Published Friday morning, 10/19/12
It’s hard to believe that the markets are actually now higher on the week by nearly 35 cents in beans and 10 cents in corn after the week had started. The overnight markets are attempting to sustain the gains of yesterday. The overnight news that spiked the wheat markets higher is based on the fact that Ukraine announced they will ban wheat exports starting on November 15th, there is still a lack of clarity if this affects the sales on the books that are scheduled to ship after the 15th or just preventing any further sales. The other factor that contributed to corns strength yesterday is the basis levels in SA rising and rising quickly, this is sending shock wave across the markets in thoughts that the supposedly endless supply of corn out of SA may indeed not be endless. The price of feed wheat out of Australia is also on the rise and has shifted more demand back to the corn markets. All this being said the US export program may not be as dire as what has been penciled.
The weather is SA remains decent, there are some attempting to discuss that excessive rains in parts of Argentina has slowed plantings and yes this is correct plantings are slow but as history has taught it’s very difficult to destroy a crop with too much rain. The areas in Brazil that have a few concerns are in the northern areas which has been dry, this is the area that has early beans that usually hit the export markets in February, if these are further delayed the spreads could have life in them.
The OI spiked higher in corn yesterday increasing by over 13k, wheat increased by 2493, beans increased by 3807, and meal was up 2684 while oil lost 5083.
The outside markets are mixed with equities are lower, crude oil higher, natural gas is higher, RBOB is up 349, $index is higher, cotton is down .50, sugar is down .06, the DCE is higher in all markets, the Matif is higher in all markets and the MDEX is up 19 ringgits. The option markets continue to show that the is not any big fear of a move coming anytime soon, especially if one was to look at the CX, these option have 1 week left, for those who want gamma it’s been years since one could buy anything at these levels. The corn spreads still have big inverses, especially CH-CZ13 or CN13-CZ13, we know that these inverses will either spike much higher or crumble either way owning the nearby vs. the deferred seems the best avenue especially since the volatility in the nearby is less than the deferred. The wheat remains in the mid 20’s but is starting to show signs of life, the downside puts with futures still seems like better value than the calls. The bean puts are similar to the wheat with downside puts discounted. The bean and meal spreads recently have been decimated if SA plantings remain slow the January contracts in both beans and meal could have tremendous value.
Editor’s Note: Daily Grain Commentary readers who are equity investors/traders only can gain access to the grain markets through the following exchange traded funds (ETFs).
Grain Markets/Indexes
ELEMENTS MLCX Grains Index Total Return ETNN (GRU, quote)
iPath Dow Jones-UBS Grains Total Return Sub-Index ETN (JJG, quote)
Power Shares DB Agriculture Trust (DBA, quote)
Corn
Teucrium Corn Fund (CORN, quote)
Wheat
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IMPORTANT NOTICE: Trading of commodities and commodity futures and options, and other commodity derivatives has substantial risk of loss, and is not suitable or appropriate for all persons. Past results are not necessarily indicative of future results. The information in this piece is based on sources that are believed to be reliable, but it is not warranted to be accurate or complete, and no performance or results from use of the information are warranted. This piece is not a solicitation or offer to purchase or sell commodities or commodity derivatives. Opinions expressed herein are subject to change without notice.
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