2/19/2015 Morning Comments

Good Morning,

 

Outside Markets as of 6:10am: Dollar Index unchanged at 94.1980; Euro down 0.00120 at 1.13740; Loonie down 0.53% at 0.80030; S&P’s are down 0.75 at 2094.75; Dow futures are up 6.00 at 18,000.00; 10-yr futures are down 0.06%; The Nikkei closed up 0.36% at 18,264.79; The DAX is up 0.33% at 10,997.59; The IBEX-35 is up 0.60% at 10,869.90; Gold is up $17.80 at $1218.00; Copper is down $0.60 at $260.85; Crude Oil is down $2.00 at $50.82; Heating Oil is down $0.0371 at $1.8485; Paris Milling Wheat is up €0.50 at €186.25/MT.

Greece is on the tape once again this morning, although the Greek saga is proving much more boring to markets and traders this time around than the last.  The European Central Bank approved a €3.3 billion increase in emergency funding early this morning as leaders continue to hash out details of the Greek austerity package.  Crude oil is getting slammed again this morning, off over 3.50% as traders brace for another large increase in energy inventories.  The American Petroleum Institute reported US crude stocks as rising 14.3 million barrels last week, which if confirmed on today’s EIA data, would be the largest weekly build on record back to 1982.  Traders are only expecting a crude inventory build of +3.0 million barrels, but expectations have been broadly exceeded over the last 6-weeks.  $50/bbls appears to be a sticking point for the time being.

A brief respite in temperatures this weekend before another cold plunge next week, although the most bitter cold will be confined to ND/MN/IA and the rest of the Great Lakes.  Precip is also expected to remain below normal, centered over IA and MO during the 6-10 and 8-14 day outlook.  A bit better snow cover is present over the SRW belt going into the next cold snap than the previous one, although snow cover remains especially limited from SD to TX.  Temps Sunday/Monday will need to be monitored in NE/KS/OK where limited snow cover exists and temperatures look to dip down into the teens and single digits for lows.  Some weather forecasters are reporting heavier rainfall in Brazil, impacting early harvest efforts there.  It is early yet, but an increased rainfall pattern during harvest will be something to monitor.

 

Sharp reversals posted on all of our charts, with outside reversals left on soybeans wheat charts in particular.  In a ramp up to March option expiration tomorrow, soybeans hit $10.12 before heading lower, while wheat markets saw an about face when word hit the wires Egypt had rejected all offers in the US-only tender, citing high prices.  Much of the bullish momentum picked up from the previous 2-4 sessions was dented, and now markets await the USDA Outlook data tomorrow, which is expected to be mostly a wet blanket on the idea of higher prices.  Expect tomorrow to see erratic price action with option expiration, USDA Outlook Forum, Brazilian harvest pressure, cold temps across the US this weekend and potential headlines out of Greece and Ukraine.  Also important to remember there are seven sessions, including today, left in the spring insurance pricing period.

Beginning first with wheat and Egypt, offers were submitted by US exporters in a US-only wheat tender as part of the $100 million credit line extended to the Egyptian government for importing US grains.  Offers hitting the wire early yesterday morning included US-SRW or HRW at $287/MT FOB (seller’s options), US-SRW or SWW at $299.87/MT FOB (seller’s option), US-SRW at $292.88/MT FOB and US-SWW at $336.46/MT FOB.  Egypt quickly canceled the tender and sent futures plummeting as they balked at offers $50/MT higher than the last round of Black Sea and French business.  Also, many of the offers were out of tender terms with increase vomi specs and optional quality classes.  The lone SRW offer at $292.88/MT for guaranteed GASC specs, and using ocean freight of $22-25/MT equated to +205/210K vs. current FOB offers around +80K.  That price differential right there shows the availability and premium for low vomi-SRW in this market year: $1.30/bu.  Incredible.  For comparison purposes, HRW can be offered out of the TX-Gulf at +135/140H/K, and should be the class and quality used by Egypt, given its almost $0.70/bu cheaper.  The tender was also complicated by the credit line wrinkle, which may have pushed Egypt to wait and either tap it for cheaper HRW, or wait until new crop and buy higher (hopefully) quality SRW LH-June.  Either way, US quality is at a premium as cash traders have known since last fall.  Higher quality wheat will be a necessity in 15/16.

Impressively, however, H/K spreads hung in tough at all three wheat exchanges yesterday and overnight, a possible sign the selling yesterday was headline driven, not commercial.  US wheat is expensive for a reason; quality is scarce.  This doesn’t change with one cancelled tender.

A good segue into the weekly deliverable stocks reports with total SRW wheat stocks falling about 500,000 bushels combined at all six delivery locations.  Deliverable grades of SRW stand at 37.219mbu vs. 37.699mbu last week and 43.880mbu last year.  Non-deliverable grades now total 19.986mbu vs. 3.542mbu last year, a 464% increase y/y.  The chart below shows a quick recap.  HRW deliverable stocks fell 550,000 bushels w/w to 42.717mbu, down from last year’s 54.490mbu.  In HRS, stocks rose 111,000 bushels in Duluth/Superior, and 61,000 bushels in Minneapolis to put combined stocks at 26.701mbu vs. 18.301mbu at this point last year.  Non-deliverable grades are on par with week ago and year ago levels as protein is the chief consideration in the HRS this year.

Switching gears to South America, Brazil reported harvest progress yesterday, pegging soybean harvest as of 2/13 at 11% complete, an increase of 3% w/w.  This is about half the progress in 2014 of 21%, and less than 15% average at this point as rainfall suspends harvest efforts.  Brazilian 1st crop corn harvest was estimated at 15% complete vs. 9% last week and 21% last year.  Brazilian 2nd crop corn planting progress was listed at 28% complete vs. 17% last week and 27% last year.  The slow start to Brazilian soybean harvest is supporting basis for prompt delivery to the Gulf, keeping the US export window open a bit longer.  The lack of Brazilian farmer selling is also supportive, with analysts pegging the farmer at 25% sold vs. 40% last year due in part to currency considerations.  Using CIF bids of +82/85H, Zone 3 cash basis is around 3-5c above gross delivery equivalence.  FH-Mar is around 4c below, and full month March right at gross DVE.  This should support the SH/SK, and probably limit deliveries in the early going next week at least.  Corn bids are steadyish with Zone 3 cash around 4c below gross DVE, despite much cheaper Argentine and Ukrainian maize still being offered.

Weekly ethanol production on tap this morning at 10:00am due to the President’s Day holiday Monday.  Ethanol production saw a nice reversal last week with margins essentially unchanged on the week.  We’re probably finding out what the ethanol storage infrastructure can really handle, although RBOB has finally moved back to a sustainable premium over Ethanol with spot month at 9c over ETH, while April-August sits at 30c premium RBOB to ETH.  This is what has been needed to reignite discretionary blending, and offer drivers a reason to opt for higher ethanol blends at the pump which have been absent since December.

One last note, one prominent Ag weather forecaster made mention yesterday of the deteriorating condition in the South African corn belt as the crop pushes into pollination.  The western portion of the South African corn belt has received less than half of normal precip during the past month, and temps during the last week have pushed into the 90-100* range.  The weather forecaster was estimating national production losses of 10-15% at current, with up to 20% losses if rainfall does not improve before the end of the month.  South Africa typically produces around 12-15MMT of corn, and exports between 2.0-3.5MMT of that total.  Not a major exporter by any stretch of the term, but can impact trade flows to the Middle East if production declines are severe enough.

 

Bottom Line: Poor technical trade yesterday has several charts looking heavy, although the fundamental situation hasn’t changed all that much.  Headline risk will be high the next 48-hours and over the weekend, so position accordingly.  The market will be watchful for continued strong performance in corn demand today and tomorrow, especialy as next year’s balance sheets take center stage.  A delayed Brazilian harvest will keep the US in business a bit longer, and US wheat may continue to be a domestic feature.

 

Good Luck Today.

 

Deliverable Stocks of SRW 2-19-15

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.

 

 

2/17/2015 Morning Comments

Good Morning,

 

Outside Markets as of 6:20am: Dollar Index down 0.2920 at 93.9130; Euro up 0.00370 at 1.14320; Loonie is up 0.81%; S&P’s are down 1.25 at 2092.25; Dow futures are up 3.00 at 17,985.00; 10-yr futures are down 0.15%; The Nikkei closed  down 0.10% at 17,987.09; The DAX is down 0.26% at 10,893.10; The IBEX-35 is up 0.11% at 10,701.50; Gold is down $4.70 at $1222.40; Copper is down 0.88% at $258.20; Crude Oil is up $0.35 at $53.13; Heating Oil is up $0.0183 at $1.9897; Paris Milling Wheat is up €2.00 at €190.75/MT.

