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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 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

April 14
Morning Dairy Comments – April 14, 2014

“I told my caddie, ‘You tell me what to do.’” – Bubba Watson

General Market News

· U.S. Stock futures choppy ahead of retail sales data

· Ukraine mobilizes as pro-Russian forces extend grip

· Glencore in $5.8 billion copper deal with Chinese group

· Dollar strengthens this morning

· Dairy industry rebounds at last in Northern San Joaquin Valley http://goo.gl/CXgDeq

· Bubba Watson claims second Maters title

Class III Futures
Nearby Class III futures bounced Friday on moderate volume amid renewed buying interest for both spot block and barrel cheese. With last week marked by an orderly but precipitous decline in spot market prices, buyers decided to wait until the last possible minute to buy against the prior week’s average.  That time was Friday’s spot session.  It also happened to coincide with short-term technical support for at least the June contract, which bounced off its 50-day Moving average Thursday and should indicate firming action for several days hence.  We’ll call the Friday’s nearby rally a timid bounce, but it was the second half continued its lower grind.

The deferred market developed a sluggish trade late last week, in part, on speculation of lost export business in the second half.  Also, market participants are paying close attention to milk receipts in the Midwest as temperatures warmed up here over the past week.  To date, the “flush” is not in full swing.  The price weakness, however, is welcomed by some commercial buyers who have largely spent the past few months concentrating on first half pricing issues. As for now, buyers are present but not aggressive in the second half of 2014.  On Friday the buying interest to note was in 2015.  274 of the 1,291 contracts or just shy of ¼ of trading volume exchanged hands thru December 2015.  Record prices so far in 2014 are beginning to push buy side budget activity 20 months out in search of lower price stability and certainty.  In high priced years we tend to see long-range budget setting start early.  This was the case in the spring of 2008 and it appears to be the case now.  Only time will tell if another 2009 is about to follow. 
With May Class III is pricing $2.0850 and the June contract is pricing $1.9550, the main question for the short term is will these futures price discounts to spot last.  The pattern has been that the futures market is right to keep a safe, discounted distance to spot – spot prices have followed futures down all month.  But some resurgence in spot market strength and therefore fresh strength to futures is expected to start the week. 

Dairy cow weekly cull rates continue to decline.  For the week ending March 29, dairy cow slaughter under federal inspection was down 8.4%, at 57,700 head, compared with the same period the previous year. Year-to-date slaughter levels are 8.6% lower than 2013 levels, with 767,600 head slaughtered.

We look for Class III to open 5-10 lower.

CME Weekly Block Chart

clip_image007

Cheese Futures
Cash-settled cheese futures took mirrored class III futures nearby strength and deferred weakness Friday.  Trading volume registered at 381 contracts and open interest rose by 192.  Like class III, a good chunk of trading (96 contracts) and new positions occurred in the first half of 2015.  Commercial buyers appear to find the high-$1.70 to low-$1.80 cheese price average available out there as a “value” entrée into hedges. 

The latest NDPSR report showed a price increase for blocks to $2.3450, a week over week increase of 8.05 cents. Sales were strong at 11,843,202 pounds, an increase of 436,477 pounds on a weekly basis. Barrel prices surged 4.1 cents on the week, to $$2.3216, on increased sales volume of 9,275,047. This is in contrast to the softening of prices on GDT that saw cheddar values fall 3.5%, to $4438/MT. February American cheese production was 341.3 million pounds, down 1.5% from a year ago. USDA weekly stocks were down 1.5% from the previous week and are 26.9% below last year. 
On April 8, Cooperatives Working Together (CWT) announced exports of 4.56 million pounds of cheddar for delivery between April and August 2014. According to the CWT news release, “Year-to-date, CWT has assisted member cooperatives in selling 40.792 million pounds of cheese, 31.903 million pounds of butter and 3.366 million pounds of whole milk powder to 27 countries on five continents. These sales are the equivalent of 1.098 billion pounds of milk on a milkfat basis.”

We look for cheese futures to open mixed.

Spot Session Results

Type

Trades

Settlement

Change

Bid

Offer

CHEESE

BLOCKS

6

$2.1700

UP 1/2

0

0

 

BARRELS

0

$2.0800

UP 1/2

1

0

NFDM

GRADE A

0

$1.9075

UP 3/4

1

0

BUTTER

GRADE AA

0

$1.9700

UNCH

0

0

clip_image009

Class IV Futures

Nearby class IV futures found some support on Friday and, inspired by strength in NFDM futures, closed steady to higher thru November.  While both domestic powder price weakness and slowing global demand are playing a large role in class IV weakness of late, stable butter prices continue to tug in the other direction.  We expect then to see more volatility this week and thru the end of April from class IV prices as the baton is passed from NFDM to butter in creating a high price class IV environment.  Additionally, the nearby June contract below looks to have bounce off of a meaningful 20-day weekly moving average. 
clip_image010
We look for Class IV to open steady. 

