7/15/2014 Morning Comments

Good Morning,

 

Outside Markets as of 5:55am: Dollar Index up 0.0340 at 80.2210; Euro down 0.00130 at 1.36090; S&P’s down 2.50 at 1968.50; Dow futures are down 8.00 at 16,970.00; 10-yr futures are up 0.09%; The Nikkei closed up 0.64% at 15,395.16; The DAX is down 0.52% at 9,732.39; The IBEX-35 is down 1.28% at 10,471.00; Gold is up $5.70 at $1312.40; Copper is down $0.70 at $324.20; Crude Oil is down $0.65 at $100.25; Heating Oil is down $0.0107 at $2.8622; Paris Milling Wheat is up €0.25 at €179.00/MT.

Market focus today will be on Fed Chain Janet Yellen’s semi-annual testimony before the Senate Banking Committee as she delivers the Fed’s semiannual monetary policy report to Congress.  Investors doubt she will offer much more today than the official Fed meetings from June 17-18, and she is undoubtedly going to keep her dovish tone.  Economic data out today includes June retail sales which are expected to show an increase of +0.6% and +0.5% ex-autos, improving from May. Today will also see the July Empire Manufacturing Index (-2.28 to 17.00), and May business inventories (+0.6%).  Investors will also be looking forward to Q2-GDP data from China out Wednesday as skepticism remains a cloud over the globe’s second largest economy.

Relatively open Midwest this morning in terms of moisture, and should remain so the next 3-days.  The southern plains will see rains fire up through Friday with heavy totals expected in OK/NE-TX/AR/LA, but again the Midwest should remain dry for almost the entire week aside from intermittent shower activity.  The feature this week will obviously be the cooler than average temperatures as some of the Midwest corn crop begins to shoot tassels.  The 6-10 and 8-14 day outlook from NOAA does see things begin to warm back up with above normal temps for the Northern Plains, while moisture will be split along the Mississippi with below normal west and above normal east.  The warm dry weather should be good for finishing the spring wheat crop in portions of the Dakotas.  Still no major weather threats to stall market declines.

 

Turnaround Tuesday in the wrong direction for grain bulls following yesterday’s relief rally which felt like the first gains in months.  Friday’s USDA reports confirmed what the market had been anticipating since the June 30th reports: without threatening weather, supply is going to rise more than demand can support during the 14/15 marketing year.  Analysts continue to raise corn yield estimates, despite the USDA standing pat at 165.3bpa.  It would seem the majority of the trade is between 167-170bpa based on current forecasts, and with that type of yield carryout is going to have a difficult time remaining below 2.0bbu on September 1st, 2015.  Demand will expand, but there are limitations outside of feed/residual.  Unfortunately for the corn bulls, there also remains two big longs in the market which continue to weigh on price: farmers and funds.  The average US farmer has ample old crop stocks remaining in the bin, and he is woefully undersold on new crop.  COT data confirmed funds adding to longs.  Both will make forming a major bottom difficult.  The yield and demand components will remain wildcards a bit longer on soybeans as the key developmental weather is still several weeks out.

Crop progress reports out last night confirmed an improving corn crop as conditions increased 1pt to 76% G/E vs 66% last year, and remain the highest since 1999.  MO is leading the pack with 84% of its crop rated G/E, followed by SD at 82% and IL at 81%.  34% of the crop is silking vs 15% last year and 33% average, so the sluggish start to planting looks to have been overcome in some of the Midwest.  Soybean conditions held steady despite expectations for an increase at 72% G/E vs 65% last year, and remain the highest since 1999.  41% of the crop is blooming vs 37% average.  Spring wheat conditions were unchanged at 70% with SD still 20pts above last year and ND 8pts above last year.  MN and MT are 12 and 11pts below a year ago.  Winter wheat harvest was pegged at 69% vs 68% average with KS now 90% complete with harvest efforts.  OK and TX are essentially done.

The University of Illinois published an interesting article yesterday talking about corn supply and demand, but the real interesting tidbit was their take on whether prices have discounted a 165.3bpa corn yield, or possibly even larger? The U of IL is projecting the stocks/use ratio at 15.4%, which would be the largest since 2005-06 when stocks pushed to 17.5% stocks/use.  The average corn price during 2005-06 was roughly $2.00/bu, but the average from 1973-74 to 2005-06 was $2.40, making the $2.00 about 83% of the average.  Yet the University argues that since corn prices have entered the “new era” price echelon in 2006-07, the average price of corn from 06/07-09/10 is actually $4.60/bu.  If we take 83% of the new era average, we come up with $3.81/bu.  Their thinking therefore is the market is already pricing in a yield higher than the USDA’s current 165.3bpa, and ending stocks above the USDA’s current 1.801bbu and 13.5% stocks/use.  I will admit their methodology is more art than science, but there is logic there and $3.50-3.80/corn lines up very well with old technical support on long-term monthly charts.  Will be interesting to see how close this analysis comes to pegging a low.

http://www.farmdoc.illinois.edu/marketing/weekly/html/071414.html

Along the same lines, I thought it would also be worthwhile to take a look at the seasonality of other record yielding years to see when price tended to find its major low.  The chart at the bottom shows 2014 December corn in black, with 2009 in blue and 2004 in red.  As one can see from the chart, 2009 didn’t hit its major seasonal low until September 4th, while 2004 proceeded to move lower right up to delivery and bottom on December 1st.  One will also notice that once 2009 hit its low it tacked on over $1.00/bu rally as we entered harvest.  This was obviously due to delayed harvest and wet conditions which went on to haunt the market well into the summer of 2010 via poor quality.  Still, the point here is to say in other record yielding years, the market continued to press price lower until the maximum supply was realized, which didn’t come until at least a month and half after the current date.

As mentioned above, the most recent COT data showed funds adding 10,319 contracts to their net long position in corn last week to bump their net long back up to 36,418 contracts.  This is by no means an egregious position, but it doesn’t imply bottoming action either.  The Gross Commercial Long (end user) finally bought corn for the first time in 4-weeks, adding roughly 19,000 contracts which is a positive sign.  There isn’t anything to extreme from either a commercial or fund perspective which makes the public opinion data showing corn at extreme pessimistic levels more difficult to trust.  Sentiment doesn’t seem to be arguing for a major bottom yet.  Soybeans on the other hand do have some extremes developing as the commercial net short position now sits at just -11,234 contracts, the smallest net short on record going back to 1/2/2007.  In addition, funds are now net short -43,142 contracts, the largest net short on record.  These two groups moving to extreme positions are major warning signals, and obviously it is usually preferred to be on the side of the commercials who look like they are about to go net long the soybean market.  It makes one wonder whether the funds piling into the short side of the market ahead of pod-setting isn’t going to end with some capitulation.  End users continue to buy soybeans on the way down, toting the largest gross commercial long (242,363 contracts) since October 22nd, 2013.  Keep watchful eyes on this market.

A few quickies to close: Russian wheat prices have begun to drop again as harvest expands; Indian’s monsoon season is looking for better rains beginning July 22nd which will be imperative after the poor June and bad start to July.  The USDA made mention many times in Friday’s WASDE report of the sub-par monsoon season to date; Brazil soybean basis strength continues unabated and will keep US demand firm; Rail freight costs continue to climb without hesitation making for poor basis levels in the Northern Plains and causing anxiety ahead of small grains harvest; Chicago wheat is sitting on 9-yr trendline support; Wheat O/I is up 30,395 contracts since the June 30th report as funds sell and harvest expands.

 

Bottom Line:  Crops aren’t done getting smaller today, and weather the next week looks beneficial.  Traders seem more willing to press corn than soybeans given the crop calendar, but corn is nearing some long-term support candidates.  Farmers remain undersold on old and new crop which will remain an albatross around the neck of the market.  No reason for funds to switch to buyers today.  Better living through lower prices.

 

Good Luck Today.

 

Dec Corn Seasonal 7-14

 

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.

 

 

 

7/11/2014 Morning Comments

Good Morning,

 

Outside Markets as of 5:55am: Dollar Index down 0.0280 at 80.1020; Euro unchanged at 1.36070; S&P’s are up 1.75 at 1959.50; Dow futures are up 19.00 at 16,861.00; 10-yr futures are up 0.05%; The Nikkei closed down 0.34% at 15,164.04; The DAX is up 0.14% at 9,672.78; The IBEX-35 is up 1.24% at 10,664.60; Gold is down $0.30 at $1338.90; Copper is down $0.90 at $325.80; Crude Oil is down $0.40 at $102.53; Heating Oil is down $0.0014 at $2.8919; Paris Milling Wheat is up €0.50 at €182.25/MT.

Global equities are rebounding from yesterday’s selloff, especially European shares which was the onus of the selling.  Yesterday’s price action looked and felt as though investors were being especially cautious about slipping back into another European financial crisis after one of Portugal’s banks, Espirito Santo International, missed a debt payment and was cited for accounting irregularities.  In response, Portugal’s 10-yr bond yield jumped 21bp to 3.97%, up 66bp from the post-crisis low of 3.31% in mid-June.  Fortunately, and probably the reason markets are shrugging the lone bank’s woes off today, is Portuguese bank assets account for only 1.6% of the region’s total, and it looks as though this is more of a one off event than one which could shove things back into contagion.