Mixed equities around the globe this morning as investors remain wary of the Greek debt standoff.  Greece’s European creditors told it to ask for an extension of current terms so that talks continue, rather than defaulting on current obligations.  A final deadline of Wednesday still stands if no extension is agreed upon.  As the Financial Times point out this morning, the irony with Greece is the very same reforms which proved successful in Portugal and Ireland, were just beginning to bear fruit before the new elections set the country back 12-18 months.  The ceasefire in Ukraine is already crumbling after just 48-hours in place with the battle for Debaltseve intensifying.  Hopefully European leaders will be open to more economic sanctions against Putin after their most recent efforts have failed as sanctions have proven more crippling than talks successful.

Cold temperatures across the Midwest this morning with single digit and zero degree temperatures widespread across ND/SD/MN/WI/IN/OH/PA/KY, while NE/KS/OK sees temps between 15-25*.  Tomorrow morning’s temps will be even colder for much of the country as temps slide down to the single digits in NE, and OK/KS is between 5-20* F.  The SRW belt will see widespread temps below zero.  Extended maps from NOAA last evening confirmed a cold bias continuing in the 6-10 and 8-14, centered over the SRW belt.  This will keep the wheat discussion going given the lack of snow cover, the recent push to warm temps and the fact it is only February 17th.  Moisture patterns look mainly dry at the tail end of the 6-10 and into the 8-14 for the Midwest which won’t help slowly intensifying drought conditions in ND/SD/MN.

 

A strong overnight open and extending those gains through the night session to find wheat markets leading the charge this morning.  Wheat charts are now signaling another leg higher is in store by taking out the 2/6 corrective highs, with technicians drawing targets around $5.55-5.60 basis both WH and WK futures.  Corn and soybeans are also firmer this morning, although bulls might really get their resolve tested with futures knocking on $10.00 basis SH, even though SK and SN are sitting at $10.02-10.07.  Other than some near-term, spot-type business, a clear catalyst for soybeans continuing higher remains absent given the mountain of soybeans coming online next month in South America.  Be especially watchful for any short-term momentum failure, and both SH and SK need to take out their 2/3 corrective highs to even talk about another leg higher such as in wheat.

On the logistic front, it would appear the Canadian Pacific rail strike has been averted after just a day and a half of picket lines with workers and management agreeing to binding arbitration.  The Canadian government was about to take steps to force the approximately 3,000 striking members of Teamsters Canada back to work before both sides agreed on arbitration.  For now, it would appear a major logistical snafu has been avoided, although port workers on the US west coast remain at odds with talks ongoing.  While still on transportation, it should be noted ocean freight values may have finally bottomed, at least in regards to grains.  Several routes out of the Gulf to Europe and Gulf to Japan saw small increases w/w in timecharter rates, even though the larger Baltic Dry Index continued to decline last week.  The widely watched index fell from 564 to 540, and fell further to 535 Monday, the lowest since data began being reported in January 1985.  The ultra-cheap ocean freight has been an advantage for soybean exports out of the Gulf, keeping US stem competitive longer into the SAM shipping season.  If grain rates continue to bounce, this could contribute to the shift to SAM.

Friday’s COT data didn’t have a lot of earth-shattering changes, with funds slightly reducing their net long in corn to +64,003 contracts, the smallest since 10/21.  The Gross Commercial Long in corn continues to buy, however, upping his position to 466,234 contracts, the largest since 11/19/2013.  Soybeans continue to see commercials and funds diverge with funds selling 20,190 contracts to leave their net short at -77,519 contracts, the largest since 9/30/14.  Commercials continued to buy heavily, kicking their net long to +41,416 contracts, the largest net long since 10/14/14.  This is the same pattern of buying and selling which began back in August/September and coincided with the major fall lows.  It does strike this analyst as odd commercials continue to buy soybeans hand over fist with such massive SAM supplies in the waiting.  Commercials betting on higher prices, not lower?

Not much change in KC or Chicago wheat as the gross commercial buying came to a close last week as did the fund selling pressure.  Not sure if this is signaling a near-term pause in the excitement just as futures have gotten going?  Minneapolis wheat kept recent trends in place with commercials whittling down their net short to -3,306 contracts, the smallest net short since 9/17/2013.  The Gross Commercial Long in MPLS is long +33,309 contracts, the largest position since 11/6/2007.  Clearly commercials betting on higher prices in MPLS from a relative sense at least.  Aggregate positions across the 12-14 futures contracts didn’t change a whole lot with managed funds remaining net short while index funds retain the smallest net long since 2009.

On the cash front, traders made comment about possible Canadian soft red wheat trading out of St. Lawrence to Mexico with whispered trades occurring around +80H.  No doubt currency valuations at work once again as Canadian wheat following the lead of SAM soybeans in trading into what most consider “captive-demand” for US grain.  Canadian wheat exports have been solid so far during the 2014/15 crop year, although exports to the US have been especially limited through December.  A loonie at a consistent 80c on the Dollar should change that.  Cash trades also not incredibly competitive FOB UKR maize values following Argy maize premiums flatlining as well.  It remains difficult to quantify the currency aspect in our grain export trade, but it would appear the US Dollar is continuing to play a role here and abroad.  Corn and soybean spreads are firmer this morning, but wheat spreads are not.  Be especially watchful for any weakness in wheat premiums as a sign the spread strength and now the eventual futures rally has done enough to bend premiums lower.  That would be a sign our rally may be losing steam.

 

Bottom line: chart pictures are turning friendly on wheat, and knocking on the door in soybeans just as funds have re-amassed sizable short positions in both markets.  Corn would do well to take out the 1/20 and 2/9 corrective highs, and join the corrective rally party.  Fundamental traders still awaiting updated balance sheets at the end of the week from the USDA.  Taking the pulse of farmer engagement this week will be important to see where the natural seller decides to turn palms out.

 

Good Luck Today.

 

CPC 6-10 2-17

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.

2/13/2015 Morning Comments

Good Morning,

 

Outside Markets as of 6:10am: Dollar Index up 0.0250 at 94.1270; Euro down 0.00060 at 1.14130; Brazilian Real down 0.78%; S&P’s are up 2.50 at 2086.50; Dow futures are up 30.00 at 17,962.00; 10-yr futures are down 0.18%; The Nikkei closed down 0.37% at 17,913.36; The DAX is up 0.55% at 10,979.60; The IBEX-35 is up 1.55% at 10,725.50; Gold is up $3.40 at $1224.10; Copper is up $0.30 at $260.50; Crude Oil is up $0.64 at $51.85; Heating Oil is up $0.0092 at $1.9229; Paris Milling Wheat is up €0.50 at €185.00/MT.

European equities rallied to near 7-yr highs this morning on better than expected economic data as well as hope for a compromise over the Greek debt situation.  The Eurozone grew 0.3% between Q3 and Q4 of 2014, slightly better than the 0.2% expected.  Growth was led by its largest member, Germany, who saw q/q growth of 0.7%, beating expectations for +0.3%.  Greece remains the truant, however, as its new PM argued for a new bailout agreement with fewer austerity demands.  Greece is set to start technical negotiations with the European Commission, the ECB and IMF today to determine which parts of the current bailout the Tsipras government will agree to maintain.  Major agri-business Bunge watched its shares selloff sharply yesterday after a big miss in Q4-earnings and revenues as volatility in its oilseed  business outweighed other gains.  Q4 sales in the agribusiness segment, Bunge’s largest by revenue, fell to $10 billion from $12.45 billion a year earlier.  Bunge also warned of third-party risk with lower-tier Chinese soybean importers which has added risk to its business overseas.  The Baltic Exchange’s main sea freight index slumped to 540 points, a new all-time record low back to January 1985.

NOAA’s extended models continue to come into alignment about the cold-snap next week which is centered over the ECB, but extends all the way to W-TX and W-ND.  It’s difficult to guess how much “below normal” temperatures might dip to, but the shade of purple being used on the maps below hasn’t been seen since last fall.  Should temps fall to zero or below, snow cover is far from adequate to prevent damage, especially in crops which have broken dormancy in the central and southern plains.  States with no snow cover would include NE/KS/OK/TX/MO/AR/TN/KY while only the northern ½ of IL/IN have any snow cover to mention.  Widespread damage isn’t expected at this date, but vigilance is warranted considering this is only February 13th, and another 2-months’ worth of frost risk still lies in front of the market.

 

Better markets so far as we get set to enter the long 3-day weekend with no grain markets until Monday evening.  For the week, corn finds itself down 1.5c, soybeans are up 14.25c and wheat is down 5.50c.  For being lower on the week, corn and wheat both are merely flagging in more of a consolidative effort than trending higher or lower.  Despite the fact we just received a refreshed set of USDA balance sheets for 14/15, it feels as though our markets are ready to begin trading 15/16 already and certainly looking forward to the USDA Outlook Conference next Friday.  Weekly demand indicators continue to support all three of our grains, and looking ahead to 15/16 highlights the need for solid corn and wheat conditions to prevent tightening balance sheets.  Soybeans are living on borrowed time, but for the time being, it looks as though they are quite comfortable borrowing.

