KCG FUTURES PM GRAIN FUTURES COMMENTS

KCG FUTURES   PM GRAIN FUTURES COMMENTS

 

Yesterday’s comment apply today as well –

Grain futures were led higher by follow through buying in the wheat futures.  Interest in buying wheat increased this week after Argentina experienced another frost/freeze event Monday night and has a possibility of another event over the weekend.  This is leading traders to expect Brazil to buy more US HRW.  Many cash wheat traders expect the US HRW to Brazil loading program to last into the spring and further tighten up the HRW balance sheet.

Today there were also rumors that China was shopping for US spring wheat as China’s domestic wheat prices are at an all time high.  Wheat calendar spreads tightened up quite a bit, and wheat futures continued to gain on corn and beans.  WZ and KWZ closed above their 50 Day Moving Average, and this may encourage Managed Money Funds to lighten up their Short positions.

 

Today’s futures trade featured follow through buying in wheat, while the bean complex drifted lower as traders removed some risk premium.  The US will experience some harvest delaying showers over the weekend, but in general harvest conditions are advantageous and appear to allow a full growing season as there is still not a hard freeze in the US forecast.

Harvest pressure is forcing MWZ to lose against KWZ and WZ, and CZ and SX to lose against wheat futures.   Northern hemisphere spring wheat production appears to be larger than expected, while demand for HRW and SRW is heavier than expected. Good harvest conditions are allowing bean and corn risk premium to “melt”.

 

–       Helen Pound

GRAIN FUTURES CLOSING PRICES AND CHANGE

Close – Rounded

 

CZ3

SX3

SMZ3

BOZ3

WZ3

KWZ3

MWZ3

Today’s Close

$4.57

$13.17

$415

$0.4205

$6.78

$7.27

$7.25

     Change

+2

-5

-2

-0.0004

+8

+9

+6

Total Open Interest

1,152,599

624,017

271,386

296,412

362,021

147,867

45,673

     Change

+5,301

+3,638

+275

-781

+2081

+304

+1,165

OVERNIGHT PERCENT CHANGE IN FUTURES VALUE

Grains

Corn

Soybeans

Soy Meal

Soy Oil

Wheat

KC Wheat

MN Wheat

October

-0.5 %

%

-0.1 %

December (or X), 2013

+0.4 %

-0.4 %

%

-0.5 %

%

-0.1 %

+1.2 %

+1.3 %

+0.9 %

July, 2014

+0.4 %

-0.5 %

-0.8 %

-0.1 %

+0.9 %

+1.0 %

+0.5 %

December (or X), 2014

+0.7 %

-0.1 %

+0.3 %

+0.0 %

+0.8 %

+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

-0.3 %

-0.2 %

+0.1 %

+0.3 %

+0.1 %

+1.0 %

-0.5 %

TERM STRUCTURE

Carries (Inverses) – Rounded

 

Corn

Soybeans

Soy meal

Soy Oil

Wheat

KC Wheat

MN Wheat

October-December

(1.5)

0.0027

     Percent Full Carry

(23 %)

60 %

November – January

2

     Percent Full Carry

11 %

December(orX) – March

13

(19)

(11)

0.0060

10

2

10

     Percent Full Carry

65 %

(55 %)

(107 %)

89 %

51 %

7 %

47 %

December(orX)–July14

27

(49)

(26)

0.0110

5

(15)

17

     Percent Full Carry

60 %

(71 %)

(112 %)

70 %

11 %

(29%)

36 %

Dec(orX)–Dec(orX)14

38

(139)

(63)

0.0103

19

6

27

     Percent Full Carry

48 %

(134 %)

(159 %)

38 %

24 %

6 %

33 %

INTERMARKET SPREADS

                                                                    Rounded

 

W-C

S-W

S-C

S/C

BC*

MW-W

MW-KW

KW-W

December

222

639

860

2.88 %

59

46

-3

49

July 2014

200

585

784

2.62 %

63

58

30

29

Dec 2014

203

481

684

2.38 %

69

55

22

32

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

9.17

9.18

9.19

9.20

Monday

9.23

9.24

9.25

9.25

CZ3

570

80 %

80 %

81 %

79 %

80 %

79 %

80 %

80 %

CN4

592

81 %

82 %

82 %

81 %

81 %

80 %

81 %

82 %

 

OZ3

338

91 %

90 %

92 %

91 %

92 %

92 %

93 %

94 %

ON4

409

74 %

74 %

74 %

74 %

74 %

74 %

75 %

75 %

 

WZ3

779

83 %

83 %

84 %

83 %

84 %

84 %

86 %

87 %

WN4

775

84 %

85 %

86 %

85 %

86 %

86 %

87 %

88 %

 

