4/25/2014 Morning Comments

Good Morning,

 

Outside Markets as of 6:00am: Dollar Index down 0.0520 at 79.7170; Euro is up 0.00120 at 1.38350; S&P’s are down 4.75 at 1868.25; Dow futures are down 54.0 at 16,377.00; 10-yr futures are up 0.2%; The Nikkei closed up 0.17% at 14,429.26; The DAX is down 0.84% at 9,468.22; Gold is up $4.80 at $1295.40; Copper is down $0.65 at $308.15; Crude Oil is down $0.46 at $101.48; Heating Oil is down $0.0155 at $2.9940; Paris Milling Wheat is up €0.75 at €216.75/MT.

Groundhog’s Day once again with tensions escalating in Ukraine which is weighing on global equities as we cap off a mostly positive week in US financials.  Amid the chaos, the rating agency Standard and Poor’s cut Russia’s credit rating from BBB to BBB- as it warns of capital flight and risks to investment due to the crisis.  Ukraine continues to stand by its operation to drive pro-Russian insurgents out of occupied building in the eastern part of the country while Russia stands firm on its threats of invasion should its citizens be harmed.  The Russian MICEX finished down another 0.69% on the day and is down 14.09% YTD.  According to the US State Department, additional sanctions are “teed up” and ready to go should Russia continue not honoring the Geneva agreement.  In the US today, we’ll see April Consumer Confidence which is expected up 0.4 to 83.0, but is still below the 6 ¾ year high hit last July.

Additional moisture falling in the ECB this morning, but a pretty wide open Midwest otherwise before the next significant system rolls through this weekend.  The first map below shows past 48-hour precip totals for the Midwest, while the second map shows 5-day forecasted precip.  As one can plainly see, fieldwork is going to come to a grinding halt later this weekend as heavy rains impact almost every portion of the corn belt.  This is behind some of the strength witnessed this week, especially with the below normal temps following it up in the 6-15 day period.  Eastern portions of the southern plains should see some decent rain totals, but dry areas of SW-KS and the panhandle will remain dry.  Forecasted temps in HRW country this weekend will see solid 90’s followed up by 50’s next week for highs.  Still no alarm bells for planting, but behind average we will stay.  Estimates for Monday are 18-20% planted.

 

A little bit of a bounce as we close as we round a positive week for the grains and a negative week for the complex.  On the week, July soybeans are down 24.75c, July corn is up 9.75c and July Chicago Wheat is up 0.75c.  Export sales kept the ball rolling yesterday with sales at or above expectations in all categories, and shipments of corn hit  62.88mbu, the highest weekly total going back 24 years.  In addition, the sweltering temps forecast for the southern plains and the general lack of rain helped wheat futures claw back to positive on the week from earlier week losses.  Several analysts are bringing their HRW production forecasts down, and the Wheat Quality Council Tour begins Monday in the Southern Plains.  The constant threat of world wheat importers going outside of the Black Sea has also lent support, but to date we’ve seen no incremental business to any major MENA destinations.

CIF corn premiums continue to slowly firm at the Gulf, up another 2c yesterday with spot barges pegged at +66K vs +62K a week ago.  This is putting Zone 3 basis at 3.7-7.1c above gross delivery equivalence, meaning buying the CK/CN spread and standing in for delivery is currently at 9c winner.  Should help with spread stability and keep futures firm on the front-end.  In addition, Argentine FOB premiums keep firming, likely part of the strength in CIF as imports keep tapping US supplies.  June basis was up another 3c yesterday to +80N vs US June CIF at +63N.  The chart picture for July corn gets a whole lot more positive with a push over $5.13 ¾ which would open up a test of the highs at $5.24.  Demand from exports remains strong, but despite strong weekly ethanol production data, ethanol plants continue to bid as though they have adequate coverage, limiting domestic homes for WCB corn.

Old news this morning, but StatsCan said Canadian farmers plan to plant much less canola than analyst originally figured.  Canola plantings are seen at 19.801 million acres, down 0.7% from last year and well short of the 21.1 million forecast.  All-wheat acres are pegged at 24.766 million, down 4.8% from last year but exceeding the average analyst estimate of 24.4 million.  Oats acres are seen at 3.188 million, up 0.6% from a year ago and in-line with expectations.

