KCG Grains

KCG FUTURES – PM GRAIN FUTURES COMMENTS – TUESDAY 8.20.13

 

Grain futures gave back some of yesterday’s rally, with prices closing in the red.  All in all, today’s trading action was an “inside day” indicating consolidation of the rally, but no real directional “news”.   With tight stocks we are in “weather market” mode where small changes in the forecast – or actual results- will have an outsized impact on prices.  Most analysts think we need to “see” beneficial rains in order to encourage selling interest.  This afternoon corn basis levels are firmer, while bean basis levels are weaker.  – Helen Pound

GRAIN FUTURES CLOSING PRICES AND CHANGE

Close – Rounded

 

CU3

SU3

SMU3

BOU3

WU3

KWU3

MWU3

Today’s Close

$4.84

$13.09

$414

$0.4288

$6.34

$6.97

$7.35

     Change

-10

-13

-7

-0.0057

-7

-7

-10

Total Open Interest

1,213,730

548,529

274,829

305,530

407,475

138,152

37,562

     Change

-569

+12,192

+4,665

-5,503

-1,219

-895

+619

OVERNIGHT PERCENT CHANGE IN FUTURES VALUE

Grains

Corn

Soybeans

Soy Meal

Soy Oil

Wheat

KC Wheat

MN Wheat

September, 2013

-1.9 %

-1.0 %

%

-1.6 %

%

-1.3 %

-1.1 %

-0.9 %

-1.4 %

December, 2013

-2.1 %

-1.0 %

-0.5 %

-1.3 %

-1.2 %

-1.1 %

-0.9 %

July, 2014

-1.7 %

-0.5 %

+0.1 %

-1.4 %

-1.1 %

-0.9 %

-0.7 %

OVERNIGHT PERCENT CHANGE IN FUTURES VALUE

Macros

 

Dollar

10 Year

S&P 500

Crude Oil

Copper

Gold

Silver

Percent Daily Change

-0.4 %

+0.5 %

+0.5 %

-1.7 %

-0.1 %

+0.5 %

-0.4 % %

TERM STRUCTURE

Carries (Inverses) – Rounded

 

Corn

Soybeans

Soy meal

Soy Oil

Wheat

KC Wheat

MN Wheat

September – December

(9)

(19)

(12)

0.0031

12

3

4

     Percent Full Carry

(41 %)

(108 %)

(122 %)

46 %

57 %

8 %

13 %

December – July 2014

27

(47)

(25)

0.0078

16

1

20

     Percent Full Carry

56 %

(65 %)

(108 %)

50 %

33 %

1 %

30 %

INTERMARKET SPREADS

                                                                    Rounded

 

W-C

S-W

S-C

S/C

BC*

MW-W

MW-KW

KW-W

September

151

675

826

2.71 %

73

101

38

63

December

171

645

815

2.71 %

69

93

40

53

July 2014

160

583

743

2.48 %

70

98

59

39

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

8.09

Monday

8.12

8.13

8.14

8.15

8.16

Monday

8.19

8.20

CU3

592

79 %

80 %

77 %

79 %

81 %

80 %

83 %

82 %

CZ3

570

80 %

81 %

78 %

80 %

83 %

81 %

85 %

83 %

CN4

592

81 %

83 %

80 %

82 %

84 %

85 %

86 %

85 %

 

 

OU3

350

103 %

103 %

103 %

104 %

109 %

108 %

110 %

109 %

OZ3

338

97 %

98 %

97 %

97 %

98 %

98 %

99 %

99 %

ON4

409

82 %

83 %

82 %

82 %

83 %

83 %

84 %

84 %

 

 

WU3

765

83 %

83 %

82 %

82 %

83 %

82 %

84 %

83 %

WZ3

779

83 %

83 %

82 %

83 %

83 %

83 %

84 %

83 %

WN4

775

86 %

87 %

85 %

85 %

86 %

85 %

86 %

85 %

 

 

