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International Assets Holding Corporation > INTL FCStone Blog

World Food Production Blog

Unless otherwise noted, the posts on this blog should be construed as market commentary, merely observing economic, political and/or market conditions, and not intended to refer to any particular trading strategy, promotional element or quality of service provided by INTL FCStone Inc. or its subsidiaries (specifically FCStone, LLC). INTL FCStone Inc. is not responsible for any trading decisions taken by persons viewing this material. Information contained herein was obtained from sources believed to be reliable, but is not guaranteed as to its accuracy. These materials represent the opinions and viewpoints of the author, and do not necessarily reflect the viewpoints and trading strategies employed by INTL FCStone Inc. or its subsidiaries. Reproduction without authorization is prohibited. All rights reserved.

April 23
Morning Livestock Report – April 23, 2014

Cattle futures traded firmer for most of the session yesterday, closing with modest 25-80 point gains and led by the deferred contracts. April-June live cattle spread tightening up to as narrow as $8.00 yesterday (it was $10.00+ as recently as last Thursday) as large traders are forced to pare April positions to less than 300 contracts today. Spot beef prices again trading firmer yesterday, up approximately $2 in both the choice and select. Note 50% lean trimmings are now trading back to $1.30/lb, up from $1.10 just a week ago. The USDA’s monthly Cold Storage data out yesterday again showed all beef stocks declining, down 21% versus last year and down 1% from last month at a time of year when we normally see beef stocks building. 405 mil lbs of total beef in storage is now the smallest total for any month since Sept 2010, a combination of reduced slaughter pumping less product into the pipeline as well as record high prices encouraging product to be pulled out of freezer inventories. “Official” estimates for this Friday’s COF report look something like this: April 1 on feed at 100.4% versus a year ago, March placements at 101.7%, and March marketings at 96.6%.

Adam Stout

April 23
Morning Grain Comments – April 23, 2014

Old crop-new crop spreads are correcting a bit this morning; Dec corn is stabilizing ahead of a week of planting delays, while nearby beans are under pressure from a slow trickle of Chinese beans redirected to the U.S.

Japan bought 109k tonnes of food wheat in their weekly tender as scheduled, including over 51k from the U.S., 25k from Canada, and 32k AUS. They also bought 29.5k tonnes of feed wheat and 33.5k tonnes barley in an SBS tender.

Two cargoes of Brazilian soybeans (totaling 125k tonnes) sold to China have been switched to the U.S., according to port data yesterday—they’re scheduled to arrive during the first half of May, in addition to two other BRZ soy cargoes that have already arrived this month, and more likely on the way.

Kazakhstan is boosting grain exports to Iran and China this year in an effort to diversify and reduce dependence on Russian and Ukrainian ports; wheat shipments to Iran have more than tripled in 2013/14 to 1.2 MMT, with total grain exports to China more than doubling to 370,000 tonnes this season. Cumulative ‘13/14 grain exports stand at 7.3 MMT, up from 5.7 MMT LY; they raised their ‘13/14 exportable grain surplus estimate from 9.0 to 9.5 MMT.

The CME announced yesterday that they’d be moving to variable grain price limits starting May 1, and resetting every six months thereafter. On May firsts, the limit will be set at 7% of the 45-day average price of the July contracts to April 16 (to the nearest five cents), and the same on Nov firsts—7% of the 45-day average price of the Nov or Dec contracts to October 16th. Starting this May 1, corn will move from 40 to 35 cents/bushel, with beans from 70 cents to $1, and CBOT wheat from 60 to 50 cents (for starters).

Brazilian soybean crushing association Abiove yesterday cut their 2013/14 BRZ soy export estimate by 1 MMT from last month, to 43.0 MMT, due to weaker Chinese demand; production was left steady at a record 86.1 MMT.

The Rosario Grains Exchange increased their 2013/14 ARG soybean estimate yesterday from 54.7 to 54.9 MMT, and corn from 22.7 to 23.0 MMT.

A USDA attache in Argentina yesterday pegged 2014/15 Argentine soybean acreage at 20.6 million hectares (50.9 mln acres), up 1.5% from the current season, with production at 57.5 MMT, up from 54.0 MMT currently.

