5/30/2014 Morning Comments

Good Morning,

 

Outside Markets as of 5:45am: Dollar Index down 0.0440 at 80.4500; Euro is up 0.00080 at 1.36100; S&P’s are down 1.75 at 1916.25; Dow futures are down 7.00 at 16,674.00; 10-yr futures are down 0.14%; The Nikkei closed down 49.34 at 14,632.38; The DAX is down 0.03% at 9,935.88; The IBEX-35 is up 0.29% at 10,765.60; The Russian MICEX is down 0.59% at 1,438.83; Gold is down $2.80 at $1254.30; Copper is up $1.00 at $315.45; Crude Oil is down $0.38 at $103.20; Heating Oil is down $0.0070 at $2.9127; Paris Milling Wheat is down €0.50 at €191.00/MT.

Mostly easier global equity markets as we limp into the weekend following weaker than expected growth data yesterday in the US.  Yesterday the Commerce Department said the US economy contracted by 1.0% in Q1, far worse than the -0.1% initial estimate.  Blaming the weather has been the popular thing all spring.  In Japan, the yen gained vs the dollar after reports showed Japan’s consumer price index rose 3.2% in April, the highest inflation rate since 1991.  Bloomberg ran a story earlier this week which highlighted the collapse in volatility across the major asset classes (stocks, bonds, forex, oil and gold).  The average among those assets is now the 2nd lowest on record going back 20-years, bested only by a few days in November 2006.  Fine sense of complacency setting in across our various markets.

Pretty quiet radar across the Midwest this morning ahead of the well discussed rain event in the WCB and Northern Plains this weekend.  Rain will begin later today across W-SD and ND where heaviest totals look to be as high as 1.70” in NC-SD.  Rain will move across the whole area through Monday with 3-day totals in W-NE/NC-SD/E-ND/N-MN approaching 2.50” according to this morning’s models.  The system moves east and south early next week bringing a general 0.50-1.00” to many areas of the central/east corn belt.  Another system is being touted in days 6-7 which could bring rain to the central and southern plains.  Totals look similar to this weekend’s storm in localized areas.  Still no change to the greenhouse-esque forecast with above normal temps and precip expected in the 6-10 and 8-14 from NOAA.  Below is the current soil moisture ranking from NOAA.

 

Another day, another lower board with July Chicago wheat looking for its eighth straight lower close and the 16th lower close in 17 sessions.  The lack of competitiveness of US wheat with other global exporters was discussed here yesterday, and this morning several news sources are reporting Russia is withdrawing most of its troops from the border with Ukraine.  Like it or not, the market has to date seen no evidence of any supply disruptions from either Ukraine or Russia, and their crops do not appear as though a lack of financing will have an impact.  Therefore, the market is rightfully extracting the premium we pumped in for that very reason in addition to favorable crops developing around the globe.  Add in softer cash markets due expanding harvest in the south, managed funds exiting or going short and terrible technical action and we’ve got the recipe for a market like we’ve seen.  One could argue the wheat/corn spread is still too wide with WZ/CZ sitting at $2.00 and KWZ/CZ sitting at $2.72/bu.  Those spreads remain seasonally weak into mid-June before bottoming post-harvest.  Market still watching HRS planting progress in the north, but this doesn’t seem like enough to stabilize and rally.

Quickly on the topic of acreage in the north, many trying to quantify acreage losses on corn and spring wheat.  Most carrying 0.50 million acre loss on both crops in the north which seems as fair as anything.  Worth pointing out regardless of the size of the cut, final HRS acres have come in below March prospective plantings 7 out of the last 10 years, suggesting strongly acreage will come down some, especially considering the weather.  On corn acreage, however, final planted corn acres have been above March intentions in 6 out of the last 10 years, and soybean plantings have been under March intentions in 8 out of the last 10-years.  The aforementioned suggests corn acres could rise, HRS and soybean acreage could fall.  That’s looking in the rear view mirror, however.

Weekly ethanol production keeps pumping along with yesterday’s update showing 927,000bbls/day, up slightly from last week’s 925,000bbls/day and the highest production level in six weeks.  This was also better than the 899,000bbls/day needed to hit the USDA’s updated ethanol production forecast.  The most impressive statistic from the weekly update was on gasoline demand which showed US gasoline demand at 9.31 million bpd for the week ended May 23rd.  This was 4% above a year ago, the highest of 2014 and higher than any single week in 2013.  This bodes well for the summer driving season we’re about to enter, and certainly puts support under ethanol demand and ethanol margins.  As of May 30th, we have no reason to doubt the USDA’s ethanol production forecast, and it could quite possibly be in need of upside correction in coming WASDE reports.

While still on the topic of corn, we’d be remiss without discussing the strength witnessed in corn spreads yesterday and the strength being seen overnight.  With cash surging at almost every demand location, the CN/CU has in kind started to rally, hitting +7.50c overnight, the highest level since March 7th.  The CN/CZ has pushed to +8.00c, the highest since mid-May.  This is due to CIF premiums screaming for corn and river basis now trading 7.8-11.1c above gross delivery equivalence through LH-June.  Given those calculations, the CN/CU looks fair priced above 8.0c.  The US farmer is not selling corn right now for either old or new crop.  He doesn’t like the old crop price, and he isn’t willing to sell new crop until his crop is further along the development curve.  If the market wants corn, then basis should rally.  Check.  After that, spreads should tighten.  Check.  Last but not least, futures should follow suit and produce a price which engages the farmer to turn palms in.  Waiting.  Most industry participants don’t think the US farmer reengages until $5.15-5.25 basis July futures on old crop, $5.00 on new crop or until pollination reaches 50%.  Stress test short futures deployment given the aforementioned.

Export sales will be released this morning with wheat sales expected at 0-200TMT for old, and 160-500TMT new.  Corn is seen at 300-600TMT of old crop, 50-400TMT new.  Soybeans at -100/+100TMT old and 300-900TMT new.  Soymeal sales are expected at 50-160TMT old, and 75-220TMT new.  Soyoil sales are seen at 10-25TMT old and 0-10TMT new.

Following is a link to yesterday’s episode of the Agweb.com radio show “Market Rally” with Chip Flory in which he and I discuss acreage, soybean demand and world wheat dynamics.  http://www.agweb.com/multimedia/market_rally/

 

Bottom Line:  Lower open to cap off what has been a lower week for our grain markets.  Week-to-date, July Chicago wheat is down 22c, July corn is down 9c and July soybeans are down 17.75c.  Weather remains the largest fundamental driver with corn developing well, soybeans possibly gaining acreage and HRW estimates bottoming.  Corn demand remains robust, however, and the cash markets are suggesting we shouldn’t press futures any lower than current levels.  Positive trade in corn wouldn’t be a surprise considering the signals basis and spreads are throwing off.  Old and new crop remain two divergent stories in corn and soybeans, and being short old crop isn’t something I want to be a part of at current levels.

 

Good Luck Today.

 

Soil Moisture 5-30

 

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.

 

 

5/29/2014 Morning Comments

Good Morning,

 

Outside Markets as of 5:40am: Dollar Index down 0.1570 at 80.4140; Euro is up 0.00260 at 1.36190; S&P’s are up 1.25 at 1910.25; Dow futures are up 14.00 at 16,641.00; 10-yr futures are up 0.05%; The Nikkei closed up 0.07% at 14,681.72; The DAX is down 0.07% at 9,932.44; The IBEX-35 is down 0.50% at 10,703.60; The Russian MICEX is up 1.41% at 1,446.00; Gold is down $5.90 at $1253.80; Copper is down $2.20 at $315.15; Crude Oil is up $0.27 at $102.99; Heating Oil is up $0.0029 at $2.9333; Paris Milling Wheat is up €0.50 at €193.00.

Muted equity markets overnight as most await updated growth and jobs figures out of the US this morning.  First up, weekly unemployment claims are expected to decline 8,000 claims to 318,000, reversing part of last week’s 28,000 claim jump.  Continuing claims are expected to drop 3,000 to 2.65 million.  Next Friday’s payroll data for May is seen adding 217,000 jobs, down from April’s 288,000.  Traders are expecting this morning’s first revision of Q1-GDP to be revised lower to -0.5% from the originally reported +0.1%, while Q1 personal consumption is seen inching higher to +3.1% from the first estimate of +3.0%.  Pending home sales for April are expected to jump 1.0% m/m, adding to the +3.4% increase witnessed in March.  The market is expecting a 250,000 bbl rise in crude oil inventories on this morning’s EIA report.

