9/19/2014 Morning Comments

Good Morning,

 

Outside Markets as of 6:10am: Dollar Index up 0.2480 at 84.5710; The Euro down 0.00490 at 1.28750; The British Pound is up 0.07% at 1.6374; The Japanese Yen is up 0.08% at 108.7547; S&P’s are up 5.75 at 2018.00; Dow futures are up 68.00 at 17,328.00; 10-yr futures are up 0.03%; The Nikkei closed up 1.58% at 16,321.17; The DAX is up 0.68% at 9,864.32; The FTSE-100 is up 0.68% at 6,865.72; Gold is down $4.40 at $1222.50; Copper is up $0.20 at $309.60; Crude Oil is down $0.15 at $92.92; Heating Oil is up $0.0037 at $2.7160; Paris Milling Wheat is down €3.25 at €155.75/MT.

The “Yes” voters for the Scottish Independence referendum weren’t quite as successful as William Wallace with the “No” vote to remain in the Union with England receiving 55% of the vote.  The challenge to the Union was unprecedented in the 307-year history of the countries, and will surely signal change in representation and economic freedom moving forward.  Currencies traded especially erratic through the night as results were released with the British Pound jumping to 1.6515 on news the “No” votes would carry before easing to 1.6372 this morning.  The Japanese Yen also grabbed attention when It pushed to 109.4600 last evening, the weakest level against the Dollar since September 2008.  Such a weak Yen could hurt purchases of commodities denominated in US Dollars.  The CRB-Index could be breaking out below 2-year support with the weakness this morning.

Showers moving across ND and N-MN, otherwise quiet across the Heartland.  Spotty shower activity the next 5-7 days with best chances for precip in KD/NE/W-IA where heaviest localized totals early next week look to fall in N-KS to the tune of 1.50-2.00”.  Otherwise drier weather ahead, which should aid in early harvest efforts and maturation of the crop in the North.  Temperatures look to remain well above normal the next 15-days for the entire Midwest, but precip potential does begin to pickup late in the 6-10 and early in the 8-14 day slot.  In fact, above normal precip is being indicated for the Northern Plains September 26th-October 2nd as indicated by the map below.  This would aid recently planted HRW, but may impact soybean harvest in some WCB locations.  Nothing threatening just yet.

 

A particularly weak overnight session for wheat and soybeans with all December and November contracts witnessing fresh contract lows while the US farmer slept.  Technical selling pressure has remained a feature, and with a breakout to fresh lows on a daily basis, the move has risk of accelerating.  December corn continues to defend the $3.35 ¾ contract low from earlier in the week, but will have a difficult time doing so if wheat continues to plunge to new lows.  The market seems as though it is pricing in another build in supply, possibly from the Sept. 30th stocks report for wheat and soybeans.  It is widely expected the USDA will increase the 2013 soybean crop, which will put upside pressure on 2014 yields.  Also, the 2014 HRS crop is likely to receive an upward revision according to anecdotal yield reports from across ND.  Hard for demand to step in when supply is still getting larger.

Encouragingly, US corn out of the Gulf is back to the cheapest available stem in the Americas on a FOB basis with spot boats worth $164.66/MT through November.  This would compare with Argy at $166.63/MT and Brazil at $171.74/MT.  PNW stem is indicated around $190.25/MT, but obviously enjoys a  $19.34/MT freight advantage for routes to Asia.  Reuters reported yesterday a tow-boat sank near mile marker 104 to 106 near Chester, Illinois, causing the Coast Guard to restrict traffic on the river.  The tow boat was carrying around 3,500 gallons of diesel fuel and an unknown amount of lube oil aboard.  This should cause barge freight to rise given expanding harvest progress along the river corridor.  While two-days old, the USDA on Tuesday said Lower IL-River barge freight was worth 633% of tariff.

Yesterday, prominent EU cereal forecaster Strategie Grains updated their latest production estimates for the EU, increasing corn and wheat production above the USDA’s latest guess by 9MMT.  If the firm ends up being a pre-cursor to the USDA, US corn demand by way of exports might need to be revised even lower.  The amount of feed wheat, and now corn, available in Europe this year is sharply higher than a year ago and the last several years, reducing the demand for US corn.  The USDA just increased corn exports by 25mbu in the latest WASDE report to help account for the 300mbu increase in supply.  If the USDA is moving in the wrong direction on demand, but supply continues to increase on futures reports as the market seems to be suggesting, carryout could be getting set to balloon well north of 2.0bbu for 2014/15.  The US farmer’s love affair with corn could end up being the source of his heartbreak.

A couple of technical objectives worth pointing out which could offer longer-term support in the soybean market.  With fresh contract lows on a daily basis, one has to pan out on weekly charts for support.  In drawing some Fibonacci progression levels, one prominent area came in around $9.28, which would be the 100% progression of the $16.36-7.76 selloff in 2008 attached to the all-time record high of $17.89.  Essentially, if the selloff in 2008 is any guide, the length of that move from $17.89 lines up around $9.28 which is also a number being thrown around by fundamental and cash traders for harvest lows.  Watch momentum signals around that area for clues.  The analogous level in soymeal would be $297.50.  In looking at weekly Chicago Wheat charts, unfortunately, we continue to slice through long-term support levels like a hot knife through butter.  The only downside objective left between spot and the 4-handle are the June 2010 lows around $4.25.  Granted, that is 60c from current levels, but there just aren’t any support levels of note between here and there.  Wheat charts have done serious technical damage, but fortunately, funds are already short up to their eyeballs.

The latest Cattle on Feed report will be released this afternoon for supplies as of September 1st with placements during August expected to come in at 1.692 million head.  If that number turns out to be accurate, placements would be down 4.5% from a year ago, and be the lowest August placements on record going back to 1996.  Cattle on feed are expected at 98.9% of last year at 9.767 million head, which would be the lowest since 1999, while marketings are seen at 90.7% of a year ago at 1.697 million.  The marketings would also be the lowest since 1996.  All of the above bodes well for keeping cattle at all-time record highs, but bodes especially poor for corn demand.

 

Bottom Line:  Favorable yield reports, favorable harvest weather, end users on the sideline and an undersold US farmer are all contributing to fresh contract lows heading into harvest.  Technicians, like myself, can throw out downside targets, but until the market sees fresh, meaningful demand, prices are going to continue to drift lower.  Storage needs to be maximized to take advantage of any post-harvest rallies, while keeping cash needs close at hand.  Tighten up and keep your head down; the ride is going to be bumpy.

 

Good Luck Today.

 

CPC 8-14 9-19

 

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.

 

9/18/2014 Morning Comments

Good Morning,

 

Outside markets as of 5:50am: Dollar Index up 0.2020 at 84.5470; Euro down 0.00370 at 1.28880; Japanese Yen down 0.59%; S&P’s are up 7.75 at 2009.25; Dow futures are up 53.00 at 17,205.00; 10-yr futures are down 0.21%; The Nikkei closed up 1.13% at 16,067.57; The DAX is up 0.95% at 9,753.67; The FTSE 100 is up 0.48% at 6,813.65; Gold is down $12.00 at $1223.90; Copper is down $1.10 at $313.25; Crude Oil is down $0.12 at $94.30; Heating Oil is down $0.0125 at $2.7326; Paris Milling Wheat is up €0.25 at €161.75/MT.

The Scottish Independence vote today is splashed all over financial media outlets this morning, and for good reason.  Scotland opened polling stations today for a referendum on whether the country will leave its union with England, Wales and Northern Ireland and become an independent state.  The first exit polls will be released after voting closes at 10:00pm local time which will be around 4:00pm central time here in the US.  Polling has suggested a neck and neck race down to the wire.  A yes vote is likely to weigh heavily on the British Pound and English equity markets.  The Federal Reserve kept its “considerable” wording in reference to how much time would elapse before the first interest rate hike in 2015.  They did raise their interest rate guidance for the end of 2015 to 1.38% from 1.13% for their benchmark lending rate.  Global equity markets are reacting positively.