 

Quiet overnight with prices chopping ahead of the USDA’s July WASDE at 11:00am.  It’s obvious what markets are expecting given price action and weather since the June 30th stocks reports.  The real question comes down to how aggressive the USDA wants to be on production ideas, and conversely, how much they’re willing to increase 14/15 demand to account for the excess supply.  In looking at demand line items for both corn and soybeans, it is going to be difficult for the demand hole to get a great deal wider and deeper in the ensuing marketing year given the constraints of livestock numbers, the ethanol blend wall and slowing Chinese soy and corn demand.  If the supply is there on both corn and soybeans, it remains difficult to see how price can mount any sort of sustained recovery.  Back to back record, or near record, crops are finally fixing what the short crops of 2011 and 2012 broke.

Fortunately, export demand does continue to click along for new crop with additional daily sales announcements yesterday including 118,000MT of soybeans sold to China during the 14/15 marketing year, and 126,000MT of soybeans sold to unknown and split between 13/14 and 14/15.  These follow multiple corn sales announced via the daily reporting system, and should ensure decent export sales next week.  Also worth mentioning as it hasn’t garnered a ton of press, new crop soymeal sales are off to a record campaign this year with 2.519MMT already on the books vs 881.9TMT at this point last year.  In fact, the 2.519MMT is the largest on record for this point in the marketing year, and is over double the previous record of 1.183MMT.  The major buyers have been unknown destinations at 1.3MMT, and the Philippines at 664,000MT.  Chatter amongst the trade suggests soymeal importers are opting to buy US soymeal as a hedge against an Indian soybean production shortfall related to El Nino and below average rainfall.  India is having a poor monsoon season so far, and it looks as though soymeal exports could slip by 3-4MMT.  This will keep 14/15 US crush ideas supported.

Corn spreads continue to flesh out with the CH/CK pushing out to -8.00c during yesterday’s session, representing 70% of full financial carry.  CK/CN and CN/CU are also sitting at fresh contract lows.  The CZ/CH spread continues to trade at -11.00c which is around 64% of full financial carry (2.23%), and based on the last several years would be a good spot to start moving hedges further out the curve.  However, given prospects for the kind of supply we’re talking about this year, spreads should continue to find pressure and work closer to full carry.  It would seem being patient for values around -13.00c would be prudent based on what we know today.  -13.00c would constitute 75% of full financial carry, and when combined with the likely cash carry, producers could be looking at 20-30c to sit on corn until February/March.  The only way to earn that carry, however, is to sell it.

The only delivery activity continues to be in KC with another 47 KWN delivered at ADM Hutchinson.  That brings the month total to 141.

 

Bottom Line:  Not really worth discussing much else until the USDA numbers are released and the data can be crunched.  There isn’t much precedent for raising soybean yields on the July WASDE, but the USDA has been known to raise corn yields in times of excellent conditions like this year.  The trade is anticipating a 1.0bpa increase in yield, and the market is certainly pricing that in.  Price will continue to fall until we have the largest estimate of the crop possible, and on July 11th, is doesn’t feel like this crop is done getting larger.

 

Good Luck Today.

 

U.S. 2013-14 end stocks U.S. 2014-15 end stocks

Corn  Soybeans      Wheat    Corn  Soybeans

Average trade estimate   1.232     0.128      0.591   1.774     0.418

Highest trade estimate   1.350     0.156      0.723   2.309     0.489

Lowest trade estimate    1.146     0.111      0.522   1.535     0.320

USDA June                1.146     0.125      0.574   1.726     0.325

 

ADM Investor Services        1.221     0.125      0.635   1.785     0.435

AgriVisor                    1.221     0.125      0.640   1.725     0.436

Allendale Inc                1.206     0.119      0.550   1.810     0.386

CHS Hedging                  1.221     0.125      0.593   1.693     0.435

CitiGroup                    1.146     0.131      0.566   1.723     0.325

Doane Advisory Services      1.231     0.145        N/A   1.735     0.425

ED&F Man Capital             1.246     0.125      0.574   1.809     0.425

Farm Futures Magazine        1.263     0.125      0.550   1.725     0.360

Futures International        1.196     0.111      0.580   1.775     0.406

Global Commodity Analytics   1.350     0.133      0.561   1.812     0.469

Hightower Report             1.275     0.125      0.585   1.974     0.489

Jefferies Bache              1.196     0.135      0.586   1.700     0.450

Sid Love Consulting          1.196     0.130      0.600   1.693     0.442

Macquarie Securities         1.280     0.128      0.723   2.309     0.437

McKeany-Flavell              1.175     0.120      0.589   1.771     0.400

Newedge                      1.226     0.135      0.522   1.750     0.450

Rice Dairy LLC               1.221     0.125      0.602   1.535     0.450

R.J. O’Brien                 1.263     0.124      0.601   1.700     0.373

U.S. Commodities             1.271     0.125      0.655   1.841     0.398

Walsh Trading                1.150     0.120      0.568   1.715     0.320

Water Street Solutions       1.263     0.156      0.570   1.707     0.461

Zaner Ag Hedge               1.296     0.131      0.565   1.751     0.421

 

 

 

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.

 

 

7/10/2014 Morning Comments

Good Morning,

 

Outside Markets as of 5:45am: Dollar Index up 0.0700 at 80.0630; Euro is down 0.0028 at 1.36220; S&P’s are down 17.50 at 1950.00; Dow futures are down 145.00 at 16,768.00; 10-yr futures are up 0.35%; The Nikkei closed down 0.56% at 15,216.47; The DAX is down 1.48% at 9,663.38; The IBEX-35 is down 2.20% at 10,510.60; Gold is up $18.40 at $1342.70; Copper is down $1.05 at $323.75; Crude Oil is down $0.58 at $101.71; Heating Oil is down $0.0011 at $2.8700; Paris Milling Wheat is up €0.75 at €182.50/MT.

European equities are leading the way lower this morning with several major indices off by more than 1.0% as investors weigh the highest stock valuation since 2009 against a tepid economic recovery across the bloc.  Bank shares were down the most, 2.2%, of all industry sectors as Espirito Santa International SA is considering making a request for protection from creditors in Luxembourg if it can’t reach a debt renegotiation agreement.  Also adding to the bearish sentiment is the planned exit of the Federal Reserve’s bond buying program in October as that is when the last $15 billion of asset purchases will cease, and the focus will be on interest rates rising.  Investors are clearly concerned about markets standing on their own without Federal assistance.  Unemployment claims today are expected to rise by 2,000 to 315,000 claims.

Moisture moving across the southern plains again this morning with KS/N-OK seeing additional precip.  The rest of the Midwest is quiet.  Shower activity will pick up tonight through Saturday across the WCB and Northern Plains with heaviest amounts the next 3-days falling in IA/S-WI/E-NE/N-IL/MI to the tune of 3.40”, although a widespread 0.50-0.75” in total looks likely.  Most areas, aside from the still flooded ones, will welcome a shot of rain as pollination lurks right around the corner north of I-80.  Things will then quiet down to start next week and for most of next week in the Midwest.  6-10 and 8-14 days maps still look mostly favorable with much below normal temps the next 15-days, while precip will trend towards the drier side for the WCB and Northern Plains.  Still nothing overtly threatening towards either row crop at the moment.

 

A little relief rally is taking place in the grains this morning as traders take note of the 6c loss in corn and the 20c loss in soybeans on the week heading into the July WASDE.  New crop Nov soybeans are closing in on a major area of support in the January lows, and bearish data by the USDA could arrange a retest of that level sooner rather than later.  At the same time, the $11.00 handle area could be the lower-range constraint soybeans have been looking for as support before this crop even enters the key developmental stages in August.  Still, the July WASDE isn’t likely to have too much for bulls to sink their teeth into for either corn or soybeans given the expectations for increasing production, rising old crop stocks and the USDA being armed with the highest condition ratings for both crops since at least 1999.  Still, markets being able to stabilize and rally on bearish data could be the signs of a near-term bottom.

Reuters poll of analyst estimates for Friday’s WASDE report peg corn carryout for 13/14 at 1.232bbu vs 1.146bbu in June, soybeans at 128mbu vs 125mbu in June and wheat at 591mbu vs 574mbu in June (14/15).  14/15 carryout for corn is estimated at 1.774bbu vs 1.726bbu in June and soybeans are seen at 418mbu vs 325mbu in June, although the high end estimate for soybeans jumps all the way to 489mbu.  When one pushes soybean acreage to 84.8 million acres to square with June 30th data, and doesn’t increase demand markedly, soybean stocks balloon quickly and $11.00 SX looks way overpriced.  Demand will be a focus as it has the last 5-years, but assuming demand will increase to clear excess supply might be a tough argument given the USDA already penciling record exports of 1.625bbu and crush at a 5-year high of 1.715bbu.  The x-factor remains yield, and as mentioned above the key developmental weather remains in front of the market, not behind it.  If the national average yield comes in near current expectations, the US will be swimming in soybeans and lower prices will be required to clear excess supply.