Matt Zeller

April 17
Morning Livestock Report – April 17, 2014

After a quiet, lackluster trading session, both the live and feeder cattle markets settled with mostly minor gains. Settlements ranged from $0.10 lower to $0.47 higher across both markets. Fresh news remains limited, with the boxed beef markets tracking sideways to slightly firmer of late and only limited cash cattle developments to speak of. Yesterday, there was some scattered business in the North at $240 dressed and $150 live, generally steady with a week ago. There have been no reports out of the South. Asking prices remain at mostly $149-150 live in the South and $242 dressed in the North. We very well might not see any large scale volumes trade until tomorrow, though the futures market will be closed for Good Friday The cash markets could hold firm for the next few weeks, before transitioning into larger market-ready supplies in May and certainly June. June futures currently trading at a $10 discount to the nearby April. Overnight, live cattle futures traded just mixed and feeder cattle futures traded slightly lower. Note, April feeder cattle futures expire today.

Adam Stout

April 17
Morning Dairy Comments – April 17, 2014

General News

· Russian President Putin admitted for the first time Russian troops in Crimea http://goo.gl/3jsfO8

· U.S. Dollar Index falling lower for the second day ahead of today’s Jobless Claims Report

· Japanese Consumer Confidence falls to lowest level since 2011 http://goo.gl/8goGtl

· Senators urge ban on banks’ ownership of physical commodities http://goo.gl/54Hol9

Class III, Cheese & Dry Whey

Class III futures traded all over the map once again yesterday, as the market continues to attempt to find equilibrium between seasonal bearishness, softening international prices, decent demand - both domestically and export driven - and a flush season that has yet to bring on the “wall of milk” many had expected. The recurring theme of late is for nearby months to show strength when spot is bid and for deferred months to lag, which has further steepened the forward curve that has existed for quite some time in this market and is unlikely to change until a fundamental shift occurs. For now, the trade wrestles with a convergence of moving averages in the 2nd quarter, with prices gravitating above longer term support levels.  However, as previously noted, the second half of the year has started to “turn over”, as short term support levels have been breached and the longer term levels are being threatened. This continues to suggest that lower prices are on the horizon. For now though, the spot market continues to show resiliency as prices for blocks gained 2 ½ cents to $2.2225, and barrels picked up 2 cents to $2.1875. May futures rallied 19 cents off the spot strength to close at $22.00 and June picked up a dime, to close at $20.38, with both months closing a little above midrange. Volume was relatively light and contained mostly to the nearby contracts, as the market has most likely entered “holiday mode”.

Cash settled cheese futures mirrored the action in Class III, with gains in nearby contracts and softer prices in the second half of 2014. The 2nd quarter pack closed better on the session, at 2.1463. Volume was decent, with an estimated 170 trades taking place. The U.S. market continues to trade at a premium to the international market as indicated by GDT earlier this week, where Cheddar prices fell by 3.3% overall to an adjusted USD equivalent of $1.9384/pound. NDPSR showed an uptick of 1.6 cents in Blocks, to $2.41, on increased sales volume of 12,395,453 pounds. Barrel prices fell 1 ½ cents, however, to $2.34, on slightly lower sales volume.

Dry Whey futures continue to trade firm, in the upper channel of its recent range. We are not suggesting a breakout here, but the firm undertones to this market are likely indicative of the relative tightness in cheese and lackluster production numbers. NDSPR prices for dry whey averaged 67.2 cents per pound on lower sales volume of 6,081,479 pounds.    

We look for Class III, cheese and whey to open mixed.

Spot Session Results

Type

Trades

Settlement

Change

Bid

Offer

CHEESE

BLOCKS

0

$2.2225

UP 2 ½    

1

0

 

BARRELS

0

$2.1875

UP 2   

1

0

NFDM

GRADE A

1

$1.8900

DOWN 2

0

3

BUTTER

GRADE AA

2

$1.8900

DOWN 1

0

1

clip_image006

Class IV, NFDM & Butter

It was a relatively quiet session for Class IV, NFDM and butter, as the market is digesting consistently soft GDT results, a weaker spot market, slowdown in demand, and holiday trade. Spot butter drifted lower by a penny, and NFDM lost 2 cents, bringing both to the $1.8900 level. As a result, butter futures finished unchanged across the board while NFDM settlements were mixed. It is interesting to note that there was considerable after-hours trading in NFDM that saw the volume nearly double after the closing bell and nearby prices come under pressure. The April contract traded to within a ½ cent of a limit down move, with May, June and July taking heat as well.

