KCG FUTURES PM GRAIN FUTURES COMMENTS

KCG FUTURES   PM GRAIN FUTURES COMMENTS  

 

     Grain futures markets continued to consolidate while cash market basis levels continued to implode.  Corn and bean basis levels at a number of locations continued to deflate again today – with a number of locations seeing a dollar or more drop in old crop premiums – as old crop values head toward or approach new crop values.

Grain futures closed mixed with corn and wheat slightly higher, while beans and meal closed a tad lower.  Traders appear to be lightening up positions before Thursday’s USDA S+D Report.  Beans and meal have held on to much of the huge premiums developed after the USDA’s August S+D report indicated much smaller than expected corn and bean production than traders had anticipated.  Corn and wheat futures closed the day higher, but still in the same range just above contract lows that they have been trading in over the past several days.  The result is that the bean/corn ratio has backed off from recent highs at about 2.95% to close at 2.89%.

Note that even with the huge deflation in domestic corn and bean basis levels, the domestic market is still a healthy premium to the export market – and may take several weeks for the price structure to fully eradicate domestic quick shipment premiums.  Traders will pay close attention to new export sales and shipments, as well as the USDA S+D on Thursday, and the USDA Quarterly Grain Stocks Summary Monday 9.30.13 to get a better handle on the supply/demand balance.

–       Helen Pound

GRAIN FUTURES CLOSING PRICES AND CHANGE

Close – Rounded

 

CZ3

SX3

SMZ3

BOZ3

WZ3

KWZ3

MWZ3

Today’s Close

$4.69

$13.55

$425

$0.4307

$6.47

$6.95

$7.07

     Change

+6

-2

-1

-0.0010

+5

+6

+3

Total Open Interest

1,075,529

612,086

266,328

284,883

357,382

142,781

38,198

     Change

+3,670

+8,363

-448

+442

-360

+1,577

+1,609

OVERNIGHT PERCENT CHANGE IN FUTURES VALUE

Grains

Corn

Soybeans

Soy Meal

Soy Oil

Wheat

KC Wheat

MN Wheat

September, 2013

-0.5 %

-0.1 %

%

-0.7 %

%

-0.2%

+0.8 %

+0.8 %

+0.8 %

December, 2013

+1.2 %

-0.1 %

-0.5 %

-0.2 %

+0.8 %

+0.9 %

+0.8 %

July, 2014

+1.1 %

-0.0 %

+0.2%

-0.3 %

+0.5 %

+0.8 %

+0.5 %

OVERNIGHT PERCENT CHANGE IN FUTURES VALUE

Macros

 

Dollar

10 Year

S&P 500

Crude Oil

Copper

Gold

Silver

Percent Daily Change

+0.1 %

-0.3 %

+0.8 %

-2.0 %

-0.4 %

-1.5 %

-2.7 %

TERM STRUCTURE

Carries (Inverses) – Rounded

 

Corn

Soybeans

Soy meal

Soy Oil

Wheat

KC Wheat

MN Wheat

September – December

(5 3/4)

(48 3/4)

(37.3)

0.0034

12 3/4

(12)

4 3/4

     Percent Full Carry

(28 %)

(280 %)

(378%)

51 %

62 %

(36 %)

17 %

December – March

13

(17)

(8.1)

0.0053

11

8

14

     Percent Full Carry

64 %

(46 %)

(82 %)

79 %

56 %

33 %

51 %

December – July 2014

28

(52)

(26.1)

0.0109

14

3

29 1/4

     Percent Full Carry

59 %

(73 %)

(113 %)

69 %

28 %

6 %

46 %

INTERMARKET SPREADS

                                                                    Rounded

 

W-C

S-W

S-C

S/C

BC*

MW-W

MW-KW

KW-W

September

159

770

929

2.96 %

84

67

(6)

73

December

178

709

886

2.89 %

54

59

11

48

July 2014

163

643

806

2.62 %

61

75

37

38

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

8.29

8.30

Tuesday

9.03

9.04

9.05

9.06

Monday

9.09

9.10

CU3

592

84 %

84 %

84 %

83 %

83 %

83 %

81 %

80 %

CZ3

570

84 %

85 %

83 %

82 %

81 %

82 %

81 %

82 %

CN4

592

86 %

86 %

85 %

84 %

83 %

84 %

83 %

84%

 

 

