KCG Grain Futures Report

KCG FUTURES   PM GRAIN FUTURES COMMENTS

 

Grain futures closed mostly well in the black as the weather forecast for the US Midwest indicating mostly hot, only scattered rainfall for the next 10 days supported higher prices.  Surprisingly, old crop corn and beans gained more than new crop.  Charts ended up with CU and SU at new recent highs, while CZ and SX closed within the recent consolidation.  In addition, the SU/CU ratio lost ground and closed below the SX/CZ ratio for the first time this year.

Another futures market feature was wheat losing to corn and bean futures.  The spring wheat harvest is beginning to ramp up and millers expect the US harvest to exceed 50% complete by the end of next week.   The Canadian spring wheat crop is larger and will soon be shipping newly harvested bushels.  This week MWU-MWZ spreads and MWU-KWU/WU spreads have collapsed.

Traders expect to see lots of lower protein spring wheat that can compete with HRW.   Brazil has been an aggressive HRW buyer after South America experience a damaging freeze just after planting, and this has kept HRW supplies tight and basis levels higher than normal.  It’s rumored that Canada has begun selling spring wheat to Brazil, and this may allow HRW futures spreads to ease.

Tomorrow morning the USDA will release its weekly US Export Sales Report.  Analysts expect to see sizeable total old crop plus new crop sales.  Last week’s sales were large, but included old crop cancellations.

Expect markets to remain volatile with little day to day follow through.  Recent heat in the US Midwest has focused traders on yield deterioration, and lessened concern about the length of growing season.   Cash markets are heavily inverted now through October. Positioning for September options expiration on Friday and September futures liquidation before First Notice Day the following Friday are also concerns and add to volatility.  – Helen Pound

 

GRAIN FUTURES CLOSING PRICES AND CHANGE

Close – Rounded

 

CU3

SU3

SMU3

BOU3

WU3

KWU3

MWU3

Today’s Close

$4.98

$13.33

$422

$0.4282

$6.39

$7.00

$7.29

     Change

+14

+24

+8

-0.0006

+5

+3

-6

Total Open Interest

1,199,310

545,780

275,079

302,029

404,468

139,168

37,620

     Change

-14,420

-2,749

+250

-3,501

-3,007

+1,016

+58

OVERNIGHT PERCENT CHANGE IN FUTURES VALUE

Grains

Corn

Soybeans

Soy Meal

Soy Oil

Wheat

KC Wheat

MN Wheat

September, 2013

+3.0 %

+1.8 %

%

+1.9 %

%

-0.1 %

+0.7 %

+0.4 %

-0.9 %

December, 2013

+1.6 %

+1.1 %

+1.5 %

-0.1 %

+0.5 %

+0.4 %

-0.4 %

July, 2014

+1.3 %

+0.6 %

+1.0 %

+0.1 %

+0.1 %

+0.2 %

-0.1 %

OVERNIGHT PERCENT CHANGE IN FUTURES VALUE

Macros

 

Dollar

10 Year

S&P 500

Crude Oil

Copper

Gold

Silver

Percent Daily Change

+0.6 %

-0.6 %

-0.9 %

-1.1 %

-0.3 %

-0.5 %

+0.9 % %

TERM STRUCTURE

Carries (Inverses) – Rounded

 

Corn

Soybeans

Soy meal

Soy Oil

Wheat

KC Wheat

MN Wheat

September – December

(15)

(29)

(13)

0.0035

11

2

7

     Percent Full Carry

(72 %)

(167 %)

(136 %)

52 %

51 %

7 %

25 %

December – July 2014

26

(51)

(27)

0.0078

13

0

23

     Percent Full Carry

54 %

(72 %)

(116 %)

50 %

28 %

0 %

35 %

INTERMARKET SPREADS

                                                                    Rounded

 

W-C

S-W

S-C

S/C

BC*

MW-W

MW-KW

KW-W

September

141

694

835

2.68 %

65

90

29

61

December

166

655

821

2.70 %

69

87

34

53

July 2014

154

590

744

2.46 %

70

96

56

40

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

Monday

8.12

8.13

8.14

8.15

8.16

Monday

8.19

8.20

8.21

CU3

592

80 %

77 %

79 %

81 %

80 %

83 %

82 %

84 %

CZ3

570

81 %

78 %

80 %

83 %

81 %

85 %

83 %

85 %

CN4

592

83 %

80 %

82 %

84 %

85 %

86 %

85 %

86 %

 

 

OU3

350

103 %

103 %

104 %

109 %

108 %

110 %

109 %

110 %

OZ3

338

98 %

97 %

97 %

98 %

98 %

99 %

99 %

99 %

ON4

409

83 %

82 %

82 %

83 %

83 %

84 %

84 %

81 %

 

 

WU3

765

83 %

82 %

82 %

83 %

82 %

84 %

83 %

83 %

WZ3

779

83 %

82 %

83 %

83 %

83 %

84 %

83 %

83 %

WN4

775

87 %

85 %

85 %

86 %

85 %

86 %

85 %

85 %

 

 