Strong seasonals begin soon on many old crop/new crop spreads in corn and soybeans with CN/CZ typically weakening from now through June.  Many analysts tout the bullish old crop story has been priced in, and the market is solely focused on weather from here through planting.  Certainly hard to argue with, especially until the next major old crop update at the end of June.  Ethanol and exports are towing the line, but not yet doing enough to warrant another increase in either category.

 

 

Bottom Line:  Look for firmer trade in the early going today as there is more supportive news around this morning than negative.  Soybeans will continue battling with rumors of imports, defaults and cancellations, likely keeping us in a range 30c either side of $15.00.  Forecasts remain supportive for grains, as does solid export pull on corn.  Wheat is a weather market and will live and die with each model run.  Sometimes it’s helpful to take a step back and look at the last 3-6 months of price movement.  $5.00 new crop corn is still available on the board.

 

 

Good Luck Today.

 

48-hr precip 4-255-day HPC 4-25

 

 

Tregg Cronin

Market Analyst

Tregg.Cronin@halocommodities.com

www.halocommodities.com

@5thWave_tcronin

 

 

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

4/24/2014 Morning Comments

Good Morning,

 

Outside Markets as of 6:00am: Dollar Index down 0.0420 at 79.8000; Euro up 0.00080 at 1.38220; S&P’s up 6.50 at 1879.50; Dow futures are up 34.00 at 16,494.00; 10-yr Treasuries are down 0.13%; The Nikkei closed down 0.97% at 14,404.99; The DAX is up 0.84% at 9,624.61; Gold is down $0.90 at $1280.20; Copper is up $3.60 at $307.00; Crude Oil is up $0.34 at $101.77; Heating Oil is up $0.0020 at $2.9778; Paris Milling Wheat is unchanged at €214.75/MT.

Global equities are mostly higher this morning after a lower Asian close when President Obama and Japan’s Prime Minister failed to reach a trade agreement.  Japan’s Prime Minister Shinzo Abe seemed more interested in re-affirming Japan and the US’s security ties in light of the building tension between China and Japan.  Speaking of escalating tension, Ukraine and Russia are splashed back on the front-page this morning as the Ukrainian government has been setting up checkpoints to keep pro-Russian protestors out of Ukrainian cities.  In the process, there are reports of 5 protestors being shot and killed by the Kiev backed forces.  Russian President Vladimir Putin said any attack on its citizens in Ukraine would be considered an attack on Russia itself.  This morning will see unemployment claims which are expected to show an increase of 11,000 to 315,000.

Lots of moisture working across the Mississippi River this morning with fieldwork being stalled in various stages.  The 7-day forecasted precip map shows heavy rains to impact S-MN/IA/MO/AR/L/IN/PH/KY/TN during the next week and should keep planting progress subdued after decent headway was made this week.  There are still relatively few who are overly concerned with delays to this point with May 5th being an unofficial line in the sand for concerns to increase.  NOAA extended maps continue to point towards below normal temps and below normal precip for the majority of the Midwest.  The temps almost seem more of a concern than the below normal precip being helpful as cool temperatures hamper even emergence.  4” soil temps below as of this morning.

 

Mostly firmer markets overnight in grains while soybeans continue to be the weak leg as has been the trend this week.  The themes in our market haven’t changed a great deal with the exception of US corn back to being the cheapest source of FOB supply in the world.  Argentine farmers have been slow sellers to date in part off inflation concerns and in part off a delayed crop.  $15.00 soybeans also seem more attractive than $5.00 corn.  At the close last night, US-Gulf corn was bid around +66K for spot, +64N for June and +63N for July putting is between $224/225/MT.  In Argentina, price per tonne was sitting around $243/MT for spot, $229/MT for June and $225/MT for July.  Ukraine remains near $245/MT.  Import needs should continue being sourced out of the US, especially with cheapening freight costs.  To wit, BNSF spot cars are now bid $500/car vs $2000 a week ago and $3500 a month ago.

While still on the subject of corn, worth noting the huge open interest increase yesterday on the bounce.  Corn open interest jumped 22,810 contracts on volume of 317,000.  Other notable changes included soybeans down 5,530, wheat up 2,340, meal up 270 and soy oil up 3,970.  Some of the starch definitely seems to be coming out of soybeans this week with Brazilian FOB premiums continuing to trade at distressed levels, CIF NOLA premiums arching lower and the rhetoric coming out of China about crusher financing.  Obtaining letters of credit is becoming a more difficult issue by the day, and just last night Reuters reported Chinese officials had detained Marubeni employees for failing to pay taxes on imported soybeans.  None of the aforementioned leaves a good taste in mouth of the global exporter when the globe’s largest natural long is experiencing the issues it is.

