The SA weather appears to be improving from what has been seen over the past 7 days with the excessive rains that were in Argentina are now moving out and drier patterns are forecasted, Brazil is also cooling down from excessive heat with better rains. The planting paces in both countries are well off from the 5 year average but should start making up some ground over the next 10 days.

 

The outside markets are not helping with the equity markets down sharply, crude is down over $1.50, natural gas is unchanged, RBOB is down over $4, sugar is down .27, cotton is down .80, gold has lost $20, the DCE was actually higher in bean meal and oil and unchanged in corn, the Matif is unchanged and MDEX is down 32 ringgits. The OI in corn increased by 607, beans were down 1644, meal was down 109, oil lost 5024 and wheat was up 3756.

 

The basis levels are steady but would expect to see increases today with the flat price break, the spreads in every arena in recent days are also showing signs that things in the cash markets are tightening. The SA corn basis continues to rise as more business is getting done and they are now reporting that nearly 75% of the corn has been sold, if they only have 25% left the back end of the US corn markets could still do much more export business than what is currently penciled.

 

The option markets are low, but that doesn’t mean they can’t go lower, the knife has been falling for nearly 5 weeks and from what the market knows there is not any fresh news to give insight for a significant move coming. The current levels would be more interest to own but patience could be the most profitable trade and wait for some sense that things are changing rather than hoping. The other way to look at things is to look for relative value trades, such as buying BOF 50 puts vs. selling SF 1420 puts for a credit, the stinger on this would be if somehow oil share rockets higher…not sure how that happens. Also look at owning multiple CF could also be value vs. SF puts. The meal has eased to levels that would also be more attractive to own, for those who still believe the spreads could be dynamic look to own downside puts vs. owning the futures spreads. The wheat has also eased back into the mid 20’s while the downside puts are even in the lower 20’s history has shown that selling these levels typically is not profitable for very long.

 

The harvest is quickly coming to an end with 80% of the beans done and 87% of the corn, this typically leads to farmer selling slowing and cash markets to creep higher.

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.