There seems to be a lot more ambiguity in the corn market given wide-ranging yield assumptions, and also the much wider possibilities on demand.  If yield is closer to 170bpa than 160bpa like many analysts are starting to suggest, then the USDA is light on their total production by about 300-400mbu.  If demand assumptions are left unchanged, ending stocks for 14/15 jump over 2.0bbu rather quickly and stocks/use ratios climb to their highest level since 2005.  In 2005, corn prices were trading much lower than even the “depressed” levels we find ourselves at now.  With more supply, demand should increase, but again, looking at the demand line items, ethanol production will be capped around ~5.100bbu given the ethanol blend wall.  Feed demand shouldn’t see a drastic increase in 14/15 given lower than expected hog supplies related to PEDv, and cattle on feed are just now in the rebuilding process.  Poultry might be the lone increase so feed/residual much higher than 5.300bbu seems a stretch.  That leaves exports at 1.700bbu vs 1.900bbu this year, but China isn’t likely to be a big source of corn imports this year given their actions to date and the shunning of US-DDGs.  In addition, SAM and Ukrainian corn crops will continue to offer competition in 14/15.  SAM political issues might offer some upside, but that should be temporary.  So much like soybeans, if the yield is there, the supply should be too and lower prices look more than likely.  Weather is still the price driver.

Basis changes of note yesterday included PNW corn premiums continue to firm with July/Aug shuttles worth +125U, while new crop also edged higher to +125Z for OND.  New crop soybean shuttles off the PNW and barges out of the Gulf have been firmer with the down board this week as well, as new crop export business is likely taking place.  Both new crop corn and soybean sales commitments could use a boost with corn sales as of last week totaling 152.5mbu vs 205.7mbu at this point last year.  Soybeans for new crop are 411.4mbu vs 452.0mbu at this point last year.  To prevent a further increase in supply, we need a big new crop export program.  Brazilian soybean premiums continue to escalate with August bracketed at +135/145Q yesterday.  Those sorts of numbers should push importers back to the US if supply was reliable for August/September out of the Gulf.

Old news now, but Egypt’s GASC bought 240,000MT of Romanian wheat yesterday at $260/265/MT C&F.  There was no US-SRW offered with quality specs said to be causing issues in the Delta.  Jul-Aug US-SRW is offered out of the Gulf at $223.86-224.60/MT FOB as of last night.

Export sales estimates for this morning’s report put corn sales at 225-450TMT old crop, 400-650TMT new crop.  Wheat is seen at 350-650TMT.  Soybeans at -100/+100TMT old crop and 350-550TMT new crop.  Meal is estimated at 25-160TMT old, 0-150TMT new, and soy oil is seen at 0-20TMT old and 0-20TMT new.

 

Bottom Line: Sharply lower equity markets and the need for a short-covering bounce heading into tomorrow’s numbers looks good enough to prop us up today, although all market participants realize what’s in store if weather remains ideal the next 2-4 weeks.  Yield assumptions are on the rise, and analysts are tripping over themselves to come out with the highest estimate to date.  There remains a lot of growing weather left between now and harvest, but waiting for a problem to bail out lax marketing plans won’t end well.  Charts are losing downside momentum.

 

Good Luck Today.

 

 

Tregg Cronin

Market Analyst

Tregg.Cronin@halocommodities.com

www.halocommodities.com

@5thWave_tcronin

 

 

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

7/9/2014 Morning Comments

Good Morning,

 

Outside Markets as of 5:45am: Dollar Index unchanged at 80.1700; Euro up 0.00020 at 1.36160; S&P’s are down 0.25 at 1960.25; Dow futures are down 9.00 at 16851.00; 10-yr futures are unchanged; The Nikkei closed down 0.08% at 15,302.65; The DAX is up 0.12% at 9,784.53; The IBEX-35 is up 0.39% at 10,730.80; Gold is up $8.10 at $1324.60; Copper is up $1.20 at $326.90; Crude Oil is down $0.06 at $103.34; Heating Oil is down $0.0034 at $2.8702; Paris Milling Wheat is down €0.50 at €182.75/MT.

The Dow Jones Industrial Average topped 17,000 and the S&P 500 is within 18 points of its all-time record high as we head into Q2 earnings season, but the overall investor sentiment seems to be one of caution at these valuations.  Alcoa reported better than expected earnings for the second quarter with earnings of $138 million, or 12 cents a share, which topped earnings expectations by 50%.  This reverses the company’s $148 million loss during the same quarter a year ago.  Of focus today will be the release of the FOMC’s June minutes as traders look for any hint at timing of the Fed’s first rate hike.  The market is still anticipating a 25bp hike to 0.50% by September 2015, although the median forecast by FOMC members is for a rate hike by spring 2015.  EIA data out later this morning is expected to show US oil production near the 27-1/2 yr high of 8.477 million bpd posted the week of June 13th.

One system working across OK this morning, otherwise the Midwest will enjoy a mostly drier day before storms start back up later tonight in the central/southern plains.  Shower activity will gradually increase in the WCB and Northern Plains with the 3-day forecasted total posted in the map below.  As more corn moves into pollination, additional water requirements will be needed and while subsoil moisture is adequate to surplus in most areas, few farmers would swear away a rain the next couple weeks.  The real feature to the weather, however, is the evolving temperature forecast the next 2-weeks with much below normal temps forecast for the entire Midwest.  The 6-10 temp map is below and mimics the “Polar Vortex” type temperature maps we were used to seeing in January.  This forecast will ensure non-threatening heat out through July 22nd when a large portion of the crop will be pollinating.  Precip looks to stay on the normal side except for the Northern Plains which will see slightly drier weather as harvest gets rolling on winter wheat.  India’s monsoon season remains in the headlines with most still forecasting a monsoon season at 85% of normal rainfall.

 

Corn and soybeans are finding themselves lower for the seventh and eighth session, respectively as corn sees itself in a bear market for 2014.  Traders are now sharpening their pencils in anticipation of growing carryouts for all three major commodities on this Friday’s WASDE report.  Looking at Reuters average analyst estimates for production, the trade has corn production increasing to 13.945bbu from 13.935bbu last month with an average yield of 166.104bpa, a new record.  Soybean production is seen at 3.774bbu, up from 3.635bbu with an average yield of 45.138bpa.  13/14 corn carryout should increase to the tune of 100-150mbu thanks to lower than expected implied feed/residual demand during Q2 as evidenced on the June 30th stocks report.  Ethanol demand should be increased by 25-50mbu to help offset this in part, and exports should remain unchanged.  Soybean carryout will be the other focus as traders wait anxiously to see how the USDA deals with the larger than expected June 1 stocks, but the insatiable crush and export demand which will readily eat up at least part of the surplus.  Traders are also cognizant of the lower than expected May soybean imports and the growing doubt of the USDA’s marketing year soybean import forecast.  Cash markets have been signaling Brazilian soybean imports have slowed and do not pencil into the US any longer.  Again, how the USDA deals with all of the aforementioned could either stem or accelerate the recent price decline.

A quick look at end user margins as compiled by www.rjomrt.com confirms what most already believed: plummeting corn prices have increased end user margins.  Ethanol margins expanded to $1.17/gln last week vs $1.07 the week previous and $0.78/gln last year.  Poultry margins are fat at 89.93c/lb vs 77.95c/lb last year.  Hog crush is solid at $158.89/hd vs $152.34/hd last week and $82.46/hd last year.  Cattle crush remains weak at $91.53/hd vs $210.61/hd last year.  C-IL soybean crush margins remain robust at $1.37/bu vs $1.17/bu last week and $0.93/bu last year.  Demand for corn should be increasing at these price levels and these margin levels for all sectors except cattle.  The question is whether demand can rise enough to offset the increased supply, and it seems the pulse of the market is erring on the side of supply rising faster than demand at current.

Updated Public Opinion data from www.sentimentrader.com also confirmed the sentiment in the market on our beloved Ag’s with wheat public opinion hitting 14.00%, the lowest on record going back to 1990.  Corn is sitting at 21.0%, the lowest since October 3rd, 2005, and soybeans are at 41.00%, the lowest since November 29th, 2011.  Conversely, cattle sit at an all-time record of 82.0%, the highest since 1990.  None of these should surprise, but to see record lows in public opinion makes one cautious about pushing price to the downside.  Taking a look at updated COT data from last Friday shows some interesting changes.  Funds in corn have cut their net long to 26,099 contracts, the smallest since their net short in February.  Concerning to this analyst is the fact the gross commercial long (end user), has been selling corn, not buying it, suggesting they see further downside in price.  Since April 29th, the gross commercial long has sold 166,406 contracts, or 19.7% of their position off.  This is not a heart-warming statistic.  In soybeans, funds are now short -28,438 contracts, the largest net short since 6/8/2010, and is the fourth largest net short on record.  The commercial net position in soybeans of -37,274 contracts is the smallest net short on record going back to 2007.  Fortunately, the gross commercial long in soybean has been buying, upping their long position by 22,000 contracts last week alone.  They do see value here.

Along the same lines as end user margins and public opinion, also interesting to look at price relationships once again with the crude oil/corn ratio hitting 25.644 this week, the highest since September 18th, 2006.  RBOB Gasoline/Corn ratio is now at 0.73552, the highest since August 28th, 2006.  The feeder cattle/corn, hog/corn and live cattle/corn ratios are all at the highest levels since 2006 as well.  When we take all of this in aggregate: profitable end user margins, bearish investor sentiment, growing short positions by the managed money and 8-year lows in price relationships, it definitely throws off some warning flags.  Yet, none of these reasons are enough to stand in front of a falling market as we could just continue to set multi-year lows/highs in all of these indicators.  The point is to be watchful for a turn in sentiment, or a turn in the fundamental news flow.