Quiet Midwest radar this morning ahead of the weekend’s pending storms.  The initial rains will impact E-MT/W-ND later today into tonight with additional rainfall hitting W-SD by Friday.  The system is expected to track east Saturday into Sunday with N-MN seeing heavy rains of 2.0”+.  Totals have been reduced for SD, although Sun-Tue is still seen as producing rainfall for the majority of SD/MN/IA/E-NE with heaviest totals seen in SE-SD and along the MN/WI border with 1.7-1.8” expected.  KS is forecast to see another decent shot of rain by mid-week next week, although coverage and placement are uncertain this far out.  The major change to the weekend/early week system is a shifting of the heaviest totals north and west to E-ND/N-MN from the SD/ND border.  Planting progress will be interrupted in the N. Plains.  No major changes to the 6-10 and 8-14 day outlooks from NOAA as of yet.

 

Don’t call it a bounce, but wheat markets are firmer this morning for what seems like the first time in a month.  To be more precise, if July Chicago wheat manages to close positive today, it will be the first higher close in eight sessions and the second higher close in sixteen.  Wheat is due for a relief bounce as fundamental data still doesn’t suggest a bottom is in.  Harvest is expanding in the south, adding harvest pressure, world FOB values remain sharply cheaper than US stem, cash markets are softer and Black Sea wheat areas are facing less threatening weather than a week ago.  On the technical front, July Chicago wheat has retracement support around $6.28 as well as the February highs around $6.24.  Otherwise, this looks like a technical bounce in an “oversold” market to use the correct technical parlance of our times.  July soybeans are trading back through $15.00, but within recent ranges.  Corn charts mirror wheat charts.

Just glancing down the list of world FOB values shows a person how far from being competitive US wheat is.  At the close yesterday, French FOB Rouen wheat was offered $244.67-248.76/MT, while FOB Russian 12.5% protein wheat changed hands for Aug/Sep at $258/MT.  For comparison purposes, US-SRW CIF put replacement at $249.40-250.50/MT, while 12.0% pro HRW CIF TX-Gulf was offered $322.98/MT FOB.  So on a grade-by-grade basis, French wheat is beating SRW by $4-6/MT, while Black Sea wheat of quality is cheaper than US-HRW by $60/MT on a FOB basis.  Even Argentine wheat has been coming down in recent weeks with offers last night around $375/MT FOB vs $400/MT 2-weeks ago.  Still not competitive, but coming down from the plateau they’ve been on for months.  Australia continues to receive rain in most regions aside from Southern Australia and values are following world numbers.

On a side, should be noted the sharp drop in KCBT basis yesterday with all classes of wheat losing 15-25c yesterday alone.  12.0% protein bids were seen at +90/100N vs +115/125N a week ago and +132/142K a month ago.  TX-Gulf bids also fell for HRW with those sliding 5c to +143/140N.  Expanding harvest and lack of competiveness on the world stage is definitely having an influence.  MPLS 14.0% protein wheat on the spot floor was seen yesterday at +125/135N vs +135/150N a week ago.

Reuters ran article two days ago talking about the 9.2mbu of SAM soybeans unloaded or about to unload at US ports.  They also said another 12.6mbu is either loading or waiting to load to head to the US.  For comparison purposes, the US exported 3.3mbu of soybeans in the latest reporting week, and will crush roughly 28mbu per week Jun-Aug.  The SAM imports on the books should get us into July, leaving 6-8 weeks until the next marketing year.  When one looks at the imports from this perspective, it becomes clear the level of SAM soybeans heading to the US shouldn’t move the demand needle nearly as much as it will sell headlines.  All of the SAM soybeans imported plus those waiting to sail would only replace 2/3’s of one week of US crush.  As noted yesterday, C-IL cash crush margins remain about $0.30/bu higher than a year ago, so no slowdown looks imminent if supply can be sourced.

The Rogers Index Fund roll begins today while the Goldman roll begins June 6th.  Were it not for these two large indices picking their length off the front end and hurling it at the back end, one would assume corn spreads would be quite a bit better than current levels based on recent CIF trades.  Lack of movement anywhere in the system has pushed the river corridor above gross July delivery equivalence, which should be bullish the spread.  Yet, hard to want to step in front of 100,000+ contracts being rolled the next 7-10 days.

Export sales are delayed until tomorrow, but weekly ethanol production will be released at 10:00am this morning.  It will be important to see production maintain a grind near 920,000bbls/day to feel confident about the USDA’s recently revised estimate.

 

Bottom Line:  Technical bounce for wheat, while soybeans still come to grips with the fact SAM imports won’t totally solve the problem, and we’ve got 2.5 months until the earliest US new crop supplies become available.  US wheat isn’t competitive, and it looks increasingly likely we’ve found a bottom in US wheat production estimates.  World supplies are developing well, and planting progress in the North remains the only other big unknown.  Corn basis and spreads suggest a near-term bottom might be at hand, but at the end of the day corn weather is good and acres won’t be known for another month.

 

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.

5/28/2014 Morning Comments

Good Morning,

 

Outside Markets as of 5:35am: Dollar Index up 0.0820 at 80.4340; Euro is down 0.00120 at 1.36220; S&P’s are up 4.50 at 1913.75; Dow futures are up 36.00 at 16,690.00; 10-yr futures are up 0.12%; The Nikkei closed up 0.24% at 14,670.95; the DAX is up 0.09% at 9,950.11; The IBEX-35 is up 0.26% at 10,742.00; The Russian MICEX is up 0.52% at 1,424.65; Gold is down $0.60 at $1265.10; Copper is up $0.85 at $318.60; Crude Oil is up $0.21 at $104.32; Heating Oil is up $0.0056 at $2.9450; Paris Milling Wheat is down €1.25 at €191.75.

Quietly mixed equities overnight as the S&P 500 hit fresh record highs again yesterday.  What’s interesting, or troubling depending on your position, is the S&P 500 is the only major index out of the four (Dow, S&P, Russell, NASDAQ) which is hitting fresh highs.  Several trade publications have pointed out volume on the rally has been especially light, raising red flags about its sustainability.  On last Friday’s fresh record high, only 23 stocks of the 500 in the S&P closed at new highs, just 4.6% of the total membership. 30-yr mortgage rates fell to a fresh 7-month low last week of 4.14%, which was down 44bp from the 3-yr high hit back in August of 2013 at 4.58%.  The current mortgage rate is 74bp above the 3.40% seen a year ago.

Popcorn showers scattered around the Midwest this morning, but no organized activity to speak of.  The first post-Memorial Day weekend models certainly provided some color yesterday afternoon, bringing in a sizable moisture event for the WCB and Northern Plains later this week. Moisture will finish up in the east by tomorrow, and then systems will move into ND Thursday with both Dakotas seeing moisture Friday into Saturday. The weekend will bring more precip with much of SD seeing 0.50-3.50” for the 3-day period ended Monday.  The same event moves into MN/IA/WI Tuesday into Wednesday.  The total forecasted precip for the 7-day stretch is in the map below.  If this verifies, there should be a fair amount of acreage which gets enrolled in the PP program.  6-10 and 8-14 day maps keep the ideal weather in place with above normal temps and precip through June 10th.

 

Ugly session yesterday followed by more of the same in grains overnight while the soy complex is clawing back just less than half of yesterday’s losses.  Themes remain the same, regardless of how repetitive they seem to be getting: ideal growing conditions for planted crops, lack of competitiveness on the world wheat export market, tight old crop soybean balance sheet and planting progress which has caught back up to averages after a sluggish start.  While planting progress looks close to average, I think this could be a bit misleading considering the date, forecast and remaining acreage in ND/N-MN.  As of last night, 88% of the nation’s corn crop had been planted, spot on the 88% 5-yr average.  But in ND, only 67% of the crop has been planted, leaving 973,000 acres unplanted as of Monday.  In MN, there are 1.634 million, in WI 1.353 million, MI 1.245 million and OH 1.147 million unplanted corn acres.  In total, these five states have 6.35 million unplanted corn acres with PP dates to be hit by all five this week.  Farmers can choose to keep planting, but lose 1% of their maximum coverage rate each day past the PP date.  Weather where the crop is planted is ideal, and shouldn’t be marginalized, but the June acreage report is shaping up to have a few surprises.

Soybean planting progress came in above expectations at 59% planted vs the 5-yr average of 56%.  Notable laggards are the same 5-states as in corn, although still lots of time for soybeans to be planted, and obviously some of the aforementioned corn acres could, and will, get switched to soybeans if seed is readily available.  On spring wheat planting, decent progress was made last week with 74% of the crop planted vs the 5-yr average of 82%.  40% of ND remains unplanted, while 33% of MN is unplanted.  North Dakota accounts for roughly 46% of the total US spring wheat production, so these 2.3 million acres are incredibly important.  The forecast below looks as though planting could get shut off into June.  Winter wheat conditions stabilized last week, moving up 1pt to 30% G/E vs 31% last year.  HRW and SWW conditions remain well below averages while SRW conditions remain favorable.

