KCG FUTURES PM GRAIN FUTURES COMMENTS

KCG FUTURES   PM GRAIN FUTURES COMMENTS  

 

Grain futures traded all over the map, but finally closed a bit lower in the corn and bean futures and a bit higher in the wheat futures as the market unwinds some risk premium.  Traders expect to see beneficial rains in southeast Iowa and northern Illinois in the next several days.  Forecasters still see no damaging cold weather to impact the US Midwest into early October.

 

 

GRAIN FUTURES CLOSING PRICES AND CHANGE

Close – Rounded

 

CZ3

SX3

SMZ3

BOZ3

WZ3

KWZ3

MWZ3

Today’s Close

$4.54

$13.43

$427

$0.4224

$6.43

$6.90

$7.00

     Change

-3

-6

-2

-0.0013

+2

+1

-2

Total Open Interest

1,105,961

613,690

270,765

287,916

356,083

148,486

40,470

     Change

+7,355

-5,358

-2,813

-1,851

-1,629

-687

-275

OVERNIGHT PERCENT CHANGE IN FUTURES VALUE

Grains

Corn

Soybeans

Soy Meal

Soy Oil

Wheat

KC Wheat

MN Wheat

October

-0.6 %

%

-0.3 %

December (or X), 2013

-0.6 %

-0.4 %

%

-0.4 %

%

-0.3 %

+0.3 %

+0.1 %

-0.3 %

July, 2014

-0.5 %

+0.2 %

+0.5 %

-0.3 %

+0.1 %

+0.2 %

-0.3 %

December (or X), 2014

-0.6 %

+0.5 %

+0.8%

-0.2 %

0.0 %

0.0 %

-0.1 %

OVERNIGHT PERCENT CHANGE IN FUTURES VALUE

Macros

 

Dollar

10 Year

S&P 500

Crude Oil

Copper

Gold

Silver

Percent Daily Change

-0.2 %

+0.1 %

+0.4 %

-1.1 %

-0.1 %

-0.6 %

-1.2 %

TERM STRUCTURE

Carries (Inverses) – Rounded

 

Corn

Soybeans

Soy meal

Soy Oil

Wheat

KC Wheat

MN Wheat

October-December

(2.2)

0.0024

     Percent Full Carry

(33 %)

54 %

December(orX) – March

13

(18)

(9)

0.0053

11

6

13

     Percent Full Carry

65 %

(51 %)

(96 %)

79 %

53 %

27 %

63 %

December(orX)–July14

28

(51)

(27)

0.0112

12

(3)

28

     Percent Full Carry

61 %

(75 %)

(117 %)

71 %

25 %

(5 %)

60 %

Dec(orX)–Dec(orX)14

39

(160)

(72)

0.0078

24

20

43

     Percent Full Carry

50 %

(156 %)

(183 %)

29 %

30 %

21 %

52 %

INTERMARKET SPREADS

                                                                    Rounded

 

W-C

S-W

S-C

S/C

BC*

MW-W

MW-KW

KW-W

December

189

700

889

2.96 %

61

57

9

47

July 2014

173

637

810

2.68 %

65

73

40

33

Dec 2014

174

515

689

2.40 %

71

75

32

43

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

9.06

Monday

9.09

9.10

9.11

9.12

9.13

Monday

9.16

9.17

CZ3

570

82 %

81 %

82 %

83 %

82 %

81 %

80 %

80 %

CN4

592

84 %

83 %

84%

84%

83%

82 %

82 %

81 %

 

 

 

 

 

 

 

 

OZ3

338

95 %

93 %

94 %

95 %

94 %

92 %

92 %

91 %

ON4

409

78 %

77 %

77 %

78 %

77 %

76 %

74 %

74 %

 

 

 

 

 

 

 

 

WZ3

779

83 %

82 %

83 %

83 %

84 %

82 %

82 %

83 %

WN4

775

86 %

85 %

85 %

85 %

86 %

85 %

84 %

84 %

 

 

 

 

 

 

 

 

KWZ3

830

84 %

83 %

84 %

84 %

85 %

83 %

83 %

83 %

KWN4

790

88 %

88 %

88 %

88 %

89 %

88 %

87 %

87 %

 