KWU3

876

85 %

86 %

85 %

86 %

86 %

86 %

86 %

85 %

KWZ3

830

85 %

85 %

85 %

85 %

85 %

85 %

85 %

84 %

KWN4

790

88 %

89 %

88 %

88 %

89 %

89 %

90 %

89 %

 

 

MWU3

860

85 %

87 %

85 %

86 %

87 %

87 %

87 %

85 %

MWZ3

858

86 %

86 %

86 %

86 %

87 %

86 %

87 %

86 %

MWN4

890

86 %

86 %

85 %

85 %

86 %

85 %

86 %

85 %

 

 

SU3

1288

95 %

98 %

98 %

99 %

100 %

100 %

103 %

102 %

SX3

1259

94 %

97 %

98 %

98 %

101 %

100 %

104 %

103 %

SN4

1287

93 %

96 %

96 %

96 %

97 %

96 %

97 %

97 %

 

 

SMU3

369

106 %

109 %

109 %

111 %

111 %

111 %

114 %

112 %

SMZ3

353

101 %

105 %

106 %

107 %

110 %

109 %

115 %

114 %

SMN4

365

99 %

102 %

102 %

102 %

103 %

102 %

104 %

104 %

 

 

BOU3 49.81

83 %

85 %

85 %

85 %

87 %

86 %

87 %

86 %

BOZ3 49.00

86 %

87 %

87 %

87 %

89 %

88 %

89 %

88 %

BON4 49.92

86 %

88 %

85 %

87 %

89 %

88 %

89 %

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.

 

 

 

PM GRAIN FUTURES COMMENTS

 

Grain futures gave back some of yesterday’s rally, with prices closing in the red.  All in all, today’s trading action was an “inside day” indicating consolidation of the rally, but no real directional “news”.   With tight stocks we are in “weather market” mode where small changes in the forecast – or actual results- will have an outsized impact on prices.  Most analysts think we need to “see” beneficial rains in order to encourage selling interest.  This afternoon corn basis levels are firmer, while bean basis levels are weaker.  – Helen Pound

 

 

 

 

 

CARRIES – INVERSES- AND FUTURES DELIVERIES

Corn –   The domestic processor, ethanol and feed market basis is well over futures delivery values, and make deliveries against the futures unlikely.  BUT inverses are severe, so the basis situation could change as we approach mid September if weather is mostly beneficial.

  • Old crop US corn supplies are tight, and expected to become more abundant in the 2013-14 season.
  • Domestic basis levels are dramatically lower than a month ago, but are still at historically high levels – at extraordinary premiums over export values.
  • 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 – just over a half a million bushels.
  • ·         There are 7 CN futures delivery receipts remaining on the Illinois River that could be sold and loaded out.
  • ·         Brazil is harvesting a sizable corn crop – with winter corn harvest nearing completion. Some of these bushels will end up going to traditional overseas US customers, and some of these bushels are expected to eventually work into the US.  The Ukraine has also produced a sizeable corn crop and has been an active seller. Aggressive foreign competition weighs on futures inverses, while tight old crop US stocks provide support.
  • ·         Erratic weather forecasts add volatility to flat price and spreads.

 

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

 

Chicago

Illinois River

Spot

+57 CU

+62 CU

 August

+49 CU

+56 CU

FH September

-19 CU

+0 CU

October

-44 CU

-21 CU

November

-33 CU

-14 CU

December

-24 CU

-7 CU

 

FUTURES SPREADS

 

SPREAD

% FULL CARRY

CU-CZ

(8 1/2)

(41 %)

CZ-CH

12 3/4

64 %

CZ-CN14

26 1/2

56 %

 

 

Beans –   Domestic processor basis bids are well over futures delivery values, and make deliveries against the futures unlikely.  BUT inverses are severe’ so the basis situation could change as we approach mid September if weather is mostly beneficial.