The other notable feature yesterday was the strength in corn basis and spreads as the board continued to sink.  Farmer selling has shut off with fieldwork taking precedence or current prices just not encouraging much selling.  This should limit significant downside from current levels given end user profitability, but there is still a very large amount of corn on-farm the farmer has to move this summer.  When and how this corn moves will prove very interesting for our cash markets and spreads.  CIF corn bids for afloats are worth +70N against no offer, FH-June +64N.  Call these up 3-5c w/w.  Iowa corn processor basis was also firmer by 2-5c yesterday from week ago levels.  PNW rail corn is holding +100N, while HETX shuttles are bid around +78/80N.  The CN/CU and CN/CZ are weaker overnight, but firmed to 6-session highs yesterday.  As a general rule of thumb, when cash basis and spreads are firming in unison, it’s always a good idea to stress test outright short futures deployment.

Speaking of end user profitability, US Composite Broiler prices moved to new all-time record highs again last week of $1.2062, up from $1.167 the week prior.  As discussed last week, this is due in part to poultry’s competitiveness with beef and pork as an alternative protein source, but also due to the big demand by almost all fast food restaurants now offering breakfast, raising the demand for egg whites and yolks.  Ethanol and hog crush remains strong, although cattle crush is slipping to some of the lowest levels on record as feeder cattle prices remain too high relative to fats.  Cash crush margins for soybean processors in C-IL remain north of $0.90/bu, suggesting little rationing taking place in that sector.  Certainly feels like we’re headed for a mid-summer moment of panic in the soybean market based on the pace we’re crushing and exporting.  Time, and spreads, will tell.

It was reported several places last night the Bureau of Meteorology said the odds of an El Nino weather event later this year held at 60% this month, raising the odds of a drier than average growing season in Australia’s wheat belt.  Results are mixed on its effects during the US growing season, but generally a drier than average Australia and SE-Asia result from this phenomenon.

Worth noting the difference in fund positions going into the growing season this year vs last year.  Last year, funds were short -5,000 contracts of corn, long 60,000 soybeans and short -67,000 Chicago wheat for a net position of -12,000.  This year, funds are long 145,000 contracts of corn, 75,000 contracts of soybean and short -13,000 Chicago wheat for a net position of +207,000.  This 200,000 contract swing is important considering the growing weather to date, the better planting progress to date and the poorer technical picture as we roll the calendar over to June.  Funds need a reason to stay in their current positions.  Whether acres in the northern states is enough remains to be seen.

Ethanol production will be delayed until tomorrow at 10:00am due to the Memorial Day holiday.

 

Bottom Line:  Mixed start, but two-sided trade in all of the major Ag’s wouldn’t be too big of a surprise given the beating witnessed recently.  Corn basis and spreads are firming with outstanding end user profitability on top of a US farmer uninterested in current prices.  The farmer can’t hold out forever, but in the short-term, basis and spreads should provide some board support.  Soybeans can’t break too much given the pace we’re using soybeans at and the relative eternity until the end of the marketing year.  The HRW crop is done getting smaller, and the board will have hard time rallying on a 750mbu HRW crop if the US is the only wheat problem in the world.

 

Good Luck Today.

 

HPC 5-28

 

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.

5/27/2014 Morning Comments

Good Morning,

 

Outside Markets as of 5:30am: Dollar Index down 0.1560 at 80.2370; Euro is up 0.00250 at 1.36510; S&P’s are up 8.75 at 1905.75; Dow futures are up 73.00 at 16,659.00; 10-yr futures are down 0.04%; The Nikkei closed up 0.23% at 14,636.52; The DAX is up 0.33% at 9,925.42; The IBEX-35 is up 0.30% at 10,720.00; The Russian MICEX is down 2.46% at 1,413.66; Gold is down $8.30 at $1283.60; Copper is up $0.55 at $317.30; Crude Oil is down $0.27 at $104.08; Heating Oil is down $0.0140 at $2.9409; Paris Milling Wheat down €1.75 at €191.00.

Weekend elections in Ukraine saw the election of Petro Poroshenko, the West’s preferred candidate, but this didn’t bring a unified Ukraine.  Ukrainian troops killed dozens of rebels, and began airstrikes in certain locations.  Poroshenko has a fortune of some $1 billion according to Bloomberg.  In the US this week, there will be seven appearances by Fed officials, $96 billion of T-note auctions and today’s durable goods orders which are expected to show a decline of -0.7% and -0.1% ex-transportation.  Increases of 2.5% headline and 2.1% ex-trans were witnessed in March. Today also sees May US consumer confidence which is expected to be up 0.7 to 83.0.

Several systems on the radar this morning including widespread rain in E-TX, and scattered showers in the upper-Midwest and Great Lakes.  The long awaited rain event in the southern plains came through over the weekend with best totals recorded in C-TX where as much as 6-8” fell locally.  Most areas saw the rain forecasted, although W-KS/E-CO looks to have been left a little light based on the radar return maps shown below.  Overall, the rains will be welcome for fall crops and cotton, although benefit to the wheat is uncertain.  It didn’t hurt, that much is for sure.  Shower activity will continue this week with several systems forecast.  The best rains for the Midwest will occur in the central/east corn belt and the Northern Plains where ND could see up to 3.2” in the southern part of the state over the 5-day run.  6-10 and 8-14 days maps still show above normal precip and temps for the Midwest.

 

Ugly evening session for the Ag markets following the long Memorial Day weekend with July KC wheat working on its 8th lower session in the last nine days.  Soybeans are seeing the largest nominal losses, but price remains well inside recent ranges with uptrends still intact.  Planting progress should have rolled hard for areas up against PP dates over the weekend and later this week, but areas already completed are seeing nearly ideal conditions across the major corn producing states.  Planting progress on tonight’s report is expected between 88-92% on corn vs 87% average, and soybeans are expected at 55-65% vs 54% average.  Spring wheat progress will be watched closely as well with PP dates approaching and ND only 25% planted as of last Monday.  2013’s slow spring had 55% of the crop planted as of last week.  How the rain impacted the HRW crop will also be of interest on the condition score.

Paris Milling Wheat continues to trade under heavy pressure and is now down to the lowest level since February.  Over the weekend it was reported France’s soft wheat crop is rated 75% G/E vs 67% last year, and 76% of the crop is heading which is about a full week ahead of average.  Combine this with the fact Paris/KC spreads are still trading near the largest discount in 2-years and it isn’t difficult to see the kind of export year it’s shaping up to be.  On a side, new crop wheat sales as of mid-May now total 129.9mbu, the third largest of the last 5-years and heavily favor HRS at 45.7mbu.  With current inter-market cash spreads and expected production distribution, HRS sales could see a big advancement in 2014/15.

Friday’s COT data confirmed the price trend of the last week with substantial selling witnessed in both corn and Chicago wheat.  Large specs sold 55,865 contracts of corn last week, taking their net position down to 145,237 contracts, the smallest since March 11th.  In Chicago wheat, funds sold 17,261 contracts to flip their net long to a net short of -13,856 contracts, the largest short position in 9-weeks.  The old crop demand story for corn and soybeans has kept funds interested in Ags with large long positions, but the ideal growing conditions for new crop was going to make at least a partial exodus only a matter of time.  One only needs to go back 4-5 months to a time when funds were wielding a 150-200,000 contract net short position in corn and a -100,000 contract short in Chicago wheat to see how quickly positions can reverse when sentiment turns.  The current chart picture for December corn and July Chicago wheat aren’t going to make any fund feel comfortable with their current positions.  Major chart damage was inflicted last week with little for substantial support for another 10-20c.

Worth keeping an eye on this week will be the 3.5MMT of corn set to be auctioned from state reserves in China on May 29th, as well as the 300,000MT of soybeans which were to be auctioned today although I haven’t seen any results yet.  Over the weekend, one prominent mid-south researcher released their updated balance sheets and maintained their 94mbu carryout for soybeans citing a crush and export pace that is simply unsustainable.  The USDA’s latest 13/14 soybean carryout projected was 130mbu and a 3.8% stocks/use ratio.  NOPA’s latest member crush data for April showed the daily rate of US soymeal consumption was 83,000 tons, which was slightly larger than February and March and well above last year’s 78,000 tons.  With record livestock prices, meal rationing is proving more difficult in 2014.  Last year, July soymeal ended up rallying to $535.50 by expiration, and it is difficult to see how we will accomplish this rationing task with lower meal prices and higher livestock feeding profitability.  It would appear old/new inverses and outright flat price performance to the upside isn’t over just yet.

