KCG FUTURES PM GRAIN FUTURES COMMENTS

KCG FUTURES   PM GRAIN FUTURES COMMENTS

 

Beans and corn futures closed significantly lower, while wheat futures closed significantly higher.  SX closed within a nickel of early October lows, CZ closed at new contract lows, and wheat futures continued to consolidate the 10-25 cents range it has traded for the past week – consolidating its Sept/Oct rally sponsored by heavier than normal South American and Asian US wheat purchases and concerns that a significant amount of Red Sea wheat will not get planted.  The combination of good harvesting weather and rumors that the EPA intends to cut ethanol and bio diesel requirements encouraged aggressive liquidation of long bean futures positions.

Although SX lost to WZ and CZ, the SX/CZ ratio only lost a couple of ticks to close the SX/CZ ratio at a still healthy 2.94% and the SH/CH ratio at 2.82%.  It’s unusual to see the futures market keep more premium in the new crop ratio than in the more deferred positions, but this year the market is rationing tight old and new crop supplies as wells as encouraging large South American bean plantings.  As harvest progresses and South America picks up the pace of new crop planting this premium may erode.  On the other hand, the bulls think that the market needs to maintain a nearby bean premium to push demand toward next spring’s South American harvest.  Traders say that there has been much unreported export trade while the USDA has been shuttered, and are anxious to see how the market reacts once more information is available

After the financial markets closed, the White House announced that it was unwilling to go along with a 6 week program to extend government financing.  I expect we will see more wrangling and headlines over the weekend.

–       Helen Pound

GRAIN FUTURES CLOSING PRICES AND CHANGE

Close – Rounded

 

CZ3

SX3

SMZ3

BOZ3

WZ3

KWZ3

MWZ3

Today’s Close

$4.33

$12.67

$403

$0.4028

$6.92

$7.60

$7.55

     Change

-5

-21

-6

-0.0094

+7

-+5

+4

Total Open Interest

1,216,016

631,195

263,751

311,168

366,179

152,975

49,510

     Change

+549

+6,777

+3,541

+8,020

-2,291

+885

+203

OVERNIGHT PERCENT CHANGE IN FUTURES VALUE

Grains

Corn

Soybeans

Soy Meal

Soy Oil

Wheat

KC Wheat

MN Wheat

October

-0.5 %

%

-2.2 %

December (or X), 2013

-1.1 %

-1.6 %

%

-1.5 %

%

-2.2 %

+1.0 %

+0.6 %

+0.5 %

July, 2014

-1.1 %

-1.3 %

-0.7 %

-2.0 %

+0.3 %

-0.2 %

+0.1 %

December (or X), 2014

-1.0 %

-1.2 %

-0.8 %

-1.7 %

+0.4 %

-0.1 %

+0.4 %

OVERNIGHT PERCENT CHANGE IN FUTURES VALUE

Macros

 

Dollar

10 Year

S&P 500

Crude Oil

Copper

Gold

Silver

Percent Daily Change

-0.1 %

+0.1 %

+0.6 %

-1.1 %

+0.8 %

-2.3 %

-2.9 %

TERM STRUCTURE

Carries (Inverses) – Rounded

 

Corn

Soybeans

Soy meal

Soy Oil

Wheat

KC Wheat

MN Wheat

October-December

(19)

0.0017

     Percent Full Carry

(289 %)

38 %

November – January

(1)

     Percent Full Carry

(3 %)

December(orX) – March

13

(13)

(9)

0.0071

9

(2)

10

     Percent Full Carry

68 %

(38 %)

(95 %)

106 %

44 %

(7 %)

47 %

December(orX)–July14

29

(32)

(22)

0.0134

(1)

(23)

14

     Percent Full Carry

63 %

(47 %)

(97 %)

85 %

(1 %)

(44 %)

30 %

Dec(orX)–Dec(orX)14

42

(109)

(53)

0.0141

18

(2)

19

     Percent Full Carry

54 %

(105 %)

(133 %)

52 %

22 %

(2 %)

23 %

INTERMARKET SPREADS

                                                                    Rounded

 

W-C

S-W

S-C

S/C

BC*

MW-W

MW-KW

KW-W

December

259

575

834

2.92 %

64

63

-6

68

July 2014

231

542

773

2.67 %

62

76

32

45

Dec 2014

234

448

683

2.44 %

70

65

18

47

*BC = Synthetic Soybean Crush
COMPARISON OF CURRENT FUTURES PRICE AND JANUARY (F) CROP REPORT LOWS – percent of Low
  Low (F)

10.02

10.03

10.04

Monday

10.07

10.08

10.09

10.10

10.11

CZ3

570

77 %

77 %

78 %

79 %

78 %

78 %

77 %

76 %

CN4

592

79 %

79 %

80 %

81 %

79 %

80 %

79 %

78 %

 

OZ3

338

93 %

94 %

94 %

94 %

94 %

94 %

95 %

94 %

ON4

409

73 %

74 %

73 %

73 %

72 %

72 %

73 %

72 %

 