  • Old crop US bean supplies are extremely tight and expect to remain tight in the 2013-14 season.
  • Over the past 30-40 days basis levels and board spreads have declined, while futures prices have rallied.
  • Domestic processors are bidding extremely large premiums over export basis bids and SU futures delivery values.
  • Exporters are winding down their bean export programs and basis levels have declined from astronomically levels 30-40 days ago. 
  • The value of loaded bean barges in Chicago for SEPTEMBER shipment is just at futures delivery value.  
  • The value of loaded bean barges on the Illinois River and in St Louis for SEPTEMBER shipment are well over futures delivery values. 
  • 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

+55 SU

+71 SU

+84 SU

August

+47 SU

+64 SU

+74 SU

FH September

+12 SU

+31 SU

+44 SU

October

-33 SU

-12 SU

+2 SU

November

-15 SU

+6 SU

+21 SU

 

FUTURES SPREADS

 

SPREAD

% FULL CARRY

SU-SX

(18 3/4)

(108 %)

SX-SH

(20) 

(54 %)

SX-SN14

(46 ¾)

(65 %)

 

 

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 for SRW is complete, and HRW hs just a bit more to go.
  • Terminal stocks are quite large.
  • Spring wheat farmers harvest has begun, and will be just a bit latter than normal.  The HRS harvest beginning to pick up pace, and millers expect the US harvest to reach the half way point next week.  (Note the Stats Can production report will be released tomorrow morning and is expected to show a million tonnes more Canadian spring wheat production.)
  • 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 well 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 60.3 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.
  • Total HRS stocks in futures delivery warehouses are moderate at 8.9 million bushels.  Cash Spring wheat markets are quite weak – trading at prices below HRW basis levels.  New crop protein levels are expected to be a bit below normal (in contrast to last year with protein levels well above normal).  The late harvest has forced the MWU-Z spread to narrow (trading at a small inverse early today), but has begun to widen out as millers expect good harvesting over the next couple of weeks.

 

 

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

 

Chicago

St Louis

Cincinnati

Memphis

Spot

-27 WU

+2 WU

-9 WU

+12 WU

August

-35 WU

-8 WU

-16 WU

+7 WU

September

-40 WU

-8 WU

-21 WU

+10 WU

October

-21 WU

+18 WU

+2 WU

+40 WU

November

-3 WU

+33 WU

+17 WU

+49 WU

December

+8 WU

+45 WU

+27 WU

+56 WU

 

FUTURES SPREADS

 

SPREAD

% FULL CARRY

WU-WZ

11 3/4

57 %

WZ-WH

11 1/4

56 %

WZ-WN14

15 1/2

33 %

 

 

 

KWU-KWZ*

2 3/4      

8 %

KWZ-KWH

7 1/2

33 %

KWZ-N14

0 1/2

1 %

 

 

 

MWU-MWZ

3 1/2   

13 %

MWZ-MWH

11 1/2

43 %

MWZ-N14

19 1/2

30 %

*Note KC charges a storage premium for

these time slots

 

 

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

+160 U

 

-31 U

 

PAR

 

0.09

0

Ill River

+146 U

+155 U

-12 U

 

PAR+2 / +3

 

0.52

0/7/0

 

 

 

 

 

 

 

 

 

BEANS

 

 

 

 

 

 

 

 

Chicago

(+66 U)

+85 X

 

+12 U

 

PAR

 

0.06

0

Ill River

(+91 U)

+111 X

(+161U)

+180 X

+31 U

 

PAR+2to+3.5

 

1.16

0/0/0/0/0

StL (+61 U)

+80 X

 

+44 U

 

PAR+6

 

0.27

0

 

 

 

 

 

 

 

 

 

WHEAT

 

 

 

 

 

 

 

 

Chicago

+0 U

+25 U

-40 U

 

PAR

 

7.96

0

Toledo

-8 U

-10 U

 

 

PAR

 

21.82

256

NW Ohio

 

 

 

 

PAR

 

8.21

0

Cincy

-23 U

-15 U

-21 U

 

PAR

 

9.47

0

StL

-10 U

+40 U

-8 U

 

PAR+10

 

0.66

0

Memphis

-10 U

 

+10 U

 

PAR+20

 

12.18

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.