On the week, CIF corn premiums were down 2-5c, PNW firmer by 5-8c and Argentine corn premiums firmer.  Argentina’s harvest continues to be hampered by wet weather with only 31% of their crop harvested vs 71% average, while soybeans are 70% harvested vs 93% last year.  Their March corn exports were only 620,000MT, the smallest March since 1995.  Quality concerns will also begin showing up.  Brazilian soybean premiums were softer w/w as farmers sell into the rally.  Spot beans are around -33N, with Argentina at -25N.  CIF SRW was 3-5c firmer w/w.

 

Bottom Line: Soft start to the week for our Ag markets as we battle large fund long positions, excellent crop weather for what’s planted, expanding southern plains harvest and a poor technical outlook.  Our markets need to give the funds a reason to defend their positions in corn and wheat or else another leg lower looks inevitable.  We are very much in weather markets, but right now the weather is ideal.  Don’t lose sight of marketing objectives just because of a rough few sessions.  They don’t call this the silly season for nothing.

 

Good Luck Today.

RFC 5-27

 

Tregg Cronin

Market Analyst

Tregg.Cronin@halocommodities.com

www.halocommodities.com

@5thWave_tcronin

 

 

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

5/23/2014 Morning Comments

Good Morning,

 

Outside Markets as of 5:50am: Dollar Index up 0.1630 at 80.4180; Euro down 0.00310 at 1.36190; S&P’s are up 1.00 at 1891.25; Dow futures are up 6.00 at 16,534.00; 10-yr futures are up 0.05%; The Nikkei closed up 0.87&, The DAX is up 0.23%, the IBEX-35 is down 0.06% and the Russian MICEX is off 0.19%; Gold is down $3.30 at $1291.70; Copper is up $2.45 at $316.65; Crude Oil is up $0.13 at $103.87; Heating Oil is up $0.0043 at $2.9544; Paris Milling Wheat is up €0.75 at €198.00/MT.

Economic data in the US today will include April new home sales which are expected to show an increase of 10.7% to 425,000, reversing much of the 14.5% plunge in March.  If confirmed, today’s data would leave the series 11% below the 5 ½ year high of 470,000 units posted in January.  Yesterday’s existing home sales were up 1.3% to 4.65 million units for the first increase of 2014.  The median home price of a new home in March was up 11.2% to $290,000 while the median price of an existing home price in April was $201,700.  Supply of new homes was sitting at a 2 ½ year high in March of 6.0 months.  The big weekend news will be Sunday’s presidential election vote in Ukraine.  Russia and Russian-backed protestors have been unable to block the vote, but will probably fail to recognize the vote as legitimate.

Rain activity picking up in the southern plains with areas in the south registering solid rain amounts in the last 24 hours, although the heaviest totals should fall today through Sunday.  N-TX has so far registered the best totals and is receiving the best rain this morning.  Totals over the next 5-7 days are still expected to range from 0.75” in NW-KS to as high as 4.7” in NC-TX.  All three major HRW states should see rain, and the moisture will extend north to bring solid precip to MO, who needs it badly, IA/ND/SD/NE.  North Dakota’s rain is expected to be drawn out over the next 5-7 days, but as much as 2.0” could fall in total.  This won’t be welcome as farmers race to wrap up seeding against PP dates.  6-10 and 8-14 day maps from NOAA continue to paint a nearly ideal forecast for developing crops in the Midwest with above normal temps and precip.  The south is also expected to see above normal precip.

 

A little relief bounce in grains and a continuation of the winning ways in the complex as we head into the long, 3-day Memorial Day weekend.  The story continues to be about soybeans while grains find a back seat.  Including this morning, July beans are sitting on a 3-day rally of 55c, although yesterday’s highs at $15.36 will offer the first line of defense.  Lots of things are contributing to the soybean rally including firming domestic basis levels prior to the rally, firmer CIF NOLA barge bids, chatter of bids rolling to the SQ and net positive export sales.  Yesterday’s export sales report showed old crop sales of 6.0mbu which were the largest in 8-weeks, and way over what we need to be doing a weekly basis.  A couple crushers in the eastern corn belt have joined the +90SN club, while crushers in the west appear more reluctant to push bids above recent highs.  Cash traders noted several crush plants in the west were rolling bids to the August from the July which is usually bullish the spread as commercials decide not to take on any additional short exposure against the July.  The Brazilian farmer did sell beans yesterday along with the US farmer, however, with FOB PGA paper trading down to -32N from -27N earlier this week.  The one farmer who appears hesitant to engage as of yet would be those in Argentina.  Those farmers held beans through the inverse collapse last year, and inflation is worse in 2014 than in 2013, so hard to know what might induce widespread selling from that group.

New crop soybean bids finally cooled off yesterday as the US farmer leaned in with CIF barge bids for OND trading to +88/90X vs  +91/92X Wednesday.  PNW shuttles also eased slightly to +152/150/148X vs +153/152/150X 2-days ago.  Likely to see a slowdown in the new crop soybean purchases from China as has been present every day this week.  No material change to US corn basis with US corn still competitive on a FOB basis through September and into October.  Somewhat odd to still see US corn competing that closely with ARG/BRAZ paper considering we should see a slowdown in soybean loadings in Brazil and a ramp up in corn exports anytime.  US corn remains the cheapest FOB source through July at $212.10/MT vs $216.43/MT in Argentina and $215.24/MT in Brazil.

Modest strength in corn spreads this week with the CN/CU pushing to +3.25c vs +1.00c Tuesday with similar moves in the CN/CZ.  The market looks as though it is coming to grips with an improving SRW crop as spreads there continue to trade weak.  The WU/WZ traded down to -18.75c yesterday, a new contract low.  In addition, US wheat remains uncompetitive on the export front, limiting any sort of underlying cash strength for the spreads or flat price.  Minneapolis continues to correct against KC, and this move is probably not over with.  Rains in the southern plains will benefit at least some of that crop even if the majority is too far along.  In addition, forecasted rain in the Northern Plains will slowdown HRS planting once again, keeping fears of PP acres in the north for a second straight year fresh.  Canadian seeding is also behind averages, although they’re wielding the largest old crop stocks in 25 years to help compensate.  Nonetheless, as harvest pressure increases in the south, and doubts over acreage of HRS persist, should be a fair amount of upside left in owning Minneapolis vs KC at current levels of -20.00c.

December corn has retraced almost 61.8% of the entire $4.35-$5.17 rally, and should consolidate near current levels.  The difficult thing is knowing whether we’ll get a B-wave as part of a larger degree ABC corrective sequence, before another round of fresh lows, or if the A-wave is still in progress.  Tonight’s COT data will be very interesting to see if the managed money continue to hold their position or if they’ve begun liquidating.  The US farmer isn’t selling a lot of new crop corn, but the funds have a 200,000+ contract net long hanging over the head of the market.

 

Bottom Line:  Would expect a modest bounce in all of our markets today as traders take some risk off the table ahead of the long 3-day weekend.  Rainfall totals throughout the session and the weekend will be key for early week direction.  Wheat harvest in the south will continue to intensify, weather forecasts for the Midwest look ideal, old crop soybean demand remains untenable and acres in the north remain a large question mark.  Still have 2-17 days before all areas hit their Prevent Planting dates.  With prices above spring guarantee levels, those acres will have every effort to get planted.

 

Good Luck Today and have a good Memorial Day Holiday.

 

Radar 5-23

 

Tregg Cronin

Market Analyst

Tregg.Cronin@halocommodities.com

www.halocommodities.com

@5thWave_tcronin

 

 

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

 

5/21/2014 Morning Comments

Good Morning,

 

Outside Markets as of 5:45am: Dollar Index down 0.0810 at 79.9590; Euro is down 0.00040 at 1.36920; S&P’s are up 3.75 at 1871.75; Dow futures are up 3.00 at 16,371.00; 10-yr futures are down 0.06%; The Nikkei closed down 0.24% at 14,042.17; The DAX is up 0.14% at 9,652.56; The IBEX-35 is up 0.23% at 10,477.60; The Russian MICEX is down 0.14% at 1,423.64; Gold is down $0.90 at $1293.70; Copper is down $2.40 at $312.10; Crude Oil is up $0.70 at $103.03; Heating Oil is up 0.0062 at $2.9521; Paris Milling Wheat is unchanged at €199.75/MT.

