MORNING COMMENTS
2/12/2016
Pg 1
WATCH FOR MID DAY UPDATES—UNTIL FURTHER NOTICE
Monday, Oct 15, 2007 US WEATHER: Another round of rain in already wet areas of the central US in 2-3 days- Maybe not quite as much
this time. Next front- currently forecast to pound the southern plains with 1-3" general rains in about a week. (Advertised as a closed off
low that just sets there for days.) Rains continue this week from west to east., harvest progress will slow; but not open bowl cotton; winter wheat benefits \
MARKETS & STRATEGIES: Yesterday the US$ started to weaken in the night session to start a firming of commodity prices in general with metals and energy
markets the strongest --- grains were not ignored rallying back from a weak start to firm into the close continuing those gains for the day but wheat ran into a lot of
selling---some off of inter-market spreading that took it to limit down in Chi, KC, and Mpls during the day. Big export programs are in place with some scaled down
pricing that helped support wheat perhaps but wheat was down again last night 12 cents, corn down 2 with soybeans higher by 3 cents., crude 8645 up 32, gold
765.70 up 3.50, silver 12.910 up .055 - dollar 7809 up 6. Ocean freight rates for dry commodities on major Asian routes rose more than 11 percent on Tuesday,
compared with a week ago, bolstered by strong bids from a tonnage market long on demand and short on supply
A news story that said the EU would approve certain GMO corn varieties for import next week, however difficulty of identify preserve (IP) this class of corn so that it
can be shipped makes one wonder if much will be made of it. Look instead for a bending of the rules with more corn gluten feed and other corn processing products
set to move into Europe to alleviate feed grain shortages. Price action recently would indicate some stock piling toward this expectation.
Export loadings strong again last week. USDA added 6 mil to last week to take the total to 105.2 mil bu. The total this week pushed higher at 118 mil. Look for
additional adjustments that push this toward 125 mil --- getting closer to the weekly totals of 130 mil some have been anticipating for weeks now. Wheat shipments
were 34.4 mil bu with 1 mil added to last week. Included 9.7 spring, 11.7 hard, 7.1 soft red, and 5 mil white. Takes total shipped to 526 mil vs 321 last year. Corn
shipments were 40.5 mil bu taking total shipped to date to 254 mil bu vs 272 last year. Included 1.7 mil off the Atlantic, 2.3 off the PNW, and 33 mil out of the gulf.
There was 3.3 mil by rail. Bean shipments were up sharply to 35.7 mil bu plus 5.3 mil added to last week. This is still short of the 40 mil shipped this week last year.
Total shipped to date is 107 mil bu vs 124 last year. There were 9 vessels loaded off the PNW to China last week---nothing from the gulf. With all the export biz
exporters are seeing big margins or "elevations" at the gulf. 15 cents for corn. (Ie, price spread between the arriving barges and a loaded vessel). There was a time
(many years running) when they'd elevate corn for 0-2cts just to keep the elevator busy. Quite a big change. The PNW regularly gets tapped out, but the Gulf
typically has capacity to spare.
The weekly condition reports raised some eyebrows with corn conditions rated 2 higher at 65 pct G&E. There are still those that want to correlate reduced yields in
the S&D to this report. It is a waste of time. Corn harvest moved up 11 to 53 pct complete vs 41 normal. The bean harvest moved up 16 to 66 pct complete, which is
very close to normal which may explain why corn did not move up more. There was no bean condition recap. Winter wheat planting was up 15 to 73 pct complete.
The southern hard wheat states are still lagging but continue to catch up with normal.
Corn: Traded higher, while market gets out of the long wheat short corn spreading. We exited the long puts losing most of the protection---if you did not, hold today
as we should see a setback. I can’t see corn running away to the upside, but rather a continuing of sideways trading range. The market is paying up for far out
delivery with better basis---not sure that good basis will be there next spring/summer with increasing carryover---, however record oil prices are a positive factor even
though ethanol prices struggle. For the end users calls appear cheap, even at-the-money Dec's are not much more than a dime for 45 days of protection. March
Calls with 4.5 months of protection cost just $.25- these aren't bad prices for lots of peace of mind. We will not yet buy back any 2007 cash sales already made
for the carry into July 2008.
Soybeans: May be the only story out there. The bean basis in So Amer continues to firm with Brazil now at 75 over on offers ---a full 55 cents above US FOB to
FOB making US beans more competitive. Maintain long SX calls ($980 or $10—I own the $980’s ).
Wheat: Spreads worked well for awhile but now a sinking ship is taking no prisoners---hold the long Mpls/short Chicago spread or nothing. Spot hard wheat loading
program remains overbooked and there is no interest in adding to inventory until later in late Nov and Dec. Soft wheat gave back last weeks gains---so much for
Egypt? European offers along with more aggressive Black Sea supplies continues to hint at difficulty in selling SRW wheat. TODAY: Increase hedges in new crop
2008 July SRW to 65% at $6.72 or better. Cancel at 12:30 if not filled and use a sell stop at new lows instead.
L CATTLE:. Increased hedges from 50% to 75% in Dec Live Cattle at 99.50 previously Reduced that hedge coverage Thurs Oct 11 back to 50%. No short puts!
TODAY: Reduce coverage further to 35% on any 40 cent setback today.
LIVE HOGS: 75% hedged in Oct and Dec----hedged in Oct and Dec ($67). More at Oct at 67.40 earlier Thoughts more pork coming this fall was proven in the Hog
Pig report
TODAY: hold at 75% hedged in Oct and Dec for now--- We rehedged 20% on the close below 59.70 on Friday--COTTON: Reversed and closed lower yesterday. If you have any long positions, exit them on a close below 63, or straight sell stop at 62.50. Otherwise stick with
the long calls and add long cotton at 64.50 and every .25 higher.
RICE: Rice retreated all the way back to the uptrend support line—hedge more on a close below 11.50, with 11.80 as our exit.
SMS MORNING COMMENTS
2/12/2016
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