3/19/2015 Morning Comments

Good Morning,

 

Outside Markets as of 6:15am: Dollar Index is up 0.1840 at 98.7.40; Euro down 0.00490 at 1.07040; S&P’s are down 2.50 at 2098.00; Dow futures are down 22.00 at 18,047.00; 10-yr futures are down 0.02%; The Nikkei closed down 0.35% at 19,476.56; The DAX is up 0.08% at 11,932.10; The IBEX-35 is up 0.76% at 11,134.40; Gold is up 11.80 at $1163.10; Copper is up $6.15 at $263.20; Crude Oil is down $1.29 at $45.36; Heating Oil is down $0.0299 at $1.7426; Paris Milling Wheat is up €0.50 at €192.75/MT.

The long-awaited Federal Reserve meeting came and went, and with it a sharp reversal in the US Dollar and rallies in US equities and treasuries.  The FOMC met market expectations by dropping its “patience” language from the meeting statement as well as saying that a funds rate hike was “unlikely” at its next meeting in April.  This leaves June open, but the market has substantially reduced its expectations for a June rate hike with the federal funds futures curve on a yield basis fell 8bp to 0.43% for Dec 2015 contract and 17bp for the Dec 2016 contract.  As noted, the US Dollar Index plunged on the news, falling 3,169 ticks from high to low before closing around 98.5500.  Crude oil was substantially lower prior to the meeting minutes being released, thanks in large part to the surge in weekly inventories which beat market expectations.  At the low, May crude was trading at $44.03 before closing at 46.64 after data showed inventories rising by 9.62 million barrels to 458.51 million barrels, a new record, and well better than the 4.10 million barrel jump expected.  Mid-40 dollar crude doesn’t seem to be restraining production the way many analysts predicted.

Fairly active Midwest radar with snow showers in ND/MN and rain working across both the southern plains, Delta and Mid-south.  Precip returns in TX and the Gulf the last 24-hours have been meaningful in spot, but not much has fallen in HRW areas. Precip which has fallen and is likely to fall in the next 12-24 hours looks to delay spring field work and planting more so than provide relief to HRW.  SRW in the Delta is receiving rain, however, and several states noted quality concerns already on Monday’s crop progress reports.  5-day forecasted precip maps as of this morning have dialed back the rain for KS/OK severely, but much of TX should see decent rainfall.  The Midwest stays dry this week, and 6-10 and 8-14 day maps have dropped from above normal precip to normal while temps stay normal/below.

 

Yesterday would have to be described as a mild session until the FOMC minutes were released at 1:00pm at which time almost every commodity on the planet caught a bid.  The minute-by-minute and tick charts show the sharp rallies at 1:00, and grains are carrying that bid into today’s session.  Weekly demand indicators for corn were strong enough to keep serve, but export sales at 7:30am will be watched especially close for corn, soybeans and wheat with expectations for softening sales.  US corn and wheat still aren’t the low cost supply of choice, and the South American harvest continues to roll forward.  The March 31st reports are now 8-trading sessions away, although it is still a bit early to be able to make the claim range bound trade will be the order of the day until then. Outside market volatility is playing as big of a role as grain market fundamentals at current, and the real “story” is still new crop for most of our markets.  The cool temps will keep an incredibly fast start to spring at bay for at least another 10-15 days.  Insurance planting dates on corn don’t get started until April 1-5for many corn belt areas.

Weekly ethanol production came in up 3,000bbls/day to 947,000bbls/day, and essentially matches the needed level to hit the USDA’s 5.200 billion bushel corn for ethanol estimate.  Ethanol stocks dropped swiftly by 353,000bbls to 20.820 million bbls, although stocks at that level remain near the highest levels since December of 2012.  Helping stocks ease was a surge in weekly gasoline demand which was the highest of 2015 to-date, and well above any week in the 5-year range Jan through mid-Mar at just over 9.25 million barrels/day.  Ethanol calendar spreads remain fairly lifeless, although off recent lows in February. RBOB/Ethanol spreads peaked around 50c/gln in late-February and are now trading between 27-30c/gln, but still providing blenders with enough reason to up discretionary blending. Timely export data would help shine even more light on current ethanol economics.

Calendar spreads have been rather lifeless the last several sessions, especially in corn with the CK/CN unchanged at -8.00c this morning, remaining in its -7.50c to -8.50c range.  CIF NOLA corn bids have been especially quiet, resisting the urge to trade lower given the SAM maize import chatter, but clearly not indicating any undue demand pickup.  PNW corn premiums have stabilized or even ticked up 1-2c, also following import rumors to California out of Argentina.  Nothing to report from wheat calendar spreads at any of the three exchanges either although KW/W and MW/W seasonals tend to kick in right around this time frame.  With a growing focus on the southern plains HRW crop and planting conditions in the Dakotas be mindful of these inter-market spreads.

Export sales estimates for this morning’s report show wheat at 300-650TMT, corn at 300-850TMT, soybeans at 0-425TMT, meal at 0-200TMT and oil at 0-20TMT.  The surprise would be better than expected sales given the lackluster futures trade the past week and the general belief US supplies are not the cheapest stem into major importing destinations.

 

Bottom Line: Higher trade looks to be the order of the day, and hard to argue with given the lack of news flow.  Most markets are biding their time until the end of the month, even though new lows were set Tuesday.  Certainly appears to be too much weather uncertainty the next 45-60 days in order to plunge lower and take out fall lows just yet.  Watch export sales and spreads for short-term signals but realize weather is slowly becoming the chief concern for our markets both here and abroad.  Time to shake off the winter dust and strap in for another growing season.

 

Good Luck Today.

Russia Gas 3-19-15

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.

 

 

 

 

 

 

 

 

3/18/2015 Morning Comments

Good Morning,

 

Outside Markets as of 6:00am: Dollar Index down 0.1080 at 99.4730; Euro up 0.00280 at 1.06390; S&P’s are down 6.75 at 2067.75; Dow futures are down 64.00 at 17,793.00; 10-yr futures are up 0.22%; The Nikkei closed up 0.55% at 19,544.48; The DAX is down 1.25% at 11,831.34; The IBEX-35 is down 0.45% at 10,978.90; Gold is down $1.50 at $1146.70; Copper is down $5.20 at $258.10; Crude Oil is down $1.17 at $42.25; Heating Oil is down $0.0084 at $1.6855; Paris Milling Wheat is down €0.25 at €192.75/MT.

Investors everywhere are waiting with baited breath for the conclusion of the FOMC meeting, and to see whether or not the Fed dropped the word “patient” from their official policy language.  The idea being the Fed could give more guidance as to when interest rate hikes will begin.  Chinese stocks rallied to a fresh 7-month high overnight as investors continue to believe stimulus both in China and abroad will keep the good times rolling.  Average private housing prices fell in February in 69 out of 70 cities vs. a year ago according to the National Bureau of Statistics.  Crude oil is getting hammered again this morning, off another 2.90%, as traders see weekly EIA crude inventories rising by another 4.4 million bbls.  US crude oil inventories are now up 16.5% since the beginning of the year and up 26% since the 1-year low in September 2014.  Inventories at Cushing, OK are just below the January 2013 record.

A couple storms moving across the Midwest this morning with snow showers in the Dakotas and MT, while rain showers move across TX/OK/KS/MO.  Precip the next 3-days will be heaviest along the TX-Gulf Coast where planting delays have been the most severe.  Totals in TX are expected to be in the 0.50-2.50” range, although N-TX is not expected to see the same kind of moisture relief.  OK will also see a very general 0.50-1.00” as will SW-KS.  The entire Delta is also slated for precip with TX to SC seeing 0.75-3.50” over the next 5-6 days.  The Midwest will remain dry the next 7-days, although patterns are looking better in the 6-10 and 8-14 day outlooks with above normal precip seen from the Dakotas and NE to the OH-Valley.  Temps will remain normal/below, especially in the East as early fieldwork commences.  Soil temperatures as of yesterday morning shown below.

 

A slight bounce in the Ag markets overnight after a particularly poor session yesterday which saw several contracts violate major levels of support, turning the chart picture decidedly bearish.  Reasons cited for the plunge yesterday included expanding Brazilian harvest and with it harvest pressure, competitor maize supplies still penciling into US-SE feed rations, drier than normal soils in the Northern Plains leading to fewer PP acres and end user margins under pressure.  While the correlation between the Dollar Index and Grains has been far from -1:+1, the fact remains commodity interest has declined substantially as the US Dollar has continued its rally.  A push back over 100.00 on the Index would likely lead to another round of commodity liquidation by index funds, and fresh lows in front-month crude oil are only adding to the negative sentiment.

