeal export book is the largest on record by an incredible margin, and is pulling meal away from the domestic sector like never before.  Add in the fact rail transportation is stodgy at best with a delayed soybean harvest in areas which supply the southeast feed market and you can readily explain the recent rally.  Eventually, it should crack once double bought end users receive product, but this won’t be a universal event, and will be difficult to track.  Wheat is losing a bit of interest as fall seeded crops in the northern hemisphere head into dormancy, but outside the US conditions are less than ideal.  Can’t stress enough, corn is along for the ride and producers now have 14/15 contracts with a $4.00 handle on the for May and July.

 

Good Luck Today.

 

Soymeal Options 10-30

 

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 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.

10/29/2014 Morning Comments

Good Morning,

 

Outside Markets as of 6:20am: Dollar Index down 0.0450 at 85.3610; Euro up 0.00050 at 1.27440; S&P’s are down 3.50 at 1976.25; Dow futures are down 11.00 at 16,925.00; 10-yr futures are down 0.04%; The Nikkei closed up 1.46% at 15,553.91; The DAX is up 0.65% at 9,127.07; The IBEX-35 is down 0.49% at 10,343.40; Gold is down $1.70 at $1227.70; Copper is down $0.20 at $309.10; Crude Oil is up $0.81 at $82.23; Heating oil is up $0.0273 at $2.5080; Paris Milling Wheat is up €1.50 at €171.00/MT.

Tepid outside markets following the surge in yesterday’s US equity markets as the focus falls squarely on the announcement following today’s FOMC meeting.  The Fed is expected to announce today it is ending its $4 trillion bond-buying program, or quantitative easing, but most investors will be curious if they shed any light as to when they might start raising interest rates.  It is also expected the FOMC will announce it plans to continue its program of reinvesting the proceeds of its portfolio in new securities purchases so that its balance sheet remains constant and does not start declining as securities mature.  The 30-yr mortgage rate fell another 5bp to 3.92%, a 1-1/2 year low, and bringing the 5-week drop to 31bp.  Refinancing is up according to MBA, although the drop in rates has not led to any increase in purchases.

Open Midwest weather this morning after yesterday’s band of showers worked through the southern and eastern corn belt.  Heaviest totals were seen in AR/N-MS/TN/KY/WV, with the main production areas of IL/IN mostly spared.  The Midwest should be mostly wide open through Saturday with the exception of a few small showers in E-MO/S-IL/S-IN, although better moisture chances move in around the beginning of the week. The map below shows the time period November 3rd-November 5th with heaviest totals obviously in the southern plains, MO and S-IL/S-IN.  Some harvest delays could be expected, although the recently planted HRW will welcome the moisture.  6-10 and 8-14 day maps keep above normal temps in place through November 11th, but the moisture track shows below normal precip over the Plains and WCB, but above normal precip for east of the MS-River.  This could end up being an issue for the remaining soybeans in central and eastern production areas.  The WCB should be able to be nearly complete with harvest by the end of this period.

 

Another day, another higher soy complex.  In similar fashion to last night, the soybean and soymeal market steadily rose throughout the night aside from a brief drop during the European open, but rallied back to hit new highs between 4:00-5:00am.  Every day for the past 3-4 sessions, price action has suggested diverging momentum, and traders have been quick to call for a blow-off or exhaustion top.  Yet, each morning we come in, price finds its way back towards recent highs.  The catalyst for the rallies in the complex can’t be undone overnight, which is probably the reason price has remained so resilient.  Rail congestion takes days and weeks to undo, not hours.  Crush plants need soybeans to be delivered before they can send out product.  The delays in Brazilian planting will keep buyers focused on US stem well into January, negating a fast start to the Brazilian shipping season like last year.  Argentine soymeal premiums have continued to work lower since Friday, which keeps product penciling into US-SE feed destinations.  However, any tonnage which may have occurred isn’t likely enough to move the needle yet.  The market is also feeling the effects of cash-flush farmers with ample storage.

First on the planting delays, Safras e Mercado reported the Brazilian soybean crop was 12% planted as of 10/24, up from 7% the week before, but down notably from last year’s 26% and 31% average. Top producing state Mato Grosso is 16% planted vs. 48% average, and second largest producing state Parana is 28% planted vs. 49% average.  Rain activity has increased, so planting should pick up, although progress out of the north is still a large concern.  As mentioned above, the real concern is the limited export offerings out of Brazil until the latter part of January and into February if timely planting doesn’t occur.