KWZ3

830

83 %

83 %

85 %

83 %

84 %

85 %

87 %

88 %

KWN4

790

87 %

87 %

89 %

87 %

88 %

88 %

89 %

90 %

 

MWZ3

858

82 %

82 %

83 %

82 %

81 %

82 %

84 %

84 %

MWN4

890

82 %

82 %

83 %

82 %

81 %

82 %

83 %

83 %

 

SX3

1259

107 %

107 %

106 %

104 %

104 %

104 %

105 %

105 %

SN4

1287

100 %

101 %

101 %

99 %

98 %

99 %

99 %

99 %

 

SMZ3

353

121 %

121 %

119 %

117 %

116 %

117 %

118 %

118 %

SMN4

365

110 %

110 %

109 %

107 %

106 %

107 %

108 %

107 %

 

BOZ3

49.00

86 %

87 %

88 %

86 %

86 %

86 %

86 %

86 %

BON4

49.92

87 %

88 %

88 %

87 %

87 %

86 %

86 %

86 %

  • +   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.

 

 

 

KCG FUTURES   PM GRAIN FUTURES COMMENTS

 

Yesterday’s comment apply today as well –

Grain futures were led higher by follow through buying in the wheat futures.  Interest in buying wheat increased this week after Argentina experienced another frost/freeze event Monday night and has a possibility of another event over the weekend.  This is leading traders to expect Brazil to buy more US HRW.  Many cash wheat traders expect the US HRW to Brazil loading program to last into the spring and further tighten up the HRW balance sheet.

Today there were also rumors that China was shopping for US spring wheat as China’s domestic wheat prices are at an all time high.  Wheat calendar spreads tightened up quite a bit, and wheat futures continued to gain on corn and beans.  WZ and KWZ closed above their 50 Day Moving Average, and this may encourage Managed Money Funds to lighten up their Short positions.

 

Today’s futures trade featured follow through buying in wheat, while the bean complex drifted lower as traders removed some risk premium.  The US will experience some harvest delaying showers over the weekend, but in general harvest conditions are advantageous and appear to allow a full growing season as there is still not a hard freeze in the US forecast.

Harvest pressure is forcing MWZ to lose against KWZ and WZ, and CZ and SX to lose against wheat futures.   Northern hemisphere spring wheat production appears to be larger than expected, while demand for HRW and SRW is heavier than expected. Good harvest conditions are allowing bean and corn risk premium to “melt”.

 

–       Helen Pound

WEEKLY EXPORT SALES REPORT

BEANS

  • Sales of soybeans continue to be well above the average weekly sales needed to hit the USDA yearly target. 
  • The total sold to date is well above the normal pace of sales at 58% sold versus a five year average of 43% sold.
  • US bean supplies are expected to remain exceedingly tight in the coming season.  It is crucial for South America to produce a large soybean crop.  Planting will start soon.
  • The function of futures prices, futures inverses and cash market basis levels in an extremely tight supply situation is to encourage end users to find substitutes or delay purchase until new crop supplies become available.  This week’s Export Sales Report shows that current high prices have not priced US soybean export sales out of the world market.
  • Export loadings picked up this week at 16 mln bu – although still well under the average needed to load each week to hit the USDA target – 27 mln bu.
  • It’s likely that domestic processors and exporters will bid aggressively against one another – strong basis – to cover pipeline needs.
  • Note that the US has sold 17 mmt of beans to China, and so far have loaded out 0.3 mmt.

CORN

  • Sales of corn were well above the average needed to hit the USDA annual target.
  • US corn supplies are more abundant than bean supplies.
  • Total corn sold to date is well above the normal pace of sales at 42% sold versus a five year average of 34% sold.
  • US corn exports in 2012-13 accounted for a stunningly low 6% of total use, and this year are expected to increase slightly to 10% of total use.
  • Export loadings increased to 19 million bushels – still below the 24 mln bu/week needed to hit the USDA target.