NDPSR numbers showed a $2.00 per pound average for the week ending April 12, representing a 5.3 cent decline from the previous week with increased sales volume of 27,682,766 pounds, which coincides with the latest CWAP numbers that again saw prices soften by 1%, to $1.9798. Butter prices increased from the previous week, coming in at $1.98 per pound, a 2 ½ cent hike, on decreased sales volume of 2,467,994 pounds.   

We look for Class IV and butter to open steady, NFDM to open lower.

Grain Futures

Grains traded mixed yesterday, with both corn and wheat coming under selling pressure, while soybeans continue to march higher. The corn trade seems range bound for the short term, with supportive fundamentals that just aren’t enough to push prices higher than they currently are; at least until the weather picture comes into clearer view. May closed down 6 ¼ cents, at $$4.97 ½. May wheat came under heavy fire, shedding 13 ¾ cents, to close at the lower end of the range at $6.88. May soybeans rallied 17 ½ cents and put in a new contract high before settling at $15.18 ¾. The futures market has more work to do in order to rectify the tight balance sheet situation moving forward.

clip_image007

We look for the grain complex to start higher this morning.

Robert Chesler

April 17
Morning Grain Comments – April 17, 2014

The trade sees an even chance for net old-crop soybean cancellations this morning; both that and drastically slowed shipments are needed soon to give the USDA export estimate any chance of coming to fruition.

Japan bought 136k tonnes of food wheat in their regular weekly tender, including 58k tonnes from the U.S., 48k from Canada, and 30k from AUS.

Ukraine’s Ag Ministry reported the country’s early spring grain (mostly spring wheat and barley) planting at 92% done, with intended plantings at 2.75 million hectares (6.8 mln acres), 8.5 mln ha (21 mln ac) when combined with corn. Cumulative ‘13/14 grain exports reached 28.6 MMT as of April 16.

German farm co-ops estimated the 2014 wheat crop at 24.74 MMT, up slightly from 24.64 MMT in March but still 1% below last year’s harvest; leading grain traders Toepfer, also reporting yesterday, put the crop at 23.95 MMT.

Official E.U. data showed soft wheat export licenses at 421k tonnes this week, with cumulative 2013/14 (July/Jun) exports now at 24.3 MMT, up from last year’s 16.3 MMT pace. Import licenses for corn came in at 497k tonnes, bringing the total to 11.3 MMT so far this year, up from 9.2 MMT last year. Strategie Grains subsequently raised their 2013/14 E.U. wheat export estimate by 1.2 MMT, to 26.8 MMT; that came after a 1.3 MMT increase in March. The previous record for wheat exports was 22.0 MMT, in 2008/09. Strategie also raised their ‘14/15 export estimate by another half a million tonnes (after a 700k increase in March and +1.2 MMT in Feb), to 22.9 MMT. This year’s wheat crop was cut by 500k tonnes to 137.2 MMT, still up 2% from 2013.

Matt Zeller

April 16
Spec funds on sidelines, for now – April 16, 2014

CORN: MIXED
Corn closed mixed yesterday despite wheat and beans closing up over 20 cents. Spec funds were on the sidelines yesterday. Longer range maps are warming up and drying out, giving the market some comfort that we will get the crop planted. The Russian-Ukraine military conflict made the market nervous yesterday. Basis is firming across a lot of the Corn Belt. With the Goldman Roll over, we saw CK/N tighten yesterday trading from 5 ½ to 6 ¼. It settled at 5 ¼ to 5 ½. Resistance in CK is $5.06 and then $5.20. Support is $4.97 and then $4.90. Corn felt weak yesterday. Beans and wheat were strong, but corn acted like it wanted to close lower. It feels the same this morning. Although we still look for the market to drift up towards $5.25, this morning’s tone is contradicting that. Look for a two-sided trade today.