 

 

 

 

 

 

 

MWZ3

858

83 %

82 %

82 %

83 %

83 %

82 %

82 %

82 %

MWN4

890

83 %

82 %

83 %

83 %

83 %

82 %

82 %

82 %

 

 

 

 

 

 

 

 

SX3

1259

109 %

108 %

108 %

108 %

111 %

110 %

107 %

107 %

SN4

1287

101 %

101 %

101 %

102 %

103 %

102 %

100 %

100 %

 

 

 

 

 

 

 

 

SMZ3

353

122 %

121 %

120 %

121 %

127 %

125 %

121 %

121 %

SMN4

365

109 %

109 %

109 %

110 %

112 %

111 %

109 %

110 %

 

 

 

 

 

 

 

 

BOZ3

49.00

89 %

88 %

88 %

88 %

88 %

87 %

86 %

86 %

BON4

49.92

90 %

89 %

89 %

88 %

88 %

88 %

87 %

87 %

  • ·         +   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 out 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.

 

 

 

KCG FUTURES   PM GRAIN FUTURES COMMENTS  

 

     Grain futures traded all over the map, but finally closed a bit lower in the corn and bean futures and a bit higher in the wheat futures as the market unwinds some risk premium.  Traders expect to see beneficial rains in southeast Iowa and northern Illinois in the next several days.  Forecasters still see no damaging cold weather to impact the US Midwest into early October.

 

 

 

CARRIES – INVERSES- AND FUTURES DELIVERIES

Corn –   At this point, basis levels are under CZ futures delivery values and suggest that there will be cash deliveries against the CZ.  This has widened board carries to 65% of Full Carry.  If anything goes wrong with the US harvest or South American planting, these carries will be viewed as quite attractive.  If the US loses market share in the world corn export market, then these carries can widen a bit more. 

  • ·         Domestic and export basis levels have dropped off dramatically over the past several weeks 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. 
  • ·         Quick delivery domestic basis levels are still at historically high levels (still over futures delivery value) – and still at premiums over export values, but the price difference is less and less severe as harvest picks up.
  • ·         Total corn stocks located in futures delivery warehouses are quite small – under 300 thousand bushels.
  • ·         There are 3 originally CN futures delivery receipts still remaining on the Illinois River that could be sold and loaded out.
  • ·         Brazil has harvested a sizable winter corn crop, and some of these bushels will end up going to traditional overseas US customers.  The Ukraine has also produced a sizeable corn crop and has been an active seller. Aggressive foreign competition and good forward coverage by world buyers weighs on the futures market and turned inverses into sizable carries.

 

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

 

Chicago

Illinois River

 Spot

-24 CZ

-4 CZ

September

-37 CZ

-14 CZ

October

-40 CZ

-16 CZ

November

-30 CZ

-10 CZ

December

-16 CZ

+2 CZ

 

FUTURES SPREADS

 

SPREAD

% FULL CARRY

CZ-CH

12 1/2

65 %

CZ-CN14

27 1/2

61 %

CZ-CZ14

38 3/4

50 %

 

 

Beans –   At present it looks like cash deliveries against the SX are unlikely, but this may change as the pace of harvest picks up.  Developments in the US harvest conditions and South American planting conditions will have a big impact on the currently inverted price structure.  Would expect SX to lose on SF as harvest picks up – barring weather problems.

  • Old crop US bean supplies are extremely tight and are expected to remain extremely tight in the 2013-14 season.
  • Although basis levels have been eroding, domestic processors are bidding large premiums over export basis bids and SX futures delivery values for quick shipment.
  • The value of loaded bean barges in Chicago for NOVEMBER shipment is under futures delivery value.  Downriver barge basis levels are above futures delivery values. 
  • Total bean stocks in futures delivery warehouses are quite small at just over 600 thousand bushels.