A few systems working across the southern plains this morning, but a quiet Midwest.  The next 7-days will see precip confined to the southern plains, and especially N-TX where totals over the week could be as high as 6.00”. The Midwest will see mainly dry weather which will be welcome for almost all as early harvest efforts expand and slow to mature crops get needed heat units in the Northern Plains.  Frost/freeze damage is still being assessed, but suffices to say the damage was very hit or miss.  Some areas are reporting heavier damage, while others nothing.  By next week, full damage should be noticeable, but lighter crops in the Dakotas and N-MN wouldn’t be a surprise.  Extended maps from NOAA remain favorable with above normal temps and below normal precip through the 6-10, but better moisture creeps into the Northern Plains during the 8-14.

 

Quiet, tight-ranged trade overnight in all of our Ag markets as the consolidation effort ahead of more widespread harvest activity begins.  The next fundamental input to our markets will be yield reports, then the September 30th stocks report, followed by the October WASDE.  Volatility has declined notably, and the slow choppy trade may become the feature until the balance sheets are updated.  As proof of the volatility decline, the CME lowered margin requirements for both spec and hedge accounts last evening for almost all Ag commodities and spreads.  For speculators, margins declined by about 16% with the initial margin now $1375 per contract of corn.  In general, however, commodities are still the whipping boy of the speculative portfolio with equity markets sitting at record highs, the Dollar Index at 14-month highs and the looming interest rate hikes in 2015.

Opinion Indices (Optix) as compiled by www.sentimentrader.com were updated this week, showing soybeans and wheat plunging into fresh lows.  On soybeans, the Optix now reads 20%, the lowest level since September 27th, 2004.  During that month, front-month soybeans were trading around $5.31/bu, a far cry from the $9.80 we currently have.  That fall when sentiment dropped so low in soybeans, a major low was carved out before beans rallied nearly $2.00 during JFM 2005.  Hedgers have the longest soybean position since 1997, and sentiment is at a 10-yr low.  These reasons, in an of themselves, aren’t enough to buy soybeans, but they are cause for watching price very closely.  The wheat Optix dropped to 14.0% this week, tying the low in July 2014.  The 14.0% reading is the second lowest outside of December 2013’s 13.0% since 1999.  The point here is sentiment on wheat is also at historic lows, and the healthy fund short in addition to the tightening FOB spread with Black Sea/French wheat are all reason for pause.  These markets aren’t likely to turn overnight, but the framework is definitely being laid.

Mostly unchanged basis on the MGEX spot floor yesterday with 216 cars including 3 trains.  14.0% were down 15c to +215/250Z while 15.0% were down 5-20c to +580/600Z.  Protein levels continue to sink as harvest works north, and it’s looking more likely ND is going to average around 13.0% protein this year.  Add in color and TW problems, and the spring wheat market is likely to stay volatile, especially when transportation issues are added in.  Comments from durum traders are similar or worse: lack of color, protein variable, lack of hard wheat, unreliable Canadian supplies, etc.  Producers with high protein and good quality in either of these crops will be in the driver’s seat this winter.  Monitor basis and spreads constantly for optimal marketing opportunities, or contact someone who does like Halo Commodities.

PNW corn basis continues to slowly creep higher with spot bids now commanding +145/140/130Z for SON vs. +125/130/120Z a week ago.  HETX rail bids are also firmer with spot +130Z through November vs. +110/115/110Z for SON a week ago.  The CIF market remains much more well supplied given harvest efforts along the river with spot barges quoted +70/76Z and +75/76Z for October vs. +73/74Z and +76/80Z a week ago.  Domestic soybean basis remains incredibly volatile with spot bids moving $1.00-2.00 by the day as crushers in the East such as Claypool, IN reportedly paid 500X, yep $15.00, for stem by the end of the week, before dropping bids to 350X.  Crushers in the West have come down quicker as old crop supplies moved from farm bins.  The real task will be getting the beans in position to meet the huge export commitments we have on the books for OND.  The exporter is short basis and counting on the farmer to turn palms out.  Price says he will sell soybeans and store corn, but only time will tell.

Things continue to get worse for Syngenta AG with Ingredion, a manufacturer of sweeteners and starches made from corn, said they will not buy the new variety of corn produced by Syngenta which is being banned in China.  The GMO strain known as Duracade has been the ire of exporters who have seen cargoes rejected at Chinese ports for containing the strain which hasn’t been approved.  This week, Cargill and one other feedstuffs exporter sued Syngenta for financial damages received due to rejected cargoes.  With Ingredion joining the list of end users who will not accept the Syngenta brand of corn, there might still be hope for US corn and corn by-products working their way back into China.

Export sales on tap at 7:30.

 

Bottom Line:  A low volatility chop looks like the order of the day which could see two-sided trade.  Markets will be anxious to hear more anecdotal yield reports in the coming weeks, and weather looks as though it will cooperate.  Acres and damage from frost will remain hot-button issues, but neither will be any clearer before the October WASDE.  Producers absolutely have to have profit margin targets in place and make disciplined sales when those margins are available.  14/15 will be about survival, not hitting home runs.

 

Good Luck Today.

 

HPC 9-18

 

Tregg Cronin

Market Analyst

Tregg.Cronin@halocommodities.com

www.halocommodities.com

@5thWave_tcronin

 

 

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

 

 

9/16/2014 Morning Comments

Good Morning,

 

Outside Markets as of 5:45am: Dollar Index down 0.0570 at 84.2090; Euro up 0.00110 at 1.29550; S&P’s are down 2.75 at 1981.50; Dow futures are down 28.00 at 17,000.00; 10-yr futures are up 0.15%; The Nikkei closed down 0.23% at 15,911.53; The DAX Is down 0.37% at 9,624.13; The IBEX-35 is down 0.50% at 10,786.60; Gold is up $4.10 at $1239.20; Copper is up $1.40 at $309.95; Crude Oil is down $0.19 at $92.72; Heating Oil is down $0.0059 at $2.7337; Paris Milling Wheat is up €2.00 at €163.50/MT.

Easier global equity markets this morning as investors play it safe ahead of the two-day Federal Reserve which begins today.  Again, investors are looking for interest rate guidance from the Fed as to when they may make that first interest rate hike in 2015.  The speculation has lifted the US Dollar Index to 14-month highs, contributing to many commodity indices hitting multi-month or multi-year lows.  Other economic data today will include the August Producer Price Index which is expected to edge higher to +1.8% y/y from +1.7% in July.

Quiet Midwest radar this morning with the Midwest expected to remain dry until the next batch of storms begins at the tail end of the week.  Widespread rains stretching from N-TX to WI are expected to bring totals in the 0.50-1.50” range Friday-Sunday.  The Northern Plains are expected to remain dry the next 15-days which will aide in small grain harvest and HRW planting.  It will also help in pushing crops to maturity which are lacking GDD’s.  An overall warmup is also expected for the Midwest during the 6-10 and 8-14 day period which will keep frost threats low until the end of September.  Below normal precip will accompany the warm up, both a boon for northern plains crops.  Nothing to really argue with on the weather front, although isolated reports of frost/freeze damage are trickling in with more soybeans hurt than originally thought.

 

Solid Turnaround Tuesday bounce occurring across the Ag complex this morning as grains catch a long-awaited relief bounce on a combination of crop progress and FSA certified acreage data.  Beginning with the former first, last night’s crop progress report seemed to suggest the corn and soybean crops in the north are a bit more immature than we thought heading into last week’s frost/freeze event.  The forecasts are turning much more favorable through the end of the month, but the data really hits home how far these crops have to go before getting in the bin.  Both are still rated very high historically, so a drastic reduction in yield shouldn’t be expected, but there is vulnerability in these crops.  This morning also saw the latest release of the FSA certified acreage data, which according to University of Illinois analysis, should mean planted acreage on corn and soybeans is coming down notably.

Corn conditions were unchanged at 74% G/E vs. 53% last year, and still the highest rated for mid-September since 1994.  Dent progress was rated 82% vs. 79% last year and 85% average, which implies this crop is right around average.  However, ND is 59% dented vs. 71% average, WI 59% vs. 69% average and MI 60% vs. 71% average.  Of more concern is the percent mature at 27% nationally vs. 20% last year and 39% average.  In ND, just 2% is mature vs. 24% average, SD 10% vs. 26% average, MN 9% vs. 25% average, WI 8% vs. 20% average, IA 19% vs. 44% average and IL 37% vs. 50% average.  The concern here would be light corn if the frost did impact the corn.  Corn harvest was estimated at 4% nationally vs. 9% average.