Kyle Smith, Mike O'Dea, Ben Parks, Collin Hulse, Ingrid Gronlund

April 16
Morning Livestock Report – April 16, 2014

The lean hog market traded to a mixed result yesterday, settling between $1.15 lower and $0.47 higher; however, the day still managed to include some fireworks. After a fairly uneventful night session, the market exploded higher between 8:00 am and 9:00 am, including a near $2.50 spike in the June contract. There didn't appear to be any cause for the abrupt rally and, slowly, the market gave back much of its gains, especially after the morning pork report which showed losses in the cutout and all of the primals except the butt and picnic. It didn't get any better for the pork market as the day progressed, with the afternoon report showing even larger declines. The cutout was off a sharp $2.68, including a $7.01 loss in the belly and a $3.11 loss in the loin. Cash hog values were reportedly lower as well. The weakness in spot cash and pork values weighed on the market overnight.

Adam Stout

April 16
Morning Grain Comments – April 16, 2014

It’s been an exciting week thus far for soybeans, and for the old-crop new-crop spreads in particular; yesterday’s NOPA crush only added gasoline to the fire with a number above even the most bullish of trade expectations, while the export program still needs to basically shut down. USDA estimates in both categories are looking weak, with carryout already approaching historical lows despite the “residual” category wiped out and imports at record highs. Spot soybeans are desperately trying to ration away what demand they can. Corn continues to show its loyalty to the $5 mark—a 60-cent soybean rally has done basically nothing for the corn complex.

China’s National Bureau of Statistics reported the results of a 110,000 (!) farmer survey, showing planting intentions fairly steady for 2014—corn area was seen up 1.75% with rice up 0.15%, while wheat acreage is expected to drop by 0.56% and cotton plantings are seen down 6.77% this season.

United Kingdom customs data showed February wheat imports at 82k tonnes, the lowest monthly total of 2013/14 (July/June); that brings the cumulative total to 1.55 MMT, down from 1.87 MMT over the same span last season. Corn imports of 172k tonnes in Feb leaves July/Feb cumulative imports at 1.61 MMT, up from 1.11 MMT in the first eight months of 2012/13.

March NOPA soybean crush came in at 153.84 million bushels yesterday morning, up from the average 146.1 mbu estimate (and above the highest 153.0 mbu trade estimate, and up from 141.6 mbu in Feb and 137.1 mbu LY.

Matt Zeller

April 14
Morning Livestock Report – April 14, 2014

The cattle complex finished last Friday (and last week) with modest gains. Nearby April live cattle futures up $1.80 for the week, June up $0.97. We finally saw some cash cattle trade on Friday at mostly $147 live in the South and $240-242 dressed in the North; however, trade volumes were again very light, especially in the South, with feeders going home for the week asking $148 and packers acting uninterested. Packers continue to pull on large volumes of previously contracted cattle, and combined with a renewed interest in producer-packer basis transactions, it has left a smaller and smaller pool of cattle to trade in the negotiated market. Some in the industry asking if basis sales aren’t just a fleeting trend, but another long term shift in the industry away from the old school weekly negotiated market in addition to grid sales, formula sales, etc?? Weekly slaughter totaling 573k head last week, down from 583k head the prior week and 607k head last year. But despite the slower slaughter, the spot beef markets continue to erode, down a serious $7 in the choice and $5 in the selects last week.

Adam Stout

April 14
Morning Grain Comments – April 14, 2014

Each of the grains had their fun at various points in the overnight, but enthusiasm waned into the morning hours; extended maps will be watched closely in the coming days, with the trade looking for confirmation of a widespread planting window as conditions improve into next week.

South Korea’s NOFI bought 193k tonnes of optional-origin corn and 65ktonnes of optional-origin feed wheat, for Sept-Oct arrival; the corn was purchased at $269-270/tonne C&F, with the wheat at $289/tonne cost & freight.

Taiwan’s flour millers bought 92,550 tonnes of milling wheat from the U.S., for May-June shipment, in two consignments with various varieties.

Egypt’s GASC bought 230k tonnes of wheat in their latest tender Friday, for May 1-10 shipment, in the $299-301/tonne C&F range; 120k of that came from Romania, with 55k each from Russia and the Ukraine.

Russia’s Ag Min reported grain exports from July 1-April 9 at 21.488 MMT, up 47.5% from LY, and including 15.9 MMT of wheat and 3.2 MMT of corn.

Friday afternoon’s Disaggregated CFTC Report showed managed money traders posting net losses across the grains on the week ending last Tuesday (4/8); net corn (-6.5k) and bean (-11.8k) losses were both more than daily trade estimates were expecting. Producer and merchant moves were generally moderate on the week as well, with corn up 3.5k net and beans up 10.6k net.

Matt Zeller

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