Easily the biggest financial market news overnight was the deal reached with Russia and China agreeing to a long-term natural gas contract by way of a new pipeline.  The contract agreement is for Gazprom to supply 38 billion cubic meters of gas annually over the next 30-years, although the major sticking point in the decade worth of talks , price, wasn’t discussed.  Gas will start to flow in four to six years after the construction of the $22 billion pipeline linking Siberian fields and China.  The agreement was reached on a state visit by President Putin to China.  Given Russia’s poor state of financial affairs as of late, I wonder if Russia requested any form of down payment?  China would certainly seem to be the winner of the whole Ukraine/Russia situation.  Today will see the release of the minutes from the April 29-30 FOMC meeting with investors looking to see if the committee began discussing its eventual exit strategy from its five years of non-standard monetary policy.

Not much in the way of moisture on the radar this morning with many looking forward to the weekend rain event, especially farmers in the southern plains.  The map below shows the 7-day forecasted precip map, and while the totals might be a bit exaggerated, this event could be the best chance of moisture in the southern plains in months if not years.  The majority of the rain will begin tomorrow into Saturday, while another round moves in early next week.  Other than delayed progress in the north, the forecast for those with planted crops is proving nearly ideal.  Moisture is expected to remain above normal, and temps are moving to above normal as well providing heat and water to emerging crops.  This fact will not be lost on the markets, aside from the uncertainty of PP acres in the north.  While difficult to have much faith in at this point, the 3-month outlook from NOAA released 5/15/14 is calling for normal/below temps for the Midwest with a cooler bias for SD/MN/ND, and normal/above precip with the above biased over NE/SD/WY/CO/UT.  Again difficult to have much faith in, but worth keeping track of.  No changes to note in the Black Sea forecast.

 

Mixed overnight trade in the grains with wheat and corn softer while soybeans are posting 5-8c gains.  The feature yesterday was the sharp price reversal in wheat, and to a lesser extent corn, as the session wore on with wheat contracts closing in the red despite 10-15c gains earlier on in the day.  Pick your reason on the reversal: southern plains moisture, beginning of wheat harvest in the far south, favorable conditions in Europe, managed fund long in wheat, etc.  More than likely a combination of all three and a realization that with the recent Egypt and Iraq tender business, the US is so far out of the market we might be doing too good of job rationing demand.  The real question with the discussed moisture event in the southern plains is will it do any good, and will it cause quality issues in the already mature wheat?  KC wheat continues to correct against MW and W.

Overnight, China released April import data which showed wheat imports at 373,606MT, up 83% y/y and the Jan-Apr period up 147% y/y.  The US shipped no wheat to China in April, but Aussie and Kazakhstan imports were higher vs a year ago.  Corn imports from the US totaled 8,508MT, down 97% from a year ago, with Jan-Apr imports down 39%.  Ukrainian corn imports were 50,300MT, up sharply while YTD they’ve shipped 243,787MT.  Soybean imports also chugged along with total April imports at 6.502MMT, up 63% y/y and Jan-Apr imports of 21.8MMT up 41% y/y.  Brazil supplied 3.949MMT, up 70% in April, while the US sent 2.523MMT, up 53% y/y.

One important feature worth noting is the recent run to all-time record prices in poultry, joining pork and beef to give the US consumer record meat prices in all three major categories.  The US National Composite Weighted Average Broiler price hit $1.167/lb last week, the highest on record and more than double the price from the early 2000’s.  The Financial Times ran an article earlier this week talking about the sharp increase and the scarcity of egg whites with egg whites now commanding a higher price than yolks for the first time in years.  When one stops and thinks about it, this makes sense considering every fast food chain in America is now offering some form of breakfast including Taco Johns and Taco Bell.  The low-cholesterol egg white sandwiches have become a mainstay on breakfast menus.  Truly interesting we’re raising the price of the entire meat spectrum from the highest end choice beef cut, to the lowest priced egg white sandwich at McDonald’s.  Either way, broiler profitability is at record highs, and the expensive meat prices should ensure continued demand for feed products to finish these various animals.  Won’t be an consolation for the consumer, however.

Corn basis off the west coast keeps firming with May-Jul corn shuttles now worth +97N vs +87/89/92N a week ago.  FOB UP Grp-3 rail basis has improved 6c w/w, and HETX basis is now +76/81/82N for MJJ vs +76N for MJJ a week ago.  Cheap ocean freight, weak rail freight and weeks of depressed basis levels seem to be helping corn find a home on the export market.  CIF corn bids are largely unchanged to maybe a skosh weaker with spot boats called +59/63N.  New crop soybean bids continue firming, and for good reason with the recent Chinese buying for 14/15.  PNW soybean shuttles are now bid +153/150/146X/F for OND vs +143/143/140X/F a week ago.  Gulf bids could be called 3-6c better.  Start that program back up.  Pro scales on KCBT are a mixed bag with lower pro weaker and higher pro firmer w/w.  Minneapolis 14.0% basis is firmer by 5-10c w/w.

There are a few troubling observations in the corn market, similar to wheat before its recent plunge.  For starters, the recent COT data has showed a real slowing in large spec buying with the group sitting on a net long of 201,102 contracts.  This would compare with the 6-year average of 105,650 contracts.  In the options pit, sizable put buying has been witnessed with the 480 puts open interest rising 27% over the last two-weeks to 14,122 contracts.  What’s more, implied volatility has been dropping as price has come off the highs, falling from over 30% at the end of March to 21.74% yesterday afternoon.  This shows little excitement about the easing prices.  In addition, On-Balance-Volume, which is a cumulative running total of up-day volume vs down-day volume has dropped to -657,118 contracts, the lowest level since 12/10/13, and really the first time we’ve gone negative since price bottomed in January.  This essentially says the volume on down days has overtaken the volume on up days which highlights the stronger resolve on those lower days.  Combine all of the aforementioned with favorable weather forecasts and the stage isn’t set for managed funds to increase their long exposure.  If they begin paring their long position, and farmers begin to feel more comfortable with their new crop prospects, one has to wonder who is going to be there to buy?  Of course, with December corn nearing the $4.60 spring guarantee price, farmer selling could begin to slow with the government put nearing ITM status.

EIA data at 9:30 with ethanol production data to be watched closely to see if the 929,000bbls/day level needed is achieved.

 

Bottom Line:  Mixed markets to get going with weather forecasts continuing to be the focal point.  Lots of questions need to be answered in regards to the southern plains moisture: will it do any good?  Will it cause farmers to rip up wheat and plant something else? Will it cause quality problems?  Time will tell.  Otherwise the old crop story remains supportive for corn and soybeans, while new crop months should continue to feel pressure from nearly ideal forecasts.  The market is still searching for that tipping point from old crop to new crop.  We’re not there yet as evidenced by soybeans.

 

Good Luck Today.

 

HPC 5-21

 

Tregg Cronin

Market Analyst

Tregg.Cronin@halocommodities.com

www.halocommodities.com

@5thWave_tcronin

 

 

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

 

 

5/20/2014 Morning Comments

Good Morning,

 

Outside Markets as of 5:30am: Dollar Index up 0.0430 at 80.0360; Euro is down 0.00120 at 1.36990; S&P’s are down 2.00 at 1880.25; Dow futures are down 14.00 at 16468.00; 10-yr futures are up 0.02%; The Nikkei closed up 0.49% at 14,075.25; The DAX is down 0.19% at 9,640.72; The IBEX-35 is up 0.14% at 10,440.60; The Russian MICEX is up 0.04% at 1,414.38; Gold down $1.30 at $1292.50; Copper is down $0.95 at $315.75; Crude Oil up $0.11 at $102.22; Heating Oil is up $0.0022 at $2.9431; Paris Milling Wheat is up €2.50 at €199.75/MT.

Lightly mixed global markets this morning, but European sovereign bond prices continue to find themselves under a fair amount of pressure.  For most of 2014, Eurozone periphery debt, like that from Greece, Italy, Spain and Portugal, has enjoyed a very strong start with many of the aforementioned yields trading to decade or even historic lows.  Many investors scratched their heads at this considering we are barely removed from the European debt crisis.  Most of the former PIIGS are still skating on very thin ice, garnering much of their strength from ideas of continued monetary easing by the European Central Bank.  Former Russian President and current Prime Minister Dmitry Medvedev told Bloomberg Russia and the West are slowly moving toward another cold war as sanctions continue to be ratcheted up.  Ukrainian Presidential elections will take place later this week.

Scattered showers across the Great Lakes Region this morning, otherwise mostly quiet across the Midwest.  Most moisture will be confined to the eastern corn belt the next couple of days before the long awaited moisture arrives in the central/southern plains Friday.  In the first round of showers, a general 0.25-0.50” is expected to fall across KS/NE/Panhandle/N-TX, but the heavier moisture comes over the weekend.  The 7-day forecasted precip map is below with the majority of the moisture in the Plains falling Friday night through Monday.  No matter what the stage of the crop is, the moisture will be welcome for an area witnessing its third year of drought.  NOAA’s 6-10 and 8-14 day maps are finally beginning to show widespread above normal temperatures across the Midwest which will be well timed for improving emergence.  Precip looks to remain above normal which will be ideal for planted crops.