Old crop export sales estimates this morning show wheat at 100-450TMT, corn at 300-800TMT, soybeans at -250/+100TMT, meal at 25-175TMT and soy oil at 0-50TMT.  Keep an eye on wheat sales as with only 6-weeks left in the marketing year, wheat needs to see commitments rise a bit more to prevent a reduction in marketing year exports on next month’s WASDE report.  Traders will also be watching soybeans intently to see if this is the week we finally have a net negative sales report.

Spring wheat continues to trade at a 20-25c discount to KC winter wheat on the board through March.  Would continue monitoring this spread as even in very, very tight balance sheet years for HRW, the new crop spreads almost always see KC winter wheat lose premium relative to spring wheat and trade at par or even a substantial discount.  There may be inter-market opportunities available.

 

Bottom Line:  Grains are feeling the bounce this morning, and barring a disastrous export sales report, there is little to deter them from trading higher.  Fieldwork will come to a halt, planting progress will remain behind the averages, farmers are focused on farming and not selling grain, and there is just enough geo-political unrest to keep things supported.  Soybeans have been the bull-leg of spreads for weeks, and as funds roll length forward, they are entitled to some profit taking.  Still no South American soybeans trading into Iowa.

 

 

Good Luck Today.

Soil Temps 4-24

 

 

Tregg Cronin

Market Analyst

Tregg.Cronin@halocommodities.com

www.halocommodities.com

@5thWave_tcronin

 

 

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

 

4/22/2014 Morning Comments

Good Morning,

 

Outside Markets as of 5:15am: Dollar Index down 0.0760 at 79.8760; Euro is up 0.00120 at 1.38060; S&P’s are up 1.25 at 1865.75; Dow futures are up 9.00 at 16,380.00; 10-yr is up 0.05%; The Nikkei closed down 0.85% at 14,388.77; The DAX is up 1.17% at 9,519.86; The FTSE-100 is up 0.96% at 6,689.07; The IBEX-35 is up 0.71% at 10,365.90; Gold is down $3.30 at $1290.60; Copper is down $1.90 at $301.50; Crude Oil is down $0.42 at $103.21; Heating Oil is down $0.0082 at $3.0035; Paris Milling Wheat is down €2.75 at €214.75/MT.

World equities are mostly firmer today as Q1 earnings seasons has gotten off to a solid start, although investors remain wary of this evening’s report on Chinese manufacturing as well as the possibility of more sanctions being levied against Russia.  The US has warned it will order new economic sanctions on Russia if it does not comply with the Geneva accord entered last week.  Pro-Moscow gunmen are showing no signs of surrendering government buildings they have seized, and it widely suspected the protesters are backed by the Kremlin who is trying to incite civil war in Ukraine.  Existing home sales data will be released in the US today, and it is expected to show a 1.1% decline to 4.55 million units which would be a 1 ¾ year low.  The 1% rise interest rates combined with lower consumer confidence tied to the Affordable Care act are being cited.

 

After a band of showers exits the far eastern corn belt this morning, the Midwest should see pretty wide open weather until this evening when another system tracks through the upper-Midwest and far-western corn belt.  This will produce modest precip in SD/ND/MN with heavier totals in IA/NE/KS.  This system will push East and impact MO/IL/WI on Thursday into Friday with heaviest totals in MO/WI up to 1.15”.  Additional moisture will push in this weekend with South Dakota seeing another shot Sunday into Monday with totals between 0.50-1.00” while S-IL/MO/AR see another 0.75-2.00”.  Lots of showers around, but expect planting to surge when and where it can occur.  Extended maps from NOAA show a cooling of temperatures to below normal during the 6-10 and 8-14, but precip will slip from above normal to below normal late in the period as we round out April.

Firmer markets overnight as prices bounce from yesterday’s sharp selloff and react to the mostly friendly crop progress report issued yesterday afternoon.  Yesterday’s loss leader, wheat, succumbed to selling pressure based on better than expected rainfall over the weekend, the forecast for rain this week in the southern plains, temporary optimism surrounding Ukraine/Russia and the trimming of fund length.  The technical picture of wheat is not incredibly encouraging, and if the lows from April 11th are breached, it will look increasingly likely the entire rally from the end of January through March 20th was bear-market corrective, and prices are set to trend towards those January lows.  Lots to happen between now and then, namely growing weather, but funds should be a little anxious about the developing chart picture in wheat.  A close over $7.18 basis July Chicago would be encouraging.