OU3

350

113 %

112 %

108 %

108 %

107 %

105 %

104 %

105 %

OZ3

338

103 %

101 %

98 %

97 %

96 %

95 %

93 %

94 %

ON4

409

83 %

82 %

79 %

79 %

79 %

78 %

77 %

77 %

 

 

WU3

765

84 %

84 %

83 %

83 %

82 %

83 %

82 %

83 %

WZ3

779

84 %

84 %

83 %

83 %

82 %

83 %

82 %

83 %

WN4

775

86 %

86 %

85 %

85 %

85 %

86 %

85 %

85 %

 

 

KWU3

876

86 %

86 %

85 %

86 %

86 %

87 %

86 %

87 %

KWZ3

830

85 %

85 %

84 %

84 %

83 %

84 %

83 %

84 %

KWN4

790

89 %

90 %

89 %

89 %

88 %

88 %

88 %

88 %

 

 

MWU3

860

84 %

84 %

82 %

83 %

82 %

82 %

81 %

82 %

MWZ3

858

85 %

85 %

84 %

84 %

83 %

83 %

82 %

82 %

MWN4

890

85 %

85 %

84 %

84 %

83 %

83 %

82 %

83 %

 

 

SU3

1288

111 %

111 %

111 %

109 %

110 %

112 %

109 %

109 %

SX3

1259

109 %

108 %

110 %

107 %

109 %

109 %

108 %

108 %

SN4

1287

101 %

102 %

103 %

101 %

102 %

101 %

101 %

101 %

 

 

SMU3

369

127 %

127 %

132 %

127 %

130 %

131 %

126 %

125 %

SMZ3

353

122 %

120 %

124 %

120 %

122 %

122 %

121 %

120 %

SMN4

365

109 %

110 %

111 %

108 %

110 %

109 %

109 %

109 %

 

 

BOU3 49.81

88 %

88 %

88 %

88 %

87 %

87 %

86 %

86 %

BOZ3 49.00

90 %

90 %

90 %

90 %

89 %

89 %

88 %

88 %

BON4 49.92

90 %

91 %

90 %

90 %

89 %

90 %

89 %

89 %

 

  • +   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.

 

 

 

KCG FUTURES   PM GRAIN FUTURES COMMENTS  

 

     Grain futures markets continued to consolidate while cash market basis levels continued to implode.  Corn and bean basis levels at a number of locations continued to deflate again today – with a number of locations seeing a dollar or more drop in old crop premiums – as old crop values head toward or approach new crop values.

Grain futures closed mixed with corn and wheat slightly higher, while beans and meal closed a tad lower.  Traders appear to be lightening up positions before Thursday’s USDA S+D Report.  Beans and meal have held on to much of the huge premiums developed after the USDA’s August S+D report indicated much smaller than expected corn and bean production than traders had anticipated.  Corn and wheat futures closed the day higher, but still in the same range just above contract lows that they have been trading in over the past several days.  The result is that the bean/corn ratio has backed off from recent highs at about 2.95% to close at 2.89%.

Note that even with the huge deflation in domestic corn and bean basis levels, the domestic market is still a healthy premium to the export market – and may take several weeks for the price structure to fully eradicate domestic quick shipment premiums.  Traders will pay close attention to new export sales and shipments, as well as the USDA S+D on Thursday, and the USDA Quarterly Grain Stocks Summary Monday 9.30.13 to get a better handle on the supply/demand balance.

–       Helen Pound

 

 

CARRIES – INVERSES- AND FUTURES DELIVERIES

Corn –   Domestic and export basis levels have dropped off dramatically over the past several days as the market leaves behind the exceedingly tight old crop corn price structure and begins to reflect a more abundant supply-demand balance for new crop.  The CU-CZ spread inverse has lost 20 cents in the past couple of days and now shows only a small inverse. 

  • Domestic basis levels are still at historically high levels (still over futures delivery value) – and at extraordinary premiums over export values, but the price inverses are less and less severe as we get closer to harvest.
  • Exporters are winding down their old crop export program.  The value of loaded barges headed to the export market for September shipment is under futures delivery values.
  • Total corn stocks located in futures delivery warehouses are quite small – under half a million bushels.
  • ·         There are 4 CN futures delivery receipts remaining on the Illinois River that could be sold and loaded out.
  • ·         Brazil has harvested a sizable winter corn crop. Some of these bushels will end up going to traditional overseas US customers, and some of these bushels are expected to work into the US.  The Ukraine has also produced a sizeable corn crop and has been an active seller. Aggressive foreign competition and good forward coverage by world buyer weighs on futures inverses.
  • ·         Erratic weather forecasts add volatility to flat price and spreads.