There were 33 HRW receipts canceled in Salina, KS last night but a fresh 89 registered in Hutchinson, KS with ADM house putting out all 89.  Some think poor rail performance could be the culprit given generally strong basis levels both domestically and at the export gate.  Speaking of rail costs, it is interesting to note the increased rail costs and the impact it is having on cash basis to the farmer in the Northern Plains.  One cash market participant noted yesterday with current PNW corn premiums against current October rail costs, cash basis to the farmer in some extreme locations of North Dakota are around -120Z to -140Z.  This would equate to $2.60-2.80 cash against $4.00 December corn futures.  If that isn’t sobering, nothing will be.

Ethanol production at 9:30am.

 

Bottom Line:  Nothing in the weather forecasts to change the downtrend so far with what looks to be favorable moisture and temperatures as the corn crop moves into its most important developmental phase.  The corn crop is rated higher for the analogous week than both 2009 and 2004, the other two record breaking yield years.  Lots of time to go before harvest, but this is the sentiment in the market at current.  Strong ethanol production could stem today’s decline, but eyes are on the growing carryouts slated for Friday.

 

Good Luck Today.

 

HPC 7-9 NOAA 6-10 7-9.

Tregg Cronin

Market Analyst

Tregg.Cronin@halocommodities.com

www.halocommodities.com

@5thWave_tcronin

 

 

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

 

 

7/8/2014 Morning Comments

Good Morning,

 

Outside Markets as of 5:50am: Dollar Index up 0.0760 at 80.2940; Euro is down 0.00160 at 1.35960; S&P’s are down 2.50 at 1968.50; Dow futures are down 19.00 at 16927.00; 10-yr futures are up 0.16%; The Nikkei closed down 0.42% at 15,314.41; The DAX is down 0.46% at 9,860.67; The IBEX-35 is down 0.71% at 10,811.00; Gold is up $3.70 at $1320.70; Copper is up $1.05 at $327.15; Crude Oil is down $0.16 at $103.37; Heating Oil is down $0.0111 at $2.9034; Paris Milling Wheat is up €0.25 at €182.75/MT.

Tepid equity markets as investors get set for Q2 earnings season to start with Alcoa releasing earnings today.  Economic data on the docket today will include May consumer credit which is expected to show another large increase of +$20 billion following the April surge of +$26.847 billion.  US consumers have been expending credit mainly on student loans and vehicles, the latter of which is a positive sign for the health of the auto industry.  Credit card usage is also expanding, however, with revolving credit expanding at a strong rate of +5.1%.  The Thomson Reuters/CoreCommodity CRB Index has been working its way lower during July, hitting 303.01 yesterday, the lowest print since April 3rd as Ag prices touch multi-year lows in the case of corn.

Systems working their way across the central/eastern corn belt this morning, bringing rain to IL/IN/MI/MO/KY with totals so far in N-MO already hitting 1.0” quite broadly over the last 24-hours.  Storms will finish in the east today before more rain fires up in the WCB/Southern Plains tomorrow with best chances for precip in NE/OK to the tune of 0.75”.  Thursday/Friday sees rain in SD/MN/IA with areas along the NE/IA border seeing the potential for up to 1.0”.  In all, the Midwest looks to stay well watered as we approach mid-July.  Even more important, and the source for some of the price pressure yesterday, are the temperature forecasts the next 15-days.  Both the 6-10 and 8-14 day temp maps from NOAA, seen below, call for below to much below temps through July 21st.  As we witnessed last year, successful pollination has more to do with temperature than precip, and no threatening heat of any kind looks to show up as pollination gets into full swing.  Precip will even remain normal/above.  This is about as ideal of a forecast as one could call for during mid-July.

 

A bit firmer grain prices overnight following the drubbing yesterday as markets grappled with favorable weather over the July 4th holiday weekend, and more importantly, had favorable forecasts the next 15-days.  To date, the corn crop has had nearly ideal developmental weather outside of some water logged areas in SE-SD/NW-IA/SW-MN.  To wit, the favorable weather has lasted right up to pollination, and the weather to get us through pollination looks ideal.  We are simply running out of time for a major summer rally based on weather, and without a drastic change to said weather, it will raise odds the USDA will have the ability to add to their already record corn yield forecast on the August WASDE.  More and more analysts continue to banter about the potential for a 170bpa national average yield.  While this analyst is not prepared to use a number like that in his balance sheets, there is no reason to say the crop isn’t capable of such a yield either.  The crop is still getting bigger at this point, and the market seems to be having a difficult time with demand increasing enough in 14/15 to offset the wall of grain ready for consumption in October.  In addition, still plenty of old crop to move yet as well.

Crop conditions out yesterday afternoon showed corn conditions unchanged at 75% G/E vs 68% last year, although most were looking for a small increase.  Seven states have over 80% of their corn crop rated as good/excellent, which in total keeps this crop the highest rated for early July since 1999.  15% of the crop was estimated to be silking vs 6% last year and 18% average.  Soybean conditions were unchanged at 72% G/E when again most were looking for a small bump in ratings.  The soybean crop has the highest index score since 1994.  24% of the soybean crop is blooming vs 21% average.  Spring wheat conditions were unchanged at 70% G/E, although SD’s crop saw a 7pt increase to 81% G/E vs 60% at this time last year.  South Dakota has solid prospects for both HRW and HRS this year thanks to weather to date.  Winter wheat harvest crossed the half-way mark to 57% complete vs 55% last year and 60% avg.

India’s monsoon season continues to disappoint, raising the prospect of cooking oil imports and a lack of a soymeal export program.  One Indian analyst said soybean production could decline 7.9% to 11MMT, which would be the smallest crop since 2009/10.  India is the largest cooking oil importer in the world, and could see vegetable oil purchases rise to 12MMT according to the analyst quoted by Bloomberg.  Given the current world soybean outlook, it will be this sort of ancillary demand, in addition to continued growth from China, which will keep supply from ballooning and price from returning to mid-2000 type levels.  The poor monsoon season hasn’t yet impacted grain supplies, but government officials have already taken steps to curtail rice exports and sales of wheat from strategic reserves.  This is a fluid situation which will take continued monitoring through the balance of 2014.

258 soybean oil, 26 corn, 4 ethanol, 32 soybean and 18 Chicago wheat deliveries overnight, although there were 50 SRW receipts canceled out of Maumee, OH.  This leaves just 144 receipts registered for delivery in the SRW warehouse district.  There were also 21 HRW receipts canceled in Salina, KS, leaving just 33 total deliverable receipts left on the street.  Deliverable supplies of SRW and HRW should take another big jump this week as harvest expands in both areas.

New crop corn and soybean spreads tied or hit fresh contract lows again during yesterday’s session, with 60% of full financial carry readily available on the forward end of the curve.  Spreads should continue to push towards full-carry is ideas about the crop continue to expand.  The board hog feeding crush hit fresh contract highs for July-April as hog prices continue to surge amidst PEDv related supply concerns and corn dwindles at 4-year lows.

St. Paul was able to resume barge loading this week, with elevators in Savage, MN on the Minnesota River expected to resume operations by the end of the week.  Some cash market participants said they witnessed isolated “throwing-in-the-towel” of old crop supplies by farmers in the ECB yesterday, although widespread dumping of old crop corn hasn’t occurred just yet.  As pollination commences, it is likely to see more grain move, but there are a lot of farmers sitting on old crop corn which is now below the cost of production who may choose to carry a portion into new crop.  There is no shortage of new grain bins being built, but back to back record crops will be difficult to store under any circumstances, especially with Northern Plains wheat harvest just 3-4 weeks away.

 

Bottom line: Call markets mixed today as grain try and hold their nostrils above water while soybeans realize the acreage buffer will allow yield to not be a record but supply to still grow.  This market is all about weather, and it will not allow traders to switch to demand until we’ve determined the crop is done getting bigger.  On July 8th, I don’t think anyone has a good enough handle on crop size to stand in front of this market.  Prices are always at the low when the news is the best.  Keep that in mind when monitoring current futures prices.

 

Good Luck Today.

 

NOAA 8-14 7-8

 

 

Tregg Cronin

Market Analyst

Tregg.Cronin@halocommodities.com

www.halocommodities.com

@5thWave_tcronin

 

 

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

 

 

 

7/7/2014 Morning Comments

Good Morning,

 

Outside Markets as of 5:50am: Dollar Index up 0.0570 at 80.2690; Euro is down 0.00120 at 1.35940; S&P’s are down 3.25 at 1974.25; Dow futures are down 23.00 at 16953.00; 10-yr futures are up 0.01%; The Nikkei closed down 0.37% at 15,379.44; The DAX is down 0.14% at 9,994.96; The IBEX-35 is down 0.38% at 10,967.30; Gold is down $5.60 at $1315.00; Copper is down $2.60 at $325.35; Crude Oil is down $0.22 at $103.84; Heating Oil is down $0.0092 at $2.9192; Paris Milling Wheat is unchanged at €184.50/MT.