Taking a quick look at export sales, most everything came in above expectations, including wheat at 15.0mbu vs. the 9.0mbu needed weekly thanks to the recently revised export forecast.  In the by-class breakdown, HRW led sales with 4.8mbu, but as impressive were the 3.6mbu worth of sales from White Wheat.  There is a lot of concern about the carryout level of SWW, and for good reason.  Corn sales were solid at 39.5mbu vs. the 17.1mbu needed weekly. Total commitments are down 4% from a year ago while the USDA forecast is calling for a 9% y/y reduction.  Soybean sales were 27.4mbu, well better than expectations or the 4.9mbu needed weekly to hit the USDA forecast.  Total commitments of 1.696bbu now account for 95% of the USDA’s marketing year forecast.  How long it takes Brazil to start shipping meaningful tonnage will hold the answer to the US soybean shipping season.

As mentioned above, the 15/16 corn balance sheet seems to be turning more interesting all the time.  Reports last night suggested Ukraine’s Oct-Jan seed corn imports were down 42% from a year ago, which suggests a sizable cut in corn production for the coming year.  Given 2014’s 28.5MMT production, one could reasonably suggest a crop in the 20-24MMT area which would be off 15-25%.  Obviously getting seed corn imports has been a struggle for farmers due to the Ukrainian Hryvnia dropping to all-time record lows, which should also make fertilizer procurement difficult.  Ukraine exported 20.0MMT of maize in 2013/14 and is expected to export 18.0MMT in 2014/15.  A 25% reduction in exports could mean a 150mbu shortfall in global supply.  Add in the likelihood of smaller corn crops in both EU and Brazil next year, and global exporter supplies could see a notable reduction.  If the USDA Outlook Conference releases acreage around 88-89 million acres for 15/16, expect CZ15 to receive a fair amount of support around $3.90-4.00 until planting and pollination have been deemed successful.

Wheat spreads were firm overnight, although off slightly heading into the day session.  WH/WK rallied to +3.00c yesterday, the highest trade since 4/1/2014.  The KWH/KWK hit -0.75c, the firmest trade since 12/1, and the MWH/MWK hit -0.50c for the third session in a row, tying highs since 5/15/2014.  H/K spreads are rallying into FND, just the way Z/H spreads did, which should make one cautious about avoiding the March rally by selling wheat in May.  The deliverable grade/milling grade supply of wheat in the US is in strong hands, which is unwilling to part with said stem until inverses really get painful.  Remember this point when making hedge placement decisions.  KCBT protein scales firmed again yesterday for 12.0-14.0% pro with 12’s and 13’s at +100/110H.  Compare this with +90/100H and +85/95H, respectively a week ago.  Call MGEX 14’s +170H vs. +135H a week ago.  Shouldn’t be a lot of resolve in betting against futures when both basis and spreads are rallying in tandem.

 

Bottom Line: Our markets are mixed on the week, so choppy trade heading into the weekend wouldn’t surprise.  Keep in mind, depending on how the Brazilian Real finishes the day, the soy complex could see some hedged pressure from the South American growers ahead of the long-weekend.  Grains are slowly generating a story for next year, and the demand signals for 14/15 are proving ample enough.  Soybeans still appear to be the market with the most to lose.

 

Good Luck Today.

 

CPC 6-10 2-13 CPC 8-14 2-13

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.

 

2/12/2015 Morning Comments

Good Morning,

 

Outside Markets as of 5:50am: Dollar Index down 0.3150 at 94.6720; Euro up 0.00340 at 1.13410; Canadian Dollar is up 0.71% at 0.79580; S&P’s are up 8.00 at 2073.75; Dow futures are up 69.00 at 17,901.00; 10-yr futures are down 0.28%; The Nikkei closed up 1.85% at 17,979.72; The DAX is up 1.61% at 10,925.69; The IBEX-35 is up 1.93% at 10,564.90; Gold is up $4.90 at $1224.50; Copper is up $4.45 at $258.55; Crude Oil is up $1.28 at $50.12; Heating Oil is up $0.0255 at $1.8396; Paris Milling Wheat is unchanged at €185.75/MT.

A ceasefire was agreed to end weeks of intense fighting in eastern Ukraine after all-night talks between leaders from Germany, France, Ukraine and Russia.  The accord was struck after 18-hours of non-stop negotiation, putting into place the ceasefire beginning February 15th.  The IMF also announced early Thursday, Ukraine will receive a $40 billion bailout package to stave off default.  This didn’t seem to help the Ukrainian Hryvnia which jumped another 2.69% today to 26.7000:1 against the US Dollar.  The Russian MICEX equity index rallied 2.47% on the ceasefire news.

The weekly EIA energy inventory report did not disappoint this week, seeing crude oil rise by another 4.87 million bbls to 417.93 million, another new record going back to 1982.  Inventories are now 15.6% above a year ago, and 16.8% above the 3-yr average.  The inventory building isn’t likely to slow anytime soon, considering the EIA showed in their latest drilling productivity report that crude oil production should rise over 66,000bbls/day during the month of March.  Crude spreads are certainly confirming the larger inventories and set back in flat price with CLH/CLJ dropping to -0.95c yesterday, the lowest on a closing basis in the contract’s history.  Would seem bottom pickers will be fighting an uphill battle for the foreseeable future, and the Congressional Budget Office sees crude oil prices falling well into 2016.  This will undoubtedly be a negative undertow for Ag prices in a general sense.

The Brazilian Real fell to a fresh 10-yr low yesterday of 2.9116, and was the lowest on a closing basis since November 2004.  Analysts are expecting zero growth for Brazil in 2015, and state-owned oil company Petrobas remains roiled in scandal.  The company was valued at $310 billion in 2008, making it the world’s fifth largest company, but now has a valuation of $48 billion thanks to recent corruption scandals.

Extended maps from NOAA last evening suggested the cold temps in the east overtaking the above normal temps in the west as a cooler bias blankets almost the entire country by the middle of next week.  Important will be how cold the temps actually get, and what the degree of snow cover is during the cold snap, especially as some of the HRW has broken dormancy with the well above normal temps from last week.  According to Commodity Weather Group, the concern area for the cold snap will encompass about 6% of the soft red wheat acreage and 9% of the hard wheat acreage, or around 7% of the national winter wheat crop.  An important piece to remember is this is February 12th, not March 12th.  Each time we go through a massive temperature swing like this, the wheat seed loses more of its winter hardiness, leaving it susceptible to full winter-kill.

 

Better markets this AM across the Ag sphere as most of our contracts appear to be trading inside triangle formations, which could be pre-empting a breakout in one direction or the other.  Based on the direction of trade before the consolidation period began, it would suggest soybeans are readying for a breakdown while corn and wheat are preparing for another leg higher.  Cash soybean trade is supporting the soy complex as the transition to SAM supplies is proving less than smooth, while weekly demand figures for corn continue to suggest strengthening demand.  The wheat market is likely gaining some traction on the looming cold snap, and combined with well-known conditions in Russia and Ukraine, is likely enough for bears to give pause.  Export sales on tap this morning with corn and wheat sales in focus to prove their updated export figures.

CIF NOLA soybean premiums have been on the move this week, trading especially firm for ETA slots (+95H) as well as for Feb and Mar (+85/80 & +72H, respectively).  There seems to be a couple of factors present supporting the firm basis; to wit, cheap ocean freight, and a delayed Brazilian soybean harvest due to slow planting last fall.  The aforementioned basis combined with applicable barge freight is putting Zone 3 cash 4.5-18.5c above gross delivery equivalence, which is rallying SH/SK to boot.  At the highs yesterday, the SH/SK rallied to -2.25c, the highest trade since June 27th.  Normally, strong premiums combined with strong calendar spreads should beget a futures rally.  This time, however, it doesn’t feel as though soybeans have an upside function to perform given the calendar constraints before Brazilian soybeans take the reins.  Also, the Brazilian Real dropping to a 10-yr low will continue to promote farmer replacement sales, even if the US farmer holds tight to his remaining supplies.  It looks as though exporters are taking advantage of freight parity to cram a few extra boats in before the door closes.  Any further delays to Brazilian shipping, and well then we can talk.

Weekly ethanol production surprised a bit with a bump in production to 961,000bbls/day, up 13,000bbls/day and above the new “needed” level of 930,000bbls/day.  Ethanol stocks rose by 149,000 bbls to 21.135 million bbls, the highest since June 2012.  Weekly gasoline demand continued to plummet, however, dropping for the 3rd straight week, and falling below the corresponding week from 2014.  Weekly gasoline demand since the beginning of the 14/15 corn marketing year has been averaging 2.3% above a year ago, while ethanol production is averaging 5.7% above a year ago.  Ethanol exports are obviously playing a role, with Sept-Dec exports up 16% y/y, but ethanol stocks since the beginning of January are up 17%.  Continued ethanol exports will be needed to prevent a glut of ethanol should gasoline demand continue to drop.