Yesterday’s crop progress report was about as expected to maybe a touch friendly with nation-wide corn planting progress pegged at 6% vs 3% last week and 14% on the 5-yr average.  Progress is slightly ahead of last year’s incredibly slow pace, and should be near 20-25% next Monday.  There are roughly 85 million acres of corn remaining to be planted.  Spring wheat planting progress was estimated at 10% vs 6% last week and 19% average.  North Dakota is 1% planted.  Oats planting progress was listed at 20% complete vs 41% last year and 55% on the 5-yr average.  The national winter wheat condition held steady at 34% G/E vs 35% last year.  Notable changes were witnessed in OK where G/E dropped 3pts to 11% G/E, while poor/very poor increased 7% to 61%.  Freeze damage is still being assessed.  9% of the winter wheat crop is headed vs 17% average with TX at 34% and OK at 38%.

Statistics Canada will be out Thursday with their first estimates of plantings on principle field crops.  Analysts expect the agency to show farmers intending to plant 24.4 million acres of wheat, down 7% from a year ago.  Canola seedings are seen up 6% to 21.1 million acres, the second largest on record after 2012’s 22 million.  Oats acres are seen steady at 3.2 million acres.  Incredibly wide basis levels, -$3.00 under the Minneapolis Board price in some cases, are expected to encourage less wheat plantings in 2014.  Poor rail performance is also thought to be inhibiting additional plantings.

Australia’s Bureau of Meteorology said in a recent statement El Nino was likely this year, and now put chances at 65% for the weather phenomena showing up as early as July.  El Nino is associated with above normal rainfall in the Americas as well as drought in Australia and Southeast Asia.

Yesterday’s export inspections on corn of 63.0 million bushels were tied for the largest single week since 1990.  Still plenty of chatter about Chinese soybean length being sold and looking for a home.  Several more Brazilian soybean cargoes were said to be trading into Mobile, AL with expectations of being railed to a southeast crusher.  Brazilian harvest is thought to be around 90% complete according to SAFRAS.  Delivery certificates continue to be canceled, and funds continue to load up on beans which should keep SN/SX very resilient above $2.50.

 

Bottom Line: Markets can find a little bit of a bounce today from yesterday’s drubbing, especially with the extended forecast looking a bit wet and cool for ramping up the planting pace.  South American soybeans are still heading to the US, and Chinese soybean inventories remain an issue.  Still, the US has to get to the end of August before new crop beans are harvested, so downside should remain limited as long as Chinese economic data doesn’t suggest a more severe slowdown is waiting in the wings.  Charts on corn and wheat need to turn around or risk further erosion.  Weather maps remain key.

 

NOAA 4-22

 

Tregg Cronin

Market Analyst

Tregg.Cronin@halocommodities.com

www.halocommodities.com

@5thWave_tcronin

 

 

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

 

4/21/2014 Morning Comments

Good Morning,

 

Outside Markets as of 5:30am: Dollar Index down 0.0210 at 79.8260; Euro is up 0.0020 at 1.38190; S&P’s up 1.75 at 1859.75; Dow futures up 17.00 at 16,360.00’ 10-yr is down 0.03%; The Nikkei closed down 0.03% at 14,512.38; The FTSE is up 0.62% at 6,625.25; The IBEX-35 is up 0.24% at 10,292.40; Gold is down $6.00 at 1,287.90; Copper is down $0.10 at $303.30; Crude Oil is down $0.19 at $104.13; Heating Oil is down $0.0140 at $2.9942; Paris Milling Wheat is still closed from the weekend.

Mixed to better financial markets overnight as the world slowly comes back from the Easter holiday.  One of the biggest pieces of news over the weekend was obviously the tentative agreement reached between Ukraine and Russia which called on all parties to make sure groups are disarmed and free captured government buildings.  It also included the call for constitutional reform that would engage representatives of all regions, but didn’t have any reference to Ukraine’s bloc-free statue.  The agreement was vague at best, but was a step in the right direction.  A shooting at a checkpoint over the weekend highlighted the fact tensions are still very high, and the conflict isn’t yet over.  Barclays became the latest Wall Street bank to wind down it’s commodity trading arm with investment banks fleeing the space in droves.  Q1 earnings season continues this week with 83 companies of the S&P 500 reporting.  Next week 155 of the 500 will be releasing earnings data.  The Bloomberg Economic Surprise Index hit a 3-month high Friday of -0.003, indicating recent US economic data has been strong relative to market expectations.  The CRB-Food Index is now up 21.6% YTD.