 

VALUE OF A LOADED CORN BARGE (CIF AND FREIGHT BID)

 

Chicago

Illinois River

 Spot

-21 CZ

-2 CZ

September

-35 CZ

-13 CZ

October

-37 CZ

-14 CZ

November

-30 CZ

-10 CZ

December

-19 CZ

-2 CZ

 

FUTURES SPREADS

 

SPREAD

% FULL CARRY

CU-CZ

(5 3/4)

(28 %)

CZ-CH

12 3/4

64 %

CZ-CN14

27 3/4

59 %

 

 

Beans –   Domestic processor basis bids are well over futures delivery values, and make deliveries against the September futures unlikely. 

  • Old crop US bean supplies are extremely tight and are expected to remain tight in the 2013-14 season.
  • Although basis levels have been eroding, domestic processors are bidding extremely large premiums over export basis bids and SU futures delivery values.
  • Exporters are winding down their old crop bean export programs. 
  • The value of loaded bean barges for SEPTEMBER shipment is well under futures delivery value.  
  • Total bean stocks in futures delivery warehouses are quite small at just over a million bushels.

 

 VALUE OF A LOADED BEAN BARGE (CIF AND FREIGHT BID)

 

Chicago

Illinois River

St Louis

Spot

+20 SX

+41 SX

+50 SX

September

-5 SX

+19 SX

+40 SX

October

-17 SX

+8 SX

+21 SX

November

-2 SX

+20 SX

+38 SX

December

+10 SX

+28 SX

+49 SX

 

FUTURES SPREADS

 

SPREAD

% FULL CARRY

SU-SX

(48 3/4)

(280 %)

SX-SH

(16 3/4) 

(46 %)

SX-SN14

(52)

(73 %)

 

 

Wheat-   US wheat has priced itself out of feed rations.  This makes delivery of marginal quality wheat a possibility – especially with WU trading at a large premium to CU.

  • Winter wheat harvest is complete.  There is a two tier cash wheat market with millers paying a hefty premium for good test weight, good quality wheat.
  • Terminal stocks are quite large – with a large amount of off quality wheat in storage as well.
  • US Spring wheat harvest is at the 80% mark, and the Canadian harvest is gearing up.  The crop is expected to have a fair amount of lower protein wheat, and a healthy premium has developed for higher protein HRS.
  • The August USDA S+D report showed total new crop US wheat supplies remaining abundant at 23% carryover as a percent of use (with SRW and HRW tighter while HRS supplies remain quite large), and facing strong overseas competition in the world market. 
  • The value of loaded SRW wheat barges in Chicago for SEPTEMBER shipment is far under futures delivery value, but there is a hefty carry to December.
  • There is a two tier SRW cash market with millers paying significant premiums for good quality and decent test weight. 
  • There are 256 WN futures delivery receipts wheat located in Toledo elevators.
  • Total SRW stocks in futures delivery warehouses are quite large at 58.7 million bushels
  • Total HRW stocks in futures delivery warehouses are quite large at 87.8 million bushels.  Cash HRW markets have backed off from earlier sky high basis premiums, but will have a tough time crashing until the weight of the spring wheat harvest helps to cover end user needs, and the size and quality of the South American crop is in better focus.
  • Total HRS stocks in futures delivery warehouses are growing – at 11.9 million bushels.  Cash Spring wheat market basis levels are weak for lower protein – trading at prices below HRW basis levels, but quite strong for higher proteins. 

 

VALUE OF A LOADED SRW BARGE (CIF AND FREIGHT BID)

 

Chicago

St Louis

Cincinnati

Memphis

August

-50 WZ

-20 WZ

-31 WZ

-7 WZ

September

-65 WZ

-20 WZ

-42 WZ

-15 WZ

October

-53 WZ

-15 WZ

-37 WZ

-6 WZ

November

-25 WZ

+15 WZ

-4 WZ

+21 WZ

December

-11 WZ

+28 WZ

+10 WZ

+30 WZ

 

FUTURES SPREADS

 

SPREAD

% FULL CARRY

WU-WZ

12 3/4

62 %

WZ-WH

11 1/2

56 %

WZ-WN14

13 1/2

28 %

 

