The overnight trade is starting the month of December with renewed hopes that December of 2012 will give a Christmas present like the December of 2011. The beans are already +20, meal has gained $5, oil has posted gains of 70 points, corn is pushing 10 higher and wheat is also +10-12.
The weekend finally saw some wheat business that will be done out of the US as Egypt purchased 230.0mt of US wheat for LH Jan FH Feb, what is interesting about this is that given the time frame for shipment there very easily could be additional wheat business heading to the US shores. We would also point out that the US is nearly 600.0mt behind
what the USDA is projecting. The USDA will issue S&D figures on Tuesday the 11th and what everyone is expecting is to see a modest increase in the overall bean CO, wheat CO while the corn CO is projected to be virtually unchanged.
The month of November PMI figure out of China also lends to some early support with it coming in at 50.6 vs. 50.2 last month; this is a 7 month high. This also seem to have lent to the $index being weaker which is assisting in nearly all commodity markets. The Crude oil is back over $90, natural gas is up .02, sugar is up .36, cotton is up .19, gold is up $6, RBOB is up 2.90, the DCE closed higher in all markets, the Matif markets are all higher while the MDEX finished lower.
The OI in corn fell by 8089, wheat was down 9222, beans increased by 3331, meal was up 5991 and oil increased by4634.
The SA weather could give both the bulls and the bears something to discuss, there is no doubt that Argentina is too wet and 1-1.5m corn acres have been lost and the forecast remains wet, these acres will not go to beans but rather go idol. Brazil for the most part is doing very well and record production should still be achieved given today’s forecast.
The basis levels at the Gulf are on fire in the beans where the best offer going home on Friday was +$1.20F, do the math and that puts cash beans at nearly $15.60. The corn basis is also improving as it traded into the upper +.80’s on Friday. The bean oil markets in SA are improving as well which is pushing additional business into the US where we already have the entire sales for the calendar year on the books.
The January options have 3 trading weeks left or 18 calendar days and from what we have seen in the 1st 12 hours of trading for the week these January options still could have some life left in them. The SF along with the CF are hovering around the 18% level, both off the lows of 17% last week but from a $ cost are still very inexpensive with so much time left. The CG could also be something to monitor as they are now under 20% and with the critical January report that will be released on January 11th these options could have tremendous value, we would point out that over the past 4 months ADM has aggressively sold the nearby corn option premium…at any level, they have not sold any CG yet so be somewhat cautious with this.
The gamma vs. Vega remains something to monitor in corn as the deferred are still significantly higher than the nearby. The BO has eased off over the course of last week and is now getting to parity with beans, for those who think the massive fund short will be chased out by years end the BOF calls on a $ value won’t hurt than badly. The meal remains at a premium to the beans and oil, possibly look at 1x2 call spread and even possibly sell some puts against it with futures for the bears or under hedge it for the bulls. The wheat premium are inching higher and are pushing back into the mid 20’s with corn so much at a discount there could be some interesting corn/wheat plays to look at such as buying the CG 8 call vs. selling WG 950 call for near even $.
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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