Global equities are a bit softer to begin the week as investors gear up for the beginning of Q2 earnings season with Alcoa kicking things off tomorrow.  The economic schedule this week is rather light, although the Bloomberg Economic Surprise Index hit a 14-month high following the US unemployment report on Thursday which showed June payrolls rising by 288,000 jobs, well better than the 215,000 expected.  April and May payrolls were also upwardly revised by a total of 29,000 to push the 3-month average payroll gain to 272,000.  Fortunately, the market is also now expecting Q2-GDP to recover by +3.5% following the -2.9% decline seen in Q1.  The forward P/E ratio of the S&P 500 hit a 4-1/2 year high of 16.75 on Friday, raising further question of whether the stock index is overvalued.

Fairly quiet 3-day weekend in terms of weather and moisture with S-IA/N-MO, MI and N-MN seeing best rain totals of 0.50-1.00” while the rest of the Midwest was mainly dry.  Storms will fire back up in the central corn belt this week with heaviest totals expected in N-MO (3.02”) over the next 3-days while the ECB states including IL/IN/OH/KY/WV/PA will all see nice rain totals by Thursday.  Shower activity will be present in the WCB and Northern Plains, but nothing heavy is seen through the weekend with off and on chances of precip.  NOAA’s extended maps from yesterday were all over the board, showing above normal temps in the 6-10 and below normal temps in the 8-14.  Precip looks mostly normal.  The one-month outlook maps posted June 30th still look for below normal temps and normal precip for the Northern Plains, perfect heading weather.  Scanning through % of normal precip tables for the entir US and Canada and almost every reporting station is showing over 100% of normal precip for June 1-July 5, nearly ideal conditions for heading into heading and pollinating.  Many locations in India’s soybean growing regions are well below 50% of normal precip for June 1-July 5.

 

A throwback to the old days today as traders everywhere have to provide opening calls for prices which don’t open until 8:30am this morning.  Given favorable weather over the 3-day weekend, easier European prices and the negative price action from last week, this analyst expects a bit softer opening this morning as the market still attempts to get its arms around how big the US corn and soybean crops are going to be this year.  Articles from Bloomberg and Reuters over the weekend have analyst quotes splashed all over of increasing crop expectations and how negative the managed money community is becoming towards Ags.  Grains are in the process of building demand, but when one really slices up the balance sheet, it is going to be difficult to build demand markedly over 13/14 given the advances we made over 12/13.  The market couldn’t erase the record drought of 2012 with one corn crop, but back to back record corn crops are certainly going to go a long way to resetting price expectations and relieving end user balance sheets.  The grain markets aren’t a one-way elevator ride to the basement, but it doesn’t feel like the crop is done getting bigger just yet.

A positive note for demand has been showing up in South American corn basis levels this past week as Argentine and Brazilian maize offers continue to scoot higher.  Going home Friday, Brazilian FOB offers for August were listed at +90U ($196.64/MT), while Argentina was shown at +98U ($199.60/MT).  Compare this with US FOB offers at +78U spot and +71U for August.  The Brazilian price strength has solely to do with uncertainty over transportation subsidies provided by the government which haven’t been renewed this year as Sao Paulo is in an election year.  These subsidies can amount to $12-15/MT, and were one of the chief reasons Brazilian maize was so competitive last year.  If the transportation costs prohibit maize from moving out of inland storage to port, US corn will remain the cheapest stem in the world.  To the south, Argentina continues to battle farmer hoarding with producers unwilling to sell corn and go long the Argentine peso for fear of further inflationary pressure.  Argentina is roughly 4-weeks away from a deadline which could push Argentina into a sovereign default which would leave farmers holding worthless pesos.  Never a cut and dried process with South America.

Several corn spreads hit or tied fresh contract lows on Friday with the CH/CK and CK/CN not out to 60-65% of full financial carry.  Conversely, but not un-coincidentally, board hog crush spreads continue to hit new contract highs on a daily basis.  The forward curve of corn prices shows the gradual flattening of the front end and heightening shape on the back end of the curve as the market adjusts to more supply than what demand can handle.  As mentioned last week, however, several corn ratio spreads with livestock and energy are hitting the highest levels in several years and does raise eyebrows when talking on a relative strength basis.  In coming days I will examine corn’s relationship to the CRB-Index as well as several other commodities to illustrate just how “cheap” corn is getting in relation to other commodities.  At some point, that will prompt bottom picking by relative strength oriented funds.

A Reuters article this morning said the European Union is moving closer to a record rapeseed crop with expectations now closer to 22.5MMT from 21.8MMT last week and the previous record of 21.6MMT in 2009.

Tonight will see the latest Commitments of Traders Report data for the week ended last Tuesday.  It is expected to confirm further reduction of managed fund longs as well as commercials continuing to pare their net short exposure.  As a percentage of old crop and new crop supply, it is thought farmers remain historically undersold, which is part of the reason for the commercial short position dropping.  With funds getting short, or reducing longs, heading into pollination and commercials getting less short by the day, it does beg the question how much short exposure one really wants heading into LH-July.  At the same time, around 25% of last year’s crop still needs to move before harvest so as to clear storage space.  Getting all of this supply moved in an orderly fashion will take great skill by market participants, especially considering they’re dealing with a railroad which has been less than unreliable.

 

Bottom Line: Expect a bit softer open with the potential for more short covering at times this week as winter wheat harvest nearing the 50% mark, and pollination still just out of reach.  Supply is growing, and questions remain if demand can increase enough to prevent supplies from ballooning in 14/15.  Competing export nations wrestling with political distractions can create short term strength, but at the end of the day, global supplies aren’t tight and our biggest wild card, China, doesn’t look to be a major importer in 14/15.

 

Good Luck Today.

 

 

Tregg Cronin

Market Analyst

Tregg.Cronin@halocommodities.com

www.halocommodities.com

@5thWave_tcronin

 

 

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

7/3/2014 Morning Comments

Good Morning,

 

Outside Markets as of 5:35am: Dollar Index up 0.0750 at 80.0330; Euro down 0.00030 at 1.36550; S&P’s are up 2.25 at 1970.00; Dow futures are up 15.00 at 16,914.00; 10-yr futures are unchanged; The Nikkei closed down 0.14% at 15,348.29; The DAX is up 0.64% at 9,974.85; The IBEX-35 is down 0.09% at 11,006.30; Gold is down $7.50 at $1323.40; Copper is down $1.60 at $324.90; Crude Oil is down $0.44 at $104.04; Heating Oil is down $0.0157 at $2.9304; Paris Milling Wheat is up €0.25 at €184.50/MT.

All about the jobs today.  The June employment situation report out today is expected to show a 215,000 gain in payrolls, close to the 217,000 seen in May.  Feb-Mar payroll growth has averaged 231,000 over the last four months.  The total payroll figure of 138.463  million in May finally exceeded the previous record high seen before the 2007/09 recession, but the labor force participation rate is still expected to be near the 36-yr low of 62.8% seen in April and May.  Unemployment rate is expected to remain unchanged at the 5-3/4 yr low of 6.3%.  Unemployment claims are expected to be up 1,000 to 313,000 claims, while continuing claims are seen down 11,000 to 2.560 million.  Today’s May US trade deficit is expected to narrow slightly to -$45 billion from -$47.2 billion in April.

Two systems moving across MI and another across N-TX, but otherwise another dry day for much of the Midwest.  Showers expected to start up in the WCB and Northern Plains tomorrow into Saturday with heaviest amounts seen in SD with 0.10-0.40”.  The same system is seen impacting MN/IA/WI later on this weekend, bringing up to 0.50” to IA and N-MN.  Heavier rains are expected in Il/IN/OH Sunday-Tuesday with C-IL/C-IN pegged for another 1.0-2.00”.  Yesterday’s extended maps from NOAA look about as non-threatening as one could hope for as we ease into mid-July as below normal temps and normal/above precip is expected for the entire Midwest through July 16th.  This will take us into the beginning of pollination, and heading into the July 4th weekend, which is commonly seen as a tipping point for markets, we have no perceivable weather threat.

 

A short-covering bounce is being witnessed this morning as we get set for the shortened session ahead of the July 4th holiday.  Old crop soybeans are leading the charge as one would surmise, given the still tight supplies despite the bearish onslaught of data provided Monday.  As the soybean board has plunged, soybean basis has been rallying, almost uniformly, in both hemispheres in an attempt to keep beans moving until new crop.  WCB crush plants have firmed appreciably with bids being floated between +85Q in S-MN to +98Q in E-IA to +110Q in NE/KS.  ECB crush plants are even higher with select plants in IL reportedly pushing to +105Q-120Q for replacement.  In addition, CIF NOLA barges remain in high demand, and the appreciation in Brazilian FOB premiums has been discussed this week several times.  Complicating the matter further is the high-water being experienced on the mid-Miss which has rolled down from the upper-Miss, halting the loading of corn and soybean barges bound for export.  River stations at Muscatine, Keokuk and Quincy are all reporting major flooding conditions which aren’t expected to crest and recede until next week.  This will keep basis firm as well.  At the end of the day, is the basis strength enough, on its own, to stem the futures decline and rally this market?  Probably not, but the old crop situation is still tight, inverses will remain high and demand will need to be rationed, just not to the level previously thought.  I wouldn’t sleep on old crop beans just yet.