Wheat spreads continue to be a focus with front-month calendars rising to the strongest levels in weeks yesterday.  The WH/WK jumped to +2.75c yesterday, the firmest trade since April 1st, 2014, while the MWH/MWK firmed to -0.50c, the highest trade since 5/15/14.  The MWK/MWN also jumped to the highest level since 12/18.  Basis bids could be called steady/better, but nothing alarming.  CIF NOLA SRW bids firmed by 4c to +85H, getting back to where they were last week.  HRW export bids are unchanged, although the spot floor bids were up by 4-8c yesterday.  No real change to HRS or DNS bids to speak of.  I want to continue respecting the firm calendar spread trade in regards to flat price, until or unless basis breaks.  The quality trade within our wheat markets has been apparent for some time, and could be the impetus for the spread rally.  Still, the shift in ownership from the funds over to the commercial end user, without any corresponding sales from the farm gate level, keeps me from betting bearish wheat in the near-term.

Export sales estimates put wheat at 300-650TMT, corn at 600-1,100TMT, soybeans at 300-550TMT, meal at 150-300TMT and soy oil at 10-20TMT.

 

Bottom line: Our markets are consolidating into rather tight ranges which could be warning of a breakout in the coming sessions.  Corn is proving the demand it needs to, the transition to SAM supply has been uneven at best and the wheat market has to deal with another cold snap in the US.  Traders are anxious to look ahead to 15/16, and next week with the USDA Outlook Conference, they’ll get that chance.  New crop corn supplies aren’t as plentiful as many would think unless we have 90 million acres and a 166bpa+ national yield.

 

Good Luck Today.

 

CPC 6-10 2-12 CPC 8-14 2-12 Snow Cover 2-12

 

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.

 

 

 

2/11/2015 Morning Comments

Good Morning,

 

Outside Markets as of 6:30am: Dollar Index up 0.0370 at 94.7940; Euro up 0.00020 at 1.13190; Brazilian Real off 1.02% to 2.8649; S&P’s are down 2.50 at 2059.75; Dow futures are down 29.00 at 17,764.00; 10-yr futures are up 0.11%; The Nikkei closed down 0.33% at 17,652.68; The DAX is down 0.32% at 10,719.00; The IBEX-35 is down 0.84% at 10,412.20; Gold is up $2.70 at $1234.90; Copper is up $2.00 at $257.15; Crude Oil is down $0.14 at $49.88; Heating Oil is down $0.0128 at $1.8199; Paris Milling Wheat is down €1.25 at €183.75/MT.

Greece continues to make headlines as their bailout is set to expire at the end of February, causing political leaders to scramble to find a solution or spark another round of secession talk.  In the East, President Putin will travel to Minsk to negotiate a truce in Ukraine as Russia signaled a deal is likely and France said discussions are focused on the degree of autonomy for rebel-held eastern regions after 10-months of fighting.  The weekly EIA report is due later this morning and traders are looking for a +3.75 million bbl rise in crude oil inventories, a 500,000 bbl decline in gasoline inventories and a -1.5 million bbl decline in distillate inventories.  The EIA’s latest drilling productivity report suggests crude oil production will continue to rise in March, despite drilling rigs being at the lowest level since December 2011, highlighting the productivity gains as old wells come offline.

Looks as though the upturn in moisture suggested by NOAA’s extended maps will take place according to the 7-day forecasted precip map below.  Early to mid-next week will see shower and possibly snow activity increase in the southern plains up through the OH-River Valley.  The continental divide of temperature remains in place during the 6-10 and 8-14 with above normal out west and below normal temps out east.  Moisture chances will drop for the Great Lakes in the 8-14 while the southern plains should continue to see precip chances.

 

Lower overnight markets throughout the evening sessions following weaker closes in all of our markets after the February WASDE report was released.  Traders had a difficult time making up their mind in the 60-minutes following the report’s release, but lower closes were definitive by 1:15pm CST.  The report didn’t really offer any game-changing statistics as pre-report estimates suggested, but carryouts did tighten for corn and beans more than the average trader thought.  At the end of the day, however, global inventories of corn, wheat and soybeans remain plentiful if not burdensome, and this will not materially change until we get into spring planting in the Northern Hemisphere.  The data was not enough to attack our lower boundary, but recent highs might be safe until at least the February Outlook reports. Cash and spreads will once again take center stage in the tug-of-war for supply.

Starting first with corn, the USDA cut feed/residual demand by 25mbu to 5.250bbu, a surprise move to many considering the USDA updates quarterly stocks, and therefore implied feed/residual demand, next month.  Rarely do they take such a move, but their 75mbu increase in ethanol demand for corn to 5.250bbu implies more DDGs production displacing corn in feed rations.  I have an issue with this logic considering at the Gulf this week DDGs are commanding a $70-90/MT premium to whole corn as DDGs exports to China have ramped back up.  DDGs prices have been slowly closing the gap to corn over the last month, but still demand a premium for the by-product itself.  One can also bet that since feed/residual and ethanol demand for corn are equal we will hear the food vs. fuel debate ramp up slightly.  Ethanol production has been running well better than the levels needed, so an increase was certainly warranted, but whether a 75mbu increase was necessary will be apparent in the weeks to come.  Weekly ethanol production is on tap at 9:30am this morning.  Exports were left unchanged to bring ending stocks down to 1.827bbu vs. the average trade guess of 1.879bbu and 1.877bbu previously.

Where the corn balance sheet becomes interesting when plugging in 14/15 ending stocks of 1.827bby is on the 15/16 balance sheet.  Using 88 million planted acres and a trendline yield of 166bpa, production comes in around 13.433bbu for a total supply of 15.286bbu.  Assuming modest growth of 1.5% in feed/residual, unchanged ethanol demand and exports bouncing back to 1.900bbu like 13/14, carryout drops to 1.400bbu, or 10% stocks/use.  The point being, anything less than trendline yield this coming growing season could plunge us right back to a sub-10% stocks/use ratio, which would be historically tight.  Given the aforementioned, corn isn’t likely to challenge recent lows, and should try to buy back a few acres for extra cushion.  Corn has the least ending stocks margin, and will draw the most scrutiny this coming growing season.

On the world front, Ukrainian exports were raised 1.5MMT, Argentine corn production was raised 1MMT with exports raised 1.5MMT and global ending stocks were increased 0.4MMT to 189.6MMT.  Plenty of competition for US old crop corn exports in the weeks ahead.

On soybeans, ending stocks came in at 385mbu, below the 398mbu average trade guess and well below the 410mbu from last month.  Imports were increased 10mbu, crush increased 10mbu and exports raised 20mbu for a total use increase of 35mbu.  The increase to crush was a bit of a surprise considering crush is running at 1% below a year ago through December, and the USDA now expects crush to finish 3.5% above a year ago.  This as hog crush margins have plummeted to near 2-yr lows, SAM meal exports are ramping up, and soybean basis has dropped over the last 3-months.  The increase in imports was also a bit odd considering the heightened supplies this marketing year, although the combination of cheap ocean freight and weak Brazilian and Canadian currencies could steer a few more beans towards the US-SE and OH-River Valley.  Global changes saw Brazilian production cut 1.0MMT to 94.5MMT from last month but Argentina increased 1MMT to 56.0MMT.  Neither country saw exports rise from last month’s combined 54MMT.  Chinese soybean imports were left unchanged at 74MMT and global ending stocks were reduced 1.5MMT to 89.3MMT.

Peaking ahead to 15/16, it’s difficult not to paint a bearish outlook given the general consensus for increased acreage, even though this analyst doubts acreage as high as 87-88 million will occur.  Using 86 million planted acres with a 45bpa trendline yield provides a total supply of 4.220bbu, up from this year’s 4.086bbu total.  Assuming 1.5-2.0% growth in both crush and exports for next year leaves us with ending stocks of 455mbu vs. this year’s 382mbu.  Stocks/use would rise to 12.0% and be the largest since 2007.  Would should realize this is a much more conservative view of next year’s crop than many in the market are currently painting.  Several well respected analysts have soybean carryout for next year rising above 600mbu.  Plenty of weather to get through yet, but soybeans are going to be shooting behind the 8-ball until weather adversity develops.

Fairly quiet day for wheat as expected with imports cut 20mbu and exports cut 25mbu to increase ending stocks by 5mbu to 692mbu.  The cut to imports was long-overdue as Canadian exports of wheat to the US through December were down over 50% from 13/14.  We did import several cargoes of European feedwheat, but nowhere near enough to make up for the Canadian shortfall.  How the weak Loonie influences trade in 2015 will be a focus.  Difficult to argue with the cut to wheat exports given the abysmal picture to-date even if sales have improved in recent weeks.  US wheat exports of 900mbu would be the weakest since 2009/10 and the third smallest program since 1980/81.  By-class changes were a bit more interesting with HRW exports cut 20mbu, SRW cut 10mbu, durum cut 5mbu, and HRS exports up 10mbu  Global changes included Australian exports being cut 0.5MMT to 17.0MMT from last month while Argentine wheat production was increased 0.5MMT to 12.5MMT and exports rising to 6.5MMT by the same amount.  Global wheat ending stocks rose to 197.9MMT, up 1.9MMT from last month and up 10MMT from a year ago.