First on techs, May corn violated both the 1/30 lows at $3.73 ¾ and the 61.8% retracement of the entire 3.39-4.25 rally at 3.72, which in the process negated a potential bullish divergence in momentum.  May corn is now devoid of meaningful support between spot levels and the 3.39 lows from last September.  Fortunately, on a continuous basis, corn has yet to trade below the January lows as well as the 61.8% retrace of the rally.  Whether this will slow any additional technical selling remains to be seen, but it is noteworthy that since March 10th, corn open interest has risen 86,000 contracts while price has declined 15c.  Fresh shorts are being added, and based on spreads and basis, they do not appear to be farmer selling.  The same technical setup in corn is present in May soybeans after the contract took out the January lows with little support between spot and Sept lows at 9.28 ¾.  November soybeans are walking the same tightrope, but are only 16c away from fall lows, or one session with the volatility we’ve been seeing lately.  Soybean open interest is up 49,998 contracts since March 5th while price has declined 24c.  Wheat remains the best looking of the three on a technical basis.

South American maize exports into the US-SE remain a negative influence as well with Argentine maize laying into the east coast at +76K and Brazilian maize laying in at +68K.  The two origins lay into Stockton, CA around +104K and +109K, respectively.  On the latter, PNW and West Coast destination bids backed off Tuesday to around +103/105K, so unlikely the gymnastics are still worth it, especially considering quality can always be an issue.  Rose Hill, NC corn bids are posted at +65K, so right at import calcs.  French maize has been pushed out of the equation, but Braz/Argy remain viable candidates for southeast hog and poultry operations, something the corn market is going to have to ration out.  CK/CN has been largely steady around -8.00c, so nothing out of the ordinary there.  Cash corn along the river remains 3-6c below delivery equivalence, but that’s not where the issue lies.  We’ll need to be watchful for any throw-in-the-towel type selling from the farm gate which could depress things to desired levels, but that might be difficult with some hoping for a bullish report at the end of the month.  Fall lows will need to be breached before panic-induced selling shows up, in my opinion.

On the subject of corn end user margins, all four of those tracked by rjomrt.com are now below year ago levels, and some mightily so.  Ethanol margins were estimated at $0.75/gln this week, up from $0.71/gln last week but well below the $1.50 from last year.  Broiler crush was seen at 79.52c/lb vs. 77.80c/lb last week and 82.46c/lb last year.  Hog crush was listed at $87.44/hd vs. $90.43/hd last week and $177.69/hd last year, and is also below the 5-year seasonal average for the first time since early 2013.  Cattle crush remains poor at $45.72/hd vs. $46.23/hd last week and $144.10/hd last year.  C-IL cash soybean crush margins remain healthy at $1.39/bu vs. $1.22/bu last year.  The US farmer has remained resolute in holding grain off the market, but end user margins have weakened in the process thanks to declining product prices, and the foreign farmer has been selling thanks to favorable currency influence.

Brazilian harvest and selling was also tossed into the mix yesterday with soybean harvest advancing 10 points to 48% complete vs. 59% in 2014 and 53% average.  Brazilian 1st crop corn harvest was seen at 39% complete vs. 35% last week and 56% in 2014.  The planting of 2nd crop corn remains swift at 93% seeded vs. 82% last week and 85% a year ago.  Argentina has yet to announce any harvesting activity for corn or soybeans as of yet, although conditions are said to be favorable aside from some flooding issues in localized areas.

Ethanol production at 9:30am with  stocks levels to be watched closely.  The weekly ethanol production report is taking on increased importance now that it looks likely the USDA is slowly adopting a higher ethanol yield than they’ve used in the past.  Since the USDA began publishing ethanol data, they’ve been working on the assumption a bushel of corn produces 2.7 gallons of ethanol.  It has been widely known in the industry that yields are and have been much higher than 2.7, and in some cases closer to 3.0 gallons/bushel.  In an attempt to slowly rectify this situation the USDA cut ethanol demand for corn by 50mbu in the latest WASDE report, but shifted into the feed/residual by increasing that category 50mbu.  At this point, it is simply shifting deck chairs, but this is a potentially longer-term negative if the industry needs less corn to produce the mandated level.

 

Bottom Line: Serious technical damage was done yesterday, but so far the fall lows have been preserved.  We have a mountain of weather to deal with the next 60-90 days, so making the assumption we should take corn and soybeans to or below the fall lows already seems a bit hasty.  Still, the drier weather should lead to less prevent-plant acres, possibly the lowest since 2012.  The Dollar Index strength is creating a windfall for the global farmer, not the US farmer.  He’s selling, but the US isn’t.  Right or wrong, the sand box is a lot bigger than it was 10-years ago.

 

Good Luck Today.

 

Soil Temps 3-18-15

 

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.

 

3/17/2015 Morning Comments

Good Morning,

 

Outside Markets as of 5:45am: Dollar Index down 0.1390 at 99.4710; Euro up 0.00310 at 1.06270; S&P’s are down 6.75 at 2069.75; Dow futures are down 46.00 at 17,887.00; 10-yr futures are up 0.27%; The Nikkei closed up 0.99% at 19,437.00; The DAX is down 0.90% at 12,058.59; The IBEX-35 is down 0.77% at 11,029.20; Gold is up $1.30 at $1154.50; Copper is down $5.20 at $261.55; Crude Oil is down $0.78 at $43.10; Heating Oil is down $0.0181 at $1.6805; Paris Milling Wheat up €0.75 at €193.50/MT.

Investor focus will be on the beginning of the FOMC meeting which starts today and concludes tomorrow with many expecting language from the Fed which might offer some guidance as to the first interest rate hike since June 2006.  Elsewhere, German investor confidence rose to 54.8 in March from 53.0 in February, but was below the average survey guess of 60.  The rally in Chinese equities has some concerned bourses have climbed too far, too fast with the Shanghai Composite up another 1.6% last night to the highest level in 6-years. The rally in the index over the last 12-months has spanned over 70% on ideas of additional stimulus from the PBOC.  Feb housing starts in the US today are expected to decline 2.4% to 1.040 million units, adding to January’s 2.0% decline.  Building permits are seen +0.5% to 1.065 million, reversing part of the -0.7% decline in January.  Bad weather cited for the declines.

Fairly empty Midwest radar this morning as we await systems to get started in the southern plains and Gulf coast the next 24-hours which will then stretch out the next 5-6 days.  Latest maps have expanded the moisture to blanket almost all of TX and OK, but has now pushed into KS with meaningful precip amounts.  The map below shows the 7-day forecasted precip, which if verified would go a long way to reducing moisture deficits in wheat country.  However, this moisture will also keep spring field work limited in TX and the Gulf/mid-South which is already said to be behind schedule.  The central and western cornbelt remains mostly dry, and will need follow up moisture once planting commences and ceases.  Extended maps take on a drier outlook for the southern plains, while temperatures should be mostly normal to slightly below in the east.

 

Mixed markets this morning with lower row crops, but firmer wheat on the back of yesterday’s double digit rally at all three exchanges.  The particularly wide ranges witnessed from the Sunday night open to the Monday afternoon close left many puzzled, especially with the better precip forecasts present this morning.  Managed funds have rebuilt a substantial short position in the wheat market, however, and the natural seller in the market, the farmer, isn’t flinching.  Without additional sell pressure, especially at areas of meaningful technical support, markets can tend to rise on their own structure.  May Chicago  futures would do well to take out the 3/2 highs in order to prompt a retest of the mid-February corrective move and follow the hard wheat contracts.  Corn and soybean technicals are flirting with serious support levels, which if broken could open another round of speculative selling.

One more note from Friday’s COT data, the large spec position in Chicago wheat moved to -63,589 contracts, the largest net short since 10/21/2014.  In addition, the large spec is now short -26,020 contracts in KC wheat, just off last week’s net short of -27,025, and the largest short on record going back to 1/3/2007.  Funds in Minneapolis are small net longs, but the combined speculative position is now -86,812 contracts, the largest since 10/7/2014.  The size of the KC wheat short should also be appreciated as it now commands over 14.0% of total open interest.  As noted yesterday, commercials have been increasing long exposure steadily the last several weeks with large gross commercial positions in place.  Add in a steady stream of call option buying the last 4-weeks, and solid support appears to be in place around the $4.90-5.00 area basis nearby Chicago futures.