Some decent rainfall amounts around over the weekend with two portions of TX receiving between 0.25-1.00” in total, although the N-TX plains didn’t see the same rain.  W-KS and E-NE also saw scattered totals, and N-IA saw cumulative totals of 0.50-1.00”.  the SE-US including AL/GA/SC/NC likely had fieldwork delayed as well with the heaviest totals hitting 2.5-3.0”.  The forecast has several systems around this week which will impact the central and southern corn belt as well as the eastern portions of the southern plains.  The 7-day forecasted precip map has some rather heavy totals for E-KS/E-NE/SW-IA/MO/AR/E-OK/E-TX.  See map below.  Few will ward off the rain, especially those in the southern plains.  Some decent chances in the driest areas of  HRW country.  Not much guidance from the 6-10 and 8-14 days maps from NOAA, although warmer temps look to remain going forward.

 

The biggest mover overnight would be the wheat market with double digit losses occurring within the first five minutes of the overnight session on weekend rainfall, forecasts for this week and a slight easing in the Ukraine/Russia tensions.  While 100% coverage didn’t occur, rains that did fall should help the battered wheat crop, and the forecasts are certainly promising like the ones shown below.  Traders have pumped up wheat on fear of disruptions to exports out of the Black Sea due to the conflict there, but despite the events to date, no shipments have been compromised and exporters continue to mop up nearly every high profile wheat tender.  Of growing concern also is the technical picture in the wheat market until prices can take out the March 20th highs.  As long as those highs remain in place, the rally which stalled last Wednesday looks like a corrective rally and selling opportunity.

Row crops are also under pressure this morning as soybeans opened 10c better last night to find themselves down 3-7c this morning.  Lots of questions remain about Chinese crush demand, and when/if US beans will see cancellations.  Before the forecasted rains move in later this week, planting progress is expected to see a notable jump.  Weekend weather was rather conducive to planting in many areas, while soil temperatures remain a bit cool north of I-80 for popping corn out of the ground.  Tonight’s crop progress report will be a focus for traders with average corn planting progress for this week at 14%.  The incredibly fast 2012 planting campaign, in which 25% of the crop was planted, certainly skews the numbers up a bit.  On Friday while markets were closed, the USDA announced 128,000MT of corn sold to unknown destinations for the 13/14 marketing year.  Corn exports continue to roll.

China released March import data overnight with total corn imports at 48,131MT, down 79% y/y.  Wheat imports were pegged at 538,950MT, up 86% y/y with the top destination being Australia at 325,684MT.  The US, France, Canada and Kazakhstan also sent wheat to China in March.  Soybean imports totaled 4.623MMT, up 20.4% y/y with the US still comprising 3.692MMT of that total.  Chinese imports of US soybeans YTD are up 11.67%, while Brazil at 929,709MT is up 121% from there terrible export performance in 2013.  Malaysian Palm Oil exports from April 1-20 totaled 717,842MT, down 6.0% from a month ago as palm oil prices have rallied sharply the past several weeks.

Will have a more in-depth look at the Commitments of Traders Report tomorrow.

 

Bottom Line:  Slow news overnight with the focus squarely on planting weather, rainfall in the southern plains and the global trade flows of soybeans.  Crop progress reports this evening will be a feature, but the markets don’t seem too concerned about any planting delays just yet.  At the end of the day, old crop corn demand is still better than expected, we need good yields in 14/15 to build carryout and acres are probably going to prove larger than current estimates provided farmers can get into the fields.  The soybean market is tight and will remain tight no matter how many imports we pencil in.  Still too many questions on the size of the HRW crop and too few answers.  Mixed to weaker trade with midday maps eyed.

 

 

 

 

Good Luck Today.

 

HPC 4-21

 

 

 

Tregg Cronin

Market Analyst

Tregg.Cronin@halocommodities.com

www.halocommodities.com

@5thWave_tcronin

 

 

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