The weekly deliverable stocks report showed draws in SRW and HRW stocks to the tune of 1.13% and 2.75%, respectively vs. a week ago.  HRS deliverable stocks rose by another 500,000-600,000 bushels, and are a solid 7-8mbu above a year ago which should be putting more pressure on spreads, although quality considerations are present this year.  Corn basis went home with minimal changes at the Gulf yesterday, although PNW premiums continue to inch higher with a reported trade of +110H.  Bids went home last night at +107H vs. +115H offers.  Calendar spreads of all the commodities are trading firmer this AM, bucking the lower futures trend.

Ethanol at 9:30am.

 

Bottom Line: The trade got the numbers it wanted, if not a little better, but funds still seem to be in liquidation mode or interested in building larger short positions.  Keep in mind the massive shift in ownership we saw on last week’s COT data, and the likelihood this trend is still continuing.  Spreads are bucking the weaker futures trend, and I will continue to take my cues from cash and spreads.

 

Good Luck Today.

 

HPC 2-11-15

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.

 

 

 

 

2/10/2015 Morning Comments

Good Morning,

 

Outside Markets as of 6:20am: Dollar Index up 0.2020 at 94.6400; Euro down 0.00160 at 1.13250; S&P’s are up 12.75 at 2055.00; Dow futures are up 99.00 at 17,780.00; 10-yr futures are down 0.29%; The Nikkei closed down 0.33% at 17,652.68; The DAX is up 0.60% at 10,727.84; The IBEX-35 is up 0.96% at 10,464.10; Gold is down 0.43% at $1236.20; Copper is down $4.90 at $253.15; Crude Oil is down $0.47 at $52.40; Heating Oil is down $0.0097 at $1.8632; Paris Milling Wheat is down €1.25 at €186.00/MT.

Greece continues to grab financial headlines this morning s they try to gather support for a bridge gap funding plan, but Germany has been unwilling to compromise on conditions attached to Greece’s bailout.  The Ukraine/Russia conflict also remains on the front-page as President Obama mulls the decision of whether or not to arm Ukraine.  He has confirmed military aid was being considered, but France and Germany are opposed to arming the embattled nation for fear of dragging out the conflict longer.  The EIA reported in its monthly drilling productivity report yesterday that US oil production will grow in March by 66,648 million bpd, which would be the lowest growth in over a year, but still growing m/m.  The sharp drop in oil rigs has only slowed the pace of US oil production growth, but has not yet contributed to a production decline.  Technology and productivity gains are keeping oil production supported.

A wintry mix is moving across the Dakotas and S-MN this morning, which should keep grain movement slow.  The up-turn in moisture is being welcomed with open arms in the upper-Midwest where the drought monitor has expanded over the winter.  7-day forecasted precip keeps moisture heaviest over the Great Lakes.  Extended maps from NOAA keep temperature trends in place with everything west of the Plains corridor seeing above normal temps and everything east of their locked in below normal temps.  Moisture trends are improving as indicated on the maps below, but no concentrated effort in either the 6-10 or 8-14 day.

 

Slightly easier markets this morning following the decent performance yesterday.  Several of our markets are posting interesting technical formations, ranging from the flagging action on soybeans to the inverted head and shoulders pattern on corn.  The market will focus on the updated USDA Supply and Demand report at 11:00am CST this morning, even though market moving changes are expected to be limited.  Still, almost every USDA report offers the market at least one surprise, and there are several which could take place depending on how aggressive the USDA wants to be in front of the March 31 Quarterly Stocks report.  This will also be a consideration with the February Outlook Conference a week from Friday with the first glance at the 15/16 US balance sheets.  Still retaining a sideways/higher bias on corn and wheat with a sideways lower bias on soybeans.

The average trade estimate on corn ending stocks is 1,879mbu vs. 1,877mbu last month, or essentially unchanged due to rounding.  Best odds for a change on the corn balance sheet would be an increase of 10-25mbu to corn demand for ethanol from their current 5.175bbu target.  Weekly ethanol production has averaged higher than the needed level each week for the past 15-weeks in a row, strongly suggesting the USDA has been light on their demand estimate.  However, production declined notably last week, and margins have come under serious pressure with oil’s demise.  Still, ethanol production should be increased given YTD progress up 4% from the needed pace and 5.5% higher than a year ago through January.  Export sales are likely to receive a punt this week given sales have averaged good enough to hold serve but inspections continue to run a bit light.  The increased competition from Ukraine in recent weeks could also temper the USDA’s resolve for moving the export needle.  Feed/residual should be held steady ahead of the March stocks report.  Unchanged to ending stocks lower by 15-25mbu looks likely but has possibly been priced in over the last week.

Soybean ending stocks are seen at 398mbu vs. 410mbu last month as exports continue to run better than the pace needed for the current USDA estimate.  Total commitments for the marketing-year-to-date account for 94% of the USDA’s marketing year forecast, a new record for early February.  Shipments have also been strong and better than needed.  However, Brazil and Argentina have strong crops coming and discounted prices from current US replacement.  This may give the USDA pause for increasing their current 1,770mbu estimate, even though cash traders report Brazil being unwilling to sell soybeans for export until LH-Mar.  How long the US program hangs on will be the best indicator as to final soybean exports.  Crush-to-date is down around 1% from a year ago while the USDA’s estimate reflects a 2.7% increase y/y.  Meal export sales remain strong as to cash crush margins.  I see no reason to tamper with the estimate this month.  SAM production estimates will be a focus with Brazil estimated at 94.7MMT vs. 95.5MMT last month while Argentina is seen at 55.6MMT vs. 55.0MMT and private estimates as high as 57MMT last month.

Wheat ending stocks are estimated at 689mbu vs. 687mbu last month with the only changes expected to come from the export estimate.  Wheat’s export estimate has been under fire for months now, running well behind the pace needed to hit the USDA’s estimate.  Sales have picked up the last 3-4 weeks, however, although shipments continue to lag.  Total commitments are down 24% from a year ago while the USDA is only calling for a 21% decline y/y.  More concerning is the fact export shipments are down 31.0% from a year ago with only 16-weeks remaining in the year.  Export shipments haven’t hit the level needed in 16-weeks also, keeping the gap to close large. Traders are not anticipating a cut to exports based on the average trade estimate, but one is certainly a possibility.  Global changes could see Australian production cut by another 1MMT to 22MMT, while EU exports could be increased.  Global wheat stocks are still going to be above last year and more than plentiful.  Any bullish implications for the wheat market will be based on Northern Hemisphere conditions when the winter crop emerges completely from dormancy.  In the US, this is already occurring as far north as SD which is a concern.

Export inspections data yesterday was a bit disappointing for grains but strong for soybeans.  Wheat exports of 14.6mbu was below last week’s 15.3mbu and below the 20.2mbu needed to hit the USDA’s export forecast.  Corn shipments were 27.6mbu, below the 34.7mbu needed to hit the USDA’s export forecast and missing the level needed for the 16th week out of the last 17.  Cumulative exports total 616.8mbu, up 2.3% from a year ago, but some big shipments occurred in 13/14 the next 5-6 weeks.  Soybean shipments totaled 54.6mbu, blowing away the 11.5mbu needed weekly to hit the USDA’s export forecast with total shipments running 17.7% above a year ago.  The USDA’s current export estimate implies a y/y increase of 7.4%.

One more note on spreads, wheat spreads made new highs for the move in several contracts, adding credence to the strength in flat price the last week.  The WH/WK hit +0.50c yesterday, the highest trade since 12/18 with heavy volume thanks to ongoing GSCI roll.  The MWH/MWK hit -1.50c yesterday, the highest trade since May 2014 before easing overnight.  Interestingly enough, basis bids didn’t firm to any notable degree yesterday, although reported offers were up by 5-6c at the Gulf.  The increased inquiries for US wheat in the last week, along with the well discussed quality issues in the US-SRW, will keep the meager supplies of quality milling wheat at a premium.  Cash basis along the OH-River Valley is now 28-35c above gross DVE for #1-SRW in February vs. 21-29c above a week ago.  March slots are 30-37c above DVE vs. 25-32c above a week ago, so complexion is definitely firmer.

 

Bottom Line: Let’s get the USDA report out of the way so we can go back to monitoring cash and spreads.  Likely to be some headline risk, although grains don’t appear ready to give back their hard work of the last week over the February WASDE.  In the larger picture, soybean supplies in both the US and globe are plentiful, and grains are dependent upon spring/summer weather for moving outside of current ranges.  Respect the trend.

 

Good Luck Today.

 

6-10 Precip 2-10 8-14 Precip 2-10

 

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.

 

2/9/2015 Morning Comments

Good Morning,

 

Outside Markets as of 6:15am: Dollar Index down 0.0500 at 94.6440; Euro down 0.00010 at 1.13220; S&P’s are down 12.00 at 2041.00; Dow futures are down 96.00 at 17,686.00; 10-yr futures are up 0.15%; The Nikkei closed up 0.36% at 17,711.93; The DAX is down 1.72% at 10,659.70; The IBEX-35 is down 2.22% at 10,338.00; Gold is up $7.30 at $1241.90; Copper is down $0.10 at $258.45; Crude Oil is up $1.19 at $52.88; Heating Oil is up $0.0232 at $1.8623; Paris Milling Wheat is down €0.50 at €187.75/MT.