Soybean conditions were seen unchanged at 72% G/E vs. 50% average, and still the highest rated since 1994.  In the dropping leaves category, nationally the crop was at 24%, dead on last year’s 24% but behind 32% average.  Northern tier states are lagging here with SD at 28% vs. 56% average ND at 37% vs. 45% average, MN 12% vs. 37% average, IA at 13% vs. 26% average and WI at 11% vs. 22% average.  Any real freeze damage might not be picked up until next week’s crop progress report.

Spring wheat harvest was estimated at 74% complete vs. 58% last week and 86% average.  ND was pegged at 65% vs. 42% last week and 84% average. MN was 74% complete vs. 54% last week and 93% average.  Same story, different week with HRS with big yields being witnessed everywhere, but quality deteriorating as things progress north.  Color and TW seem to be the big areas, but protein continues to slip as combines march north.  MT seems to have an especially large amount of quality issues this year.  Switching over to durum, select states have plenty of progress left to tackle with MT at 38% harvested vs. 60% average.  MT also saw its G/E durum condition rating drop 5pts with the P/VP category rising 6pts.  ND is 34% harvested vs. 68% average, but only has 87% of the crop mature which was surely impacted by the frost.  ND also is just 72% harvested on oats vs. 93% average.  The durum market bears watching as that market can trade on a hair trigger given its size.  The high protein wheat story, between both HRS and durum, could really get interesting when the crop is in the bin later this month.

Switching gears to this morning’s FSA certified acreage data, it would appear on face value the numbers are supportive.  In corn, the latest update put certified acreage at 84.684 million with 1.581 prevent plant acres.  These would compare with 83.322 and 1.54 million in the August update.  Below is a link from the University of Illinois talking about how to interpret the data.  Based on their analysis, it would appear NASS corn planted/harvested acres will be coming down significantly in the October WASDE.  The second link below takes you to the FSA data.  On soybeans, the latest FSA data shows certified acreage at 80.805 million with 841,000 prevent plant vs. 79.249 million and 827,000 in August.  Again, based on current NASS numbers, these would appear to be supportive.  One caveat, there was talk last month that filing deadlines had been extended, which could be affecting completeness.

Quickly, worth pointing out a Chinese trade delegation is in the states this week and signed frame purchase contracts on soybeans totaling 4.8MMT at a ceremony in Wisconsin last night.  These could be reported on the USDA’s daily reporting system and could draw market attention.  These ceremonies happen every year, and usually draw market attention.  However, because they are “frame contracts,” there is likely no basis or futures portion attached, meaning no risk is actually transferred.  Classic ‘dog and pony’ show.

 

Bottom Line:  Hard to argue with a long-awaited bounce in our markets.  Continue to monitor developments related to the FSA data as they are sure to be spun every which way.  If acres are coming down, and yield ideas are going drastically higher, it is conceivable we have seen the largest carryout ideas for the 14/15 balance sheets.  If carryout isn’t going up any further, it will go a long way in helping our markets put in longer term bottoms.  Watch upside technical objectives for momentum.

 

Good Luck Today.

 

http://www.farmdoc.illinois.edu/marketing/weekly/html/091514.html

http://www.fsa.usda.gov/FSA/webapp?area=newsroom&subject=landing&topic=foi-er-fri-cad

 

 

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.

9/15/2014 Morning Comments

Good Morning,

 

Outside markets as of 6:20am: Dollar Index up 0.1140 at 84.3520; Euro down 0.00310 at 1.29270; S&P’s are down 0.25 at 1984.50; Dow futures are unchanged at 16,922.00; 10-yr futures are up 0.08%; The Nikkei closed up 0.25% at 15,948.29; The DAX is up 0.13% at 9,663.55; Gold is up $4.80 at $1236.30; Copper is down $2.45 at $308.20; Crude Oil is down $0.72 at $91.55; Heating Oil is down $0.0002 at $2.7403; Paris Milling Wheat is down €1.00 at €161.75/MT.

The main focus this week for financial markets will be the Tue/Wed FOMC meeting as investors believe some guidance on when the Fed is likely to raise interest rates in 2015.  The US Dollar has obviously been rising on confidence the Fed will in fact raise rates sooner rather than later, so getting some clue as to when will be a highlight of the meeting.  In addition, The House of Representatives is expected to approve a continuing spending resolution to keep the US government funded into 2015, past the November elections.  Some members of Congress are threatening to filibuster the measure, which could thrust government shutdown ideas onto the market.  The US Dollar Index remains right near 14-month highs.

Several systems working across the Midwest and Southern Plains this morning, delaying early harvest efforts in the mid-south.  The frost/freeze event came and went without much fan-fare, although reports are coming in of damage to developing corn and soybean crops.  This analyst saw freeze damaged corn in W-SD with gray leaves aplenty in the Wall, SD area.  Granted, Wall isn’t Des Moines, but isolated damage did occur.  No cold air threats are being seen the next 10-days which will alleviate market concern.  There is the outside chance of some cool temps by the end of September.  Fairly dry in the Midwest the next week with the central belt seeing rain by the end of the week.

 

A new week, and new test of contract lows as harvest rolls on in southern locations with excellent yield reports continuing.  While the market did a fairly good job of pricing in a yield increase on the September USDA report, it feels as though the market is already penciling in a yield bump on the October WASDE, and actively trying to price that in now too.  Since the early 80’s, the USDA has increased the national average corn yield 20 times from August to September.  Of those 20 years, 17 also saw a further increase on the October WASDE.  The difference between those prior years and now is the fact the 4.3bpa increase the USDA made last week was the largest Aug-Sep increase on record, likely taking some of the sting out of future reports.  Nonetheless, the propensity is for a further increase in subsequent reports.  The only fly in the ointment is FSA acreage which some prominent research firms are still calling 1-2 million acres lower on corn and 1 million lower on soybeans.  We will get another update to FSA data tomorrow, which is likely to stir the pot.

While still on corn it is worth taking a look at the demand side of the equation as this may raise just as many concerns.  After last week, the USDA is calling total demand 13.605bbu, up from August at 13.435bbu and just a skosh above 13/14 at 13.600bbu.  So despite significantly lower prices, the USDA doesn’t see demand expanding much above last year’s numbers, which were up 2.5bbu over 12/13, and 550mbu larger than the highest demanding year of the last 5-years.  Expecting demand to slingshot higher in 14/15 looks troubling considering the demand expansion of last year, and the competing supplies found in UKR/BRAZ/ARG.  If yield continues to move higher in future reports, which there is a real tendency to do, demand might not be able to eat up the excess, pushing stocks well in excess of the current 2.002bbu level.  This would certainly call for a test of the $3.00 level in December corn.

Friday’s COT data kept recent trends in place in soybeans with large specs pushing their net short to a fresh record of -81,567 contracts, which accounts for 7.6% of total open interest.  In addition, the gross commercial long bought 24,000 contracts to push his position to 351,399 contracts, also a new record.  Open interest also jumped notable by 24,000 contracts, highlighting the trend followers jumping on as prices pushed below $10.00.  The trend in soybeans of commercials buying hand over fist and specs selling hand over fist isn’t sustainable.  The question is who is going to be right?  Quickly, according to the CBOT Legacy report, the commercial hedger net long of 106,130 contracts is now the highest since September of 1997.  In corn, Gross Commercial Longs bought corn for the first time in 6-weeks, which may be a sign end users are seeing value at current levels?

Lastly on the COT, the Aggregate Spec position across C,S,W,BO,KW,LH,LC,FC,CT,SB,KC,CC now totals -51,981 contracts, which is a bullish sentiment reading of 48.8%.  Both readings are the lowest since August 13th, 2013.  The Dollar’s strength is having an impact on investment demand for commodities.  If the US Dollar Index sees a breakout above 14-month highs, this will likely exacerbate the outflow of investment dollars from commodities into equities.  Equity indices at all-time highs are also pulling dollars away from our space.