KWU3

876

86 %

85 %

86 %

86 %

86 %

86 %

85 %

86 %

KWZ3

830

85 %

85 %

85 %

85 %

85 %

85 %

84 %

85 %

KWN4

790

89 %

88 %

88 %

89 %

89 %

90 %

89 %

89 %

 

 

MWU3

860

87 %

85 %

86 %

87 %

87 %

87 %

85 %

85 %

MWZ3

858

86 %

86 %

86 %

87 %

86 %

87 %

86 %

86 %

MWN4

890

86 %

85 %

85 %

86 %

85 %

86 %

85 %

85 %

 

 

SU3

1288

98 %

98 %

99 %

100 %

100 %

103 %

102 %

103 %

SX3

1259

97 %

98 %

98 %

101 %

100 %

104 %

103 %

104 %

SN4

1287

96 %

96 %

96 %

97 %

96 %

97 %

97 %

97 %

 

 

SMU3

369

109 %

109 %

111 %

111 %

111 %

114 %

112 %

114 %

SMZ3

353

105 %

106 %

107 %

110 %

109 %

115 %

114 %

116 %

SMN4

365

102 %

102 %

102 %

103 %

102 %

104 %

104 %

105 %

 

 

BOU3 49.81

85 %

85 %

85 %

87 %

86 %

87 %

86 %

86 %

BOZ3 49.00

87 %

87 %

87 %

89 %

88 %

89 %

88 %

88 %

BON4 49.92

88 %

85 %

87 %

89 %

88 %

89 %

88 %

88 %

 

  • +   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.

 

 

 

KCG FUTURES   PM GRAIN FUTURES COMMENTS

 

Grain futures closed mostly in the black as the weather forecast for the US Midwest indicating mostly hot, only scattered rainfall for the next 10 days supported higher prices.  Surprisingly, old crop corn and beans gained more than new crop.  Charts ended up with CU and SU at new recent highs, while CZ and SX closed within the recent consolidation.  In addition, the SU/CU ratio lost ground and closed below the SX/CZ ratio for the first time this year.

Another futures market feature was wheat losing to corn and bean futures.  The spring wheat harvest is beginning to ramp up and millers expect the US harvest to exceed 50% complete by the end of next week.   The Canadian spring wheat crop is larger and will soon be shipping newly harvested bushels.  This week MWU-MWZ spreads and MWU-KWU/WU spreads have collapsed.

Traders expect to see lots of lower protein spring wheat that can compete with HRW.   Brazil has been an aggressive HRW buyer after South America experience a damaging freeze just after planting, and this has kept HRW supplies tight and basis levels higher than normal.  It’s rumored that Canada has begun selling spring wheat to Brazil, and this may allow HRW futures spreads to ease.

Tomorrow morning the USDA will release its weekly US Export Sales Report.  Analysts expect to see sizeable total old crop plus new crop sales.  Last week’s sales were large, but included old crop cancellations.

Expect markets to remain volatile with little day to day follow through.  Recent heat in the US Midwest has focused traders on yield deterioration, and lessened concern about the length of growing season.   Cash markets are heavily inverted now through October. Positioning for September options expiration on Friday and September futures liquidation before First Notice Day the following Friday are also concerns and add to volatility.  – Helen Pound

 

 

ANALYST EXTIMATES FOR WEEKLY US EXPORT SALES REPORT

–       In million bushels and thousand metric tons – rounded

 

This Week

Range

Last Week

Wheat

15-24

18

Corn

22-37

31

Beans

50-73

69

 

Meal

150-400

243.5

Oil

0-20

7.8

 

 

 

WORLD CORN, BEAN AND WHEAT FUNDAMENTALS – WASDE AUGUST REPORT

 

WORLD CORN PRODUCTION / TRADE / CARRYOVER –mmt – AUG 2013

 

13-14

12-13

13-14

12-13

13-14

12-13

 
 

Prod

Prod

Trade

Trade

C/U %

C/U %

 
World

957.2

855.1

15 %

13 %

Huge production increase over last year
 

 
Exporters

Export

Export

 
 US

349.6

273.8

31.1

17.8

14 %

7 %

Heat and scattered light rains during the last two weeks of Aug are helping to push maturity, but also stressing drier areas – High spot US basis levels may cut US world market share
 Argentina

27.0

26.5

18.5

19.0

3 %

3 %

Expect exports through Fall and Winter
 Brazil

72.0

77.0

18.0

22.0

18 %

15 %

2nd crop harvest near complete – expect sizable exports through Fall and Winter
 Ukraine

26.0

20.9

18.0

13.5

10 %

4 %

Exports up 1.5 mmt from July report – export prices very cheap
 S. Africa

13.0

12.2

2.0

1.9

25 %

27 %

 
 

 
 