European equities are under pressure this morning as new Greek PM Tsipras showed little sign of backing down in a standoff with international creditors.  Greek 3-yr notes saw yields rise 366bp to 21.66%, the largest increase since March 2012.  Weak economic data out of China is also keeping bourses on the defensive as a data dump last night showed imports during January fell almost 20% from a year earlier while exports dropped 3.2% from a year ago.  Imports of iron ore totaled 78.57MMT, down 9.5% from December.  Imports of coal dropped 38% from December to 16.78MMT, less than half the level in January 2014.  Crude oil continues to bounce on ideas the bottom is in as drilling company Baker Hughes released updated rig counts Friday which showed 1,456 rigs drilling as of 2/6, the smallest since March 5th, 2010.  Crude oil drilling rigs totaled the smallest since December 2011.  Inventories remain record large, however, and production isn’t expected to drop noticeably until later on this spring or early summer.

Winter weather on both of the coasts, but not much happening in the Midwest to begin the week.  Precip will develop the next 24-48 hours in the Northern Plains, however, bringing a mix of rain/snow to ND/SD/MN/MT with heaviest totals around 0.50”.  Otherwise not a lot of change in NOAA extended maps with well above normal temps in the west and well below normal temps in the east.  Precip patterns keep moisture confined to MT/ND/SD/MN/IA/WI/IL/IN/OH while everything south of those states stays below normal on precip.  Most areas in the southern plains made it through January in good shape, but drought conditions continue to slowly increase in the Dakotas/MN which will need to be monitored as spring gets closer.

 

A two-sided overnight session after a firmer open last night with grains and the soy complex coming off a strong performance last week.  Whether one wants to look at technicals or fundamentals, it looks increasingly likely wheat and corn have found some intermediate term bottoms.  The shift in ownership from funds to commercials during the last week was readily apparent on COT data, farmers had no part in length transference, and major importers of both grains choked up on the bat noticeably.  Soybeans still appear to be living on borrowed time with what look to be monster crops coming out of Braz/Argy, but the nail isn’t in the coffin just yet.  The USDA will release the February WASDE on Tuesday morning, but neither the average trade guesses nor recent price action would suggest anything game-changing is laying in waiting.

Beginning with tender business, global importers of wheat made a splash last week with Taiwan, Thailand, Saudi Arabia, Japan and Egypt all buying wheat with the first four buying at least some US.  GASC bought French and Romanian, but newswires were abuzz with Egypt possibly tapping a $100 million grant to purchase US wheat, although the total would only amount to around 13-16mbu, depending on pricing.  It also seems unlikely commercials would have the confidence to sell that size of business in old crop slots given well discussed quality issues of this year’s SRW crop.  Still, the fact so many major importers stepped up to the plate speaks volumes.  Speaking of volume, trade activity also picked up at all three exchanges this past week with total volume rising to the highest since at least mid-December and in the case of KC wheat, the highest since mid-November.  Add in the decline in winter wheat conditions, although those have probably stabilized since Monday, and there was plenty of fodder for bulls to stake out “bottoms.”  $4.90 basis WH looks as though it should act as solid support, especially given the proximity to the Sept/Oct lows.

Corn business was also solid last week with weekly export sales almost doubling the needed pace at 33.3mbu, and marking the fourth straight week of hitting the target level.  Getting a lot of chatter in regards to corn business continues to be cheaper Ukrainian maize supplies, however.  Ukrainian FOB supplies are said to be offered between $172-177/MT FOB for Feb/Mar delivery vs. $177-178/MT FOB US-GX and $192.02/MT FOB PNW.  In addition, ocean freight has been flat on its back with time charter rates dropping to the lowest levels since at least 2012, offering Ukraine a $5/MT ocean freight advantage in SE-Asia.  Lastly, the Ukrainian Hryvnia dropped to 25.2500:1 against the US Dollar last week, the lowest price on record.  Combine all of the aforementioned, and Ukraine maize should continue to compete directly with US stem until SAM supplies come online in later this summer.  Granted, the precipitous pace at which the Hryvnia has fallen likely speaks to larger economic concerns, but for the time being, should keep grain flowing.

Friday’s COT data offered many interesting insights, the largest of which was found in the wheat markets.  The chart below shows the gross commercial long position in KC wheat which pushed to 59,677 contracts, the largest since 1/11/2011.  By contrast, the net short position held by fund traders rose to 18,527 contracts, the largest net short since 7/16/2013.  In SRW, the gross commercial long rose to 101,379 contracts, the largest since 2/11/2014, while the fund short rose to 54,515 contracts, the largest since 10/28/2014.  In Minneapolis, the gross comm long jumped to 33,598 contracts, the largest since 1/29/2008.  Funds hold a small net long in Minneapolis.  The point of this paragraph is to highlight the massive shift of ownership from funds over to end users as prices grabbed around fall lows.  These turning points are when owernship changes hands to this kind of degree.

In corn, the gross commercial long also jumped to 451,374 contracts, the largest since 11/19/2013 as the funds whittled their net long down to 68,064 contracts, the smallest net long since 10/21/2014.  Soybeans saw activity slow from recent weeks as funds bought back some of their net short position to leave them net short -57,329 contracts.  Commercials remain net long 20,877 contracts, which is still a rarity when looking over the last 7-8 years.

 

Bottom Line: Grains have given back some of their overnight gains, but last week’s performance should still be looked upon with optimism given the host of fundamental and technical factors contributing to the strength.  Traders may be a little cautious ahead of tomorrow’s USDA report, but market moving details should be limited.  More traders are optimistic crude has bottomed, and Dollar strength has slowed.  Ownership has changed hands for the time being, and spring insurance pricing is also underway.  Plenty of reasons to stay vigilant for better pricing opportunities.

 

Good Luck Today.

 

HRW Gross Comm Long 2-9

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.

 

 

 

2/5/2015 Morning Comments

Good Morning,

 

Outside Markets as of 6:25am: Dollar Index down 0.0750 at 93.9160; Euro is up 0.00070 at 1.14300; S&P‘s are up 14.00 at 2044.00; Dow futures are up 97.00 at 17,665.00; 10-yr futures are up 0.06%; The Nikkei closed down 0.98% at 17,504.62; The DAX is down 0.13% at 10,897.22; The IBEX-35 is down 0.64% at 10,510.10; Gold is down $3.90 at $1260.60; Copper is down $5.10 at $254.00; Crude Oil is up $.70 at $49.15; Heating Oil is up $0.0179 at $1.7845; Paris Milling Wheat is up €1.25 at €187.75/MT.

The incredible volatility in crude oil continued yesterday with spot month futures dropping $4.60/bbl by the close to erase the previous day’s $3.48/bbl gain and more.  www.sentimentrader.com published an article last night looking at the volatility in crude oil compared to other major bottoms in crude in the past.  Over the last 30-days, crude oil has witnessed three days with 3-standard deviation moves (7%).  This is well short of the major bottoms witnessed in 2008 and 1986 in which they saw 11 and 10, respectively.  Still, this sort of whipsaw activity is consistent with a larger degree bottom, although still probably premature to conclude that as the case.  Crude oil inventories in the week ended 1/30 rose by 6.33 million barrels to 413.06 million barrels, much higher than the +3.70 million barrel build estimate.  Stocks at 413.06 million barrels are another new record going back to August 1986.

The band of snow heading towards the East coast and dumping snow along the way looks to finally be dissipating over the Atlantic.  Moisture the next 3-days will be confined to the Dakotas/MN/MT and the Canadian Prairies.  Although, with the warmup on tap, uncertain as to how this moisture will fall.  The temperature dichotomy will remain in place the next 15-days with above normal temps west of the MS-River and below normal temps east of there.  Moisture will also be a mixed bag with much below normal in the US-SE, but above normal over the Great Lakes and Northern Plains.  Hard to find a forecaster who doesn’t call current weather in SAM nearly ideal so expect crop ideas there to hold or get larger.  Corn conditions in Argentina are said to be excellent.

 

In a similar fashion, although much less volatile, one could say the grain markets are exercising very choppy trading behavior which can be consistent with a near-term bottom.  All three of the major Ag commodity markets have posted reversals from the previous week, or have taken out the previous week’s highs, some of which have occurred at major Fibonacci retracement and progression levels.  More than anything, it feels as though our markets are still subject to money flow in the near-term while price tries to find the sweet spot of where the US/SAM farmer turns a palms out seller, and where the natural consumptive demand rests.  US corn has a ton of competition into Asia from Ukrainian maize, US wheat is not close to connecting on MENA business and the trade flows have slowly, but surely, shifted from the US to SAM on soybeans.  When the aforementioned happens, we turn inward.  Ethanol grind is still strong while livestock margins have slipped notably.  Domestic wheat basis remains strong, although tied more to protein and quality considerations.  Soy crush margins are strong and meal basis is above delivery equivalence.  All of the above looks like a holding pattern to this analyst.