Worth touching on wheat basis quickly as the MPLS spot floor continues to impress.  On Friday, 14.0% saw offers move sharply higher with that protein level now indicated at +250/600Z.  This would compare with +295/350Z a week earlier.  15.0% protein was mostly unchanged to close the week at +605/650Z.  Harvest progress should have jumped notably in ND the last week given the weather with harvest progress expected around 70% complete tonight.  Protein levels are dropping as harvest advances, but the bushels are not.  Color is also said to be a major concern.  Also of interest tonight on the crop progress report will be the Durum rating and progress.  The frost/freeze event hit the durum belt especially hard last week, with only around 69% of the crop mature as of 9/7 vs. 96% a year ago.  On Friday, reports indicated durum bids moved higher by $1.00/bu in some cases to around $14.00-15.00/bu.  The durum market is currently forecast to have a carryout of around 22-23% stocks/use.  With both the Canadian and US durum belts being impacted, this market could get squirrely in a big hurry.  Continue monitoring both of these high pro markets in coming weeks for clues about the latter-half of harvest.

 

Bottom Line:  Mixed/weaker markets look like the order of today with fresh contract lows in the sights for all of our markets. CZ is tracking 2004 fairly closely which eventually put in contract lows of $3.24/bu in December of that year.  We’re not all that far away from those levels now.  Big crops tend to get bigger, although the frost/freeze may have impacted things more than anticipated.  Time will tell.  Still plenty of old crop to move before fall harvest.

 

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.

9/11/2014 Morning Comments

Good Morning,

 

Outside Markets as of 6:15am: Dollar Index up 0.0720 at 84.2730; Euro up 0.00140 at 1.29200; CAD down 0.51%; S&P’s are down 6.25 at 1988.75; Dow futures are down 52.00 at 17,006.00; 10-yr futures are up 0.04%; The Nikkei closed up 0.76% at 15,909.20; The DAX is down 0.04% at 9,696.44; The IBEX-35 is down 0.34% at 10,901.00; Gold is down $2.90 at $1242.40; Copper is down $4.15 at $306.90; Crude Oil  is down $1.20 at $90.47; Heating Oil is down $0.0302 at $2.7233; Paris Milling Wheat is down €1.75 at €165.50/MT.

Mixed to easier equity markets this morning, but crude oil is trading sharply lower with the spot month at the lowest level since May 1st, 2013.  On Wednesday, OPEC revised down its growth forecasts for global crude oil demand in their monthly report.  Money flow into crude oil and other commodities has also been siphoned off, and instead diverted into the much better performing equity markets.  President Obama outlined his strategy for dealing with the terrorist group ISIS in front of the nation last night, choosing a targeted approach with airstrikes.  A ground campaign won’t be part of the strategy, the President said.  Russian natural gas deliveries to Poland dropped by 45% on Wednesday, the third day of decreases, heightening concerns Russia is curtailing gas supplies in response to Western sanctions.  Poland gets 60% of its gas needs from Russia.

A band of showers stretching from E-OK to PA this morning bringing finishing rains to the mid-south, while snow falls across WY/W-SD/MT.  The first bout of cold weather moved into the WCB/Northern Plains this morning, although Friday’s lows are the focus for growers in the US.  Temps’ Friday are expected to get into the low-30’s across MT/ND/SD/MN, but how long and how low are uncertain at this point.  Still nobody talking about a crop killing freeze.  After the current rains move out, the next 7-days are going to be fairly quiet in terms of precip which will be an aid to early harvest efforts in MO/IL et al.  The drier tone will stick around the next 15-days with below normal precip expected through September 24th.  Temperatures will stay on the cool side for the Midwest, but temps are above normal out west.

 

Markets are going to be weaker heading into the 11:00am USDA reports, highlighting trader expectations for expanding crop size.  The general tenor of the market seems to be one in which no matter what the USDA gives us today, market participants are going to assume yields and production get bigger on the October WASDE.  It would appear then that this report is more of an inconvenience than anything, but algos and HFT will still have fun at 11:00am.  The focus on the October WASDE is understandable as that’s when updated FSA acreage will be incorporated as well as objective pod and ear weights.  The latter two items are precisely why big crops get bigger as healthy crops with good potential usually get heavier as the year progresses.  Demand items will take a back seat, although corn bears will have a hard time with demand increasing further to account for increasing supply.  Trade estimates below.

There will be plenty of time to analyze every minute detail of the USDA report after the numbers are released, but there is plenty of activity occurring in basis and spreads to keep us occupied until then.  First, there is no slow down taking place in HRS basis with 15.0% protein climbing another 25-45c yesterday to +645/675Z.  Volume has dropped off slightly with only 143 cars including 2 trains, but the demand for high protein hasn’t.  14.0% was unchanged at +275/350Z.  The spread between 14’s and 15’s on the bid side is now 370c vs. 350c a week ago and 90c a month ago.  Harvest should continue strong the next week in ND/MN/MT, so watching protein spreads the next several weeks will provide a lot of clues as to whether the protein premium is here to stay.  Still no change in high pro HRW with 14.0% unchanged at +140/150Z.

PNW corn bids firmed slightly yesterday with spot trains worth +125/130Z for Sep/Oct.  HETX was also firmer with OND pegged at +115/110/110Z.  PNW soybean bids also firmed for Nov-Jan slots, now bid +197/193/185X.  It’s hard not to take notice of the firmness in soybean calendar spreads with X/F pushing to -6.00c yesterday, the highest level since 7/24, while SF/SH pushed to -5.25c, the highest level since 7/28.  The latter spread is also near the highest levels since June 30th.  The aforementioned, combined with the gigantic commercial long position implies commercials are short an awful lot of soybean basis which is going to have to be bought in by Dec/Jan.  Exporters are clearly counting on the US farmer to turn palms out in Oct/Nov, which he still may do.  If he doesn’t, however, soybean spreads and basis could be in for some sustained strength.

Wheat spreads have been showing their own strength as of late with the WZ/WH trading at -16.5c yesterday, the highest level since May 30th.  The strength in WZ/WH tracked well with the WU/WZ, although inverses aren’t likely.  KWZ/KWH two-days ago was trading close to -5.0c which is the highest levels in a month.  CZ/CH jumped to -12.25c overnight, the highest level since 8/21.  While the aforementioned spread strength isn’t enough to become outright bullish, it makes one pause about continuing to beat down the futures.  Commercials appear to be finding value across our markets at these levels, and our long awaited end user pricing might finally be taking place.  Spread direction after the numbers could provide a lot of clues about trade the next 30-days.  Quickly, MWZ/MWH is the lone spread which looks like it is headed for the basement, trading near the lowest levels since mid-July.

While still on wheat, France Agri-Mer released details about this year’s French wheat crop yesterday.  They said protein levels averaged 11.1% this year vs. 11.2% last year, but only 59% of the crop is good to very good for bread making vs. 95% last year.  Only 46% contains a Hagberg falling number over 220, the level desired by millers, compared with 99% last year.  In Germany, 80% of the wheat crop is considered suitable for milling and 20% for feed, in-line with last year.  The French quality problems are really going to rear their head later in the year when the little bit of milling quality wheat becomes exhausted.  US corn imports to the EU are going to drop off sharply this year, but the US grabbing traditional French export business could be something to watch for.

Other headlines included France reporting a record corn crop, while China continues to trim theirs due to drought.  Ethanol production yesterday rebounded slightly while stocks jumped by 348,000 barrels.

 

 

Bottom Line:  Lower prices into the numbers, but provided the USDA doesn’t throw anything to wild at the market, these trends should continue.  Multi-decade highs in condition ratings, strong anecdotal yield reports and an undersold farmer are limiting any rally attempt.  Lower prices are supposed to spur demand, which is what the USDA is counting on in their balance sheets.  We just desperately need end-users to step up and start pricing or risk even lower prices.  Our last risk to this crop is going to pass Saturday with a slow warm-up.  More after the numbers.

 

Good Luck Today.

 

WASDE Estimates 9-11

 

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.

