The corn market continues to be plagued by a lack of fresh news along with the mentality that on a break the export channel could actually gain some interest yet a rally would completely dismiss the chances of the US doing any export business…the bottom line to this is that ADM has been dead right selling these strangles over the past few months and unfortunately the future doesn’t look much different than the past. Saying all of this, the market is still priced at $7.50 and the future spreads still have a big inverse which means at some point something needs to change. The basis levels at this point remain very strong which will at some point draw farmers to sell unsold product and also create the consumer to move needs out forward, this will most likely take place shortly after the first of the year and once the market is comfortable that SA will have a bumper crop.

 

The bean market on the other hand is doing business, China has been inquiring for beans each and every night for the past week as internal crush margins are back on the positive side. The basis levels that are trading are near +$1.20 at the gulf, unheard of levels for this time of year. The meal demand remains robust as well and with the US returning to the export markets in bean oil expect there to be a battle from the domestic crusher vs. the exporter for the next few months for beans.

 

The weather in SA continues to be mostly benign, Argentina is wet, nothing is new with this, and they have lost corn acres and will not be planted to beans. Brazil at this point is mostly very good and production figures remain at record levels, remember every day that passes and there is not a problem is a day closer to new crop and an abundance of product.

 

The outside are not doing much with crude oil down .33, equities are higher, natural gas is up .02, RBOB is up .27, gold is down $6, $index is higher, cotton is up .06, DCE is higher in all markets, the Matif is higher in all markets and the MDEX finished down .10 inggits.

 

The corn OI dropped by another 11740, wheat was down 4645, beans increased by 2284, meal was down 445 and oil increased by 776.

 

The option markets are very cheap in the nearby contracts in virtually every market, yet they have been cheap for the past month and only have become cheaper. The deferred corn options are at a significant premium to the nearby which still seems to be a missprice but yet this also has been this way for weeks now. The bean puts seem like value vs. calls, this too has been the way for weeks, bean oil is still higher than corn, this has not stayed like this in over a decade, nearby wheat premiums are sub 20%.

 

The world of volatility seems to have changed in nearly every arena as all volatility levels are trading much lower than what has traded over the past 5-7 years. It’s from corn to natural gas to crude oil options and with overall market participants being reduced and the banking community not being nearly as active and providing liquidity like years past it could be that the paradigm has indeed shifted to a global environment that is much less volatile.

 

Editor’s Note: Daily Grain Commentary readers who are equity investors/traders only can gain access to the grain markets through the following exchange traded funds (ETFs).

Grain Markets/Indexes

ELEMENTS MLCX Grains Index Total Return ETNN (GRU, quote)

iPath Dow Jones-UBS Grains Total Return Sub-Index ETN (JJG, quote)

Power Shares DB Agriculture Trust (DBA, quote)

Corn

Teucrium Corn Fund (CORN, quote)

Wheat

Teucrium Wheat (WEAT, quote)

 

About OTC Global Holdings

Formed in 2007, OTC Global Holdings is headquartered in Houston and New York, with additional offices in Chicago, Jersey City, London and Louisville. It is a leading independent interdealer broker in over the counter commodities and the largest liquidity provider to CME ClearPort and ICE Clear U.S. Through its subsidiaries the company holds a dominant market share in the U.S. and Canadian natural gas markets, the U.S. power markets, crude oil and crude oil options, crude oil products and crude oil product options, agricultural and soft commodities, as well as structured weather and emission derivatives. The company serves more than 250 institutional clients, including 45 members of the Fortune 500, and transacts at over 150 different commodity delivery points. To learn more about the company, please visit www.otcgh.com or go to http://bit.ly/OTCYouTube.

 

 

IMPORTANT NOTICE:  Trading of commodities and commodity futures and options, and other commodity derivatives has substantial risk of loss, and is not suitable or appropriate for all persons.  Past results are not necessarily indicative of future results.  The information in this piece is based on sources that are believed to be reliable, but it is not warranted to be accurate or complete, and no performance or results from use of the information are warranted.  This piece is not a solicitation or offer to purchase or sell commodities or commodity derivatives. Opinions expressed herein are subject to change without notice.