On the global weather front, there continues to be discussion on the blocking pattern setting up over the Commonwealth of Independent States (CIS), including parts of Ukraine, Kazakhstan and parts of Russia.  Models haven’t been updated this morning, but yesterday’s analysis showed the blocking pattern remaining in place for the next week to ten days which will follow dry conditions which have been in place for months in some of these areas.  Highest temperatures will be seen in Kazakhstan with 90’s to near 100 degrees.  There are chances for rain in the Black Sea region next week, which could provide relief for some of the aforementioned areas.  I don’t think the situation is at a critical breaking point just yet, but it should be monitored as wheat moves through its development stages in some of the countries.

 

Relief rally overnight in wheat and corn while soybeans continue to add to their impressive gains yesterday.  The sharp midsession rally yesterday in the complex had many fundamentalists scrambling as domestic and export cash markets appeared rather steady yesterday.  Some mentions about frost on early planted beans last week were made, although this didn’t fit with the front-end led strength.  Likely a combination of large spec buying, and possibly a bit of Chinese pricing.  One of the next big features will be the index fund roll during the first week of June in which index funds will be rolling a large portion of their 144,679 contract net long in soybeans.  Add to it the 83,132 contracts held by the large spec , and there is plenty of reason to watch the SN/SQ and SN/SX in coming sessions.  CIF NOLA soybeans largely steady yesterday with spot boats called +73/85N.  One market observer did mention analytic firm Informa was now using a 94mbu old crop soybean carryout which is obviously untenable.  Informa doesn’t believe the carryout will get that small, simply that imports and inverses will have to make sure it doesn’t happen based on current exports and crush margins.

Crop Progress report out yesterday afternoon with most of the numbers coming out as expected with corn planting progress pegged at 73% complete vs 76% average, and solidly above last year’s 65%.  Largest laggards continue to be ND/MN/WI/MI with an estimated 11 million unplanted corn acres in these four states.  Soybean planting progress was estimated at 33% vs 38% average and 21% last year.  ND is 5% vs 25% average, MN at 16% vs 45% average, WI at 16% vs 45% average and MI at 8% vs 26% average.  Spring wheat planting jumped to 49% complete vs 64% last year and 68% on average.  Solid progress was made last week in the north, although weekend showers likely slowed progress.  ND is 25% planted vs 55% average, and MN is 20% planted vs 72% average.  All other states are near averages.  Spring wheat can be planted into June, but obviously that’s not ideal.  Tough call on HRS acreage.

Winter Wheat conditions slipped again this week with the national rating falling 1% to 29% G/E.  Largest declined were witnessed in NE (-7%) and SD (-5%).  Conditions are now solidly below 2013 and 2011 and are the lowest since 1996.  National winter wheat heading progress was estimated at 57% vs 44% last week and 58% average with TX at 89%, OK at 96% and KS at 71%.  The question now becomes with the southern plains wheat already heading out, what will the below moisture actually accomplish?  Headed wheat has its yield potential already determined.  Russian spring planting is progressing normally with 64.2% of total planned area planted.  Spring wheat planting is 50.7% complete on 6.7 million hectares which is 2.2 million more than  year ago.  Spring acreage is expected to be up 1.7% y/y with the Ag Ministry using a grain harvest of 97MMT which would include recently annexed Crimea.

Began looking at Black Sea production and export estimates yesterday given the aforementioned blocking pattern, although much is conjecture at this point given dependency on weather forecasts.  Nonetheless, while qualms can be made about Ukraine and Russia, the real country worth focusing on seems to be Kazakhstan, even though much of their wheat production isn’t harvested until August-September.  They’ve been receiving 50-80% of normal precip for months, yet the USDA is still penciling KAZ wheat production at 14.5MMT vs 13.94MMT last year and 9.84MMT the year before.  A few MMT difference in Kazakhstan isn’t going to upset the world wheat balance sheet, but the entire region begs attention.  The Black Sea is the low cost supplier to MENA, and trade flows out of that region have far reaching consequence.  Near-term weather forecasts are especially important.

No change to the global corn export situation with the US remaining the cheapest FOB source through July.  CIF NOLA corn is pegged at +65N for JJ, while Argentina sits at +90N for June, +72N for July and Brazil is +70N for July and +60U for August.  PNW and HETX corn basis continues to slowly improve, although corn spreads have been in a downtrend the last week which isn’t a fundamentally bullish input.  CN/CU is trading at +1.75c overnight vs +7.00c on the 12th, and the CN/CZ is now at +1.25c vs +10.5c on the 12th.

 

Bottom Line:  Expect firmer markets today for the duration as wheat and corn bounce from depressed levels in technical fashion while soybeans continue to struggle with their impossibly tight balance sheet.  Market participants will be watching the southern plains rains closely this week as to what it means for overall production figures.  The corn market is now close to 75% planted by May 20th, and ahead of last year with better weather to date.  The northern plains states will remain a sticking point as farmers weigh switching crops, PP and continuing to plant.  Plenty of wrinkles to get through the next 6-weeks, but old crop corn demand remains robust, soybeans are tight and the wheat situation is still playing out, both in the US and abroad.  Stress test your marketing plans against current levels and +/- 50c to see what 2014 looks like, and do it often.

 

Good Luck Today.

HPC 5-20

Tregg Cronin

Market Analyst

Tregg.Cronin@halocommodities.com

www.halocommodities.com

@5thWave_tcronin

 

 

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

 

 

5/16/2014 Morning Comments

Good Morning,

 

 

Outside Markets as of 5:35am: Dollar Index up 0.0780 at 80.0810; Euro is down 0.00240 at 1.36900; S&P’s are down 4.75 at 1862.75; Dow futures are down 37.00 at 16,384.00; 10-yr futures are up 0.08%; The Nikkei closed down 1.41% at 14,069.59; The DAX is down 0.66% at 9,592.56; The IBEX-35 is down 0.32% at 10,331.80; The Russian MICEX is down 0.17% at 1,379.61; Gold is up $1.20 at $1294.80; Copper is up $0.25 at $314.70; Crude Oil is up $0.16 at $101.67; Heating Oil is up $0.0067 at $2.9573; Paris Milling Wheat is up €0.75 at €199.75/MT.

Global equities weaker to close the week after sluggish growth statistics yesterday in Europe, and ahead of housing data in the US today.  April housing starts, due out later today, are expected to show an increase of 3.6% to 980,000, adding to the 2.8% increase in March.  April building permits are expected to show an increase of 1.3% to 1.01 million, following the 2.4% decline to 990,000 in March.  Early-May US Consumer Confidence from the University of Michigan is expected to show a 0.4 point increase to 84.5, adding to the 4.1 point increase in April.  After hitting 37.72 in early March, the Russian Ruble has strengthened right at 7.0% to 35.07 vs the Dollar, suggesting less perceived risk in the Ukrainian/Russian tension than a month ago.  Reports suggest Russia and Ukraine are closer to reaching a deal on Ukraine’s outstanding natural gas bill due by June 1st.

Light showers across W-SD/W-ND this morning as well as a few showers across IL/IN impacting growing regions this morning.  Showers will impact the southern Midwest/northern Delta today with E-KS seeing some precip, but the majority of the Midwest should be dry. More chances for the southern plains tomorrow with W-KS seeing prospects for precip.  Sunday/Monday still exists as the best chance for precip in the Northern Plains with MT/W-ND seeing 0.25-0.92” in the heaviest locales.  Otherwise moisture should move into MN/IA/WI later on Tue/Wed.  Given the open weather until mid-week next week, the vast majority of the corn belt should wrap up corn planting with even farmers in the west making substantial progress where able.  ND/N-MN will remain slow.  No change in NOAA maps: normal/below temps and normal/above precip for most of the Midwest, but warmer central/east.  Below are the soil moisture profile and days since significant rainfall in the south.

 

Quiet markets to close out the weak with bulls still licking their wounds from yesterday’s trouncing.  Heavy charts, poor export sales and prospects for moisture in the southern plains all combined to weigh on wheat heavily yesterday, and spillover selling hit corn as well.  Planting progress has improved substantially this week, and it appears likely we will cross the 75% planted threshold by Monday, a big line in the sand.  Most analysts’ yield models contain a planting date component based on when national planting progress reaches 75% complete.  Usually, negative implications don’t occur until after May 15th-20th, keeping this year’s crop on pace for trend yields, making the huge assumption of normal weather the rest of the summer.  With the length wielded by managed money in the Ags, our markets will be subject to downdrafts without a bullish influence to support prices.

