Grains Commentary
The overnight markets once again have lost the momentum as it seems the entire market place is watching the same movie. The beans are trading down 10-12, meal is down $3-4, oil has eased by 20 points, corn is down 2-3 and wheat is hovering around unchanged.
The market knows that the SA weather for the most part is good; the market knows that the bean yield exceeded everyone’s expectations; the market knows that the basis is strong; the market knows funds are still long from much higher levels. So what is out there for influential news? The demand aspect seems to be questioned recently with speculation that China has cancelled bean purchases, there has been no confirmation of this but there has been re- negotiated contracts (don’t we all wish we could do this with trading losses?) The CO figure seems to be rising for beans with some estimating figures closer to 175 than 140, but with domestic crush running so hard don’t be too quick to change the CO figure. The corn is stuck in a range, at this point $7 it appears that the US will do more export business that is needed while at $775 it appears that we would lose the export markets. The bottom line to corn is that it is getting closer to exports and the threat for the corn CO at this point is to get smaller rather than larger.
The other factor that has been discussed is how bearish the new crop markets are, based on additional acreage along trend yield new crop CO are massive, beans are starting in the area of 400+ and corn would approach 2.0b. We realize that there are many factors to this but if this is correct the reality is the spreads most likely are not any good either even with a tight old crop balance sheet as every consumer will ration with the inverse and every farmer will sell every kernel into the inverse.
The outside markets are mixed with equities marginally higher, crude oil is down .17, natural gas is up .05, sugar is down .09, gold is down $2, $index is weaker, cotton is up .19, the DCE is lower in the beans and meal but higher in oil and corn, the Matif markets are lower in all markets and the MDEX finished +33 ringgits.
The OI in corn increased by 8882, wheat was up 3421, beans were down 2654, meal was down 1036 and oil was down 2326.
The option markets have once again worked themselves lower with downside CF puts down under 20%. The downside SN puts are under 19% as are the SX13 puts. These puts seem like better ownership for the bull with futures or the bear and under hedge them. The BO has shown that the market is attempting to make the big shorts liquidate and with this buying call spreads and selling puts could be something to look at as BO premium is still higher than beans. The wheat is much higher than corn and with the recent 50 cent move in CH-WH look to buy corn puts vs. wheat puts.
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
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