NFDM Futures

The leader of the price weakness over the past few weeks caught a bid Friday trading limit up – or 4 cents -  in the May contract to settled at $187.500.  This is the type of volatility you can expect from futures prices that carry deep discounts to cash market prices; bearish market bounces are swift and ruthless sometimes (before we get ahead of ourselves let me say that the jury is still out on whether or not this is the beginning of a bear market or simply a steep price correction).  Regardless, a key feature to NFDM last week was the consistent Open Interest declines for much of the week as market dynamics have triggered long-liquidation of futures.  There is a sense of additional price weakness yet to come and the trade is illustrating that.  Now we’ll have to see what GDT does this week as price declines on the global platform have been increasing for four events now.
NDPSR numbers show a slight decline over the past week, with a weighted price at $2.0524 on over 3 million more lbs. from the prior week at 23,869,288 pounds. 

The April NZX SMP contract settled at $3920MT, a $230/MT week over week slide. The April WMP contract settled down at $3910MT, a $55/MT decline since last Friday.

We look for NFDM futures to open steady/firm.

Butter Futures

Cash settled butter futures finished last week on a slightly weaker tone as spot butter prices have held steady at $1.97 for the past 7 trading sessions.  Bull markets don’t move higher on that type of information, so we’d call the recent futures trade a slight correction or a reluctant decline on a lack of fresh news.  We’ve beat the drum about tight cream supplies and the Easter sales bell curve.  What remains to be seen is a fundamental shift away from producing butter for export even amid softening EU butter prices.  Furthermore, if you go back in time the key feature to watch for in determining butter price weakness is milk supply.  U.S. milk supply, although impressive so far in California, has yet to see the kind of numbers one would expect from $20+ milk.  A 1.2% increase is not going to cut it.  And since we’re not likely going to build inventory of butter for months, the market continues to find underpinning support today.
NDSPR results showed a week over week increase in prices of 7.08 cents to 1.9697 on about half the sales of the prior week at 2,073,949 million pounds.  Cooperatives Working Together (CWT) announced export assistance of 2.48 million pounds of butter for the delivery period of April through August 2014.  USDA weekly stocks were up 3.9% from the previous week and are 43.7% above last year.

The NZX’s April AMF contract settled Friday at the price of 4,070/MT, up $70/MT week over week.

We look for butter to open mixed.

Dry Whey Futures

Dry whey futures finished out the week on a modestly stronger note with the May contract leading the way up 1.000 cent to 64.75.  The market generally seems in balance as far as discussions are concerned.  The bulk of the dry whey futures trading over the past five weeks have taken place in a relatively narrow band of prices.  It’s a sideways market with intermittent upticks in price for the very front month.  Meanwhile, trading activity for 2015 has picked up with 9 January to December packs trading at around 51.70 average last week.  Here again we see hedge interest developing many months into the future.

An uptick in prices on the weekly NDPSR numbers put dry whey at 0.6710 dollars/pound on stronger sales volume of 7,024,434 million pounds. 

We look for dry whey to open steady.

Grain Futures

The corn market ended the week lower on early reports of planting in southern Illinois, Iowa and parts of Kansas. Also, corn export sales were less than expected last week at 25.9 million bushels of old crop and 2.3 million new crop. Corn Shipments will shift into more focus over the next few months as the U.S. has shipped 945 of 1.750 million bushels. According to the math, shipments need to average 37.4 million bushels per week – something that hasn’t been done since 2010.

General concerns surrounding anything from banking to bird flu last week seemed to act as a “cooler” for the once red hot soybean market.  Old crop led the way to the downside as traders are concerned about reports of Chinese importers defaulting on additional cargoes. Chinese importers have defaulted on 500k tons (18.4 million bushels) of US and Brazilian bean purchases in recent days as crushers fail to get letters of credit open.

One interesting area to note is that the largest origin of U.S. imports is not from Brazil but from our neighbors to the north.  For the past 5 years soybean imports from Canada have averaged 11.5 million bushels. Canada had over 95 million bushels on hand as of Dec 31; the largest amount of any recent year.

On tap for today will be this afternoon’s Planting Progress Report. Expectations are for 2-3%. Delays will get more attention when we get into next month.

We look for corn to open 3 to 5 higher, beans to open steady to 7 higher, meal to open steady to 2.5 higher and wheat to open 8 to 12 higher.

Robert Chesler

April 11
Morning Grain Comments – April 11, 2014

Farmers are enjoying seeing the $5 mark hold down the line in corn, and enjoying at least initial planting preparations thanks to long-awaited favorable weather; conditions are going to become a whole lot less favorable later this weekend, though, as the cold and wet pattern returns.

Egypt’s GASC is in for wheat again today, for May 1-10 shipment.

Algeria bought 450k tonnes of milling wheat at $315-316.50/tonne C&F, in an international tender late yesterday, for May-June shipment; it was technically optional-origin but likely sourced from France, their main supplier.

A USDA attaché in Argentina pegged ‘14/15 wheat output at 12.0 MMT, up from 10.5 MMT in ‘13/14 due to increased plantings; barley and corn acreage are seen falling in ‘14, with the ‘14/15 corn crop down 2 MMT to 22.0 MMT.

Brazil’s Ag Ministry raised their 2013/14 soybean production estimate this month, from 85.4 to 86.1 MMT (still below the USDA’s 87.5 MMT), thanks to an upward adjustment in planted area of over half a million acres. Corn output also rose slightly from March, from 75.2 to 75.5 MMT (vs the 72 MMT USDA), thanks to a strong outlook for second-crop production.

Matt Zeller

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