NOPA crush data was released yesterday, and even though estimates were achieved, it seemed as though markets were hoping for a bullish surprise.  April NOPA member crush was 132.7mbu vs estimates of 132.3mbu and 120.1mbu last year.  Soybean oil stocks were 2.058 billion pounds vs estimates of 1.990 billion.  This year’s April crush was still the highest in five years, and adjusting for total US crush, Sept-Apr soybean crush is estimated to total 1.233bbu, up 3% from last year.  To hit the USDA’s marketing year crush estimate, May-Aug crush would have to decline 6% from last year to total the smallest May-Aug crush since 2003/04.  With board crush margins still 37-50c, and cash margins closer to 80-90c, the task of rationing crush to that degree will prove incredibly difficult.  Old/new spreads and basis should continue firming to help achieve this formidable task.  One other note on soybeans, it’s worth noting the very big bearish expectations for new crop soybeans via the options pit.  The November put/call ratio this morning is sitting at 293.6% vs 283% a week ago and 275% a month ago.  Always worth keeping abreast of this contrarian indicator.

Informa Economics released their revised acreage ideas yesterday during the session, dropping corn acres slightly to 91.581 million from 91.691 million, and increasing soybean acres to 82.073 million from 81.493 million.  Other Spring wheat acres were inched higher to 12.059 million from 12.009 million in March.

Several SE-Asia feed grain importers bought or are working tenders this week with South Korea’s MFG buying 188,000MT of corn for new crop delivery, and 106,000MT of feed wheat for October delivery.  South Korea’s NOFI bought 130,000-140,000MT of corn without a delivery date specified.  Would appear importers are stepping up on the break to book, and old crop corn basis would suggest the same as it firmed again yesterday.  PNW corn shuttle bids for old May/Jun are now seen at +90/92N vs +86/89N a week ago.  HETX basis is now +76/78N vs +65/70N a week ago.  Looks as though business was booked just before the board break with basis having to strengthen even further to help shorts get bought in.  CN/CU had been in a firming trend until yesterday’s downdraft, but it’s not uncommon for managed money downdrafts to squash the forward curve despite underlying cash strength.

World Weather, Inc. put together a nice summary of global wheat growing weather yesterday with the underlying theme being favorable growing conditions almost everywhere except the US Southern Plains.  Australian rainfall during May has been above average with just southern Australia remaining in deficit.  Chinese rainfall has been well above average in March/April/May with wheat development right around joint stage.  Pakistan and India received a bit too much rain during harvest which has caused some quality issues, but total tonnage was healthy.  Europe has had above normal rainfall this spring with rainy weather expected to prevail for the majority of the continent.  Weather in the Commonwealth of Independent States has been ideal in western growing areas, but areas in the East including a portion of Russia and Kazakhstan have witnessed 50-80% of average precip.  Temperatures are expected to rise to above normal in much of this area in the next two-weeks.  The developing El Nino should produce better rainfall for this area, but the slow onset may not arrive in time to bring widespread relief.  This remains the only area outside of the US with troubling production prospects.

 

Bottom Line:  Mixed/weaker markets to close the week with July wheat sitting on 43c losses and July corn off 23c as of this morning.  We have to feed the bull every day, and right now there isn’t enough fodder to keep the sizable managed money long positions content.  Crops are getting planted, moisture prospects are favorable across the Midwest, US wheat isn’t competitive and technical sellers have shown up en masse.  Continue monitoring basis and spreads for signs the rout is over, and review marketing targets early and often.

 

Good Luck Today.

 

Soil Profile 5-16 Days Since Rain 5-16

 

Tregg Cronin

Market Analyst

Tregg.Cronin@halocommodities.com

www.halocommodities.com

@5thWave_tcronin

 

 

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

 

 

 

 

 

5/15/2014 Morning Comments

Good Morning,

 

Outside Markets as of 5:40am: Dollar Index up 0.1890 at 80.2620; Euro  down 0.00420 at 1.36630; S&P’s are down 0.75 at 1884.75; Dow futures are up 1.00 at 16587.00; 10-yr futures are down 0.02%; The Nikkei closed down 0.75% at 14,298.21; The DAX is down 0.05% at 9,749.61; The IBEX-35 is down 0.49% at 10,562.10; The Russian MICEX is up 0.31% at 1,393.37; Gold is down $1.40 at $1304.50; Copper is up $0.15 at $316.15; Crude Oil is down $0.30 at $102.06; Heating Oil is up $0.0036 at $2.9662; Paris Milling Wheat is down €1.00 at €200.00/MT.

Strong data from Japan overnight, but that couldn’t help the Nikkei close firmer.  Japan’s economy grew 5.9% annualized in the first quarter, the strongest growth in over three years as citizens raced to extend purchases ahead of new sales taxes which were implemented April 1st.  Analysts say the tax could cause recession later this year.  Crude oil continues to trade heavy after EIA data yesterday showed US crude oil production hitting a 28-yr high of 8.428 million bbls in the week ended May 9th.  Conversations continue about the US relaxing its ban on exporting crude oil.  Several articles yesterday reported on Russian companies facing tougher lending restrictions from western banks as sanctions against the country start to bite.  New loans are said to carry clauses forcing immediate repayment or default if sanctions affect borrowers or their beneficiaries.  Unemployment claims in the US today are expected to show a 1,000 claim increase to 320,000 vs last week’s decline of 26,000.  Continuing claims are seen rising 5,000 to 2.690 million.

Quiet Midwest radar aside from some precip impacting the Great Lakes and far SE-US.  Rainfall this week has been heaviest east of the Mississippi where planting progress is furthest along.  Crop observers in the eastern corn belt are now talking in terms of emergence instead of planting, highlighting the break neck pace at which they planted last week.  The rainfall is probably welcome for most producers.  The central and western corn belt will remain dry until Sunday/Monday when the next chance of showers moves in.  Heaviest precip looks like it would fall in MN where as much as 0.50-1.1” is forecast this morning.  Additional moisture see in WY/W-SD/NE out into Wednesday.  A slight warm up into the weekend, with 70’s seen on Sun/Mon.  More of the same in the 6-10 and 8-14 from NOAA: normal/below temps and normal/above precip.  Planting windows look to remain tight.

 

Softer grains markets again this morning following yesterday’s losses as wheat is working on its fifth lower close in a rose.  This would mark the longest losing streak in wheat since mid-January as charts begin to look heavy after July Chicago wheat moved below its 50-day moving average for the first time since mid-February.  Weekly continuous charts have gaps lower, and monthly charts are working on a bearish outside month lower.  None of the aforementioned leaves a good taste in the mouths of the funds who are sitting atop a fair amount of wheat length.  The milder weather in the southern plains, the improved planting progress in ND/MN at least until the weekend and the lack of competitiveness in US wheat exports are all contributing.  Worth noting, however, the Canadian wheat board pegged overall planting progress there at 6% vs 10% a year ago and 25% on the 5-yr average.  There are still supportive influences in the wheat market, but the run to $8.50 futures in Kansas City seemed to price in a lot of production loss and loss of demand.  Wheat/corn spreads remain near multi-year highs with KW/C sitting at +309.50.  We’ve been over +300.00c just four times since 2008, and only briefly.

One other note on wheat, the spread between Kansas City wheat and Paris Milling Wheat continues to move higher with KC now commanding a $22.44/MT premium to Paris on a front-month rolling basis, the largest premium since 2009.  If one moves to November Milling Wheat and Kansas City December futures, the spread is around $28.06/MT premium KC, the largest since last June.  Historical relationships always beg attention.

While old news at this point, price forecasts by Goldman Sachs were released yesterday during the session and seemed to incite profit taking by managed funds.  Goldman sees corn prices falling 20%, soybeans down 29% and wheat off 18% in the next 6-months as global inventories of the three crops rise during the 14/15 marketing year.  They see “sequential builds in inventories assuming normal weather in coming months.”  If only it were that simple.  China’s National Grain and Oils Information Centre sees higher grain production in 2014/15 after subsidies and other incentives encourage farmers to expand acreage under grains.  They see combined production in wheat, corn and rise of 552.14MMT, up 1.7%.  Imports of the three grains are forecast to fall by 34.3% to 11.5MMT, while consumption is expected to be up 2% to 530.93MMT, hurt by slower economic growth and negative margins for hog feeders.

As noted above, many are beginning to plug the current soybean shortfall with early harvested southern beans thanks to speedy progress in the Delta.  As of Monday, LA was 78% planted vs 61% average, AR 42% vs 36% average and MS 55% complete.  Combined soybean acreage in AL/AR/GA/LA/MS/NC/SC/TN/TX/VA is also seen rising to 11.9 million acres, the third largest since 1990.  Combined acreage would be up 7.2% from 2013, and would account for around 14% of the total crop.  Worth paying closer attention to the Delta this growing season, nonetheless.

