Friday, February 23, 2018

Financials: Stocks look to open higher, crude is unch at $63, and the dollar is up 150pts. The ECB’s Jan meeting minutes showed its hawkish members arguing that conditions were strong enough for them to drop a commitment to boost QE in the event of a slowdown. The Fed’s semiannual monetary policy report will be out today. Several Fed members will also be speaking at the annual Monetary Policy Forum today. During an interview yesterday, Treasury Secretary Steven Mnuchin said he believes the administration’s policies will boost wages without causing broader inflation. “You can have wage inflation and not necessarily have inflation concerns in general”. In other Treasury news, this week’s auction of 7-year notes drew the highest yield since 2011. Indirect bidders, a class of investors that includes pensions and mutual funds, purchased 62%, down from 78% LM. The Defense Dept. said it supports the Commerce Dept’s tariffs on steel & aluminum. President Trump has until April to decide whether to take action. President Trump has called for a meeting early next week with key senators and Cabinet officials to discuss changes to biofuels policies. Senators include: Ted Cruz, Chuck Grassley, Joni Ernst. Cabinet members include: Scott Pruitt, Sonny Perdue, and Rick Perry. One source told Reuters part of the meeting will focus on short-term solutions to help Phili Energy Solutions continue operating. The other sources said the meeting will consider whether to cap prices for biofuel credits, let higher-ethanol blends be sold all year, and efforts to get speculators out of the market. The Chinese gov’t seized control of Anbang Insurance Group and prosecuted its chairman for “seriously endangering the solvency of the company” & fundraising fraud. You might remember Anbang from its high profile deals the past few years which included acquiring the Waldorf Astoria & engaging in a bidding war with Marriot for Starwood Resorts. The JD announced $500M in charges against 200 alleged perpetrators for using mass mailing & telemarketing schemes to rip off senior citizens. Mailings included promises to win large cash prizes if seniors would fill out a form & provide a registration fee. Since 2013, victims lost more than $110M. General Mills said it will buy natural pet food maker, Blue Buffalo, for $8B in cash.

Corn: Overnight volume 49k and OI -7k. Another big week of sales at 61 mbu. CWG says Argy moisture stress to persist in up to 60% of production. Crop insurance price so far averaging $3.95 vs. $3.96 LY. China imported 390kmt of corn and 560kmt of milo during Jan. CH/CK trading 8 to 8 1/2 range overnight. Argy A/M FOB at + 75CK is keeping US exports competitive. Market chatter that the Chinese milo import tariff may be set at 36%, which implies the best bid for milo April forward will the domestic mkt.

Beans: Futures were 5-6c higher, till export sales came out. Bean sales were a negative 2 mbu with cancellations from China of 13mbu and unknown 5mbu. Overnight vol at 98k with 35k SH/SK trading and OI +2k. Outlook conference put 18/19 carryout at a comfy 460 mbu, which included a 200 mbu increase in exports. Obviously lots of time/weather to unfold for that to materialize. Expect Sunday nights trade to be a gap and go market, up or down, depending on the forecast. Argie crop is approx. 25% veg stage, 29% flowering, 26% setting pods and 20% filling pods. Expect to see bean spreads stay under pressure and suggest rolling SK/SK at 11.5-12. Meal basis is sliding lower at plants and also appears US is not competitive for A/M export biz.

Wheat: Futures up 4. Export sales were on the low side at 12.1mbu. The USDA forum balance sheet pegged 18/19 ending stocks at 931mbu. It utilized 38.8mln harvested acres, 47.4bpa, 925mbu exports, and 1127 dom use. Frigid temps are expected to move across the Black Sea & W EU next week which may lead to some freeze damage.

T-Storm: The best opportunity for rain in Argentina of the next 2-wks is over Tues/Fri as a large upper-level circulation triggers scattered t-storms, but drought likely worsens because 2.50” to 3.00” is normal of the climate over the next 2-wks, and key areas generally receive 1” or less. Drought ends in most of the central US into March with the possible exception of the driest ~30% of HRW wheat in and adjacent the OK and TX panhandles.