 

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

 

Chicago

Illinois River

St Louis

Spot

+1 SX

+22 SX

+26 SX

September

-13 SX

+12 SX

+23 SX

October

-27 SX

-1 SX

+14 SX

November

-8 SX

+15 SX

+35 SX

December

+10 SX

+28 SX

+48 SX

 

FUTURES SPREADS

 

SPREAD

% FULL CARRY

SX-SH

(17 1/2)

(51 %)

SX-SN14

(51)

(75 %)

SX-SX14

(160)

(156 %)

 

 

Wheat-   There are huge wheat stocks in futures delivery terminals, but there are also aggressive export programs for SRW to China and for HRW to Brazil.  Traders expect to see sizable load outs from terminal stocks, and no deliveries against the WZ futures – just like WU.  Chicago and KC futures spreads have been narrowing in response.  If the Argentine wheat crop improves, then pressure on spreads to narrow will abate – weather developments in the next couple of weeks will give guidance. 

  • ·         Wheat futures have gained versus corn.  US wheat has priced itself out of feed rations.        
  • ·         Terminal stocks are quite large – with a large amount of off quality wheat as well.
  • ·         US Spring wheat harvest is finishing up, and the Canadian harvest is hitting its midpoint.  The crop is expected to have a fair amount of lower protein wheat, and a healthy premium has developed for higher protein spring wheat.
  • ·         The value of loaded SRW wheat barges in Chicago for DECEMBER shipment is far under futures delivery value, but over delivery value downriver.
  • ·         There is a two tier SRW cash market with millers paying premiums for good quality and decent test weight. 
  • ·         There are 265 WN futures delivery receipts wheat still located in Toledo elevators.
  • ·         Total SRW stocks in futures delivery warehouses are quite large at 59 million bushels
  • ·         Total HRW stocks in futures delivery warehouses are quite large at 86 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 15 million bushels.  Cash Spring wheat market basis levels are very weak for lower protein – and very competitive with HRW basis levels – but quite a bit more for higher proteins. 

 

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

 

Chicago

St Louis

Cincinnati

Memphis

Spot

-35 WZ

-9 WZ

-32 WZ

-1 WZ

September

-48 WZ

-12 WZ

-35 WZ

-3 WZ

October

-48 WZ

-7 WZ

-32 WZ

+2 WZ

November

-24 WZ

+19 WZ

-3 WZ

+23 WZ

December

-1 WZ

+37 WZ

+19 WZ

+39 WZ

 

FUTURES SPREADS

 

SPREAD

% FULL CARRY

WZ-WH

10 1/2

53 %

WZ-WN14

11 3/4

25 %

WZ-WZ14

24

30 %

 

KWZ-KWH

6 1/4

27 %

KWZ-N14

(2 ½)

(5 %)

KWZ-Z14

19 3/4

21 %

 

MWZ-MWH

12 3/4

63 %

MWZ-N14

28 1/4

60 %

MWZ-Z14

42 1/2

52 %

 

 

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

 

Cash

Truck

Nearby

Mill

Basis

Nearby

Loaded

Barge

DEC(NOV)

Shipment

Futures

Delivery

Delivery

Stocks (MLN BU)

Outstanding

Receipts

(BY ZONE)

Futures

Delivery

Location

 

CORN

Chicago

+25 Z

-16 Z

PAR

0.02

0

Ill River

+24 Z

+25 Z

+2 Z

PAR+2 / +3

0.26

0/3/0

 

BEANS

Chicago

+0 X

-8 X

PAR

0.02

0

Ill River

+7 X

+75 X

+15 X

PAR+2to+3.5

0.53

0/0/0/0/0

StL +21 X

+35 X

PAR+6

0.07

0

 

WHEAT

Chicago

-5 Z

-10 Z

-1 Z

PAR

9.45

0

Toledo

-18 Z

-15 Z

PAR

24.05

265

NW Ohio

PAR

8.25

0

Cincy

-30 Z

-20 Z

+19 Z

PAR

7.73

0

StL

-25 Z

-25 Z

+37 Z

PAR+10

1.24

0

Memphis

-40 Z

+39 Z

PAR+20

8.21

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.

KCG Holdings, Inc. (“KCG”) is comprised of trading and related entities under common control such as Knight Capital Americas, LLC, KCG Europe Limited (a U.K. registered broker-dealer) and KCG Hotspot FX LLC.

© 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.