Soybean basis continued firmer yesterday with eastern crushers now said to be paying north of +80N and in some cases as high as +85N.  This supported the CIF NOLA barge market which is now seen bid as high as +85N for May/FH-Jun vs +70N a week ago.  No untoward movement in SAM premiums which would suggest additional distressed vessels heading north, and Argentine soybeans remain at a sharp discount of -45N thanks to protein concerns which should prevent them from working into the US.  Corn basis worked firmer during the day yesterday as well with PNW, Grp-3 and HETX basis all firmer vs previous day closing bids.  It is likely additional corn business is being transacted off the PNW thanks to its discount on a delivered basis into SE-Asia.  New crop PNW soybean shuttles also continue to firm with SON trains now bid +148/152X.

Export sales estimates out today see wheat at 100-340TMT old crop, 150-300TMT new crop; corn at 200-625 old crop and 50-250TMT new; soybeans at -100/+100TMT old crop and 75-350TMT new crop; meal at 25-150TMT old crop, 0-150TMT new.  Soyoil sales are seen at 0-20TMT old and 0 new crop.  NOPA crush data out at 11:00am with average trade guess lining up right around 130-133mbu.

 

Bottom Line: Grain charts are looking heavier by the day, and aside from well publicized and well discounted southern plains wheat production shortfalls, the wheat bull isn’t finding much to hang his hat on.  Weather concerns in the Black Sea and planting delays in Canada are still in the background and worth paying attention to.  Corn is being weighed down by improved planting weather and the realization that at some point “rain makes grain.”  Old crop demand still appears strong, and some weather risk premium will need to be maintained.  Still seems fair priced 20-25c +/- from $5.00.  Soybeans are finding it harder to break old crop each day with firming basis, but acres for new crop appear to be on the rise.  Old/new spreads should remain strong incentivizing producers to move each and every last bushel.

 

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

5/14/2014 Morning Comments

Good Morning,

 

Outside Markets as of 5:50am: Dollar Index down 0.0860 at 80.0590; Euro is up 0.00090 at 1.37060; S&P’s are down 2.25 at 1892.00; Dow futures are down 10.00 at 16,665.00; 10-yr futes are up 0.25%; The Nikkei closed down 0.14% at 14,405.796; The DAX is down 0.14% at 9,741.08; The IBEX-35 is down 0.37% at 10,547.80; The Russian MICEX is down 0.21% at 1,382.36; Gold is up $6.00 at $1300.80; Copper is up $2.50 at $316.05; Crude Oil is up $0.25 at $101.95; Heating Oil is up $0.0029 at $2.9469; Paris Milling Wheat is down €0.75 at €202.75/MT.

Very little financial market news overnight, although plenty of head-scratching over the fact the S&P 500 hit new all-time, record highs this week while the NASDAQ and Russell 2000 are down 5-6% from their 52-week highs.  Investors are having a difficult time with this as the tech-heavy NASDAQ and the small-business heavy Russell are usually better indicators of risk, while the S&P 500’s broad company base is usually the more conservative of the three major indices.  In addition, analysts surveyed by Bloomberg continue to suggest the S&P 500 is undervalued by up to 4% compared with where they think it will close 2014.  The % of mutual funds parking their money in cash right now is near the lowest levels since the 50’s and 60’s, suggesting investors are heavily invested in the market.  Hasn’t paid to fight the trend yet, but equity market beg attention at these levels.

Showers moving across the eastern plains and northern Delta this morning, but mostly dry across the heart of the Midwest.  Some shower activity will occur in the far-eastern corn belt tomorrow, but otherwise, the central and western corn belt will be wide open the next 5-days allowing much needed fieldwork.  Shower activity increases in the west at the beginning of next week, but a great deal of progress could be made between now and then given the increased productivity of the US farmer.  This may be the Northern Plains’ best chance for catching up as 6-10 and 8-14 day precip maps from NOAA, shown below, bring above normal precip for the region back in beginning May 19th.  Prevent Plant dates for ND/SD/N-MN on corn are all around 5/25-5/31, so the date is approaching, but lots of corn can be planted in 10-days.  Black Sea ridge is still garnering attention 10-14 days out.

 

Quiet overnight session with July corn sitting inside a 3.5c range, and wheat mostly in a 6c range as we try to gauge additional planting progress, the state of the HRW crop and the health of US demand.  Basis seemed to be the word on Tuesday, especially in soybeans.  To wit, a couple of crushers in the eastern corn belt were said to have paid +75SN for nearby replacement crush which at that level would be over CIF NOLA bids at +73/80N.  The impetus would appear to be three-fold: 1) US farmer selling of old crop soybeans is nearly non-existent with supplies committed and fieldwork taking precedent.  2) It would seem distressed Brazilian soybean boats have been cleared up in the near-term, preventing additional beans from working into interior crush locations.  Spot basis at Paranagua is posted around -21N vs -47N two-weeks ago, so appreciably better.  Thirdly, US crushers are still armed with handsome crush margins with which to buy soybeans which bleeds over into expectations for Thursday’s NOPA  crush report coming in at 136-137mbu vs 153.84mbu in March, 120mbu in April of 2013 and the record 140mbu in April of 2008.  Margins were generally 55-90c/bu during April.  All the aforementioned would suggest old/new spreads aren’t done yet, and basis will continue to play a major role in sourcing beans the next 3-months.  The majority of the Brazilian soybeans aren’t going to arrive until after June 1.  Worth noting, both PNW and CIF new crop bean bids firmed 1-3c for Sept-Oct yesterday.

An article from Reuters overnight worth sharing.  http://www.reuters.com/article/2014/05/14/china-soybeans-idUSL3N0O015Q20140514  Coincidently, Dalian soybean futures have rallied sharply the past two sessions.  Maybe the 69MMT Chinese soybean import number isn’t ridiculously high as some are suggesting?

Soybean basis wasn’t the only firmer market yesterday as corn basis was uniformly better in what seemed like the first time in months.  PNW corn shuttle basis popped 2c, Group-3 rail was up 2c, Hereford, TX was up 4-6c and CIF barge bids were 1-3c better.  The strength could be coming from the South Korean sale for 126,000MT announced yesterday as the PNW has been the cheapest source of FOB corn in the US for several weeks now.  Whether this will lead to widespread basis strength in the country remains to be seen.  Domestic margins on corn end users remain healthy for 3 of the 4 with ethanol, broilers and hog crush all positive while cattle crush remains decidedly negative thanks to $190.00/cwt feeder cattle.  Newswires reported on Cargill closing a second beef packing plant in Dalhart, TX later this year following their closure of the Plainview, TX plant in 2013.

Interesting to note when breaking down the Taiwan wheat tender from earlier in the week the prices paid for 14.5% DNS came out to $9.65/bu and the 12.5% HRW at $9.35/bu.  The spread highlights the math many quality importers are going through right now thanks to the stretched out premiums being enjoyed by HRW.  HRS demand should see a resurgence for lower pro wheat in coming months provided weather patterns and inter-markets don’t change dramatically.  From Australia, Nidera is reporting a sharp discrepancy in new crop wheat bids from the Northern provinces to the south.  According to their weekly newsletter, bids in NSW/Queensland are as high as A$335-342/MT vs A$300/MT in Southern/Western Australia.  Much of this is due to drier soils in the north and fear over a possible El Nino later this year.

Ukraine’s Ag Ministry dispelled rumors of a sharp decline in Ukrainian maize plantings this week by reporting 86% of the planned corn area had been planted as of May 13th.  The Ministry said it expects farmers to sow around 12.6 million acres.  Analysts have been suggesting as much as 20% of arable Ukrainian farm ground might not get planted this year due to the increased prices of fuel and fertilizer and the difficulty in securing financing.  To date, those fears appear unfounded.

Ethanol production out this morning which needs to see an increase in weekly demand to support the USDA’s recently increased number of 5.050bbu for the 13/14 marketing year.  Weekly production needs to total around 929,000bbls/day through the end of the marketing year to support such a number.

 

Bottom Line:  Looks like a mixed day with eyes on export sales announcements and EIA data at 9:30.  The basis strength this week is a supportive feature to our markets, but the majority of the strength is likely due to a lack of farmer selling.  This seasonal strength happens every year.  Aside from that, we’re still in weather markets, although overall the weather is much less bullish than it was 2-weeks ago with corn being planted and HRW weather much less threatening.  Continue to monitor basis/spreads for clues on demand an keep chart objectives close at hand.  We’re getting into the silly season.

 

Good Luck Today.

 

NOAA 6-10 5-14 NOAA 8-14 5-9

 

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