The UN’s Food & Agriculture Organization said yesterday food prices fell for a third month in June led by grains.  The index of 55 food items dropped 1.8 percent to 206 points from a restated 209.8 in May and are down 2.8% from a year ago.  These sorts of headlines can promote or dissuade fund interest.

Lots of contracts lows in spreads yesterday with WN/WU, WZ/WH, WH/WK and WK/WN all hitting or tying contract lows yesterday.  Most Chicago wheat spreads have moved to over 80% of full financial carry.  CZ/CH hit -11.75c yesterday, representing 65% of full financial carry (2.23%) with full around -17.50c.  Corn spreads have strong seasonal tendencies to continue weakening through July and August, and based on crop conditions to date, I wouldn’t expect this year to be any different.  Commercials are targeting around -15.00c to begin moving portions of their deck, and if rail freight becomes the issue it was last year, the deck will have to be rolled forward.  Looks like a good target.  New crop soybean spreads also hit new contract lows, and hog board crush spreads for Dec-Apr hit fresh contract highs.

While on the subject of spreads, there are a number of ratios which are hitting fresh yearly highs worth pointing out given the recent performance of corn.  The feeder cattle/corn ratio hit 52.06 yesterday, the highest level since 1/23/06.  Live cattle/corn pushed to the highest level since 9/5/06, and Lean Hog/Corn hit 31.34, the highest since 6/19/2006.  In addition to livestock/corn ratios, energy/corn ratios are also hitting multi-year highs with crude oil/corn at 24.88, the highest since 11/19/2007.  RBOB Unleaded Gasoline/Corn hit 0.7211 yesterday, the highest level since 9/5/2006.  The relative value of corn to all of these other products shouldn’t go noticed, although the ratios being at multi-year highs isn’t a reason for a bottom in and of themselves.  Whether funds recognize the value of current relationships remains to be seen, but it bodes well for continued end user demand.

The energy/corn ratios are a good segue into weekly ethanol production which came in yesterday at 953,000bbls/day, up from 938,000bbls/day the week before and the second highest since the week of December 2011.  Weekly ethanol production has been running 9-10% above a year ago for the last 4-weeks, strongly arguing for an increase in the USDA’s marketing year ethanol demand for corn estimate.  We should see at least a 50mbu bump in ethanol demand on the July WASDE.  Ethanol stocks rose 21,000bbls to 18.204 million barrels, but weekly gasoline demand bounced back from last week’s depressed levels.  It’s been very difficult to get a gauge on gasoline demand given the yo-yo action in recent weeks, but in general 2014 gasoline demand is outpacing 2013 for the summer months.

Newswires aren’t carrying export sales estimates ahead of the report at 7:30am, but a continuation of recent trends is expected as corn sales slowly wane.  Soybean sales will probably continue to outpace levels needed based on cash bids.

 

Bottom Line:  It looks like after a week of beatings grain prices want to bounce into the holiday lengthened weekend.  Sunday/Monday forecasts will probably be the biggest fundamental driver when trading resumes next week as those will push us out to July 20th when pollination will be in full swing.  Without a perceived threat, price action will continue with recent trends.  Supply is growing, new crop demand is showing cracks and the managed money community is more inclined to sell our markets than buy them.  Price is still searching for fair value which it doesn’t feel like we found yet.

 

Good Luck Today and have a happy 4th of July.

Keokuk 7-3

 

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.

 

7/2/2014 Morning Comments

Good Morning,

 

Outside Markets as of 5:40am: Dollar Index up 0.0380 at 79.8530; Euro down 0.00170 at 1.36660; S&P’s are up 0.75 at 1966.50; Dow futures are up 10.00 at 16886.00; 10-yr futures are up 0.04%; The Nikkei closed up 0.29% at 15,369.97; The DAX is up 0.23% at 9,925.44; The IBEX-35 is up 0.13% at 11,021.90; Gold is up $1.30 at $1327.90; Copper is down $0.20 at $320.20; Crude Oil is down $0.33 at $105.01; Heating Oil is down $0.0085 at $2.9697; Paris Milling Wheat is unchanged €184.25/MT.

Mostly firmer equity markets today in front of the first of two employment reports this week.  Later this morning we’ll get the ADP private payroll report which is expected to show a solid rise of 205,000 jobs added, strengthening from May’s report which showed hiring of 179,000.  This should hopefully set the stage for a solid June unemployment report which market consensus puts at 215,000, close to the May increase of 217,000.  The market is also expecting the unemployment rate to be unchanged from the 5-3/4 low of 6.3% posted in April and May.  The labor force participation rate is seen remaining near the 36-year low of 62.8% from April and May as well.  The labor force as a percentage of the entire population is the lowest since 1979.  May factory orders out later today are expected to show a decline of -0.3% following an increase in April of +0.7%.

Showers moving across the southern plains this morning, but otherwise the Midwest is enjoying a welcome day without moisture.  Things should be mostly quiet outside of the southern plains the rest of the week until scattered precip pops up Friday into Saturday for the entire Great Plains from ND-KS.  Totals are expected to remain light with heaviest amounts under 0.50” in ND.  This precip will move east into IA/MO late in the weekend, bringing another 0.50-1.00” to most of IA, with IL/IN/OH seeing moisture at the beginning of next week.  Extended weather maps remain favorable for the Midwest with below normal temps for the entire central corridor accompanied by normal/above precip which gets us out to July 11th.  The 8-14 day is similar, although a little drier in the southern plains, but nothing threatening through July 15th which should mark the beginning of pollination for corn.

 

Mixed markets this morning with soybeans firm and grains a bit softer as offices empty ahead of the July 4th holiday Friday.  Most are still digesting the USDA data from Monday and the implications it carries the next 3-months, especially provided the current weather pattern rolls forward to produce favorable reproductive phases for both corn and soybeans.  It is difficult to really get a good gauge of cash markets following the USDA reports in this holiday shortened week, but for the most part grain movement has shut off as would be expected and the positive margin structure for domestic end users of corn and soybeans hasn’t gone anywhere.  Still, buyers are armed with good forecasts and data from the USDA saying old crop supplies are larger than previously thought, so most are going to remain hand-to-mouth as long as possible.

End user margins as compiled by rjomrt.com mostly improved last week as the drop in board grain prices and the continued improvement in meat prices keeps margins elevated.  MN Spot Gross Ethanol margins improved to $1.07/gln vs $1.06/gln last week and $0.85/gln last year.  Poultry margins improved to 89.3c/lb vs 88.99c/lb last week and 80.43c/lb last year.  Hog crush tabulated at $152.34/hd vs $145.42/hd last week and $87.80/hd last year.  Cattle crush remains woefully in the red at $85.94/hd vs $100.13/hd last week and $208.25/hd last year.  The constantly surging feeder cattle market is easily offsetting any gains seen by live cattle or the drop in corn prices, so unless the feedlot is vertically integrated with slaughterhouses and packing facilities, odds are good money isn’t being made.  C-IL soy crush margins jumped to $1.17/bu vs $0.91/bu last week and $0.84c/bu last year.

Reuters published an article overnight talking about the burdensome stocks levels in China, which should eventually lead to the government scrapping its stockpiling program for corn as it has with soybeans and cotton.  Stocks of corn in China, while not 100% clear, are thought to be around 100MMT, which is over half of the world’s expected carryout for the 2014/15 crop year.  Because of the government’s push to elevate farm income, their stock piling program has kept domestic prices artificially high, causing end users in southeast China to opt for cheaper, imported supplies from countries like the US.  If China begins to rotate inventories, or become more liberal with dumping supplies on the domestic market, or even exporting some of the supply, world prices could be pressed even lower.  Because the situation in China seems to be one of logistics and keeping supply in condition, it looks increasingly likely China will not be a major corn importer in the 14/15 marketing year which is one less demand cog.  Couple this with the current MIR-162 rejections, and the USDA’s current 1.700bbu corn export forecast for 14/15 looks appropriate to possibly even a touch high.  Price will be the ultimate arbiter of supply.

The Financial Times also had a good piece talking about the possibility of improved demand for commodities by passive and active investors in 2014/15.  That article can be found here: http://www.ft.com/intl/cms/s/0/d4fc6394-006e-11e4-9a62-00144feab7de.html?siteedition=intl#axzz36J8caBGM

Egypt’s GASC bought 240,000MT of wheat in their latest international tender for August delivery, bypassing all US and French offers in a sign of the West’s competitiveness into MENA.  The average price on the tender was $252.38/MT C&F, around $0.20/MT above the latest tender two-weeks ago.  US offers centered around $259/MT C&F.  A quality theme is already popping up with traders said to be adding in a premium for Romanian wheat given doubts surrounding the country’s harvest.

Several spreads hit contract lows during yesterday’s session including the WN/WU, WZ/WH, WH/WK and the WK/WN, all of which are trading around 63-83% of full financial carry.  The forward curve continues to reflect good quality and abundant supplies around the OH-River Valley delivery warehouses.  Interestingly, as the WN/WU and MWN/MWU both hit fresh contract lows yesterday, the KWN/KWU hit a new contract high, highlighting the crop expectations for each class, and the inter-market spread taking place as evidenced by last week’s COT data.  Several soybean spreads also hit contract lows including the SX/SF, SF/SH and SH/SK as traders waste no time pricing in larger new crop soybean supplies.  Keep an eye on -10.00c for the SX/SF as this would be near full delivery storage carry with no contribution to interest, which might not be a bad place to move hedges to January.

