Outside Markets as of 6:20am: Dollar Index up 0.20 at 88.8820; Euro down 0.00180 at 1.23500; Russian Ruble is up 1.20% to 53.7201; S&P’s are up 2.50 at 2074.50; Dow futures are up 28.00 at 17,918.00; 10-yr futures are down 0.06%; The Nikkei closed up 0.19% at 17,920.45; The DAX is up 1.27% at 9,976.58; The IBEX-35 is up 1.55% at 10,784.00; The Shanghai Composite closed up 1.32% at 2,937.65; Gold is down $4.90 at $1202.80; Copper is up $1.95 at $293.40; Crude Oil is down $0.38 at $66.45; Heating Oil is down $0.0108 at $2.1069; Paris Milling Wheat is down €0.50 at €185.75/MT.
All eyes are on the jobs report at 7:30am in which investors expect more than 200,000 jobs to be added for the 10th straight month. This would keep the unemployment rate at 5.8%. The second reading of euro-area GDP was released this morning as well, showing Greece as the best third quarter performer out of the 14 countries that released data with 0.7% growth. Italy, Cyprus and Austria posted negative economic growth during the quarter. While US equities have been strong as of late, so too has the Shanghai Composite which is trading at the highest levels since May 2011 after a particularly impressive fall. Expectations for further economic stimulus is said to be behind the most recent surge, but it does help combat the “China is headed for a death spiral” crowd. Crude Oil is currently up $0.25/bbl on the week which would be the second winning week in the last ten.
Pretty substantial moisture system moving across the southern plains and southern Midwest this morning, working its way north and east towards the Great Lakes and ECB. The Midwest is going to be pretty quiet the next 7-days once this current system passes through, and then the above normal temps/below normal precip kicks in for the following 10-days. Extended maps from NOAA show much above normal temps for the 6-10 and 8-14 centered right over the WCB and Northern Plains. Precip will error on the below normal side, so it may give farmers in WI and MI a chance to finish the remaining corn acres. South American growing areas remain in favorable condition with average to above average precip expected the next 7-days. Argentina actually needs below average precip for a spell to finish planting which it looks like it will get.
Modestly lower Ag markets as we look to close out another week with corn down 2c week-to-date, soybeans off 8.75c and Chicago wheat up 6.0c. Not any real market breaking information since yesterday, although notable features include weak corn basis across most all demand centers which could be implying better movement from the farm on yesterday’s rally. US wheat continues to be uncompetitive on the global stage, but that hasn’t stopped cash and spreads from firming, and deliverable certs from being canceled. Today’s COT report will be of great interest to see if index funds followed up last week’s big selling with a similar week this week. There is growing evidence that index funds could be notably absent in commodities during 2015 which would remove the passive long vehicle from our space. The December WASDE should be a sleeper, but average trade guesses are below.
Beginning first with deliveries, there were 40 re-deliveries of corn last night, 177 redeliveries of KC-HRW, 5 oats and 33 Ethanol. Prior to the deliveries, there were another 50 SRW delivery certificates canceled in NW-OH last night, leaving just 164 certs outstanding, or 820,000 bushels. Given where the domestic and CIF NOLA markets are trading, there shouldn’t be any SRW deliveries, and the remaining certs could be canceled and loaded out. At current, there is less than half of one panamax registered for delivery. The aforementioned has helped drive WZ/WH to +15.00c, and is also helping to keep WH/WK firm. Aside from the stab high to -3.50c on 12/2, the WH/WK is trading at the highest level since May and looks as though it is going to pick up right where WZ/WH is leaving off. -5.00c is no great shakes, but it is worth keeping an eye on in coming weeks. All delivery locations are above delivery equivalence for Dec-Mar. CIF NOLA SRW basis also firmed 5c for Dec/Jan/Feb last night to +110/115/115H. First basis, then spreads, then futures…. HRW delivery certs also declined 100 in Hutchinson, leaving 576 left outstanding.
As mentioned above, corn basis was notably weak going home last night with CIF NOLA corn off 1-5c for Dec/JFM/AMJJ with those markets indicated at +60/67/60H last evening. CPI in Chicago is off 10c from a week ago at -12H. PNW corn shuttles for JFM were weaker and are off 2-3c to +103/105/108H with a notable cash carry. HETX is off the same and indicated at +82/84/86H. Barge freight had been sloppy most of the week, dragging on basis, but the moves last night look more farm gate related? PNW bean shuttles were firmer going home last night at +126F for NDJ, up 1-3c.
A couple quick statistics on export sales from yesterday, with the latest week’s commitments, Sorghum sales now stand at 4.618MMT, up 219% y/y. Further, the 4.618MMT accounts for 78.9% of the USDA’s entire marketing year projection of 230mbu. In fact, we sold more sorghum than we did wheat last week, despite wheat’s marketing year sales objective being four times what sorghum’s is. The only other commodity with than kind of sales on the books would be soybeans with commitments already on accounting for 84.6% of the marketing year estimate. Both sorghum and soybeans should see an upward revision to these estimates on either the December or January WASDE. The difference between the two is sorghum could be flirting with a negative carryout by year’s end while soybeans have room in the balance sheet for demand to expand further without inciting panic.
As mentioned earlier this week, index fund selling was the second largest on record last week amidst crude oil’s slaughter and big customer redemptions. There is growing concern investors could shun commodity indices even more in 2015 given only Ags have put in back-to-back losing years since 2000. Several negative backdrops have already surfaced in 2014 and don’t look to be going anywhere in 2015. Those would include the crude supply glut related to the shale explosion, weak Russian economic growth and probably a recession during Q4-2014/Q1-2015, and growing global supplies of both corn and soybeans. While intra-year returns have occurred, the Bloomberg Commodity Index is on pace for its 3rd consecutive year of negative growth. Several global equity indices hitting multi-year or all-time highs don’t help the diversification story either.
Bottom Line: Not looking for much in the Ags to close the week. Despite the back and forth of negative and positive headlines, wheat markets still have a lot of underlying positives including deliverable supplies, cash and spreads working for it. Soybeans aren’t ready for the death blow yet with the entire South American growing season ahead, and corn looks range bound depending on farmer movement and end user interest.
***I will off markets Monday-Wednesday as I travel to Chicago to present at the DTN Ag Summit Marketing University. No commentary will be posted during that time frame, although will be responding to markets on Twitter.***
Good Luck Today.
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