 

 

9/10/2014 Morning Comments

Good Morning,

 

 

Outside Markets as of 6:05am: Dollar Index down 0.1550 at 84.1230; Euro up 0.00320 at 1.29510; AUD down 0.51% at 0.91440; S&P’s are up 1.75 at 1991.50; Dow futures are up 15.00 at 17,050.00; 10-yr futures are down 0.10%; The Nikkei closed up 0.25% at 15,788.78; The DAX is up 0.03% at 9,713.73; The IBEX-35 is down 0.39% at 10,909.00; Gold is up $5.90 at $1254.40; Copper is down $0.35 at $309.85; Crude Oil is down $0.03 at $92.72; Heating Oil is down $0.0091 at $2.7824; Paris Milling Wheat is down €1.50 at €167.75/MT.

Aside from the Dollar Index correcting slightly, global financial markets are fairly muted on this Wednesday.  The headline grabbing news from yesterday was of course the new product into from Apple with the latest version of the iPhone unveiled as well as the new iWatch.  Essentially, the new iPhone’s have larger screens, along with the latest gadgets to make payments at retailers such as Macy’s and McDonald’s.  Apple finished the day off 0.38% at $97.99/share.  Mortgage activity is expected to get a bounce with 30-year mortgage rates near a 15-month low of 4.10%.  That is 48bp below the 3-1/4 year high of 4.58% posted last summer.  Today’s EIA report is expected to show crude oil production moving near a new 27-3/4 year high, hitting levels not seen since November of 1986.

Large systems moving across the central corn belt this morning, impacting IA/MO/IL/MN/WI/MI with more scattered systems across MT and NE.  Rainfall in the last 24 hours has been heaviest in N-MO and the southern half of IA where localized totals hit 5.0-8.0” plus.  SD and MN also saw decent rains of 0.50-1.00” across eastern growing areas.  The impacted areas this morning will see heaviest rainfall over the next 3-days before the system moves east into IN/MI/OH.  Western SD, WY and S-MT are also in for additional moisture through Saturday.  Extended maps seen softening on the much below normal temps during the 8-14, while moisture drops to below normal for the entire Midwest which will probably be welcome with the onslaught of harvest.

 

Wal-Mart trading at work in the Ag sector this morning with better living through lower prices.  Follow through selling is being witnessed in our space in the ramp up to tomorrow’s USDA report, even as most analysts admit the likelihood of the USDA matching the impressive private crop estimates being floated isn’t very good.  Still, carryouts are set to grow on tomorrow’s report, both in the US and world in regards to wheat.  Managed money continues to add to the short side of these markets, the Dollar Index is near 3-year highs, early yield report from IL/MO and the mid-south are nothing short of outstanding, and the US farmer continues to be undersold on both 13/14 and 14/15 crops.  Bagging seems to continue coming up as the storage plan of choice for both farmers and elevators as harvest looms.  These markets need a major catalyst to stem the slide and recover.  At current we don’t have one.

The weekly margin recap put together by www.rjomrt.com showed end user margins flat to better with gross ethanol margins pegged at $1.37/gln vs. $1.40 last week and $0.93 last year.  US Broiler Crush was estimated at 82.65c/lb vs. 79.39c/lb last week and 68.09c/lb last year.  Hog crush jumped solidly to $147.75/hd vs. $134.10 last week and $102.71/hd last year.  Cattle crush remains weak at $86.38/hd vs. $88.46/hd last week and $201.60/hd last year.  Profitability of C-IL soy crushers remains almost unbelievably high at $5.78/bu vs. $3.92/bu last week at $0.95/bu last year.  What’s funny is the fact that $0.95/bu is considered a good margin.  With meal remaining aggressively high at either +160U or +260V, crushers have plenty of margin to play with.  Cattle prices remaining at all-time record highs will keep demand high even if feeding margins are weak.  The squeeze will just travel up the supply chain.

Some decent moves in corn basis yesterday with destination rail bids improving off the PNW to +125Z for OND vs. +115Z a week ago.  HETX basis was firmer as well at +105/110Z for OND vs. +90/92Z a week ago.  Ethanol basis is considered flat. CIF barges have been under pressure, however, with harvest ramping up along the MS-River corridor.  OND boats could be called +81/83Z or $167.41-168.20/MT FOB.  US prices out of the Gulf have finally caught up with aggressive SAM numbers which were reported last night at $165.84-170.96/MT out of Argy for OND, and $172.92/MT out of Brazil for Nov/Dec.  SAM will remain an aggressive competitor this year, but acres are expected to shift more solidly to soybeans given current corn/bean ratios for the 2015 season.  The US isn’t the only place with a corn supply glut.

Still solid volume on the MPLS spot floor with 332 cars including 7 trains.  14.0% treading water at +275/350Z, 15.0% at +600/650Z and 16.0% pro finally getting some definition at +650Z.  Still not a lot of overt quality concerns out of ND in the way of vom and sprout, but color and TW seem to be genuine concerns.  Bushels will be there, but the desired bushels might be tough to come by.  Asian customers are the real sticklers for color, so PNW bids will be worth watching.  At some point, would still think a more concerted push for high pro-HRW comes around given the spreads with high pro spring wheat, but there is a lot of harvest and winter to get through yet.  13.0% pro HRW dropped 5c to +110/120Z and 14.0% pro was unchanged at +140/150Z.

Public Opinion as compiled by www.sentimentrader.com dropped to a fresh low of 23% on soybeans this week, now the lowest public opinion toward the commodity since February 7th, 2005.  As reported yesterday, funds are record short the soybean market and commercials have turned record long, so negative public sentiment is completely understandable.  Unfortunately, bearish sentiment isn’t a reason in and of itself to buy a commodity.  Bearish public opinion simply sets the stage for a major reversal once the trend finally changes.  Until upside technical objectives have been achieved, the trend in soybeans remains down on all scales and could still accelerate.  At the very least, the market would need to prove strength above $10.38, but preferably $10.89 or even $11.17 before traders can do anything more than cover shorts.  Sentiment remains negative towards corn and wheat, but nothing to the degree of soybeans.  Sentiment towards the CRB-Index as a whole is about to slip into pessimistic territory, the first time since June of 2012.  This might be the larger indicator, as it isn’t just grains feeling the negative sentiment.

 

Bottom Line:  Choppy, two-sided trade today as traders square positions ahead of tomorrow’s USDA reports.  The USDA will probably disappoint bears, choosing to wait until more reliable field data is available before confirming the monster yields.  The market is definitely pricing in larger yields than those seen in August, so now it is about demand picking up the slack.  Basis is firming, but end users are still comfortable lying in the weeds.  14/15 is shaping up to be a year of margin survival as opposed to margin maximization.

 

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.

9/9/2014 Morning Comments

Good Morning,

 

Outside Markets as of 6:15am: Dollar Index up 0.1190 at 84.3500; Euro down 0.00230 at 1.28850; British Pound flat at 1.6118; Yen up 0.32% at 106.2022; S&P’s are up 1.75 at 2002.25; Dow futures are up 14.00 at 17,114.00; 10-yr futures are down 0.26%; The Nikkei closed up 0.28% at 15,749.15; The DAX is down 0.13% at 9,745.68; The IBEX-35 is down 0.58% at 11,038.50; Gold is up $2.90 at $1257.20; Copper is down $2.45 at $314.40; Crude Oil is up $0.88 at $93.54; Heating Oil is down $0.0023 at $2.8071; Paris Milling Wheat is up €0.50 at €170.75/MT.

Currency fluctuations continue to grab headlines with the US Dollar Index making fresh 14-month highs, and trading just 426 pips away from making fresh 3-year highs.  Poor economic data in Japan, looser monetary policy by the ECB and Scottish succession plans are weighing on the Yen, Euro and Pound, respectively, propelling the US Dollar higher. As mentioned ad nausea, this is a negative undertow for commodities as not only does it make physical goods priced in US dollars more expensive to global importers, but the Dollar is a major input for investment models employed by managed money groups.  With equities at or near record highs, a strengthening US Dollar will not be a boon for commodities.  Relatively quiet economic calendar in the US today.