 

 

KWU-KWZ*

(12)      

(36 %)

KWZ-KWH

7 1/2

33 %

KWZ-N14

3

6 %

 

 

 

MWU-MWZ

4 3/4   

17 %

MWZ-MWH

13 3/4

51 %

MWZ-N14

29 1/4

46 %

*Note KC charges a storage premium for

this time slot

 

 

COMPARISON OF SPOT CASH BIDS WITH LOADED BARGE VALUE AND DELIVERY VALUE

 

Cash

Truck

 

Nearby

Mill

Basis

 

Nearby

Loaded

Barge

SEPT

Shipment

 

Futures

Delivery

 

Delivery

Stocks (MLN BU)

Outstanding

Receipts

(BY ZONE)

Futures

Delivery

Location

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

CORN

 

 

 

 

 

 

 

 

Chicago (+43U)

+50 Z

 

(-42 U)

-35 Z

 

PAR

 

0.01

0

Ill River (+74U)

+81 Z

(+73U)

+80 Z

(-20 U)

-13 Z

 

PAR+2 / +3

 

0.32

0/4/0

 

 

 

 

 

 

 

 

 

BEANS

 

 

 

 

 

 

 

 

Chicago

(+31 U)

+75 X

 

(-49 U)

-5 X

 

PAR

 

0.03

0

Ill River

(+47 U)

+91 X

(+91 U)

+135 X

(- 25 U)

+19 X

 

PAR+2to+3.5

 

0.87

0/0/0/0/0

StL (+40 U)

+84X

 

(-4 U)

+40 X

 

PAR+6

 

0.16

0

 

 

 

 

 

 

 

 

 

WHEAT

 

 

 

 

 

 

 

 

Chicago

(+7 U)

-5 Z

(+2 U)

-10 Z

(-53 U)

-65 Z

 

PAR

 

9.12

0

Toledo

(-6 U)

-18 Z

(-3 U)

-15 Z

 

 

PAR

 

23.18

456

NW Ohio

 

 

 

 

PAR

 

8.42

0

Cincy

(-18 U)

-30 Z

(-8 U)

-20 Z

(-30 U)

-42 Z

 

PAR

 

8.17

0

StL

(-13 U)

-25 Z

(+14 U)

+10 Z

(-8 U)

-20 Z

 

PAR+10

 

0.98

0

Memphis

(-28 U)

-40 Z

 

(-3 U)

-15 Z

 

PAR+20

 

8.90

0

  • ·         These basis values are “ball park” numbers and should not be construed as actual tradable values.
  • ·         The corn and bean “mill basis” numbers are truck bids for central Illinois processors
  • Futures delivery values do not include load out charges, daily storage charges until load out, interest on inventory or grade/weight risk – about 11cents for wheat and corn, and 12 ¼ for beans. 

 

 

 

 

This communication has been prepared by the trading, market making and/or the sales personnel (“Trader”) of Knight Capital Americas, LLC. (“KCA”), a subsidiary of KCG Holdings, Inc. (“KCG”). The information contained herein may be the personal perspective of the KCG Trader and/or commentary compiled from public sources. The information from public sources is believed to be reliable but KCG does not guarantee or represent its accuracy or completeness. The opinions and views expressed by the individual trader do not represent the opinions and views of KCG, its affiliates, officers or other personnel. No responsibility and no express or limited liability is assumed jointly or individually for any losses or damages arising out of errors, omissions, delays in the receipt of the information, or any actions taken in reliance upon the information. The information contained herein does not provide investment advice and is not a sufficient basis for an investment decision. No information contained herein should be construed as a solicitation or an offer to buy or sell any security or product. Indications of interest, opinions or views expressed by the trader are not firm orders or quotes and may not be current. No responsibility is assumed to maintain and/or update the information. KCA most likely makes a market in the securities mentioned in this document and its personnel, including those involved in the preparation or issuance of the material may take a position or action which may be inconsistent with the opinions and views expressed therein. Questions regarding the information presented herein or to request a copy of this document should be referred to your KCG Representative.

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© 2013 KCG Holdings, Inc. (“KCG”) All rights reserved. Provided by Knight Capital Americas LLC, member of FINRA and SIPC. For additional information about KCG Holdings, Inc. (NYSE: Euronext: KCG) please visit www.kcg.com.