Nothing remarkable in yesterday’s inspection data, and in fact, most commodities underwhelmed relative to expectations.  Wheat shipments were solid at 19.1mbu vs. the 18.7mbu needed weekly to hit the USDA forecast.  Cumulative shipments are down 27.9% from a year ago at 658.4mbu.  Corn shipments were disappointing at 28.9mbu vs. 46.5mbu last week and the 36.0mbu needed weekly to hit the USDA mark.  Total shipments are still up 2.9% from a year ago at 807.1mbu, but the fact USDA increased export sales on last week’s WASDE raises the importance of every week being solid here on out.  Soybean shipments were decent at 21.5mbu vs. 23.0mbu last week and the 8.4mbu needed weekly to hit the USDA forecast.  Most were expecting shipments below 20.0mbu.  Sorghum shipments were a marketing year high at 13.9mbu, pushing YTD shipments to 203.5mbu, up 154.2% y/y.

NOPA crush data was released yesterday morning with member crush reported at 146.970mbu for the month of February which was less than the 148.5mbu estimated by the trade.  Feb crush was down from January’s 162.7mbu, but up sharply from last year’s 141.6mbu.  Soybean oil stocks were reported at 1.322 billion pounds, a tick under the average guess of 1.332 billion pounds.  Soybean oil yield remains low at 11.25lbs/bu vs. 11.62lbs/bu last year.  Estimated crush for the first half of the year now stands at around 938.0mbu, which would be up about 0.5% from last year, while the USDA is calling for a 3.5% annual increase.  In order to reach that sort of number, March-August crush is going to need to be up just over 7.0% from year ago levels, which would be no small task.  It should be noted, however, that June-August crush suffered due to incredibly low soybean supplies during the summer of 2014.  Still, crush can ill-afford to have a soft month the rest of the marketing year, especially considering many crushers tend to take downtime for maintenance in the spring of the year.  Cash crush margins last week in C-IL were estimated at $1.47/bu vs. $1.52/bu in 2014, both considered healthy margins.

A couple quickies to close: Reuters reported China has booked over 600,000MT of Ukrainian corn so far in 2015 in a loan-for-grain deal aimed at shoring up the Ukrainian government.  Price was said to be around $240/MT C&F, which looks especially high considering FOB prices in both the US and Ukraine around $171-174/MT FOB.  Ocean freight from the US-Gulf to China would run between $25-30/MT.  Warm weather across Eastern Europe and Russia is allowing for an early start so spring field work, but is also raising moisture concerns for the 2015 crop as are higher borrowing costs and more expensive inputs due to the collapsing Ruble.  TX corn planting was reported at 11% completed vs. 6% last week, 14% last year and 25% average.  Sorghum planting was seen at 4%, up from 1% last week, but behind 10% last year and 18% on the 5-year average.  Heavy rains have hampered planting.

 

Bottom Line: Could be a mixed affair today with wheat unsure if it wants to carry the torch by its lonesome while row crops languish awaiting fresh inputs at the end of the month.  Given the drier start to the spring season, there is also the chance we see lower than average Prevent Plant acres in the Northern Plains, something which has plagued the area since 2012.  A larger than expected acreage pie on March 31st could change the tune of some bulls.  Otherwise continue monitoring cash and spreads for short-term signals.

 

Good Luck Today.

HPC 3-17-15

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.

 

 

3/16/2015 Morning Comments

Good Morning,

 

Outside Markets as of 5:50am: Dollar Index down 0.4470 at 99.8830; Euro up 0.00670 at 1.05510; Brazilian Real off 0.68%; S&P’s are up 9.75 at 2059.50; Dow futures are up 81.00 at 17,810.00; 10-yr futures are up 0.06%; The Nikkei closed down 0.04% at 19,246.06; The DAX is up 1.03% at 12,023.93; The IBEX-35 is up 0.93% at 11,136.50; Gold is up $4.70 at $1157.10; Copper is up $0.75 at $267.10; Crude Oil is down $0.22 at $44.64; Heating Oil is down $0.0028 at $1.7102; Paris Milling Wheat is down €1.00 at €189.25/MT.

A better start to the week in equities as Chinese stocks hit the highest level since August 2009, and Germany’s DAX pushed over 12,000 for the first time ever this morning.  Chinese leaders on Sunday expressed willingness to do more if economic growth slows too much, while the European Central Bank appears committed to its new QE program.  Russian President Vladimir Putin hasn’t been seen in public since March 5th, fueling a ton of speculation, although he is scheduled to appear in St. Petersburg later today.  After hitting the highest level since April 28th, 2003, the US Dollar Index is back-pedaling a bit this morning.  The strength in the US Dollar has been felt by importing and exporting nations alike with several exporting currencies (Brazil, Euro, Black Sea) at the lowest level since March 2003.  Continues to undermine US exports.  US rig count dropped to 1,125 Friday, lowest since 11/20/2009.

Some scattered rain moving across MT/ND/N-MN this morning, otherwise the US Midwest is quiet.  The corn belt is expected to be mainly dry the next 7-days, although moisture will be falling to the north and south of the heartland.  TX/OK and the Delta is expected to see fairly heavy precip the next 7-days with totals between 0.50-2.50” in isolated spots.  Some precip is expected in KS, although not to the degree of its southern brethren.  The Northern Plains, including ND/MN, should also see some precip this week which is badly needed in all areas north of I-80.  Extended maps keep a temperature dichotomy in place with above normal west of the MO-River, and below normal east of the MO-River.  Precip models are trending wetter with above normal precip seen in the 8-14 which will be welcome for all ahead of spring planting.  1-month outlooks show equal chances for above and below.

 

Slightly lower markets this morning, but off the overnight lows set at the open with a mixed weather outlook and traders waiting until for the end of the month reports for new direction.  Precious little fresh news over the weekend with the same themes we closed the week with present this morning: US grains are not competitive into major importing destinations due in part to price and in part to currency fluctuations.  In addition, competing maize supplies are dangerously close to working into US-SE feed rations for both old and new crop slots.  The unavoidable swelling in global soybean inventories is well underway, wheat markets on paper aren’t in any jeopardy as of March 16th.  Outside markets are bearish, and specific fundamentals aren’t bullish.  Our markets need to shift the focus to new crop where opportunity lies as cracks have certainly formed in the old crop.

Friday’s COT data saw recent trends continue with managed funds dumping 22,056 contracts of corn to leave their net long at 4,194, the smallest since 10/7/14.  The commercial net short is down to the lowest level since 1/28/14 at -192,518 contracts.  Funds sold about as much soybeans to leave their net short at -29,965 contracts with commercials about flat.  Funds were quiet in KC wheat, although the gross commercial long at 59,519 contracts remains near the largest levels since 2010.  The same thing is true in Chicago with a gross commercial long of 102,492 contracts, the largest since 2/11/2014, while the Minneapolis Gross Comm Long of 38,582 is the largest since 9/25/2007.  Important to note the heavy end-user buying in wheat as prices have slowed their descent and remain supported near fall lows.

Switching over to the Index Funds, some noteworthy activity has been occurring as of late.  Isolating just corn, soybeans and Chicago wheat, we find a net long position of 545,193 contracts, the smallest position since 5/26/2009.  Similarly, the Aggregate Index net long for C,S,W,MW,KW,BO,SM,LC,LH,FC,CT,SB,CC,KC dropped to 1,229,674 contracts, the smallest since June 30th, 2009.  Importers aren’t the only group who’ve noted the rising US Dollar and the prospects for higher interest rates at some point this summer.  Whether a person is planning to store commodities in a grain bin or on paper, the exercise is about to get more expensive via interest rates.  Not to mention that on paper, most commodities don’t have especially compelling fundamentals.  Losing this long-only exposure would be a long-term negative.  The chart below shows the C,S,W and combined positions.

Reuters reported this morning that local Argentine consultancy Agripac has cut their soybean production estimate to 55.5MMT vs. the government’s official forecast of 58MMT and the USDA at 56MMT.  The group reduced the estimate due to flooding in Argentina’s northern farm belt.  This type of number will need more verification, but in the grand scheme of things, 1-2MMT isn’t going to alter the bearish outlook for global soybean inventories.  Worth noting on Friday, soybean prices in Brazilian Reais rose to 31.70 reais/bushel, the highest level since June 2014, while corn priced in reais rose to 12.31 reais/bushel, the highest since August 2013.  This is keeping the SAM farmer engaged, and will also be difficult to discourage production unless something changes.  Others have noted fertilizer prices are the highest since 2009 and interest rates are the highest since 2004, but even in the 1980’s, farmers didn’t stop producing just because borrowing costs rose well over 15% in some cases.  The high price of fertilizer could shift more acreage to soybeans, keeping supplies burdensome.

Along that same line, worth noting the heavy buildup in $9.00 put open interest throughout the curve.  Using Thursday’s official O/I data, there were 27,215 May 900P open, 19,504 July 900 Puts and 10,079 November 900 Puts open.  Applying Friday settlements to these puts shows a net value of $38,057,233 betting on soybean prices at or below $9.00 between now and late October.  May put/call ratio on Friday closed at 206.0%.  Quickly, call buying in wheat has been picking up the last several weeks with the WK put/call ratio dropping from 190% on 3/5 to 115% on 3/12.  Similarly, the WN put/call ratio dropped to 88.4% on 3/12, down from 93.6% on 3/5 and 101.3% on 2/13.