Light, scattered precip across the Rockies and WCB this morning with rainfall chances increasing throughout the day today in the Dakotas, MN, IA, NE, MO.  The heaviest rainfall amounts will be found in E-NE/IA/S-WI where anywhere between 2.3-3.6” is expected to fall, but the WCB and Northern Plains are slated for a general 0.50-1.00” rain between now and Friday.  Following the spate of rain this week, things will then dry out during the 6-15 day period, which will be welcome to speed maturity along for row crops.  Temperatures will remain biased to the cool side the next 15-days with the first cold snap coming Thursday morning.  Friday’s lows still look the coldest, although forecasters have been moderating all week as to how cold it will actually get.  Widespread crop damage isn’t expected with our first taste of fall/winter weather.

 

Weaker markets from the overnight open and continuing that trend this morning led by corn and wheat as harvest progress picked up in the Northern Plains over the weekend and frost chances get dialed back.  Crop conditions last night remain historically high, resisting the urge to decline as happens seasonally every year, which suggests crop potential in the eyes of observers is holding or getting larger.  Old crop corn and soybean basis remains firm in an effort by end users to pry the last few “bridge-bushels” out before new crop, but new crop basis doesn’t suggest widespread export business is taking place.  The flash and sizzle of large scale Chinese wheat and corn purchases are notably absent this year, combined NAM and SAM soybean supplies are going to rise to record levels by the spring of 2015 and managed funds want nothing to do with the long side of our markets.

Corn conditions held steady last night at 74% G/E vs. 54% last year and remaining the highest since 1994.  Corn denting was pegged at 69% vs. 61% last year and 74% average.  Northern tier states remain behind on dent progress, such as ND -19% from average, MN -6%, WI -12%, MI -12% and PA -10%.  These states will need to be monitored in coming weeks as a significant amount of time is needed before this crop is frost-risk free.  15% of the crop is mature vs. 8% last year and 26% average.  ND, MN and WI have a combined 3% of the crop which is mature.  Soybean conditions were also unchanged at 72% vs. 52% a year ago, and still the highest rated for early-September since 1985.  12% of the crop is dropping leaves vs. 10% last year and 17% average.  More soybeans would appear at risk of frost-damage in the North than corn looking at state-by-state comparisons.

Spring Wheat harvest was estimated at 58% complete, up 20% from a week ago but still 20% below the 5-yr average.  ND doubled progress in the last week, going from 21% harvested to 42% but behind 74% average.  MN is 54% harvested vs. 35% last week at 89% average.  In ND there were 4.6 days suitable for fieldwork and it would appear producers took advantage.  Color and TW continue to be the biggest areas of concern for HRS quality as vomo and spout appear limited in severity so far.  ND is still just 76% harvested on HRW which is said to be laden with vom.  Oats harvest remains stubbornly slow in several states as well with WI at 80% harvested vs. 73% last week and 98% average.  ND is 54% harvested vs. 86% last year and 84% average.  MN is 90% harvested vs. 96% last year and 97% average.  Forecasts for this week could slow things further, and 2014 could well be the year of quality.

Lastly, HRW planting saw its first progress report with 3% of the crop planted nationally vs. 4% average.  The most progress has been made in NE where 11% has been planted which is spot on the 5-yr average.  Southern Plains states should have ample moisture for the onset of planting based on 14-day observed rainfall maps.  This will be welcome news to HRW farmers who have planted into dry soils the last two falls.

Reuters kicked out their average trade estimates for Thursday’s WASDE report.  Corn production is expected to come in at 14.288bbu with an average yield of 170.743bpa which would compare with the USDA’s August assessment of 14.032bbu and 167.4bpa.  The soybean crop is seen at 3.883bbu with an average yield of 46.293bpa vs. the USDA’s August numbers of 3.816bbu and 45.4bpa.  It remains the topic for debate as to whether the USDA will respond with production numbers close to average trade ideas, or wait until more objective harvest data is collected ahead of the October WASDE?  FWIW, over the last six years, the USDA has come in above the average trade guess on corn production 3 times and below 3.  If one pans out further, however, over the last 15 years, the USDA has come in above the average trade guess 12 times out of the last 15 years.  On soybeans, it is a crapshoot with the USDA coming in above the average trade guess 3 times and below 4 over the last 7-years.  Carryout ideas are expected to rise slightly on old crop corn, but drop on old soybeans.  New crop carryouts are seen rising for corn, soybeans and wheat.

 

Bottom Line: No reason to get fancy today as lower prices should carry the day.  Frost chances look less severe, average trade ideas for Thursday’s report are big and seem to be getting bigger, macro influences such as the Dollar Index continue to be a negative undertow and the US farmer remains undersold on all major crops.  CZ looks/feels as though it is still 15-20c above prices which would coincide with a longer-term low while SX still looks rich based on carryout ideas.  Constant margin stress testing needs to be enacted in this environment.

 

Good Luck Today.

 

9-12 Low Temps 9-9

 

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.

 

9/8/2014 Morning Comments

Good Morning,

 

Outside Markets as of 5:55am: Dollar Index up 0.1900 at 83.9270; Euro is down 0.00130 at 1.29460; the British Pound is off 1.28%; S&P’s are down 3.00 at 2003.00; Dow futures are off 27.00 at 17,090.00; 10-yr futures are up 0.15%; The Nikkei closed up 0.23% at 15,705.11; The DAX is down 0.20% at 9,727.95; The FTSE-100 is down 0.95% at 6,790.17; Gold is down $0.20 at $1267.10; Copper is up $2.95 at $319.90; Crude Oil is down $0.64 at $92.65; Heating Oil is down $0.0151 at $2.8041; Paris Milling Wheat is down €0.75 at €171.25/MT.

The Pound, the FTSE and the UK are grabbing headlines this morning as polls over the weekend showed momentum is growing for Scotland to break away from the United Kingdom.  There have been months of surveys showing Scotland was unlikely to leave the 307-year old union with Brittan, but the latest survey Sunday showed “Yes” voters increasing to 51% on ending the alliance.  In response, the London stock exchange is down almost a full percent, the Sterling is off against the Dollar the most in a year.  Friday’s unemployment report was viewed as disappointing with August payrolls increasing just 142,000 vs. the pre-report estimate of 230,000.  The unemployment rate eased slightly to 6.1% from 6.2%.  Participation in the equity rally is becoming a concern with fewer than 6% of the S&P’s components at new highs despite the index closing at fresh record highs.

Small system in SE-SD this morning, otherwise a fairly quiet Midwest to start the week.  The moisture and cold mid-week into the weekend continue to be the focus of the Ag markets, although Sunday night maps suggested the cold air mass wasn’t going to be as damaging as what Friday runs suggested.  Most forecasters are still calling for low to mid-30’s in the Dakotas, the NW ½ of MN and far NW-IA by Friday morning.  ND, MT and possibly WI could see freezing temps, and the Canadian Prairies will see frost/freeze which could produce damage to Canola and immature wheat.  Moisture chances will increase with the cold which should be a benefit with IA/WI/MI seeing heavy rains the next 3-days including up to 3.25” in IA.  NOAA maps put 6-10 temps much below normal but things moderate in the 8-14.  Both outlooks were drier than average.

 

Mostly weaker tone to begin the week with frost/freeze chances not looking as severe as they did to close the week, and traders rightly taking a bit of risk premium out in response.  The private crop estimate tour continued Friday with Informa Economics releasing their latest estimates, although they have been one of the few firms who are accounting for an acreage drop due to differences in NASS and official FSA data.  Commitments of Traders Data released Friday showed a continuation of recent trends, especially in soybeans which saw commercial hedger positions move to historic levels.  Markets feel content to ease heading into the September WASDE report later this week, although the USDA isn’t likely to match some of the huge estimates out there given October is when more objective yield data becomes available.  We need signs of fresh demand as end users continue to lay in the weeds.

StatsCan released their latest inventory report as of July 31st with almost all grains coming in below pre-report estimates.  All-wheat was pegged at 9.795MMT vs. pre-report ideas of 10.7MMT, although the stocks were still 93% higher than a year ago.  Canola was pegged at 2.363MMT vs. ideas of 3.0MMT, but up 301% y/y.  Oats were seen at 1.031MMT vs. ideas of 1.2MMT, but up 103% y/y.  Lentils were the interesting one at 169,000MT, down 45% from a year ago.  Production of lentils in Canada were only expected to be up 2% from a year ago, and with stocks levels sharply lower than a year ago, this market may be one to pay attention to for affected growers.  Lower stocks than estimated, but still plenty of grain in Canada to buffer against delays or smaller than expected production in the coming harvest.

