From: Grohsmeyer, Alex [email@example.com]
Sent: Wednesday, November 27, 2013 4:23 PM
To: Undisclosed recipients:
Subject: Advance Insight - 11/27/13
Attachments: AI 112713.pdf
**Advance Trading will be closed all day, tomorrow, for Thanksgiving. We will re-open at 6am on Friday. The market closes at noon that day, so we will closing the office at 3pm that afternoon. Hope everyone enjoys their Thanksgiving holiday!**
Nearby corn was not able to muster any strength into the close as weak longs made a point to liquidate ahead of FND on Friday. With around 900tmt of corn expected to unload in China in the next few weeks, traders fear that more GMO issues could arrive since many of these vessels were booked 50 plus cents higher than what the market is at currently. Overnight 2 different Korean feed groups bought 118tmt of corn for April shipment. Today’s EIA report had production at 927k barrels per day which along with 2 weeks ago are the largest grinds we have had since Feb of 2012. Even though our ethanol grind has remained large, stocks again declined from last week by 61,000 barrels. Basis at the processors were steady to better for most markets whereas cif was steady to weaker (China GMO concerns?). Given the general firmness of corn basis and lack of farmer movement we have seen, it was surprising to see the Z/H weaken 3 cents heading into FND. Deliveries are not expected and will see export sales being released on Friday with the average trade estimates at 32 to 43 mbu. If we don’t see any unloading issues out of China, would expect to see additional strength in cif and spreads. Those that need time or have space, would look to have short hedges to the May given its current carry.
SF closed dn 9.25 at 1320 near the bottom of a 23c trading range. We have seen significant farmer movement since the 11/19 low of 1268.25. Export sales are expected of 26-48mbu with sbm of 150kt-300 on Friday. Market has been driven by export sales of beans and meal with yr-to-date bean total of 1.303 or 90% of what USDA expects for the year. Since June 1 the Chinese have taken 8.5mmt more beans in than last year. While their demand is up, we would guess (guessing is what we do wrt China) that half that increase has gone to rebuild pipelines. We would also look for S. Am Feb-May shipments to be up a minimum of 4mmt (which is our forecast of what their corn shipments will be down) with 7mmt increase possible. The job of the Chinese bean buyer is to not pay $5bil in costs associated with late shipment out of S. Am as they did last year. If cancellations occur due to excess US booking, it is anyone’s guess when that will occur. If they were to occur prior to March, it would mean the Chinese were confident that the S. Am infrastructure could meet the demand. My perception is a very big inverse would be needed for someone in China to make that bet.
Wheat ended the day ahead of the Thanksgiving Holiday higher with Chicago Dec closing 4 ¾ higher at 6.51 ¼ while KC wheat closed up 8 ¾ cents at $7.17. Wheat initially received spillover support from the rally in beans. In export business, Egypt booked 60K of French wheat for Dec 16-31 shipment turning down offers from Romania and Germany. US values are competitive but were not so for the specific time frame in this tender. This is the 14th time Egypt has purchased wheat since the removal of the Mursi regime – they had left the country well behind in procuring wheat to fill the needs of the food subsidy system betting on higher domestic wheat production. Egypt historically has been importing 10 MMT of wheat a year. The winterkill/wheat damage chatter surfaced in a few reports today – one article quotes Cropcast meteorologist talking about near term forecasts taking some of the severe cold out and with conflicting forecast on snow cover in the mix before the next cold wave. Less severe cold and snow cover should keep the wheat entering into dormancy from being harmed. Wheat in dormancy not covered with snow is at risk of winterkill if temperatures maintain below zero Fahrenheit temps for four or more hours. Northern plains are expected to get into the low 20’s Fahrenheit for the next few days warming up to the high 20’s next week before dropping back into the single digits by the first week in December. SRW basis was steady on the day. Expecting to see decent deliveries against the Dec. – although the deliverable stocks technically meet milling quality standards, falling numbers are less than desirable and therefore the miller has zero interest in deliverable stox – export market also not interested not only because of quality but also because of mother nature freezing the lakes. WZ/WH spread has reflected this widening 3 cents today (widened out this week from 5 to 12 ½ carry this week) – longs stood on the Dec long enough to spark concern by the short to move quality. Although milling quality wheat is technically trading at or above DVE values – the quality in deliverables does not match the quality of wheat trading at these DVE values. HRW basis steady/ protein premiums steady as well. Interesting day in Minneapolis wheat – Z/H spread widened 10 cents as expectations of Canadian wheat deliveries and deliverable quality is questionable if it will fit the needs of the miller. Spot Minneapolis wheat basis rolled to the March this afternoon.
This data is provided for information purposes only and is not intended to be used for specific trading strategies without consulting Advance Trading, Inc. No guarantee of any kind is implied or possible where projections of future conditions are attempted. Past results are no indication of future performance. All information is based upon data that is believed to be reliable, but its accuracy is not guaranteed. Please see http://www.advance-trading.com/index.php/disclaimer for full disclaimer