 
Importers

Import

Import

 
 Japan

0.0

0.0

15.5

14.5

4 %

4 %

Buying corn from S Am and Black Sea much cheaper than US prices
 Mexico

22.0

21.5

8.0

6.5

7 %

5 %

Imports up 1.5 mmt from July report
 

 
S Korea

0.1

0.1

8.4

8.0

16 %

18 %

Buying corn from S Am and Black Sea
 SE Asia

26.4

24.7

8.0

7.4

6 %

7 %

 
 Egypt

5.6

5.8

5.2

4.0

8 %

12 %

 
 EU-27

65.0

58.5

7.5

10.5

8 %

8 %

 
 

 
China

211.0

205.6

7.0

3.0

24 %

29%

Feed needs continue to expand

*C/U%  is Carryover as a Percent of Use

Total world corn imports 102 mmt – exports 104 mmt

SE Asia- Indonesia, Malaysia, Philippines, Thailand, and Vietnam

 

WORLD BEAN PRODUCTION / TRADE / CARRYOVER – in mmt – AUG 2013

 

13-14

12-13

13-14

12-13

13-14

12-13

 
 

Prod

Prod

Trade

Trade

C/U %

C/U %

 
World

281.7

268.1

19%

17 %

Moderate increase in world supplies
 

 
Exporters

Export

Export

 
 Brazil

85.0

82.0

41.5

37.9

26 %

24 %

Expect aggressive exports through Fall – Expect increased acreage
 US

88.6

82.1

37.7

36.2

7 %

4 %

Tight supplies continue –

Farmers concerned about possible early end to growing season. High spot basis levels may cut world market share

Argentina

53.5

50.2

13.7

7.8

52 %

56 %

Expect aggressive exports through Fall
 

 
 

 
Importers

Import

Import

 
China

12.5

12.8

69.0

59.0

18 %

15 %

Feed needs continue to expand
 EU-27

1.2

1.0

12.1

12.2

2 %

3 %

 
 Mexico

0.3

0.3

3.6

3.7

1 %

1 %

 
 Japan

0.2

0.2

2.8

2.9

3 %

5 %

 

*C/U%  is Carryover as a Percent of Use

Total world bean imports 105 mmt – exports 107 mmt

Also note that Argentina charges a 35% tax on exports.

 

 

WORLD WHEAT PRODUCTION / TRADE / CARRYOVER in mmt – AUG 2013

 

13-14

12-13

13-14

12-13

13-14

12-13

 
 

Prod

Prod

Trade

Trade

C/U %

C/U %

 
World

705.4

655.2

20 %

21 %

Large increase in world supplies
 

 
Exporters

Export

Export

 
 US

57.5

61.8

29.9

27.5

23 %

30 %

North American Spring wheat harvest is beginning to ramp up  – protein is expected to be well below 14%.

May help to offset price support from early SRW demand from China and HRW demand from Brazil.

 Australia

25.5

22.1

19.0

19.0

13 %

13 %

An aggressive seller –especially to China
 Canada

29.5

27.2

20.0

18.8

18 %

17 %

Today’s StatsCan production report showed wheat production at 30.5 mmt
 EU-27

141.4

133.1

22.0

22.0

8 %

7 %

Aug report increased production 3 mmt and exports 2 mmt over July report
 

Eastern Europe -Aggressive seller to Middle East and North Africa – cheaper than US
 Russia

54.0

37.7

17.0

11.1

12 %

12 %

Aggressive seller to Middle East and North Africa – Much cheaper than US
Kazakhstan

17.0

9.8

9.5

6.5

19 %

22 %

Production and exports up 2.5 mmt from July report – aggressive seller
 India

92.5

94.9

5.5

6.5

21 %

27 %

Less aggressive seller as they only want to sell high priced exports
 Argentina

12.0

10.0

6.0

4.0

6 %

1 %

Production and exports down 1 mmt from July report – concerns about freeze damage in newly planted crop
 Ukraine

21.5

15.8

10.0

7.0

11 %

12 %

Production and exports up 2 mmt from July report.
 

Aggressive seller to Middle East and North Africa – cheaper than US
 

 
 

 
Importers

Import

Import

 
 N Afr

20.4

17.2

20.6

21.2

24 %

27 %

Political problems in Egypt may limit imports
 M East

20.0

17.4

18.9

20.2

32 %

27 %

Imports up 1.6 mmt from July report – political problems in region may limit imports
 SE Asia

0.0

0.0

16.4

15.4

20 %

22 %

Buying from Australia
Brazil

4.8

4.3

7.5

7.7

13 %

9 %

Aggressively buying US HRW and Canadian Spring wheat to offset South American freeze issues – not buying Black Sea as they don’t provide safety/health documents
China

121.0

121.0

9.5

3.2

45 %

43 %

Imports up 1 mmt from July report
 Pakistan

24.0

23.3

0.9

0.2

14 %

12 %

 

*C/U%  is Carryover as a Percent of Use

Total world wheat imports 149 mmt – exports 144. mmt

M East-  Lebanon, Iraq, Iran, Israel, Jordan, Kuwait, S Arabia, Yemen, UAE, and Oman

N Afr- Algeria, Egypt, Libya, Morocco and Tunisia

SE Asia- Indonesia, Malaysia, Philippines, Thailand, and Vietnam

 

 

 

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.

Helen Pound