 

Bottom Line:  Be watchful for early cash trade to gauge the impact of lower priced maize around the globe as well as US farmer engagement ahead of the March 31st reports.  It is widely believed the US farmer is still holding 55-60% of the corn crop, but less than 20% of the soybean crop.  Forex influence is changing things quickly in our space, and needs to be respected as much as any demand line-item.  Our markets seem content to bide their time until the end of the month, although the intra-range chop can be volatile.

 

Good Luck Today.

 

HPC 3-16 Index Fund Positions 3-16

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.

 

3/13/2015 Morning Comments

Good Morning,

 

Outside Markets as of 6:45am: Dollar Index up 0.1190 at 99.5540; Euro down 0.00140 at 1.05850; S&P’s are down 1.75 at 2062.25; Dow futures are down 17.00 at 17,849.00; 10-yr futures are down 0.18%; The Nikkei closed up 1.39% at 19,254.25; The DAX is unchanged at 11,799.09; The IBEX-35 is up 0.14% at 11,027.60; Gold is up $2.70 at $1154.60; Copper is down $0.80 at $265.05; Crude Oil is down $0.91 at $46.14; Heating Oil is down $0.0210 at $1.7576; Paris Milling Wheat is up €0.25 at €190.25/MT.

While off the highs set during yesterday’s session, the Dollar Index is still trading within arm’s reach of the 100.06 high posted, the highest value since April 2003.  The Dollar Index then has stair-step values all the way up to Jun/Jul 2001 highs around 120.00.  In the process, currencies around the globe are hitting fresh lows for the move, and in many cases, fresh record lows.  These would include currencies from exporting nations like Brazil, Ukraine, Russia and Europe as well as importing nations such as Mexico, Columbia and Japan.  The move doesn’t seem to be over just yet either as central banks around the world have continued cutting rates to spur economic growth even this week.  Just this morning, the Russian Central Bank lowered its main interest rate to 14%, following a 2% cut in January, thanks to stabilizing inflation.  Inflation in February was estimated at 16.7% from a year earlier.

Sizable system moving across the Delta and mid-south this morning, adding to increased rainfall totals over the last several weeks there.  Precip returns the next 48-hours are expected to be heaviest in N-AR/S-MO/S-IL/S-in where as much as 2.50” could fall.  Returns elsewhere in the Delta should range in the 0.25-0.75” range.  Early next week will see rainfall chances increase for the southern plains with expectations for C-TX to see 0.10-0.90”, while OK/KS see 0.10-0.50” chances, both of which are very much needed as dormancy is fully broken.  No meaningful rainfall chances seen for the central/western cornbelt or the Northern Plains the next 7-days.  Extended maps keep below normal precip in place for the upper-Midwest/Great Lakes region, while temps are seen below normal for everything east of the MS-River during the 6-15 day.

 

A decent overnight session in the wheat markets following a solid performance yesterday, and if gains are held throughout the session, Chicago wheat will notch its 6th winning session in a row.  For the week, May Chicago wheat is up 28.50c, May corn is up 3.0c and May soybeans are up just a 0.50c.  Corn and soybeans really seem to be marking time until the end of the month reports which will shed better light on acreage ideas as well as Q2 feed/residual demand, which up until this point has been just speculation.  After setting fresh contract lows last week, wheat appears to be finding some bargain buying and obviously some short-covering/profit-taking by the sizable managed short held in both KC and Chicago.  Unfortunately, US grains and oilseeds aren’t the cheapest in the world by a long shot, so any buying support wouldn’t appear to be consumer demand coming to the table.  Weather is slowly taking on more importance in the US, with dryness concerns in the Dakotas/MN and wetness concerns in the Delta/mid-South.  Corn and wheat want to desperately shift the focus to new crop while soybeans keep pulling the blanket over its eyes trying to enjoy five more minutes of sleep.

Export sales yesterday morning were a bit disappointing for everything except wheat as it posted 16.4mbu vs. the 8.3mbu needed weekly with 12-weeks remaining in the 13/14 marketing year.  China took 115,000MT of US-HRS, putting total commitments for the season at 306,100MT.  Total commitments are now 817.7mbu which are 24% below a year ago with 184.5mbu of total outstanding commitments.  Corn sales were well below expectations at 16.5mbu vs. 32.5mbu last week and the 17.6mbu needed weekly to hit the USDA’s export forecast.  Total commitments are 1419.0mbu vs. 1502.5mbu last year.  US corn isn’t even the lowest priced corn in the United States, let alone to importing destinations.  More on that in a bit.  Soybean sales were 6.2mbu vs. 18.3mbu last week and the 3.3mbu needed weekly.  Total commitments are now 1755.9mbu, up 8% from a year ago and comprising 98.0% of the marketing year forecast.  Soymeal exports were solid at 101.3TMT vs. 130.3TMT last week and the 89.7TMT needed weekly to hit the USDA forecast.  Soymeal sales now stand at 78.1% of the marketing year forecast.

As noted above, US corn has slowly watched its competitive position in the export market slip away, even inside its own country.  As of last night, US corn at the Gulf was between $173-175/MT FOB compared with the PNW at $193/MT, Argentine stem at $168.20/MT FOB, Brazilian maize for OND offered at +46Z, or $179/MT FOB (US at $182/MT), Ukrainian maize at $173/MT FOB and French maize is seen laying into Wilmington, NC feed operations at +77K, or $182/MT C&F with ocean freight accounted for.  All of the aforementioned stem is enjoying favorable currency influence thanks to the US Dollar at fresh 12-year highs yesterday, not to mention ocean freight remaining at depressed values.  Given these new developments coming to light, the sloppy corn export sales from yesterday are much more easily understood.  It also casts doubt over the USDA’s recently revised 14/15 export demand forecast of 1.800bbu.  15/16 remains a completely different animal given input concerns in Ukraine/Brazil, smaller acreage in Europe and drought in SAF.  These values need to be paid attention to as currently, swing business should not be coming to the US when exports need to be maintaining healthy levels.

Domestic wheat basis has come off its frothy levels posted last week as favorable weather found a bit better movement in addition to many locations offering “free DP” ahead of spring seeding.  Spot floor values in Minneapolis were reported at +150/225K for 14.0%, and +305/450K for 15.0% pro, mixed on the day.  These would compare with +245/260K and +500K a week ago, respectively.  KCBT premiums were unchanged yesterday at +103/113K for 12.0% and 13.0%, and unchanged from week ago values.  SRW premiums at the Gulf could be called steady/better at +90K for Mar/Apr and +75K for May with the scare of US 2 SRW 3.0 vomi seemingly passed now.  WH/WK settled yesterday at +6.00c, while the WK/WN after touching -9.25c a week ago traded up to -1.25c overnight.  Think about that: almost full-financial carry to near even money inside of a week.  Fundamentals clearly being exercised…

 

Bottom Line: Wheat is working on a nice week of gains, but is still awaiting fresh inputs from crop conditions and reports out of the Black Sea.  Managed funds are certainly allowed to trim exposure, and that’s what the rally appears to be about at this juncture.  Another “go-nowhere” week for corn and soybeans, which could be seen as a moral victory considering the slowdown in the export pace, and the lack of competiveness with competing origins.  Corn is mainly a new crop story while soybeans want to focus on old crop demand as long as possible.

 

Good Luck Today.

 

Oil Revenue 3-13

 

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.

 

 

3/6/2015 Morning Comments

Good Morning,

 

Outside Markets as of 5:50am: Dollar Index up 0.3450 at 96.7240; Euro down 0.00720 at 1.09560; Aussie Dollar up 0.45% at 0.78050; Russian Ruble is up 2.13%; S&P’s are down 1.25 at 2098.50; Dow futures are down 13.00 at 18107.00; 10-yr futures are down 0.01%; The Nikkei closed up 1.17% at 18,971.00; The DAX is up 0.07% at 11,512.51; The IBEX-35 is down 0.13% at 11,110.40; Gold is down $0.10 at $1196.10; Copper is down $1.25 at $264.00; Crude Oil is up $0.15 at $50.91; Heating Oil is up $0.0163 at $1.8936; Paris Milling Wheat is down €0.75 at €182.00/MT.