WHEAT

  • Weekly US wheat sales continue at a healthy pace.  
  • So far we have sold 55% of our expected 2013-14 wheat exports
  • Export loading continue at a healthy pace with 38% of expected sales for the year already shipped versus an average pace of 19%
  • US wheat prices are well above prices in Russia, Ukraine, Romania, EU, and Australia.
  • Sizable amounts of wheat have already been sold, and this week there are rumors that Brazil and China may buy additional chunks.  It’s possible that most/all US SRW and HRW stocks in futures deliverable terminals may end up moving into the export market.
  • This week there has been much conversation about record high prices for wheat in China,  China has been buying Australian wheat, and are rumored to be looking at purchasing northern hemisphere spring wheat now that harvest is nearing its final stages and prices are quite cheap.
  • A frost event in Argentina early this week and the possibility of another this weekend has supported the rally in the wheat market this week.  Many traders think a large chunk of HRW futures delivery stocks have already been committed to the export market. Traders think Brazil may continue to be a HRW buyer beyond the first of the year due to low Argentine production and quality.
  • The US Spring wheat harvest is close to complete, and the Canadian harvest is expected to be about 75% harvested.
  • HRS is having a difficult time making export sales as buyers want 14% protein and some shippers are having trouble loading 13% protein..
  • Recent USDA reports show US carryover as a percent of use for winter wheat is close to more normal levels after suffering through exceedingly abundant supplies the past several years.  Spring wheat supplies are still abundant with better than expected US and Canadian yields.  On Monday the USDA will release its Small Grains Summary and Quarterly Stocks Report. Traders expect to see increased supplies of spring wheat, but less winter wheat stocks due to aggressive late summer feeding.
  • Worldwide wheat production estimates show potential quality and yield problems in many exporting countries.
  • US millers are paying premiums for good quality wheat – especially good test weight SRW and high protein HRW and HRS.

 

 

2013-2014 EXPORT SALES (in Millions of bushels – rounded)

 Week ended 9.19.13

CORN

BEANS

WHEAT

 

WEEKLY SALES FOR 2013-13

25

104

23

Needed to hit USDA target

(14)

(11)

(13)

 

TOTAL SALES

546

944

650

USDA YEARLY SALES ESTIMATE

1225

1385

1100

 

PERCENT SOLD

45 %

68 %

59 %

5 year average percent sold

34 %

43 %

48 %

 

UNSOLD

679

441

450

UNSHIPPED

500

923

206

 

SHIPPED THIS WEEK

19

16

38

Needed to ship to hit USDA target

(24)

(27)

(19)

 

PERCENT SHIPPED

4 %

2 %

40 %

5 year average percent sold

6 %

2 %

32 %

 

 

US CARRYOVER/USE %

15 %

5 %

23 %

WORLD CARRYOVER/USE %

15 %

19 %

20 %

 

EXPORTS AS A PERCENT OF

US TOTAL USE

10 %

44 %

46 %

# weeks left in marketing year:  wheat = 36  corn and beans = 49

 

Corn sales:  Mexico, China and others

Beans sales:  China, Unknown, Indonesia, Egypt, Taiwan, Mexico and others

Wheat sales:  China, Mexico, Indonesia, Brazil, Japan, south Korea and others

 

 

WHEAT SALES BY CLASS (in Millions of bushels – rounded)

 

HRW

HRS

DURUM

SRW

WHITE

WEEKLY SALES

7

6

0.0

4

5

(NEED TO HIT USDA)

(5)

(3)

(0.5)

(2)

(2)

 

TOTAL SALES

238

111

7

213

80

USDA ESTIMATE

405

235

25

285

150

 

PERCENT SOLD

59 %

47 %

28 %

73 %

53 %

 

UNSOLD

167

124

18

72

70

UNSHIPPED

56

45

3

69

33

 

CARRYOVER/USE %

21 %

35 %

26 %

18 %

19 %

 

EXPORTS AS A PERCENT OF USE

43 %

46 %

24 %

49 %

56 %

#   weeks left in the wheat marketing year: 36

 

 

ESTIMATES FOR 2012-13 US CARRYOUT (billion bushels)

 

2012-13

2012-13

2012-13

 

Sept 1 Stocks

Average

Range

Sept

2011-12

2010-11

CORN

0.688

0.552-0.765

0.661

0.989

1.128

BEANS

0.126

0.112-0.155

0.125

0.169

0.215

 

ESTIMATES FOR 2012-13 US STOCKS (billion bushels)

 

2012-13

2012-13

2011-12

 

Sept 1 Stocks

Average

Range

Sept 1 Stocks

WHEAT

1.938

1.819-2.085

2.105

 

ESTIMATES FOR 2013 US WHEAT PRODUCTION

 

2013-14

2013-14

2013-14

 

9.30.13

Average

Range

September

2012-13

11-12

ALL WHEAT

2.121

2.095-2.137

2.114

2.269

1.999

  HRW

0.792

0.782-0.805

0.791

1.004

0.780

  SRW

0.545

0.542-0.555

0.542

0.420

0.458

  WHITE

0.215

0.205-0.250

0.246

0.221

0.256

  OTHER SPRING

0.509

0.465-0.530

0.475

0.542

0.365

  DURUM

0.060

0.056-0.063

0.060

0.082

0.050


 

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