In the Commitments of Traders data, funds were shown adding to their corn positions with their gross position now 640,389 contracts, which accounts for 36.89% of total open interest.  This remains the third largest exposure to the market for funds going back to 2006, even though their net position remains uninspiring at +11,621 contracts.  More concerning is the fact gross commercial longs continue to see their position drop which is now down to 329,708 contracts, the smallest since September 25th, 2012.  In a year we are going to harvest a record corn crop, end users shouldn’t have their lowest position in 2-years.  Commercial shorts also remain stubbornly small, hinting at farmer % sold levels, or lack thereof.  The latter two positions are obviously tied together, and without farmer selling, it is difficult for end users to obtain coverage.

In soybeans, record territory was once again achieved with funds now amassing a net short position of -70,405 contracts, the largest going back to at least 1/1/2007.  They now account for -7.1% of total open interest.  On the other side of the coin, gross commercial longs pushed to 310,436 contracts, also a new record for that group.  The net commercial position of +46,084 contracts is a record also.  I always look at the Supplemental report for COT analysis, but in wanting to see just how historic current soybean positions are, I took a look at the CBOT Legacy report which has more data, but is less separated by groups.  So one gives up a bit of clarity on who for more history.  In doing so, I found that commercial hedgers according to the Legacy report have a net long of +96,540 contracts which is the largest net long since September 29th, 1997.  In addition, the small speculator now has a net short of -82,820 contracts which is the largest net short for that group going back to January 1986.  The trends in the soybean market don’t seem sustainable with funds getting record short while commercials are record long.  At some point, something is going to have to give.  Below is a chart from www.sentimentrader.com showing the commercial soybean position going back to 1986.

No backing down in wheat basis on Friday with Minneapolis 14.0% pro bid +295/350Z, up 25c on the high end.  15.0% protein was indicated at +625/630Z, up 75c on the bid side.  Volume continues to be heavy at 247 cars including 7 trains.  Still not much pickup in high-pro HRW basis, at least according to news wires with 12.0% unchanged at +110/120Z, 13.0% unchanged at +115/125Z and 14.0% unchanged at +140/150Z.  14.0% pro is up 20c from a week ago, but 12’s and 13’s were roughly unchanged.  Some harvest progress should have been made last week in ND and MN, so tonight’s crop condition report will be interesting to get a gauge on remaining acres and quality.  If this protein scare is for real, we should see basis respond in coming days/weeks.  Color seems to be the main concern as of late as opposed to vomotoxin or sprout as originally feared.

The Dollar Index continues to play a major role in US grain competiveness, and with the Dollar hitting the highest levels in 14-months, this is obviously a negative for export demand.  This week we will take a look at US grain prices adjusted for the US Dollar Index which sheds light on the currency’s influence.

 

Bottom Line:  Less frost risk should mean premium extraction today provided midday updates don’t force cold air back in for later this week.  Northern Plains’ row crops still need a lot of time to reach full maturity and this week’s cold temps won’t help.  Still, crop estimates suggest higher USDA numbers this week and next month, and until end users get in line to support price, a sustained rally will prove fleeting.  Crop conditions will be a focus this evening, but charts are still negative and will remain a drag to our prices.

 

Good Luck Today.

 

Soybean Commercial Position 9-8

 

 

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.

9/5/2014 Morning Comments

Good Morning,

 

Outside Markets as of 5:55am: Dollar Index down 0.0800 at 83.7400; Euro up 0.00170 at 1.29550; S&P’s are down 7.50 at 1990.50; Dow futures are down 58.00 at 17,021.00; 10-yr futures are down 0.04%; The Nikkei closed down 0.05% at 15,668.68; The DAX is down 0.30% at 9,695.25; The IBEX-35 is down 0.08% at 11,091.40; Gold is down $0.90 at $1265.60; Copper is up $0.35 at $315.45; Crude Oil is up $0.29 at $94.74; Heating Oil is up $0.0095 at $2.8458; Paris Milling Wheat is down €0.25 at €170.50/MT.

The US Dollar Index is off slightly this morning following the surge to fresh 14-month highs thanks in part to the ECB’s decision yesterday to cut benchmark interest rates from record lows to new record lows, and after the BOJ decided to hold steady on stimulus efforts.  The Japanese Yen is trading at a six-year low, which will bring back stories of the carry trade picking up in popularity.  The main focus of today will be the August unemployment report in the US which is expected to show a gain of 225,000 jobs, up from 209,000 in July with the unemployment rate easing -0.1% to 6.1%, matching the six-year low posted in June.  The US economy has now produced a net +9.3 million jobs since the payroll trough in February 2010.  The total number of US payroll jobs in May 2014 finally exceeded the previous payroll peak posted in January 2008.

A fairly wide band of showers passing through the WCB and Great Lakes this region, encompassing NE/KS/IA/WI/MI with totals since midnight relatively light aside from heavier activity along the NE/IA border.  Precip the next 5-days will be confined to KS/MO/IL with outlying areas receiving some moisture, but precip in those three states picking up to 1.00-2.50” in spots.  The Northern Plains is expected to remain dry the next 5-7 days in ND/MT which will be especially welcome, providing the chance for HRS harvest to pick up.  Afternoon NOAA maps, shown below, for the 6-10 and 8-14 time frames got cooler on yesterday afternoon’s model.  The first map, the 6-10, now shows much below normal temps for the Northern Plains and WCB, which is likely to produce frost/freeze in northern growing areas.  Futures are showing a bit of a bounce on this news this morning.

 

After setting fresh contract lows in SX, CZ, WZ, KWZ and MWZ yesterday, the Ag complex is seeing a bit of a relief bounce this morning on cooler forecasts yesterday afternoon and a technical bounce as profit-taking grabs hold ahead of the weekend.  For the week, CZ is down -16.0c, SX down -15.50c and WZ is down -27.25c as November soybeans barely defended the all-important $10.00 level.  Private forecasts continue to roll out each day, and almost every single estimate puts the US corn and soybean crops and yields above the USDA’s August numbers.  The market is clearly transitioning to the idea of bigger crops, and taking risk premium out in the process.  The cooler forecast in the maps below will give traders caution on getting too bearish, too quick, but unless this frost event is catastrophic, it probably won’t derail these crops from getting bigger.  What it will do, however, is slow the maturation process, stringing out harvest well into November and December for northern growers.  This may prevent a concentrated harvest selling effort, but the bushels appear to be there, and markets are trying to price themselves accordingly.

Lanworth, the satellite imagery company, was the latest firm to release corn and soybean production estimates, putting the corn crop at 173.7bpa and 14.649bbu.  Their soybean crop was pegged at 46.7bpa and 3.852bbu.  Both sets of numbers are below their previous forecasts, but well above the USDA’s August numbers.  Informa Economics is scheduled to be out mid-morning with their latest numbers.  Informa’s estimates are similar to the USDA’s in that they take field samples in addition to polling farmers.  Their numbers aren’t likely to be as big as some of those released in recent days, but higher than the USDA’s latest guess looks likely.  Remember that Informa is one outfit which has been touting an acreage reduction in corn of 2.0-2.5 million based on FSA-data, so an increase in yield isn’t necessarily going to grow their carryout projections sharply above the USDA.  Acres are still definitively in play.

There were reports from cash traders yesterday South Korea was showing dissatisfaction towards their latest US corn cargoes due to high damage and FM.  This is to be expected given the high percentage of corn which was either dried or put away wet, and the last bit of old crop is usually of lesser quality than harvest boats.  It doesn’t help that the cargoes South Korea is currently receiving are priced at values well above current replacement numbers.  CIF corn boats were easier by 2-4c for OND yesterday at $171.84/MT FOB.  Argentine corn has been trending well cheaper than US as of late with Oct/Nov indications down around $164.86-169.09/MT.  The same can be said about US soymeal against Argentine meal with yesterday’s sell off being blamed in part on new crop meal sales out of the US being switched to SAM.  US soybeans are cheaper than SAM, but meal is not given the impressive domestic feeding margins and the ability of livestock producers to pay up in competition with importers.  October soymeal cargoes in the Gulf were quoted at $480.49/MT yesterday vs. Sept meal cargoes in Argentina at $430.00/MT and Oct Brazil cargoes at $424.28/MT.  Reliability holds a big premium, however.