The March employment situation report will take center stage this morning when it is expected to show 235,000 jobs added during the month of February while the unemployment rate moved down to 5.6%, a six-year low.  However, as important if not more important, the Dollar Index continues its dominant trend to the upside, notching fresh 11-year highs in the process.  Currencies around the globe are showing the same as everything from the Mexican and Columbian peso to the Brazilian Real and the Euro are hitting either decade lows or fresh record lows against the greenback.  As has been noted many times in this space, the effect this Dollar strength is having on US exports is incredibly difficult to quantify, although its effect is undeniable.  This is an environment we haven’t dealt with since 2003-2004, a time in which grain prices were sharply lower than even where we are now.  One thing is for certain, vacations to Mexico should be a bit cheaper this time around…

A blank US radar screen this morning after the system yesterday made its way east and expired.  Activity will remain elevated in the TX-Gulf and Gulf Coast the next 3-7 days with totals as high as 5.8” along the TX portion.  Some of this system will extend north into AR/TN/KY, but nothing is expected to hit the corn belt.  There are growing concerns about planting delays in the Delta and mid-south given the amount of precip witnessed the last month.  The map below shows the % of normal precip over the last 30-days, and the band from E-TX to S-OH is quite clear.  Nothing to be alarmed about yet, but TX has begun corn planting, and the Delta won’t be far behind.  Notable moisture concerns remain in the central and western corn belt.  Warm and dry remains the outlook for the Midwest the next 15-days.

 

A rather mild overnight session compared with the heavy selling pressure witnessed during the day session yesterday.  Wheat finally broke through its September lows basis the May contract yesterday, plunging through 4.89 ¼ and putting in a low of 4.80 ¼.  Volume at all three wheat exchanges had been drying up with the decline to the fall lows, but a surge in volume the last two-days to the highest since 2/12 seemed to confirm the breakdown as legit.  On a continuous basis, Chicago wheat remains above its fall lows, and Minneapolis wheat hasn’t yet breached support levels from September and January.  KC wheat, however, continues to plunge lower, seemingly searching for fresh demand.  Farm gate selling has shut off, and basis has picked up, at least a small silver lining.  Soybeans appear headed for fall lows as well, having violated support and put open interest continues to pick up on the selloff.  The relative strength in the corn market is making market participants scratch their head wondering if corn will be the next shoe to drop, or if that market knows something the rest of us don’t?

The March 10th WASDE will be released next Tuesday, and Reuters kicked out average trade estimates yesterday morning.  The trade sees carryout on corn essentially unchanged at 1.826bbu vs. 1.827bbu in February, wheat at 699mbu vs. 692mbu in February and soybeans at 376mbu vs. 385mbu in February.  Changes should be light considering the bevy of data which will be released on March 31st as part of the Prospective Plantings and Quarterly Stocks reports.  The corn balance sheet looks very well balanced from exports to ethanol at the current moment, while feed/residual is always a moving target.  Some feel soybean exports still need to be bumped higher, although the USDA has 6-months to make necessary changes.  The wheat market also shouldn’t see any meaningful changes with the only wildcard being feed use, and that will be updated at the end of the month.

Export sales released yesterday were fairly solid for all commodities with wheat coming in at 17.3mbu vs. 8.1mbu needed weekly to hit the USDA forecast.  Sales this past week were the highest in 5-weeks, and brought total commitments to 801.3mbu, 89% of the marketing year forecast.  Shipments are what need to pick up for the wheat market.  Corn sales were a solid 32.6mbu, well better than the 15.3mbu needed weekly, and brought total commitments to 1402.6mbu, 80% of the USDA forecast.  Total commitments slipped to 5% below a year ago, while the USDA forecast is calling for an 8.9% y/y drop.  Something to keep track of in weeks ahead.  Soybean sales were better than expectations at 18.3mbu, and above the 3.4mbu needed weekly to hit the USDA forecast.  Total commitments are now 1749.7mbu, 97.7% of the marketing year forecast, and the reason behind the call for higher exports.

A lot of chatter yesterday emanating from the cash trenches about possible corn business conducted between China and Ukraine with totals and delivery slots a moving target.  Sources suggest between 750-1,000TMT of Ukrainian maize traded into China at $215/MT C&F with GMO risk attached to the seller.  Traders noted this price looked incredibly cheap, and could be tied to financing from Beijing to Kiev, especially with wire stories noting Ukrainian foreign currency reserves have now dropped to the lowest levels since 2003.  Given this business, it is entirely possibly MY Chinese corn imports could rise to 3MMT, even though the US might not have a hand in it.  Ukrainian FOB prices have firmed a bit, now though to be steady at $170-174/MT FOB.  At the same time, Argy maize premiums have firmed from low water mark levels around +43K to +47/55K as some suggest stem could be headed towards South Africa given intense drought pressure there.  As noted here last week, some in the trade think the SAF maize crop could drop to as low as 10MMT from 13-15MMT last year, reducing exports to meaningless levels.  Given this irregular demand pull, US corn, even though it is a bit higher priced than both UKR and ARG, should be collaterally supported.  Demand expansion, even if it isn’t tied to US stem specifically, still means demand expansion.  The trade needs to be watchful for US corn working into traditional SAM destinations for the spring/summer time frame.

The shutoff in farmer gate selling is readily apparent when looking at Minneapolis spot floor values, which have appreciated almost every day this week.  Spot 14.0% pro was indicated at +245/260K, up 15c yesterday while 15.0% pro was unchanged at +500K.  Movement picked up on the spot floor as well, noted at 157 cars, although the heavier volume wasn’t able to dent the amount of buying.  Farmers with quality continue to be in the driver’s seat, and that could play a role with spring planting decisions given the lack of protein in MT/ND and the severe discounts being enacted on farmers in those areas.  Spring wheat seems to be slowly moving toward being labeled a specialty market.  KCBT proteins were up 3c for 12.0-13.2% pro, 8c for 13.8’s and 15c for 14.0% pro.  12’s were indicated at +103/113K, 13’s at +103/113K and 14’s at +130/140K.

Thought it interesting to point out some of the recent options activity in the markets which have been beaten down so badly.  The chart below shows the breakdown of soybean calls and puts for May expiration.  As one will notice, there is a much higher preponderance of puts open than calls, with the put/call ratio around 218%.  The heaviest strikes are the $9.00 level with 28,952 puts open, and the $10.00 ITM puts with 24,528 open.  In fact, the seven highest strikes open for all option expirations are puts, highlighting how heavily the options pit is betting on lower prices.  In the case of May and July options, much lower prices with many obviously expecting the $9.00 strike to come into play.  Wheat has been witnessing a fair amount of call buying recently, and has watched its July put/call ratio drop from 106% a month ago to 103% 2-weeks ago to 93% last evening.  Heaviest strike in July wheat options is the $5.00 July puts.

A few quick hitters: The 250 WH5 deliveries Nidera put out on the street are slowly getting stopped with only 98 re-deliveries posted overnight.  There were also 279 KW re-deliveries, 98 soybean and 202 corn.  The Ukrainian national weather center said bad weather and high costs will lead to a lower wheat harvest this year which should be in the 21-22MMT range, down from 24.3MMT in 2014.  The center put winterkill losses at 1.2 million hectares, or around 15% of planted area, above the average 10%.  The record low Hryvnia is also expected to play a role.  Wheat/corn and KC wheat/corn spreads hit fresh contract lows from March ’15 through March ’16 yesterday with Chicago now inside $1.00/bu from corn.  These are the lowest levels on a continuous basis since June 2013.  July new crop Chicago wheat is now just 115% of the weight adjusted price of corn, a possible sign wheat feeding could pick up.

 

Bottom Line:  Markets are mostly softer overnight, but I don’t expect much follow through from yesterday’s selling pressure ahead of the weekend.  Markets have been beaten down solidly this week, and some profit taking ahead of the March WASDE is also likely.  Basis is improving with the plunge in prices, so be watchful for any short-term momentum failures.  The Dollar Index remains an overarching theme, and it’s not positive.

 

Good Luck Today.

 

AHPS 3-6 Soy options 3-6

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.

 

3/5/2015 Morning Comments

Good Morning,

 

Outside Markets as of 5:35am: Dollar Index up 0.2030 at 96.1690; Euro down 0.00240 at 1.10510; S&P’s are up 2.75 at 2099.25; Dow futures are up 23.00 at 18,109.00; 10-yr futures are down 0.06%; The Nikkei closed up 0.26% at 18,751.84; The DAX is up 0.50% at 11,447.25; The IBEX-35 is up 0.41% at 11,096.50; Gold is down $0.90 at $1200.00; Copper is up $1.45 at $267.40; Crude Oil is up $0.50 at $52.03; Heating Oil is up $0.0028 at $1.9041; Paris Milling Wheat is up €0.50 at €186.75/MT.