Ethanol production in the week ended 1/30 finally saw the pullback many have been waiting for with per day production pegged at 948,000bbls/day vs. 978,000bbls/day the week previous.  This is the lowest production total since early November, but importantly, still well above the 908,000bbls/day needed to hit the USDA’s 5.175bbu corn demand for ethanol estimate.  Despite the pullback in production, stocks continued to climb, which may be the more important headline.  Stocks rose 355,000bbls to 20.986 million barrels, the highest since June 2012.  Fortunately, RBOB has moved backed to a premium over ethanol for spot month out through August.  At 6c a gallon for spot month and 28-29c a gallon through the rest of the curve, some discretionary blending might actually come back to the ethanol sector which is what the stocks situation needs badly.

StatsCan also released their stocks of principle field crops as of December 31, 2014 yesterday, coming in at or slightly above expectations.  Total wheat stocks as of 12/31 totaled 24.818MMT, down around 13.5% from 2013 but right in line with expectations of 25MMT.  Stocks of canola totaled 11.1MMT vs. the average trade estimate of 10.7MMT, but down from last year’s 12.4MMT.  Stocks at 11.1MMT would still be the second largest on record.  Nothing here to really move the needle, and I think the larger theme to focus on is the continued lack of Canadian wheat exports to the US through December.  Through Dec, exports to the US are down over 50%, despite many thinking the weak Loonie would support increased movement south.  This will have to be monitored in coming months to gauge export velocity as it relates to total US imports.

CIF NOLA SRW premiums continued to ease yesterday, but barge freight slipped faster, keeping delivery economics well above gross DVE.  The upper and lower-OH River Valley remains 18-26c above DVE for Feb, 23-30c above for Mar, 25-32c above for May and 3-10c above for July.  FOB Toledo rail bids were whispered around +30/35H and Chicago around +20/25H, both above gross DVE.  Still no reason to turn bearish WH/WK or WH/WN at current levels given aforementioned basis bids.  The index fund bearspread roll will get underway tomorrow, so be aware of drive-by weakness from index flows.  A lot of chatter yesterday about Egypt agreeing to use $100 million in US grant money to buy American wheat, with payment made in Egyptian pounds.  None of it was enough to get algos going, and obviously CIF NOLA premiums didn’t exhibit any undue influence.  Seemed to be a lot more confusion about the article than clarity, especially given suspect quality of this year’s old crop SRW.  Some posited it will be for new crop slots, others suggested US-HRW could be in the mix.  Will continue to watch headlines for any change.

Another feature worth pointing out has been the continued downward assault on hog crush margins.  Board spreads hit contract lows for the G, J, N and Q contracts yesterday, and the chart below shows front-month rolling hog crush at the lowest levels since April of 2013.  As one will notice in the chart, much better hog crush margins have been present for much of 2014, and odds are high integrated hog feeding operations took that opportunity to forward hedge.  Many think attractive margins were locked in out through June 2015.  This should minimize the impact of the reduced margin structure, but it is still important to keep in mind for forward projections.

Export sales out momentarily.  Wheat seen at 250-650TMT, corn at 700-1,150TMT, soybeans at 200-600TMT, meal at 120-300TMT and soy oil at 5-20TMT.

 

Bottom Line: Our markets seem to be settling into a tighter range, exhibiting the choppiness commonly associated with at least an intermediate term bottom.  Farm gate movement has been better this week, but by no means heavy.  Many think the US farmer is behind the 8-ball on marketing, but as of February 5th, he doesn’t seem to be any big hurry to change that situation.

 

Good Luck Today.

Hog Crush 2-5

 

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.

2/4/2015 Morning Comments

Good Morning,

 

Outside Markets as of 6:25am: Dollar Index up 0.1780 at 93.7780; Euro down 0.002870 at 1.14620; S&P’s are down 7.00 at 2035.00; Dow futures are down 34.00 at 17,538.00; 10-yr futures are unchanged; The Nikkei closed up 1.98% at 17,678.74; The DAX closed down 0.19% at 10,870.55; The IBEX-35 is down 0.33% at 10,563.40; Gold is up $6.60 at $1266.90; Copper is up $1.05 at $259.20; Crude Oil is down $1.62 at $51.42; Heating Oil is down $0.0246 at $1.8219; Paris Milling Wheat is up €1.25 at €187.75/MT.

Crude oil is once again grabbing headlines after a 7% move Tuesday to follow up its 8% move on Friday, both of which helped Brent crude move into a bull market for 2014.  Investors are hoping oil has found a floor after a 60% freefall, but based on crude oil carloadings, inventories at Cushing, OK, and the productivity from new wells replacing legacy wells, it might be premature to think supplies have peaked in the US.  Another fly in the ointment of crude oil is the fact calendar spreads haven’t rallied anywhere close to what flat price has.  Front month CLH/CLJ is trading at -0.85c this morning, up from its low print of -1.03 on 2/2, but only 0.03 up from its low close of -0.88c the same day.  Back month crude spreads have rallied even less.  Crude oil is certainly entitled to some bounce, having suffered one of the worst selloffs in recent memory, but definitively concluding crude has bottomed could prove to be risky.  The weekly EIA inventory report is expected to show a 3.0 million bbl increase in crude oil inventories.  Current oil inventories have risen 21.3 million bbls (5.5%) since the beginning of the year to a record high of 406.727 million bbls.

A band of snow moving across the central plains this morning, bringing accumulation to WU/CO/NE/IA and expected to bring snow to the Great Lakes and ECB as well.  The upper-Midwest has built back a little bit of snow cover, with most areas north of KS/MO/KY having at least some protection as of this morning.  Temps will be rising into the weekend for much of the Midwest, however, putting much of that snow cover at risk once again.  The map below shows high temps for Friday with Saturday and Sunday to see similar temps.  The ridge of high temps is cut off with the snow cover as areas around the Great Lakes with more abundant accumulation will remain colder.  Would imagine we will start to hear about wheat breaking dormancy once again in the southern plains in coming weeks.

 

Mixed markets this morning following the sharp rallies across the entire Ag complex yesterday.  The severity of the rally certainly had fund activity written all over it, especially as basis continues to muddle along which wouldn’t imply robust consumer demand.  Farm gate movement did pick up a bit yesterday, but still nothing above a “5” on the old 1-10 scale according to most cash traders.  Usually, the least complicated approach proves to be the most appropriate, and in the case of grains, funds were toting the largest shorts in beans since mid-September, the largest shorts in wheat since mid-November and the smallest net long in corn since late-October.  Add in an impressive day from crude oil as well as technical considerations, and we had the makings of an abrupt covering-type rally.  Most important will be how the natural seller, farmers, follow the rally?  It is widely expected the US farmer still owns 60% of the US corn crop, either on the farm or in Delayed Pricing programs.  Soybeans it is thought less to around 30-40%.  Combine slower than expected farmer selling in SAM, and there remains ample supply to throw at a rally.  Vigilant watching of basis and spreads here will prove wise.

Taking care of a bit of house-keeping from yesterday, Egypt’s GASC bought 300,000MT of French and Romanian wheat for Mar 1-10 shipment.  The average price of the purchase was $236.25/MT C&F.  There was no US-SRW offered in the tender, no Russian and one Ukrainian boat.  CIF NOLA SRW premiums didn’t show a lot of change yesterday, going home offered +95H for Feb/Mar against bids around +75H which could be called softer than Monday.  Corn and soybean premiums also held ground yesterday, indicating what supply was moving wasn’t making it to the river or the west coast.  Going home, CIF NOLA corn premiums were bid +58/59H for Feb/Mar and +55H for AM which could be called steady.  PNW corn shuttles went home +102/103H bids against +106H offers for Feb/Mar.  The PNW continues to look like a situation where export business was conducted when the PNW was the cheapest FOB corn supply in the world, which was also right before the board slid 40-50c/bu.  There appears to be a short, whether reseller or outright export, which is trying to cover considering the FOB spread with the Gulf now in place.  CIF NOLA soybeans went home +90H for Jan, +78/80H for Feb, steady.

Spreads did pop on the rally yesterday with the CH/CK rising to -7.50c overnight, the highest trade since 1/22.  Chicago wheat spreads were firmer, continuing their trek higher since putting in lows on 1/28.  At its zenith yesterday, the KWH/KWK hit -0.75c, the highest trade since 12/1.  MWH/MWK also joined in the party, hitting -2.00c at the highs yesterday and this morning, the highest trades since last May.  Hard wheats are certainly correcting sharply against Chicago, which appears to be warranted given the strength Chicago has been exhibiting much of the winter.  As noted in yesterday’s comments, wheat/corn spreads are by no means cheap at current levels relative to history, but considering the correction already witnessed, these inter-market spreads look ripe for profit taking.  W/C and KW/C still near the lows on a weight-adjusted basis.