Market participants continue to focus on the amount of supply left to be harvested by US farmers, which admittedly is still rather large.  As of Monday’s crop progress reports, there remained a combined 9.0bbu of corn and soybeans left in the field vs. 9.4bbu having already been harvested.  This supply will need a home, and it is this thought which keeps bears calling for weaker markets ahead.  As export inspections have showed recently, however, the soybeans at least, have a home.  Just specifically off the PNW, there are 70mbu worth of ships either loading or waiting to load soybeans.  In an aside on corn, there is only 1 vessel waiting to load with an additional corn/wheat combo vessel.  The program off the west coast is non-existent, and is part of the reason BNSF rail freight continues to trade weakly in addition to better turn times.  Rail freight going home last night was $1400/2000/car.

Corn isn’t the only soft market off the PNW, however, with spot soybean shuttles indicated at +150/157X for Oct/Nov against +160/160X a week ago, although November slots have bottomed a bit vs. earlier in the week.  CIF NOLA soybean premiums were called +118/122X for Oct and +118/120X for Nov, down around 3-4c vs. Monday markets.  In addition to softer basis, the SX/SF continues to trend weaker, sitting at -7.50c this morning vs. -5.25c 2-days ago.  However, Friday is first notice day, and there is likely some late rolling out of positions taking place which could distort cash influence.  The SF/SH remains fairly steadfast at -6.00c this morning, just off yesterday’s high at -5.50c.  Meal spreads also don’t suggest the top is in or that the world is ending with the SMZ/SMF at +20.00c this morning, down from yesterday’s +24.60 high print, but definitely high range.  Spreads should confirm when a top has been reached.  Board crush spreads also remain well supported with the December crush at +190.0c and the January at +140.5c.  A spread with this many moving pieces has  lot of volatility, but it looks as though on a continuous basis, we are in record territory for board crush.

Shifting the focus to the other commodity which is building a bull case, wheat markets continue to fly under the radar with slowly improving fundamentals.  In a Reuters article out yesterday, Ag Ministry officials in Kazakhstan continue to suggest supplies and quality will be down with their 14/15 crop.  Latest estimates put the wheat crop at 11.5MMT vs. 13.9MMT and the USDA at 12.5MMT.  In addition, the majority of the wheat is thought to be of 4 or 5 grade feed wheat.  Export ideas have dropped to 3.5MMT vs. 8.1MMT last year, which would be the lowest since 2004/05 if realized.  The USDA is still carrying 5.5MMT.  In addition, it is widely expected Kazakhstan will be an imported of Russian wheat to the tune of 0.5MMT instead of an exporter like usual years.  Russia should have the excess tonnage, but the gap between feed wheat and milling wheat around the globe is expanding.  Also, with the Russian Ruble trading down to all-time lows against the Dollar of 42.59, this should keep Russian wheat very competitive into major import destinations.

In the US, deliverable supplies dropped 2.4mbu in Duluth last week to bring total deliverable supplies down to 18.326mbu vs. 19.984mbu a year ago.  Minneapolis crept higher and stands at 4.967mbu vs. 4.426mbu a year ago.  Not much for changes in SRW stocks at 66.658mbu vs. 66.511mbu a week ago and 65.085mbu a year ago, although deliverable grade supplies remain sharply below a year ago at 44.790mbu vs. 59.269mbu. Non-deliverable grades are also well above a year ago at 21.868mbu vs. 5.816mbu.  There is a ton of off-grade wheat to store or blend this year.  HRW stocks up a pimple on the week, but still down 15mbu from a year ago which will need to be monitored as the year progresses.  No big changes in wheat basis yesterday, but the concern exists with spreads as the KWZ/KWH has now drifted down to -4.50c, off from recent highs of +2.00c and the lowest trade since 10/2.  Part of this decline has undoubtedly been due to rail freight as TX-Gulf premiums have eased also.  The spread weakness appears to be confined to HRW, however, as HRS and SRW spreads are steady better.  This is worth monitoring, however, as wheat can’t uncork a rally if spreads are dropping on a daily basis.

Ethanol production data out later this morning as the focus closes in on corn demand.  As one might have noticed above, bullish features for corn weren’t really mentioned.  There is plenty of corn left to harvest, basis levels aren’t strong, and another cut in acres needs to occur next year. Corn has very few bullish data points for bulls to hang their hats on at the moment, although that doesn’t mean it can’t go along for the ride.  Keep in mind, however, out of corn, soybean and wheat, funds are long only corn.