Chinese officials announced an official growth target of about 7% last night, down from 7.5% last year following growth in 2014 of 7.4%, its slowest in almost 25 years.  7% growth is still an incredibly robust economy by any developed countries’ standards, but compared with growth throughout the 2000-2013 time frame, 7.0% could feel like a recession to the people and business owners of China.  There will be growing pains as China transitions to a service based economy with a more mature population and larger middle class.

Crude oil inventories stayed the course this week, building by another 10.3 million bbls, blowing away analyst expectations for a build of 4.60 million bbls.  Total crude inventories now measure 444.37 million barrels, the highest on record.  Some analysts think storage tanks measuring 85 million barrels located in Cushing, OK are now close to 2/3’s full, and at the recent rate of increase, could be completely filled by mid-April.  Despite the negative news, crude oil prices managed to close up by more than $1.00/bbl, a possible sign peak oil production has been mostly priced in.  Elsewhere, the US Dollar Index rose to fresh 11-year highs yesterday of 96.0590, thanks in large part to a plummeting euro as the EU gets set to kick off their own QE program.  Also, Brazil’s central bank raised borrowing costs for a fourth straight meeting to the highest level in almost six years as monthly inflation jumped to the highest since 2003.  Benchmark lending rates are now 12.75% in hopes of combatting the rapidly deteriorating Real which dropped to a 10-yr low yesterday.  Recent economic data out of Brazil suggests 2015 economic contraction could be as much as -0.58%.

A giant band of moisture moving from E-TX to ME this morning with a mix of snow, rain, sleet and other wintry mix, especially along the Gulf Coast.  The majority of the expected precip should finish up in the next 6-12 hours which will add to the 48-hour precip totals seen below.  There are still large swaths of the central/WCB as well as southern plains which are running moisture deficits over the last 30 and 60-day time periods.  Extended maps from NOAA suggest a warm, dry stretch of weather during the 6-15 day which will have farmers chomping at the big as this gets us out to the middle of March.

 

Mixed to weaker markets this morning following the sizable losses Wednesday, although wheat contracts haven’t been able to penetrate either the January or September lows just yet.  Soybeans on the other hand have now managed to plunge through both the $10.00 handle as well as the 50-day MA, both of which are going to keep trend followers more apt to sell soybeans than buy.  In addition, soybeans failed at support levels at $9.9425/50, and could possibly be setting the stage for a larger head-and-shoulders pattern in coming sessions.  Corn has remained especially resilient while wheat and soybeans have sold off, preferring instead to keep coiling inside recent flagging action.  Corn volume has also dropped considerably during the recent consolidation with yesterday’s volume of 195,122 contracts the lowest since 1/27.  Corn seems to be priming itself for a breakout, and given the weak trade posted by corn and soybeans, it would certainly be against the grain for a substantial rally.  The next major fundamental input for our markets will be the Marth 10th WASDE next week.

As was feared by several analysts, the 250 WH5 deliveries posted by Nidera Tuesday evening were in fact US 2 SRW 3ppm vomi, which hung on spreads heavily during the session Wednesday.  After trading as high as +8.50c Monday, the WH/WK hit -3.75c Wednesday before recovering while the WK/WN hit a low of -7.25c.  With over 1mbu of off-grade wheat having been dumped into the delivery warehouse system, stoppers of futures now have the uncertainty of knowing what grade of wheat they will receive when standing on paper.  This proposition is obviously a risky one for any end user needing a specific quality grade, and sellers reacted accordingly. There are some analysts who believe the deliveries are enough of a game-changer they could push WK/WN beyond full delivery storage carry, enacting an increase to the variable storage rate.  Either way, puts great emphasis on the 15/16 crop.

Spring wheat basis firmed noticeably on the Minneapolis spot floor, improving by 10-125c for 13.0% pro and 14.0-15.0% pro.  Going home, 14’s were indicated at +245K and 15’s at +500K.  The bid for high proteins is getting back to the high-water mark witnessed last fall when the quality scare was in full swing.  Movement by elevators and selling by farmers has slowed down considerably as futures have dropped down to September and January lows once again.  There were only 38 cars on the spot floor Wednesday.  One should be watchful for any confirmation by calendar spreads which would suggest being wary about pressing futures “down here.”  KCBT spot floor premiums saw isolated strength, but the majority of classes were unchanged.  No change to CIF NOLA SRW bids at this juncture.

Corn basis saw a nice jump at several locations Wednesday, partially in response to the lower board and lack of farmer selling, but also due to a worsening of railroad performance.  PNW corn shuttles went home bid +108K for this week and +106/102K for FH-Mar/Full Mar.  These sort of levels would compare with +99/97K a week ago, or up 7-10c depending on the slot.  Group-3 basis was steady vs. Tuesday at -1K, but up 6-7c from week ago levels.  There were also several destination ethanol plants which showed improved basis of 2-3 w/w.  CIF NOLA corn premiums were relatively static, however, undoubtedly showing pause due to the heavy deliveries this week.  CIF NOLA corn went home at +53/55K for Mar, +53/54K for AM and +48/51N for JJ.  CIF NOLA soybean premiums did have a decidedly negative tone compare with late last week and early this week.  The entire trucker strike premium has been extracted.

Weekly ethanol production saw another modest decline of 16,000bbls/day to 931,000bbls/day, which put the rate right at the needed weekly level to hit the USDA’s corn demand for ethanol forecast.  Stocks also dropped 66,000 bbls to 21.528 million barrels, still near the highest levels since April 2012.  The recent string of exceptionally strong ethanol production rates has provided a strong buffer against softening production as of late, which should prevent any need for an update on next week’s WASDE report.  In addition, RBOB/Ethanol spreads have rebounded sharply with the nearby spread trading around 42c/gln and the 6-month strip trading at 37.6c/gln.  This would compare with ethanol trading a premium to RBOB just a couple of months back, a situation which killed any and all discretionary blending above and beyond the mandated level.

Export sales out later this morning are expected to come in as follows: wheat 350-750TMT; corn 700-1300TMT; beans 200-600TMT; soymeal 0-225TMT; soy oil 5-20TMT.  Traders will be watching soybean and soymeal sales closest following the slowdown in sales and shipments of soybeans as of late as well as the net cancellations witnessed in soymeal last week.

 

Bottom Line: Keep an eye on export sales for early price direction as traders will be watching closely to see if the soybean program is over and if the corn program can sustain recent performance despite cheap stem from Ukraine and Argentina.  Technicals are slipping negative, and currency influence has been mostly negative towards our space.  The Brazilian, Ukrainian and Argentine currency moves are playing a bigger role than they ever have, and monitoring events there will be important during 2015.  A rebound in price today seems probable.

 

Good Luck Today.

 

RFC 3-5

 

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.

 

3/4/2015 Morning Comments

Good Morning,

 

Outside Markets as of 6:50am: Dollar Index up 0.2580 at 95.6410; Euro down 0.00520 at 1.11280; Brazilian Real is off 2.13% to 2.9967; S&P’s are down 6.75 at 2098.00; Dow futures are down 49.00 at 18,138.00; 10-yr futures are up 0.10%; The Nikkei closed down 0.59% at 18,703.60; The DAX is up 0.02% at 11,282.87; The IBEX-35 is down 0.19% at 10,993.30; Gold is up $0.90 at $1205.30; Copper is up $0.35 at $266.00; Crude Oil is up $0.41 at $50.94; Heating Oil is down $0.0176 at $1.9219; Paris Milling Wheat is unchanged at €186.75/MT.

The Brazilian Real is trading especially weak this morning, nearing the 3:1 level against the US Dollar for the first time since August 2004.  Fears that the political and economic situation in South America’s largest economy are growing worse seem to be driving the rout.  Brazil’s chief prosecutor asked the Supreme Court to investigate 54 people, including politicians, for alleged involvement in a huge kickback scheme at state-run oil company Petrobas.  On Monday, the trade ministry sad Brazil had a trade deficit of $2.8 billion in February the worst result for the month since 1980.  The 12-month trade deficit is now -$3.8 billion compared with a $1.4 billion surplus during the same period ended February 2014.  A weak currency will continue to make soybean prices in Brazil more attractive to growers there.  Traders are looking for a weekly crude oil inventory build of +4.0 million bbls, adding to the massive string of increases since the 1st of the year.  Crude inventories in the US are now 12.6% higher than the beginning of the year and 21.7% higher than September’s 1-yr low.

A mix of precip moving across the southern plains, southern Midwest and ECB this morning with light precip already being recorded.  This system is expected to bring 0.50-2.50” to the area from E-TX to WV over the next 3-days.  Following this round of precip, things are expected to quiet down quite a bit in the extended time frame with below normal precip for the entire country.  The 8-14 sees more normal precip patterns, but above normal temps will be the feature during the 6-15 day.  This will begin to melt snow cover and possibly firm up fields for fieldwork or seeding.  Corn planting has already begun in TX with 4% planted being reported as of Monday.