The MWU/MWZ hit a new contract high yesterday of +14.25c as basis on the Minneapolis spot floor continues to hold firm amidst heavy volume.  Yesterday there were 271 cars including 6 trains with 14.0% protein wheat trading up 25-45c at +295/325Z.  15.0% pro wheat was indicated at +550/630Z, down 50c on the bid side, but up 5c on the offer.  In South Dakota, multiple elevator groups have been reported as paying $1.00-2.00 over the board, equating to $7.50-8.00 cash wheat for 15.0% protein in the OND slots.  The question on a lot of farmers minds is whether this is a short-term basis event to be taken advantage of, or whether 14/15 is going to prove to be a strong basis environment throughout.  My gut says the former given HRW’s discount to HRS at similar protein levels.  For instance, 13.0% HRS is bid at $7.09 a bushel vs. 13.0% HRW at $7.41/bu.  But 14.0% protein HRS is bid at $9.09/bu and 14.0% HRW is bid at $7.66/bu, a difference of $1.43.  US mills are making the same calculation and will adjust mill grinds to work in as much high-pro HRW as possible at that kind of spread.  In addition, with 70% of North Dakota’s wheat harvest left to come in, odds are at least decent, all of it isn’t going to be feed grade due to recent moisture.  The ability for 14.0% and 15.0% HRS to maintain +300/500Z for months at a time isn’t unprecedented.  Yet, taking advantage of the basis rally on the chance North Dakota isn’t chock full of feed grain seems like a good hedge going into fall harvest.  Contact Halo Commodities for the most up to date bid/asks in your area.

Export sales will be released this morning after their one day delay because of the Labor Day holiday.  A pick up in export demand should be seen now that fresh contract lows have been set in every December contract on the board.  Corn export sales are running behind a year ago due to slower sales to China and Europe.  But sales to other major importing destinations such as Mexico, South Korea and Japan are well above a year ago, and in some cases on pace for record imports.

 

Bottom Line:  Continue to watch forecasts for clues about next week’s frost event in the northern growing areas, but realize it is probably a good excuse for some profit taking ahead of the weekend.  Private estimates are growing, but the USDA may be slow to adopt the big numbers until more harvest activity has taken place.  Storage decisions will need to be made in coming weeks about which crop to store, and if spring wheat is in the bin, consider the strong basis levels currently being afforded for quality wheat.

 

Good Luck Today.

 

http://www.ft.com/intl/cms/s/0/2ac3cd88-3447-11e4-8039-00144feabdc0.html?siteedition=intl#axzz3CRH9yDer

 

CPC 6-10 9-5 CPC 8-14 9-5

 

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.

9/4/2014 Morning Comments

Good Morning,

 

 

Outside Markets as of 6:25am: Dollar Index up 0.0630 at 82.9280; Euro down 0.00180 at 1.31270; S&P’s are up 7.00 at 2005.75; Dow futures are up 42.00 at 17,115.00; 10-yr futures are down 0.06%; The Nikkei closed down 0.33% at 15,676.18; The DAX is down 0.03% at 9,623.86; The IBEX-35 is up 0.43% at 10,933.90; Gold is up $2.30 at $1272.60; Copper is up $1.85 at $314.55; Crude Oil is down $0.23 at $95.32; Heating Oil is up $0.22 at $2.8720; Paris Milling Wheat is down €2.50 at €168.25/MT.

Lots of economic data in the US today, but important to global markets will be the results of this morning’s European Central Bank meeting.  Investors are hopeful ECB President Mario Draghi will announce new stimulus measures to save the fragile economic recovery in Europe as hinted about in last month’s presser.  The ECB’s benchmark interest rate is already at a record low of 0.15%, so new measures such as the Federal Reserve’s bond buying program could be enacted.  In the US, economic data today will include the ADP private payroll report which is expected to show 220,000 jobs added during the month of August, a slight improvement from the 218,000 in July.  Friday’s unemployment report is expected to show an increase in August payrolls of 225,000, up from July’s 209,000.  Unemployment claims are expected to jump rise by 2,000 to 300,000.

Rains moving across N-MN as well as WI/IL/MI this morning as the forecasted precip for the Great Lakes falls as advertised.  Updated maps this morning show rains continuing to impact the Great Lakes the next 3-days, before a system moves in the middle of next week to the central corn belt.  7-day forecasted precip amounts for the central/eastern corn belt show heavy totals in MO/IA/IL/WI/MI.  The WCB and Northern Plains are expected to be dry the next 7-days which will be welcome for small grains harvest.  Manitoba and Ontario are still slated for rains which will impact harvest efforts there.  Frost has been the main topic the last 2-3 days and NOAA’s extended maps are confirming a below normal temperature pattern during the 6-15.  Slight frost/freeze risk does exist for the Dakotas, but impact is expected to be light.  September 13th-19th are the primary dates for the cooler temps.

 

Mixed Ag markets this morning with a little bounce in the grains but softer prices in the complex as traders readjust after yesterday’s drubbing.  Fresh contract lows were witnessed for CZ, WZ, KWZ, MWZ and SX yesterday, a sign technical momentum to the downside has been reestablished.  Private crop estimates which are well above the USDA’s August estimates continued to be released yesterday, and when combined with a counter-seasonal rise in condition ratings Monday, it is very hard to make the argument the crop isn’t getting larger.  Informa economics will be out with their latest estimates sometime this week, and should be a bit lighter than FC Stone and Allendale.  Still, the market was getting comfortable in the first half of August the crop had stabilized, but weather since has been conducive to adding test weight and filling pods.  Frost remains the only risk to this crop.

US wheat was uncompetitive in the latest Egypt-GASC tender with French and Romanian wheat taking the business handily.  60,000MT of French and 60,000MT of Romanian wheat were purchased at an average price of $258.89/MT.  A number of Russian cargoes were offered, but were uncompetitive, which is a heartening thing for other global exporters.  No US wheat was even offered, and what’s worse is French wheat won the business, the country battling feed wheat issues.  Will be interesting to see if Egypt institutes policies like Algeria in the way of banning cargoes containing wheat from other origins than that listed in the contract details.  This of course due to France importing wheat from Lithuania and Great Britain.

Also on wheat, it was announced Sinograin has bought 24.3MMT of wheat from farmers in China, nearly three times the amount purchased at this time last year in an attempt to buy more domestically and less abroad.  The purchases will come in tandem with a 10MMT sale of wheat from domestic reserves so as to rotate reserves in Northern growing areas.  Imports by China are expected to fall from 6.8MMT last year to near 3MMT this year, a negative for suppliers in North America.

Worth noting that during yesterday’s session, the feeder cattle/corn ratio rallied to 65.26, the highest level on record going back to January 1974.  In addition, the live cattle/corn ratio jumped to 44.68, the highest level since January 16th, 2006.  Also, Heating Oil/Corn pushed to 0.81125, the highest level since August 28th, 2006.  Profitability for livestock producers continues to remain very, very strong.  Ethanol margins are also in that book, and it ensures consistent demand in the coming marketing year.  However, end users continue to lay in the weeds when it comes to booking corn.  This strategy has proven wise so far with lower lows in corn for weeks.  At some point, end users should step up to the plate to help stabilize this corn market and cash sources believe this happens when December corn slips into the $3.25-3.50 pricing envelop.  Would probably line up with harvest lows at this pace.

The Dollar Index is rising to fresh 14-month highs this morning on the back of the ECB’s decision to cut their benchmark interest rate to 0.05% from 0.15%, a new record low.  This will be a negative feature for commodities during today’s trading as well as the rest of this week.

 

Bottom Line: Expect a choppy/lower market today with the Dollar Index surging to the highest levels in over a year.  Just when it felt like crops were beginning to stabilize, weather the latter half of August and so far in September has been conducive to adding test weight and filling pods.  If these crops make it through the frost scare next week, they will be well down the homestretch.  Our markets desperately need end users to step up with the big bat, something they’ve been reluctant to do so far.

 

 

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.