Before switching away from wheat, worth noting the changes in deliverable stocks yesterday.  Minneapolis saw another nice bump in Duluth with supplies now at 20.025mbu vs. 19.544mbu last week and 16.180mbu last year.  Combined supplies in MPLS/DUL now total 25.935mbu, up  32.8% from a year ago at this time.  This makes the spread strength a little more peculiar, although protein spreads continue to suggest a shortage of premium milling wheat in the country.  SRW total wheat stocks fell 791,000 bushels last week to 58.683mbu which would compare with 48.516mbu last year at this time.  Deliverable grades fell 867,000 bushels to 38.434mbu, however, which is around 6.5mbu lower than a year ago.  Milling grade supplies continue to drop while non-deliverable grades hold to build.  HRW supplies fell 905,000 bushels on the week to 44.430mbu vs. 59.681mbu a year ago.

Domestic margins for corn end users as complied by www.rjomrt.com mostly fell last week with gross ethanol margins calculated at $0.68/gln vs. $0.73/gln last week and $0.91/gln last year.  Broiler crush was estimated at 74.93c/lb vs. 78.01c/lb last week and 72.59c/lb last year.  Hog crush fell to $70.55/hd vs. $75.30/hd last week and $128.87/hd last year.  Cattle crush remains negative at $55.96/hd vs. $60.04/hd last week and $129.91/hd last year.  Crush margins in C-IL remain positive.

Weekly ethanol production will be released at 9:30 this morning with a lot of focus on the continued decline in estimated margins.  It seems most market observers are waiting for ethanol production to decline along with margins, much the same traders are waiting for crude oil production to decline along with price.  Production last week at 978,000bbls/day was well above the 909,000bbls/day needed while stocks increased to 20.631 million barrels.

 

Bottom Line: A little back and fill for row crops after the largest rallies in weeks.  It doesn’t seem like the US farmer is engaged at these prices just yet, but how long the gains hang around could have a lot to say about that.  Monitoring weekly demand statistics along with basis and spreads should give us the clearest view of where price is headed.  South American farmers have been slow sellers as well recently, but have a mountain of grain to throw at the market in coming weeks/months.

 

Good Luck Today.

 

High Temp 2-4

 

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.

 

2/3/2015 Morning Comments

Good Morning,

 

Outside Markets as of 6:15am: Dollar Index down 0.0710 at 94.4390; Euro up 0.00060 at 1.13560; Aussie Dollar down 1.75% at 0.76490; S&P’s are up 9.00 at 2026.00; Dow futures are up 70.00 at 17,369.00; 10-yr futures are down 0.30%; THE Nikkei closed down 1.27% at 17,335.85; The DAX is up 1.20% at 10,958.05; The IBEX-35 is up 2.25% at 10,560.00; Gold is up $4.00 at $1280.90; Copper is up $8.85 at $257.85; Crude Oil is up $1.53 at $51.10; Heating Oil is up $0.0479 at $1.8054; Paris Milling Wheat is up €2.00 at €185.00/MT.

A surprise rate cut by the Reserve Bank of Australia sent stocks there to a near-seven-year high, but continued pummeling of the Aussie Dollar sent it to the lowest level since May 2009.  RBA cut its benchmark interest rate by 0.25bp to a record low 2.25% in an attempt to revive the economy which is being hit especially hard with the fall in commodity prices.  A particularly interesting article from www.sentimentrader.com took a look at correlations with the VIX “fear gauge” and found that Interest Rates and the US Dollar currently have the largest negative correlation with the index, a sign that traders deem these two markets to be more important than most others at the current time.  The interest rate:VIX correlation stands at -0.80 and the Dollar:Vix sits at -0.44, both the most extreme of the last two years.

Fairly quiet Midwest radar this morning with the exception of some snow moving across MT and ND.  There will be several rounds of precip moving across the upper-Midwest the next several days with heaviest amounts seen in MT/ND/MN to the tune of 0.50-0.70” of moisture.  Many of these areas of the upper-Midwest have entered drought status on the latest drought monitor, so some precip relief is needed.  Extended weather maps look to remain fairly steady the next 15-days with normal/above precip for the upper Plains and Great Lakes while a drier bias holds for the southern plains and US-SE.  Temps will remain normal/above in the west and normal/below in the east.  Hard to call SAM weather anything but favorable.  Harvest as of Monday in Brazil was estimated at 6% vs. 3% a week ago.

 

A bit of turnaround Tuesday action in our grain markets led by row crops which find themselves up over 1.0% heading into the 7:00 hour.  All of our markets remain in downtrends to varying degrees, and need substantial upside progress to flip trends higher.  It appears as though wheat and corn especially are searching for the level which incites consumer demand above and beyond passive buying to cover spot needs.  Despite corn being off 45c from the December highs and wheat off $1.70, managed funds still seem ready and willing to shed corn length and engage wheat shorts.  Index funds have finally ceased their sell-commodities program, but until crude oil can mount a sustained rally, we shouldn’t expect that demand to return.  February can be an especially slow month for commodity news, aside from the spring insurance pricing period.  Otherwise traders will be looking forward to the February 20th USDA Outlook Conference at which the USDA gives us their first guess about the 2015/16 balance sheet.  It does feel as though next year’s crop will be the next opportunity for our markets to really break from current ranges.

Several states released crop progress reports yesterday afternoon, and going into the reports there was a fair amount of concern given precip patterns during the month of December.  The first map below shows the percent of normal precip for the month of December in KS/OK/TX/SE-CO.  As one can see, there were notable moisture deficits in OK and the TX-panhandle.  Fast forward a month to the end of January, however, and much of that deficit appears to have been erased with favorable moisture patterns across TX throughout Jan.  CO reported winter wheat conditions at 38% G/E and 14% P/VP.  KS wheat conditions were seen at 46% G/E and 14% P/VP. OK wheat conditions were estimated at 41% G/E and 13% P/VP, while TX was seen at 42% G/E and 16% P/VP.  Spring wheat and oats planting was said to be finishing up in S-TX.

Wheat/corn spreads hit fresh contract lows yesterday for the WH/CH through WZ/CZ contracts, while KWK/CK through KWZ/CZ also hit fresh contract lows.  On a front-month continuous basis, W/C is at the lowest levels since mid-July, while KW/C is at the lowest levels since July 2013.  When looking at history, W/C typically trades in a range between 50c and 150c, with the exception of 2007/08 and 2011/12 when W/C moved outside of this band for an extended time period.  So given that band, W/C at +123.75c is still near the upper level of that band despite the $1.25 move off the highs.  However, W/C also hasn’t traded below $1.20 since July-2013 either, and seasonally W/C begins to strengthen by the end of February.  Managed fund positions could have much to do with that spreads trajectory and their willingness to extend current positions will guide the spread.

Export inspections data released yesterday morning showed wheat shipments at 14.5mbu vs. the 19.8mbu needed, corn shipments at 26.0mbu vs. 34.8mbu needed and soybean shipments at 62.4mbu vs. the 12.1mbu needed.  The biggest surprise was obviously the torrid pace soy shipments continue to run at despite the world transitioning to SAM supply in another 30-days.  Shipments now total 1.376bbu, up 18.8% from a year ago while the USDA marketing year forecast stands at 1.770bbu.  This 77.7% shipped percentage is extremely impressive and might suggest the USDA’s export forecast is still a bit too low.  Many private forecasters are carrying 1.800bbu in their balance sheets, but shipments and cancellations during February will give us a better clue than anything as to the USDA export potential this year.

Corn basis continues to work its way higher, probably a sign of slow farm gate selling more than anything.  PNW corn shuttles went home bid +102/103H, up 2-3c from a week ago and likely a reseller short trying to cover positions after the dearth of farm selling.  CIF NOLA corn barges went home bid +58/62H for Feb, +59/62H for Mar and +54/57K for AM.  Call these up 2-3c from Friday’s levels.  Columbus and Evansville 90’s seem to be grouped around option-price bids and +6/8H for offers.  Decatur, IL is bid +8H, up 4c from Friday.  Given the PNW’s lack of competitiveness with the Gulf, poor ethanol crush margins and slack livestock margins for cattle and hogs, would characterize above basis strength as lack of farm gate replacement until proven otherwise.  Regardless, keep eyes on the CH/CK at wider than -9.00c, especially as the index funds get set to roll H length to K this week.

GASC tendered for Mar 1-10 shipment overnight with results expected later this morning.  Interestingly, GASC lowered the moisture content ceiling to 13.0% with no allowances to 13.5%, which might limit French availability.  In addition, GASC specs call for max 1.25ppm vomi, something US-SRW will have a difficult time meeting.  How the tender shakes out will be interesting, especially with the almost certainty Russia and Ukraine won’t be participating.  Separately, StatsCan will release grain stocks as of Dec 31, 2014 tomorrow morning.  Average trade estimates are looking for all-wheat stocks to fall 13% to 25MMT, which would be the second largest supply at the end of the year since 1996.  Canola stocks are estimated at 10.7MMT, down 14% from the previous year.

 

Bottom Line:  Our markets are probably owed a firmer day following the bludgeoning witnessed the last several weeks.  Basis and spreads aren’t indicating our markets have run into robust consumer demand, so be wary about calling bottoms just yet.  Farm selling has slowed to a trickle, but it’s hard telling how far we are from panic induced selling.

 

Good Luck Today.

AHPS Dec 2-3

AHPS Jan 2-3

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.