The overnight markets are starting to show signs of life again, but considering the bean market is down nearly 10% since the first of the month things are just trying to get its footing again before it starts to run. As of 8CST the bean market is trading +15-17, meal has gained $4-5, bean oil is up 60-70 points, corn has increased by 1-2 and wheat is also only up 1-2.
The bean market is realizing that even though the supply side of the balance sheets have increased by over 300m bushels in the past 60 days this morning this morning the NOPA crush increased by over 33 m bushels from a month ago and was 6m bushels above the expectations, coming in at 153.3. The exports remain stout as China announced a purchase of 120.0mt this AM after early rumors this week of them cancelling. The bean oil market also had an announcement of 40.0mt sold to unknown.
The markets have been beaten up since the first of the month and have blazed to levels that no one thought would be reached, at the same time the funds now have a massive short in the bean oil and nearly all the soy markets are heavily oversold. These various features may not last long but definitely could create a quick short covering rally that could move extremely fast.
The basis levels remains stout as well with beans trading over +101 and corn is +78 both levels are extremely high for this time of year.
The OI in corn fell by 8431, wheat was up 585, beans fell by 722, meal was down 3260 and oil fell by 5913.
The outside markets are creeping higher with equities trading higher, crude oil is up .11, natural gas is up .05, RBOB is up 4.80, gold is up $6, $index is weaker, cotton is up .13, DCE is higher in all markets, Matif is higher in all markets and MDEX is up 102 ringgits. The option markets are starting to show signs of life again, future volumes are increasing in nearly every arena yesterday being led by energy markets and future spreads trading one of the biggest volume days in months.
Will this flow over to grains? At this point buying puts with hedges seems like the best value, especially in the bean complex, the SN at 19% seems like the best value considering that SN-SX still has a decent inverse. The CN vs. CZ could also be looked at. The BO remains higher than beans but with such a violent break over the past 5 weeks and the funds now having a near record short looking for various calls or call spreads for protection could be worth having on, such as the BOH 50-55 1`x2 for a debit of 50-60 points.
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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