A few basis moves of note yesterday including Brazilian corn offers sliding 7-10c from spot through December to bring their FOB prices right down to current US offers.  Both countries are now offering corn around $192-193/MT FOB, while Argentina remains several dollars higher.  Traders have been waiting for Brazilian supplies to have more of an impact on their competitiveness, and it looks like those supplies are finally getting into position.  On the opposite end of the spectrum, Brazilian FOB soybean offers continue to appreciate with spot offers now +150Q, August at +115Q and Sept at +190U.  This would compare with the US at +100N for spot and +180U for September.  Would appear Brazilian farmer selling of soybeans has come to a screeching halt, and so too will the imports into the US of Brazilian soybeans at that type of price spread.

Weekly ethanol production out at 9:30am with production expected to remain elevated and well above the level needed to hit the USDA’s marketing year forecast.  Keep a close eye on ethanol inventories and EIA gasoline demand, as these two will provide clues about production moving forward.

 

Bottom Line:  Mixed open as we continue to digest the wave of bearish data dumped on the market Monday while trying to retain some measure of premium as grains enter the key reproductive stages in coming weeks.  Global grain inventories are abundant, exporting nations are or will harvest adequate crops, weather remains price bearish, funds are in sell mode, charts remain terrible and end users are content to watch prices slide.  At some point we’ll need a relief bounce, but nobody is getting too lathered up about the next bounce to sell.

 

Good Luck Today.

 

 

 

Tregg Cronin

Market Analyst

Tregg.Cronin@halocommodities.com

www.halocommodities.com

@5thWave_tcronin

 

 

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

7/1/2014 Morning Comments

Good Morning,

 

Outside Markets as of 5:40am: Dollar Index up 0.0360 at 79.8130; Euro down 0.00030 at 1.36950; S&P’s are up 4.50 at 1957.00; Dow futures are up 45.00 at 16784.00; 10-yr futures are down 0.21%; The Nikkei closed up 1.08% at 15,326.20; The DAX is up 0.31% at 9,863.77; The IBEX-35 is up 0.40% at 10,966.80; Gold is up $5.30 at $1327.30; Copper is down $0.45 at $319.90;Crude Oil is up $0.42 at $$105.77; Heating Oil up $0.0012 at $2.9763; Paris Milling Wheat is down €0.25 at €185.50/MT.

Mostly better equity markets overnight after China’s June manufacturing PMI rose +0.2 to a 7-month high of 51.0, which fell in line with expectations.  This survey is compiled by the National Bureau of Statistics and is much stronger than the HSBC manufacturing PMI, but nonetheless both measures are above the 50.0 contraction/expansion line.  In the US, today’s ISM manufacturing index is expected to show a +0.5 point increase to 55.4, marking the fifth consecutive monthly increase in manufacturing confidence. Today will also see June total vehicle sales which are expected to fall back to 16.3 million units after posting 7 1/3 year high of 16.7 million units in May.  In other news, Ukrainian President Poroshenko has effectively called peace talks with the Kremlin dead, ending the unilateral truce and ceasefire, with more sanctions on Russia expected.

Storms are moving across the southern plains this morning, and will push into the central and southern corn belt later today.  A round of fairly heavy showers went through IA/IL last night, with some of the storms severe. Pictures are flying around social media of flattened crops due to high wind and hail.  Total damage is difficult to quantify at this point.  Heaviest totals in the last 24 hours were along the IA/IL border where up to 3.0” fell.  After showers finish up today, things will turn quiet for much of the week with only some scattered precip falling in the northern corn belt, but most totals will be under 0.20”.  The southern plains will see the most concentrated moisture.  The open weather will be welcome for most.  Extended maps show a warming trend in the Northern Plains and WCB, but precip looks to stay above normal as well in both the 6-10 and 8-14.  Still no major threats seen.

 

Mostly weaker markets overnight, following the price direction prevalent post-USDA report yesterday.  Old crop soybeans have pushed positive several times, however, with old/new inverses going to work more than ever thanks to the acreage surprises put forth by the USDA.  Now that the highest risk reports of the summer are behind the market, traders are free to focus almost exclusively on weather aside from regional cash issues.  With current weather patterns in place to mid-July, and the latest extended maps from NOAA showing normal/below temps through summer, there just isn’t much to latch on to from the supply side for bulls.  With end users strapped with yesterday’s numbers, they will be slow to bid up for stem given larger old crop supplies, and until we’ve got an issue, new crop is growing by the day.

The biggest surprise to the numbers yesterday belonged to soybeans in the form of both June 1 stocks as well as planted soybean acreage.  First with stocks, June 1 soybean stocks totaled 405mbu, well above the average trade estimate of 378mbu, although far from the top of 440mbu.  This “miss” by the trade of 27mbu represents the second largest miss going back to at least 1989.  The larger than expected stocks also implies a negative Q3 residual of -110mbu, the largest negative residual for Q3 on record.  Essentially, the USDA confirmed the 2013 soybean crop was understated, and is backing into the number via the residual category until it can properly adjust the 2013 crop on the September 30th batch of reports.  In addition, the negative residual will allow the USDA to account for the stronger crush and export pace than they are currently reflecting in their balance sheets.  Current cash basis levels in the country tracking below year ago levels are certainly more palatable when considering there is actually more available supply in the country then we’ve been led to believe up to this point.

On acreage, the USDA also walloped the trade with an 84.839 million acre planted figure for soybeans, up 3.346 million from March, up 2.7 million from average trade ideas and up 8.3 million from 2013.  Largest acreage increases from the March Prospective Planting report were seen in IL (+600k), IA (+500k), and ND (+350k).  Is somewhat odd to see North Dakota become the swing acreage state it has the past two years given its geography, weather patterns, growing season length and crop diversity.  When plugging in the 84.8 million acre number into the balance sheet with the current USDA yield assessment of 45.2bpa, stocks balloon anyway one slices it.  Even with increased demand assumptions, carryout still rises towards 375mbu, or even 400mbu in some analyst balance sheets.  With a stocks/use ratio that is likely to climb over 10.0% for the first time since 2006/07, it looks like new crop soybean prices are going to continue shedding risk premium in the sessions to come.  In 06/07, the stocks/use ratio climbed to 18.6% and farm prices averaged $6.43/bu.  10% is a far-cry from 18%, but supplies will be the most plentiful since that time should weather cooperate, and we’ve had much lower prices than $11.50 SX since 2007.  Between larger old crop stocks, increased SAM imports, larger planted acreage and favorable weather to date, soybeans are getting pelted with bearish inputs from all sides.  The path of least resistance is down.

Switching to corn, stocks were the surprise to the trade, coming in at 3.854bbu vs the average trade estimate of 3.722bbu and the 2.766bbu on June 1, 2013.  The USDA had been indicating better than expected feed demand on its previous two quarterly stocks reports, but brought marketing year feed demand back down to earth with today’s figures.  3rd quarter feed/residual was implied at around 860-865mbu, down 6% from a year ago.  That would put Q1-Q3 feed demand at 4.720bbu, up 15.4% from last year.  Assuming the USDA is correct with their 5.300bbu marketing year feed estimate, that would imply Q4 feed demand at 580mbu, up 234% from a year ago.  Obviously this type of statistical anomaly can’t be explained through animal numbers and feed conversions.  Therefore, it would appear the USDA is set to drop its marketing year feed/residual number on the July WASDE between 100-150mbu.  Last Friday’s Quarterly Hog and Pigs report certainly corroborated the lighter than expected Q3 feed demand number as there just aren’t as many animals in feed lots and confinement barns as there were in Q3-2013.  Keeping ethanol and export data static, 13/14 carryout could grow towards 1.300bbu.

Corn acreage ideas provided little fodder for bulls or bears, coming in at 91.641 million acres vs the March estimate of 91.691 million and market expectations at 91.725 million.  The focus will now shift solely to the USDA’s yield assumption of 165.3bpa, which as of today looks appropriate given the highest crop condition ratings since 1999.  If yield ideas rise further from 165.3bpa, balance sheet ideas quickly rise towards a 14/15 carryout near 2.0bbu.  Demand assumptions for 14/15 have feed/residual largely steady to slightly lower next year, exports lower and ethanol flat.  Looking at current margin structures, the argument can certainly be made ethanol demand will be higher, and livestock feed demand will remain stout.  Exports should struggle, however, given competing nations unless price drops to a level which makes the US the clear quantity and quality choice of global importers.

A quick note on corn exports, yesterday also saw weekly export inspections released just before the USDA numbers.  Corn export inspections came in at 34.4mbu, below last week’s 38.9mbu and the 41.0mbu needed weekly to hit the USDA’s export estimate.  The 34.4mbu worth of exports were the lowest level in 18-weeks, and marks a continued downtrend since the marketing year high near 65.0mbu in April.  While this alone isn’t evidence for the USDA to drop their export estimate, it is enough to warrant them taking pause until the August WASDE to get a better feel of exports to that point.  Certainly something to monitor moving forward.  Wheat exports were light at 12.3mbu vs the 17.4mbu needed, and soybean shipments were 2.7mbu vs the 0.50mbu needed weekly.