 

Bottom Line: top callers will be out again today in the soy complex, and today might be the day.  I’d prefer to watch bean and meal spreads for confirmation as well as a sharp reversal in meal basis both domestically and on the export front.  The market has provided an excellent marketing opportunity, and one which should be taken advantage of given the short-term nature of the rally catalysts.

 

Good Luck Today.

 

HPC 10-29

 

Tregg Cronin

Market Analyst

Tregg.Cronin@halocommodities.com

www.halocommodities.com

@5thWave_tcronin

 

 

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

 

 

 

10/28/2014 Morning Comments

Good Morning,

 

Outside Markets as of 6:35am: Dollar Index up 0.0930 at 85.5880; Euro down 0.00050 at 1.27070; S&P’s are up 9.00 at 1966.00; Dow futures are up 69.00 at 16,826.00; 10-yr futures are down 0.16%; The Nikkei closed down 0.38% at 15,329.91; The DAX is up 1.42% at 9,029.27; The IBEX-35 is up 1.51% at 10,349.20; Gold is down $1.30 at $1228.00; Copper is up $1.40 at $307.80; Crude Oil is up $0.48 at $81.46; Heating Oil is up $0.0090 at $2.4719; Paris Milling Wheat is up €3.00 at €168.00/MT.

Global equity markets are rallying today ahead of the Federal Reserve meeting this week at which the Fed is expected to end its long-running Quantitative Easing program.  The real concern, however, is when they begin to start raising short-term interest rates, which most believe will still be sometime in 2015.  Economic data in the US today will include October US Consumer Confidence which is expected to down a +1.1 point increase to 87.1, recovering a bit from the -7.4 point decline in September.  Durable goods orders for September are expected to show an overall increase of +0.5%, and an ex-trans increase of +0.5%.  This would follow the August report of -18.4% and +0.4% ex-trans.

Band of showers moving across the Midwest stretching from SE-OK to S-MI and bringing rain to all areas in between.  After that system, things should remain mostly dry for the central and western corn belt, while the southern plains and southern Midwest battle moisture a bit late in the 7-day period.  Temperatures from NOAA show the 6-10 and 8-14 day remaining well above normal throughout the period, although moisture will move to above normal status for the southern and eastern Midwest.  The 8-14 has an overall drier bias.  In general, temps will remain above normal through November 10th, while southern and eastern areas battle hit and miss moisture.  The WCB shouldn’t be impeded in their harvest efforts.

 

Soymeal remains the name of the game with that market up another 3.64% as of this writing, lugging soybeans and the rest of the Ag complex along with it.  The performance of soymeal over the month of October has been nothing short of astonishing, rallying from a low of $295.10 on October 1st, to a high of $399.80 this morning, a gain of 35%. The stalled pace of soybean harvest in the east, coupled with tight farmer holding of available soybeans, and poor rail performance, is causing cash soymeal offers to skyrocket when supply and basis should be the cheapest.  The sharp rally also shows the hand-to-mouth buying end users of all feed grains have been employing, and the lack of coverage on through the end of the month and probably the month of November as well.  Bears continue to want to talk about the surplus of soybeans which will be available “eventually,” or the amount of soybeans which the US will carryout in August 2015, but neither of those figures do any good to hungry hogs and poultry.  Add in the fact, the soymeal export program is the largest on record by a huge margin and the table is set for the price action we’ve seen.  Corn and wheat are simply along for the ride again today.

A quick note on soymeal technicals, the continuous chart shows meal having gone through the 50 and 100-day moving averages with the 200-day resting just overhead at $410.00.  The last time the continuous chart was above all three major moving averages was June 6th.  The December contract itself is already through all of these averages.  Encouragingly, momentum isn’t flashing a bearish divergence, and on-balance-volume continues to trend steadily higher, rising to 238,599 contracts, the highest level since April 16th, 2014.  The continuous chart has the 50% retrace of the $509.40-295.10 sell off at $402.30, which will be a key area overhead.  Managed funds have been working back into the soymeal market with the latest COT data showing them net long 37,573 contracts, the largest net long since 9/2/14, but a far cry from the 70-75,000 contract levels witnessed in April.  Funds are still wielding a 50,000 contract net short in soybeans, so the propulsion through the $10.00 handle is easily explained.  November soybeans have the 38.2% retrace sitting at $10.47 from the $12.79-9.04 selloff as a target ahead.  No momentum divergence as of this morning.