 

Softer overnight markets for all of the Ag markets as futures grapple with a rapidly declining Brazilian currency, surprise deliveries against the WH15, solid precip returns expected across the south and eastern US wheat belts and indications spring could be early this year as opposed to late like the last two.  Wheat and soybeans have been the focus of the selling pressure, but both have yet to violate serious technical support which would open up a new wave of selling.  The corn market is still flagging into declining volume which could be setting the stage for a breakout in coming sessions.  Be watchful for any minor term momentum failures.  Weekly ethanol production on tap at 9:30am which most think will lead to another decline as margins remain relatively low compared with inputs and outputs.  The US farmer remains a subdued seller due to both price and the calendar.

The big overnight news were the 250 deliveries posted against the WH15 by Nidera which most think are going to be US 2 SRW 3 PPM vomi, or feed wheat in effect.  It is no secret the last two years have witnessed poorer than average soft red wheat quality, and the CME deliverable stocks report has confirmed that week after week.  What we haven’t seen, however, is any major commercial deliver this poorer quality wheat at a discount of up to 20c to US 1 SRW certificates.  This would lead one to believe a couple things: 1) calendar spreads could see pressure both up front and deferred as this wheat just gets rolled and rolled until it can be adequately blended off.  The WH/WK is off 3.0c overnight and the WK/WN is off 1.0c.  2) KC wheat could begin to exert more premium over Chicago given its lack of quality concerns and the potential for customers to turn to KW instead of W via delivery supplies.  3) It could set the stage for additional off-grade wheat supplies to be delivered at a discount if the cash market isn’t willing to pay for anything but US 1 SRW 1.25ppm vomi or less which would meet GASC specs.  There is no shortage of wheat in the US, just a shortage of quality wheat.  There were 1,065 corn re-deliveries also.

The soybean market continues to react to the weakening trucker strike and a weakening Brazilian currency.  Only a handful of roads remained blocked in Brazil as of Tuesday evening, according to Reuters.  There were seven protests over rising freight costs affecting federal highways, down from 18 on Monday and down from 100 a week ago.  With the Brazilian Real continuing to plummet, soybeans priced in Brazilian Real are actually trading at around 29.90 reals/bushel, the highest level since August while CBOT soy prices remain in the lower half of their Oct-Feb range.  CIF NOLA soybean premiums are reflecting the same with a softer tone, and in some cases no bid for spot barges.  Spreads haven’t suggested anything different with the SH/SK and SK/SN trading down to the lowest levels since 2/17.  The global soy pipeline appears adequately stocked for the time being.

While still on the topic of South America, Brazil did release updated planting and harvesting data yesterday with Brazilian soybean harvest advancing to 28% from 17% last week and compares to 41% last year and 32% average.  1st crop corn harvest was estimated at 26% vs. 21% last week and 41% in 2014, while 2nd crop corn planting was pegged at 58% vs. 40% last week and 56% last year.  Informa economics released updated South American soybean production estimates yesterday during the session and pegged combined Braz/Argy/Para production at 159MMT vs. 148.321MMT in 2013 thanks to Argentine production being raised all the way to 58MMT, a new record.  Next year they see the three country production pushing to 163.35MMT thanks to Brazilian production of 97.5MMT, a new record.  World corn production looks set to decline noticeably in 2015, something traders will need to monitor.

Draws were reported on the deliverable stocks reports for both SRW and HRW this past week.  Total wheat stocks of SRW fell to 56.2mbu from 57.464mbu last week and 45.149mbu last year.  Deliverable grade supplies of SRW were reported at 36.951mbu vs. 37.434mbu last week and 42.017mbu last year.  HRW supplies fell to 41.639mbu from 42.313mbu last week and 50.993mbu last year.  HRS supplies in Duluth/Superior and MPLS were essentially unchanged on the week.

 

Bottom Line:  The entire trucker strike premium has been erased from both futures and basis, indicating supplies are plentiful and disruptions minimal.  Wheat is feeling a two-pronged attack from heavy old crop deliveries which contain poor quality wheat, and moisture moving across the wheat belts as we get set to break dormancy.  Corn demand appears to be strong enough to support current levels, and new crop balance sheets are already more snug than most would prefer.  Hard to see positive trade today in my opinion.

 

Good Luck Today.

 

Radar 3-4

Tregg Cronin

Market Analyst

Tregg.Cronin@halocommodities.com

www.halocommodities.com

@5thWave_tcronin

 

 

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

3/3/2015 Morning Comments

Good Morning,

 

Outside Markets as of 6:40am: Dollar Index up 0.0510 at 95.5220; Euro down 0.00290 at 1.11590; S&P’s are down 3.00 at 2111.00; Dow futures are down 19.00 at 18,229.00; 10-yr futures are down 0.11%; The Nikkei closed down 0.06% at 18,815.16; The DAX is down 0.04% at 11,406.27; The IBEX-35 is down 0.56% at 11,116.40; Gold is up $1.70 at $1209.90; Copper is down $3.75 at $266.00; Crude Oil is up $0.73 at $50.32; Heating Oil is up $0.0380 at $1.9255; Paris Milling Wheat is down €0.25 at €184.50/MT.

The walls seem to be slowly closing in around Mr. Putin, both economically and politically.  Russia’s finance ministry says the country’s foreign currency reserves dropped by almost 10% in dollar terms during the month of February, thanks again to low oil prices.  The fund dropped from $85.09 billion to $77.05 billion, the ministry said, as the government spent around $8 billion to support the budget.  The Ruble was a bit firmer this morning, holding around 65.35:1 against the US Dollar.  Crude oil calendar spreads saw a sharp reversal yesterday, a possible sign flat price has witnessed another intermediate term low.  The CLJ/CLK spread hit a low yesterday of -$2.49 before rallying to a high of -$1.80 and closing at -$1.93.  At the highs, the spread was up almost 20%, an incredible move for a calendar spread.  Last week saw large inventory builds, something which will have to stop before crude can bottom.

Snow moving across the Northern Plains and Great Lakes, while a wintry mix moves across the central corn belt this morning.  Accompanying the snow in the Northern Plains will be fierce winds in the range of 20-40mph, creating blizzard like conditions.  Movement of grain should slow the next 24 hours.  Actual precip returns are expected to be light in the Northern Plains, but the other system working across the Delta, mid-south and ECB will carry with it much more moisture to the tune of 0.75-3.50” in spots of KY and WV.  Moisture prospects will wane as we get later in the 7-day and into the 6-10 and 8-14 where much below normal precip will encompass the entire contiguous US.  Temps also look to warm to above normal throughout the 6-15 day period which should begin drying soils ahead of field work.

 

A bit better markets this morning as we recover from yesterday’s heavy selling pressure which spared few markets in its path.  An easing Brazilian trucker strike, better moisture prospects for wheat growing areas around the globe and still competitive corn supplies out of other export origins all combined to weigh on prices.  In addition, looking back at Friday’s rally, it would argue that the sharp reversal in price could have been month-end profit taking before positions were reestablished yesterday.  Most wheat charts did not see fresh contract lows yesterday, which will be viewed as a moral victory for bulls, while soybeans also managed to remain above support levels and did not compromise their technical structure further.  Corn once again finds itself producing flagging action which could be pre-empting another breakout.

Reuters reported yesterday striking truckers still blocked some major roadways in Brazil, even as the government cracked down on protestors.  As of yesterday afternoon, 23 road blockages in three southern states still existed, down from 99 points nationwide a week ago.  One major highway coming from Mato Grasso remained blocked as of yesterday, which could still suspend some supply arrivals.  As of yet, there has been no appreciable jump in front-end CIF NOLA soybean premiums which might suggest export business is swinging back to the US.  Still, these sort of shenanigans play out every year in Brazil and Argentina, which continue to remind buyers of the reliability from sourcing out of the US.  Going home last night, FOB prices across the Americas ranged from the US at $403.00/MT FOB for spot and $398.21/MT FOB for April vs. Argy for May at $384.62/MT and Brazil for spot at $386.29/MT FOB.

Canadian export data for the month of January was released late last week and showed some surprising statistics relative to expectations by the USDA.  Total wheat exports for January totaled 1.160MMT, up slightly from January a year ago.  MYTD shipments totaled 8.165MMT, up 6.08% from a year ago.  Exports of wheat to the US, however, totaled 69,800MT, down from 158,600MT a year ago.  MYTD shipments to the US total 462,200MT, down 57.8% from a year ago.  This would compare with the USDA’s marketing year import forecast being down 5.3% y/y.  Granted we did import somewhere between 2-5 cargoes of European feed wheat last fall, but even if all of these vessels were panamaxes, which they weren’t, the total would only be around 10mbu.  Simply put, the Canadian Dollar should be pushing more supply south of the border given the price discrepancy, but that has not happened during the first 6-months of the marketing year.  Quality could be a large factor as protein and overall quality were not high in this year’s Canadian wheat crop.  Exports to Western Europe are up 37% y/y with Africa up 22%.  Oats, on the other hand, are up around 14.2% y/y to 526,500MT through January.