Wheat stocks data was largely a non-event with June 1 stocks coming in at 590mbu vs the average trade guess of 598mbu and vs 718mbu last year.  The big surprise came by way of spring wheat planted acreage which was pegged at 12.709 million acres vs the 12.009 million estimated in March and the 11.86 million acres based on the average trade guess.  Acres would also be up from last year’s 11.596 million, showing Northern Plains farmers continued planting wheat and soybeans after corn PP dates came and went.  Spring wheat acreage coming in above the average trade estimate on the June report marks the fifth year in the last six in which this has occurred.  Durum acreage was pegged at 1.469 million vs 1.790 million for an average trade guess and 1.470 million last year.  As important will be the status of Canadian planted acreage and crop conditions moving forward.  Several weather outlets have made mention of the heavy rains over the weekend in SE-Saskatchewan and SW-Manitoba where localized totals were as high as 6.89”.  This heavy rain follows several events the past few weeks which have left fields flooded and crops sickly.  Commodity Weather Group is estimating as much as 10% of the Canadian spring wheat crop and 15% of the canola crop could be affected.

Crop progress reports released last night showed the corn condition rating rising nationally by 1% to 75% G/E with declines in ND/MN/SD offset by increases in NE/KS/MO/IL/MI.  Soybean conditions were unchanged at 72% G/E, although the trade had been expecting the national rating to fall by 1-2% given the heavy rain in the Northern Plains.  SD/ND/MN/IA/WI did see ratings fall, but were offset by improvements in NE/KS/MO/IL.  Soybean conditions are now rated the highest for late June since at least 1986.  Spring wheat conditions fell 1pt to 70% G/E with a 7% drop in SD and a 9% drop in MN.  The spring wheat crop is rated just below the 5 and 10-yr averages, despite anecdotal comments of an amazing crop currently developing in the field.  Winter wheat harvest was pegged at 43% vs 40% last year and 48% on the 5-yr average.  KS is 40% harvested vs 66% average.

While the data certainly took precedence yesterday, there were some cash moves which beg attention, notably Brazilian soybean basis.  One cash source noted Brazilian FOB soybean premiums rallying 20c for spot and August and 30-45c for September with new crop bids also rising 5-10c.  While Brazil is the clear low cost leader for Jul-Aug, they are only $4/MT cheaper than the US for September.  Corn basis was understandably firmer with the drop in the board as both CIF and PNW premiums firmed by 2-5c.  SAM offers steady and still above US replacement through December.  14.0% protein HRS basis on the spot floor popped 15-40c to +285U yesterday with 63 cars on the floor.  Hog board crush feeding spreads hit new contract highs pretty much as far out the curve as one wants to do the calculation.

 

Bottom Line:  Markets need to correct lower to find fair value for the larger old crop stocks and ballooning new crop carryout.  Until proven otherwise via weather forecasts, the trade will assume new crop supplies are growing and carryouts are expanding.  Managed funds still have length to shed in corn, and seem ready and willing to press shorts in wheat and soybeans.  Without their money on the long side, markets need to find the natural buyer by way of demand.  End users are in the black, but will be in no hurry to step in front of our markets falling down the elevator shaft.

 

Good Luck Today.

 

USDA Acreage Change 7-1

 

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.

 

6/30/2014 Morning Comments

Good Morning,

 

Outside Markets as of 5:50am: Dollar Index down 0.0230 at 80.0160’ Euro up 0.00080 at 1.36570; S&P’s are down 2.00 at 1950.25; Dow futures are down 16.00 at 16,741.00; 10-yr futures are up 0.04%; The Nikkei closed up 0.44% at 15,162.10; The DAX is up 0.10% at 9,824.83; The IBEX-35 is down 0.74% at 10,878.80; Gold is down $6.40 at $1313.60; Copper is down $0.10 at $316.70; Crude Oil is down $0.44 at $105.30; Heating Oil is down $0.0184 at $2.9851; Paris Milling Wheat is down €0.25 at €187.50/MT.

A heavy economic calendar will be the feature this week, especially Friday’s June employment situation report as investors wait to see if the improving job market continues into summer.  The Bloomberg Economic Surprise Index posted a 14-month high last week of 0.292, but backed off slightly to 0.262 by Friday.  This shows US economic data is the strongest relative the market expectations since March of 2013.  Strong economic data this week expected to help elevate this indicator further will include May pending home sales (+1.2%), the June ISM-Manufacturing index (+0.4 to 55.8) and Thursday’s unemployment report (+215,000).  Today will see May pending home sales which are expected to increase +1.2% m/m.

Systems moving across NE/E-SD/IA/IL this morning, following the moderate to heavy totals witnessed over the weekend in the WCB and Northern Plains.  Heaviest totals over the weekend were seen in N-ND an E-IA where localized amounts topped 3.0”.  The rains turned out lighter than forecast in S-MN, which was beneficial as areas there have received their entire years’ worth of rainfall in the last 3-weeks.  Rainfall this week will be confined to IA/S-WI/IL as well as a separate system in NM/N-TX/OK.  Rains in IA are seen as heavy as 2.0-3.0”, but the majority of the Midwest will be on the dry side, although soil moisture profiles are nearly full in many areas.  Nothing too extreme in the NOAA extended maps over the weekend as temps will remain normal/below for the Midwest through July 9th, while precip is going to be normal/below.  Temperatures push well above normal in the Northern Rockies, however.

 

The wait is over and the Quarterly Stocks reports are now just a few hours away.  Our markets are taking a breather heading into the numbers as weekend weather was beneficial for most areas, even though soybean condition ratings on this evening’s crop progress report are expected to ease 1-2pts.  Corn condition ratings are expected to stabilize after a couple weeks of decline, but both crops will still be rated near the highest levels of the last two decades.  The focus of today’s reports will undoubtedly be the old crop stocks as of June 1st for both corn and soybeans.  Bullish and bearish surprises of great magnitude have been witnessed in these reports, and more than once have led to “Waterloo” moments for row crops.  The largest fundamental factor, however, is still weather and that remains price bearish as of June 30th.  Expect choppy markets heading into 11:00am with our usual dose of volatility as the algos react to the numbers before most of us can even find the line item we’re looking for.

The Minnesota River at Savage crested over the weekend, and has started to come down although it doesn’t appear water levels will drop to the point barges can be loaded until after July 6th.  This will keep one more supply source from hitting the river and the export market.  It also looks as though the high water will roll forward to the mid-Miss as locations such as Quincy and Keokuk, IL look to reach moderate-major flood stage around July 5th/6th.  Any impediment of the mid-Miss will have far more effect to CIF premiums than the upper-Miss.  See charts below.

Today is First Notice Day, and deliveries today included 3 corn, 3 oats and 71 Chicago wheat.  There were also 396 Minneapolis Wheat with 391 in Duluth and 5 in MPLS/STP.  ADMIS House account put out all 396 with the only real strong stopper looking like CHS house standing in on 166.  The MWN/MWU is bid/offered 12c wide this morning, so not sure we can really glean much until we get markets opened up.  The DTN National Cash Corn Index is implying a national basis of -19N, the firmest basis level since February 3rd.  As if we needed proof the farmer isn’t moving corn.

Friday saw the USDA Quarterly Hogs and Pigs Report which was viewed bullishly for hog prices but bearishly for corn feed demand.  All Hogs and Pigs as of June 1 were pegged at 95.3% of a year ago, well under the 97.1% average estimate.  The June 1 hog inventory of 62.1 million was the smallest since 2007, and highlights the continued struggle with PEDv.  All major categories missed estimates with Kept for Breeding at 99.5% vs 101.8%, Kept for Marketing at 94.9% vs 96.8% expected and the Mar-May pig crop was 94.6% vs 97.7% expected.  Farrowing intentions for Jun-Aug look to be on par with a year ago rather than the 2.2% expected given the economic incentives to expand the hog herd.  This could create problems for corn feed demand during Q4 of the 13/14 marketing year, but we’ll have a much better idea of that after 11:00am this morning.

Friday also saw the latest COT data released which showed continued selling across the row crop markets with the large spec now long just 50,376 contracts of corn, the smallest position since 2/25/2014.  Unfortunately, the gross commercial long (end user) also sold corn in large volumes, taking their gross long down from 442,087 contracts to 407,329 in the latest reporting week.  Large specs also sold soybeans lightly to take them to a net short position of -573 contracts, the first net short since 8/6/2013.  Since 1/2/2007, large specs have only been net short soybeans 33 out of 391 weeks, or 8.44% of the time.  Today’s report could have implications for this group.  Large specs continued to sell Chicago wheat, pushing their net short to -61,783 contracts, the largest net short since mid-February.  Interestingly, specs bought KC while selling CGO and MPLS, highlighting the inter-market spreading taking place.

 

Bottom Line:  Not worth discussing much else until the numbers are released.  Ensure positions are in-line with risk tolerances heading into these important numbers.  The week of July 4th is often seen as the turning point in the marketing year in terms of weather as often we get a glimpse into early pollination and price can either stage a bottom or prepare for a further thrust lower.  As of June 30th, weather looks mostly ideal and managed money appears ready to push price to the downside.  Prepare your balance sheet for all possibilities.

 

Good Luck Today.

 

Savage 6-30 Quincy 6-30

 

Tregg Cronin

Market Analyst

Tregg.Cronin@halocommodities.com

www.halocommodities.com

@5thWave_tcronin

 

 

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