WZ3

779

88 %

88 %

88 %

89 %

89 %

89 %

88 %

89 %

WN4

775

88 %

89 %

90 %

90 %

90 %

90 %

89 %

89 %

 

KWZ3

830

91 %

91 %

90 %

91 %

92 %

91 %

91 %

92 %

KWN4

790

91 %

93 %

93 %

94 %

94 %

94 %

93 %

93 %

 

MWZ3

858

87 %

87 %

87 %

87 %

88 %

88 %

88 %

88 %

MWN4

890

84 %

85 %

85 %

86 %

86 %

86 %

86 %

86 %

 

SX3

1259

101 %

102 %

103 %

103 %

102 %

102 %

102 %

101 %

SN4

1287

96 %

97 %

97 %

98 %

97 %

97 %

97 %

96 %

 

SMZ3

353

117 %

118 %

119 %

119 %

118 %

117 %

116 %

114 %

SMN4

365

106 %

106 %

107 %

108 %

107 %

106 %

105 %

104 %

 

BOZ3

49.00

80 %

82 %

82 %

81 %

83 %

83 %

84 %

82 %

BON4

49.92

81 %

83 %

83 %

83 %

84 %

84 %

85 %

83 %

 

  • +   Jan lows occurred in anticipation of bearish Production, Stocks, Winter Wheat Seeding, and WASDE reports.  Instead the Jan reports were friendlier than expected, with less than expected US stocks and tighter world carryover.
  • –  The USDA February report showed just a few changes – more wheat feeding – but was viewed as “not bullish”.  South American and US crop growing weather improved during February.
  • -/+  The feature in the USDA March report was an increase of 100 mln bu of US corn feeding offset by 75 million bushels fewer US corn exports and an additional 25 million bushels of US corn imports.
  •   The March Quarterly Stocks report was a bearish surprise with grain stocks above estimates – and corn stocks well above trade estimates forcing corn limit down.
  • -/+  The April S+D report showed World carryover for corn, beans and wheat above the high end of the analysts’ range of guesses.  US carryover didn’t increase as much as suggested by the Stocks report – with bean carryover unchanged at pipeline needs.  Cool, wet weather delayed planting and reduced HRW quality.
  •   The May S+D report showed increased South American corn production, as well as increased South American old crop corn and bean carryover as China reduced old crop imports.  US old crop bean and corn stocks continue to be exceedingly tight.  New crop US and World corn, bean and wheat carryover were larger than the average guesses.  Planting weather is erratic, and analysts expect some corn, bean and spring wheat acres to go unplanted.
  • -/+  The June S+D report showed another increase in ‘12-13 South American corn production, but a decrease in bean production.  The ‘13-14 S+D showed reduced Ukraine and Russian wheat production, as well as lower US corn production.  World wheat supplies continue to be abundant, while world corn and bean supplies are expected to become more comfortable as US new crop is harvested this fall.  In contrast, US bean supplies are expected to remain exceedingly tight.
  • +   The 6.28.13 Quarterly Stocks Report was a bullish surprise which showed less than expected corn and bean stocks with greater than expected March-May use.
  • –  The 6.28.13 Acreage Report was a bearish surprise which showed harvested corn acres up 2% from last year and up 1% for beans. In addition, yields are expected to be much improved over last year.  Harvested wheat acres are expected to be down 7% from last year – with many less HRW and HRS acres, but many more SRW acres.  This was somewhat offset by heavy old crop HRW and HRS stocks and less abundant SRW stocks.
  • -/+   The July S+D was the most neutral report that the USDA has issued in a while, with changes mostly well within the range of guesses.  New crop US carryover for soybeans remains quite tight (but more abundant than old crop) and corn remains tight (but much more abundant than old crop), while wheat carryover is finally moving back to more normal levels (much less than the overly abundant carryover of the past several years).  Improving weather has supported new crop quality and progress, and weighed on prices.
  • +     The August S+D Report was a bullish surprise as the USDA cut yield and production estimates for US new crop corn and beans. The result was reduced US and World carryout.  Carryout as a percent of use for new crop beans dropped to 6% (-2%) – indicating exceedingly tight new crop supplies but still better than the 2012-13 C/U% of 4%.  Corn C/U% is also tight at 14 %.  Tight stocks create volatile responses to changes in the weather forecast.  Last Half August US weather turned hot and dry, and sparked a short covering rally.
  • +/-     The September S+D report featured a surprise increase in the new crop corn yield, in contrast to   the new crop bean yield which was reduced as anticipated.  This pushed the SX/CZ ratio up to 3.01%.  Wheat is now being priced as a “food grain” rather than as “feed grain” – as it was the last couple of years when wheat stocks were enormous.
  •      The Quarterly Grain Stocks report showed much more corn than expected, slightly more beans than expected, and much less wheat than expected – indicating more than expected wheat feeding.  The Small Grain Summary showed much less than expected HRW production, but much more than expected production of HRS, SRW, and White wheat.