Weekly export inspections were also released yesterday with corn posting the largest shipments of the marketing year to date.  50.4mbu of corn were shipped in the week ended 2/26, well better than the 34.3mbu needed to hit the USDA’s 1.750bbu export target. Total shipments to date now stand at 731.6mbu, up 3.2% from a year ago while the USDA’s marketing year forecast calls for an 8.7% decline.  Several weeks of heavy shipments occurred last year at this time, which it looks like this year will keep track with.  Wheat shipments were 16.5mbu, slightly below the 18.9mbu needed weekly to hit the USDA forecast.  Total shipments now stand at 623.4mbu, down 29.1% from a year ago.  Soybean shipments were 23.3mbu, above the 9.4mbu needed weekly but the smallest since September.  Total shipments are up 13.6% from a year ago.  Sorghum exports continue to plug along at 8.1mbu, well better than the 4.2mbu needed weekly to hit the USDA forecast.  Total shipments are now at 187.5mbu, up 189% from a year ago and will likely prompt another export increase from the USDA on the March WASDE report.

Several states released winter wheat condition ratings for the end of February yesterday, with most states seeing an improvement.  KS wheat conditions were rated at 44% G/E and 12% P/VP.  OK saw conditions at 42% G/E and 16% P/VP with 45% of their wheat being reported as grazed, up 3pts from a year ago.  TX wheat conditions were reported at 46% G/E and 12% P/VP.  Texas also reported corn planting progress at 4% vs. 7% average.  Oats planting was 100% complete vs. 100% average.  CO conditions were seen at 48% G/E and 11% Poor with top soil moisture at 71% Adequate and subsoil 49% adequate.  SD wheat conditions were reported at 49% G/E and 7% Poor while NE was 62% G/E and 3% poor.

 

Bottom Line: Could see a two-sided affair today as the turnaround Tuesday party meets the continued sell pressure of the funds which have reengaged after the start of a new month.  Corn demand is good enough to support prices above the $3.70-3.75 level for now it would appear.  Wheat prices also seem hesitant to make new lows until more is known about the Northern Hemisphere crop.  Soybeans are biding time until the market has full confidence in Brazil and Argentina taking over as the majority supplier.

 

Good Luck Today.

Canadian Wheat Exports 3-3

 

Tregg Cronin

Market Analyst

Tregg.Cronin@halocommodities.com

www.halocommodities.com

@5thWave_tcronin

 

 

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

3/2/2015 Morning Comments

Good Morning,

 

Outside Markets as of 6:45am: Dollar Index down 0.1960 at 95.0970; Euro up 0.00370 at 1.12320; S&P’s are down 0.25 at 2102.50; Dow futures are up 2.00 at 18,129.00; 10-yr futures are up 0.04%; The Nikkei closed up 0.15% at 18,826.88; The DAX is down 0.03% at 11,397.84; The IBEX-35 is down 0.16% at 11,160.80; Gold is up $3.30 at $1216.40; Copper is down $0.70 at $268.45; Crude Oil is down $0.85 at $48.91; Heating Oil is down $0.0400 at $1.9337; Paris Milling Wheat is up €0.25 at €187.75/MT.

Tepid equity markets this morning after investor optimism faded following a weekend interest rate cut by the Chinese central bank.  The People’s Bank of China cut interest rates for a second time in three months over the weekend, axing rates for one-year loans by commercial banks by 0.25 percentage points to 5.35%.  The one-year deposit rate was reduced by 0.25 to 2.50%.  Rotary rig counts as compiled by drilling company Baker Hughes fell again in the week ended 2/27.  Total rig counts in the United States now stand at 1,267, down 43 from last week and 502 from a year ago.  The decline is also being felt in Canada with total rigs now at 330 vs. 360 a week ago and 626 a year ago.  Texas still leads the US with 570 rigs drilling followed by Oklahoma at 146 and North Dakota with 108.

The band of the US which has seen the lion’s share of moisture the past several weeks will continue to receive moisture in the 7-days ahead.  E-TX to PA is expected to see a band of precip come through bringing 0.50-4.50” of water-equivalent moisture with AR/TN/KY/WV being the area impacted most.  The entire US-SE will see precip measuring 0.50-0.75”, which should snarl travel further.  Not much moisture for the WCB and Northern Plains.  A big shift in precip outlook is seen with the 6-10 and 8-14 day, however, with well below normal precip expected for almost the entire contiguous US.  Temps will also be warming to above normal in the west and north with temperatures into the 50’s expected by the beginning of next week.  This outlook gets us out to March 15th, which could get some farmers anxious by the end of the period.

 

Fairly quiet overnight session with corn chopping around inside of a 3c range, wheat in a 2-4c range and soybeans a 10c range.  The big themes to close the week last week were the rally in Chicago wheat, and the impact of the Brazilian trucker strike.  After making new lows for the move, and the lowest trade since 9/25 on Thursday, wheat prices reversed hard, posting a key reversal followed by the 12c gains on Friday.  Fundamentalists were scratching their heads for an impetus to the rally, eventually settling on “technical considerations.” Considering the lack of basis changes to close the week, that reason will have to suffice for now.  The Brazilian trucker strike was also center-stage, although that situation appears to be slowly resolving itself, and the lack of front-end strength in CIF NOLA bids would also suggest the strike isn’t causing widespread panic.

CIF NOLA SRW bids went home bid +90K for spot barges, +85K for full month March, about unchanged on the week depending on where one rolled their WH/WK spread.  HRW premiums were firmer w/w at +140K at both the TX-Gulf and PNW, not doubt thanks to the Egyptian business conducted this week.  If five cargoes were in fact purchased, should leave around $20 million left in the Egyptian credit line to be tapped. Whether additional HRW is sourced now, or buyers wait until new crop SRW is available remains to be seen.  K/N wheat spreads closed Friday and are trading mostly firmer this morning.  The MWH/MWK got blown out to -10.50c on Friday thanks to heavy deliveries against the MWH contract.  No clear stopper has shown up yet with 266 contracts re-delivered this morning.  The spring wheat market is flush with low protein wheat this year, but the cash market prefers 14.0-15.0%.  Standing on delivery in Minneapolis only guarantees one 13.0-13.5% protein wheat which isn’t worth much this year.  Bids for 14.0% pro went home Friday bid +160/200K while 14.5% was +220/250K and 15.0% was +375/440K.

The Brazilian trucker strike was said to have clogged as many as 80 major highways the middle of last week, but the backlogged number was down to 59 Friday, 38 Saturday and 28 Sunday.  The remaining road closures were said to be focused around the capital and political buildings.  The idea of swing cargoes being sold out of the US provided strength for the rally, but neither cash nor spreads have suggested the same.  CIF NOLA soybean bids for prompt shipment were reported at +86/88H, trading in a narrow 4c range for most of the week.  One would certainly anticipate more front-end strength if cargoes were being sold in volume out of the Gulf.  The SH/SK spread does remain firm, however, trading up to -1.00c again overnight, the highest trades since June 2014.  The SN/SX also remains firm at +37.25c, near the highest levels since mid-January as someone remains concerned about carryout levels.

Wasn’t a great deal of feature in US cash corn markets to close the week, but the real story was Argentine cash premiums getting slaughtered.  By Friday, indications were for spot Argy maize cargoes were +43H/K through May, down 11-13c on the week.  Ideas about the Argentine maize crop are growing, no pun intended, with ideas of 25-26 or even 27MMT possible vs. the USDA at 23MMT.  Fresh export licenses were also issued for the new crop cycle, adding additional supply to compete with US stem.  Ukrainian maize values finally stabilized around +47H, remaining well under US replacement values, especially with ocean freight considerations factored in.  The real story in my opinion will be Ukrainian maize offerings in 2015/16 given the difficulty in sourcing inputs for the spring campaign.  Still, US corn has plenty of competition at current and export sales and loadings need to be monitored closely.

 

Bottom Line: Choppy start to the week with the situation in South America being monitored closely.  Wheat doesn’t have a story until the new crop cycle takes center stage and dormancy is fully broken in another 30-days.  Condition ratings from KS/OK/TX should be released after the close.  Corn demand remains solid, although more competition is showing up by the day.  Charts look good for additional upside in soybeans and wheat.

 

Good Luck Today.

HPC 3-2

 

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.