As would be expected, board crush is off and running this morning on soybeans with the December contract up 18.0c/bu to 195.5c, the January contract up 9.3c to 147.8c, and March up 4.5c to 105.0c.  The 5-month strip is calculating at 122.5c this morning, an incredible margin plants can lock in via futures, and cash margins should be even higher given soymeal basis trading where it is.  The point is, plants should have plenty of margin to bid up soybean basis in an attempt to originate soybeans, so basis could be getting friendlier in the days ahead.  Soybean meal spreads are confirming the breakout with the SMZ/SMH currently sitting up $4 at $19.90 after touching $24.60 earlier this morning.  Meal spreads should be an early canary-in-the-coal-mine to this move running out of steam, but so far cash and spreads are behind the rally.  The SF/SH continues to press firmer, although the SX/SF is less enthused.

As mentioned above, rail performance in the ECB has been a leading culprit to the cash move, and railroad statistics confirm same.  As of 10/24, average grain train speed for the CSX railroad had dropped to 16.0mph vs. 17.5mph the week before and 18.0mph two weeks ago.  The Norfolk Southern saw speeds increase slightly to 17.6mph from 17.3mph the week before, but is down from 18.0mph 2-weeks ago.  Dwell times have also been increasing with NS reporting average dwell times at 34.5 hours, up from 32.7 hours the week before and 31.4 hours two weeks ago.  CSX has watched dwell times go from 30.0 hours two weeks ago to 32.0 hours last week, to a slight improvement this week at 31.4 hours.  The trend isn’t good with train speeds trending slower, and dwell times mostly increasing during the busiest time of the year.  Until sustained improvement is witnessed in railroad performance, it is going to be difficult to squelch this cash led rally as end users wait for product.  This will perpetuate the rumors of South American soymeal working into the US-SE, but the futures board doesn’t seem too concerned with that this morning.

Getting to the actual fresh data from last night, the crop progress report, only adds a bit of wood to the fire given the progress to date.  Soybean harvest was pegged at 70% complete, which was in-line with expectations of 70%, but also means soybean harvest is over 2/3’s complete and we have yet to really feel the harvest pressure commonly associated with October and November.  Significant progress remains in the ECB with IL at 63% complete vs. 77% average, IN at 50% complete vs. 75% average, OH at 50% vs. 73% and MI at 44% vs. 73%, but the WCB is essentially done with SD/ND/MN all > 90%.  IA is 81% complete and NE is 87% complete.  Corn harvest was a bit behind expectations at 46% vs. 56% last year and 65% average.  ND/SD/MN remain the laggards at 22%, 34% and 41% complete, respectively.  Farmers will continue waiting until the crop is dry in the field before harvesting to avoid drying charges.

Adding support to wheat, and specifically SRW, is the winter wheat planting and emergence progress in the ECB.  National winter wheat planting was pegged at 84% complete vs. 84% average, but IL was just 41% complete vs. 75% average, IN at 67% vs. 75% average, OH at 72% vs. 80% average and MI at 77% vs. 85% average.  This is what is leading to ideas SRW planted average will be down 10-20% over a year ago.  As concerning is the fact emergence in IL is at just 18% vs. 42% average.  Move of the other ECB states are closer to average, but the first winter wheat condition rating of 59% was below ideas of 65% and below last year’s 61% G/E.  HRW states are generally above last year which shouldn’t be terribly difficult given last fall’s conditions.  Add in the fact quality of this year’s SRW harvest was sub-optimal, and there is a reason for the SRW balance sheet concern.  More on stocks in a separate post tonight.

One other note on wheat, production estimates continue to slip on Aussie production with Rabobank hitting the tape at 23MMT vs. the USDA’s latest estimate of 25MMT.  Informed handlers on the island claim it could be lower, closer to 21-22MMT.  This should be adding underlying support to the market, although quality of said production will be about as important given the quality downgrades being witnessed around the globe this year.

 

Bottom Line: Soybeans and meal could be entering an exhaustion phase with the current move, but getting in front of that runaway train would be futile.  End users with huge profit margins are pushing for product due to their uncovered nature, and that isn’t a trade one wants to be on the other side of.  Eventually, beans and meal should trade projected supplies, but projected supplies don’t do any good today.  Corn and wheat are along for the ride, although wheat is gathering evidence for being higher on its own.  Plenty of corn available and plenty left to be picked.  Not a lot of reason to be bullish corn, so producers need to be paying attention to the rally and rewarding it if needed.

 

Good Luck Today.

 

Tregg Cronin

Market Analyst

Tregg.Cronin@halocommodities.com

www.halocommodities.com

@5thWave_tcronin

 

 

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