Closing Grain & Soybean Comments

Transcription

1 SRW and HRW futures finished 7-10 cents lower and were down at their lowest point. HRS futures finished just 3-7 cents lower. The continued US shutout on major export business, stronger US dollar and technical selling combined to weigh on wheat. WZ8 closed below $5.00 for only the 3 rd time since January. The July low of $4.90 looms large; if violated, the market would be exposed to a good deal of additional downside. The front months led the way down resulting in softer wheat spreads. It was new lows for the HRW spreads while the SRW & HRS traded in the same ranges seen in recent weeks. Soybean meal finished $3-$5 lower but was down an additional $1 when on its low. Along with wheat, meal was Closing Grain & Soybean Comments October 24 th, 2018 the downside leader in the grain & oilseed space. Also like wheat, this was chalked up as technical because bearish headlines were lacking. Beans finished 4-8 cents lower but managed to hold the October lows of $8.47 (SX8) and $8.98 ½ (SN9). Those levels should continue to be watched closely. Oil was down 15 points on the day. There was not a lot of change in the intermonth soybean spreads but the Jan-May did fall harder than the SX8 contract which narrowed the Nov-forward spreads. The Nov-Jan came in ¼ to settle at 13 ¼ but it traded a high of 12 ½ and was 12 ½ bid vs. 12 ¾ offered late in the session. Corn was downright boring compared to other markets. It finished 1-2 cents lower and had less than a 2 cent trading range! Weekly ethanol data failed to move the market but the news that more Korean feeders were pricing cheap corn (most likely not from the US) kept values in the red. The corn spreads did widen by ¼ to 1 cent in spite of the muted flat price change. CZ/CN went home at 25 ¾ cents carry. There huge moves in some outside markets with the DOW down 450 points and the dollar index up 400 points as of this writing. Hogs finished limit higher. Calls for Tonight: Steady-higher ahead of the export sales. Highlights: November options expire on Friday s close. As of 10/23, open interest among all the strikes between $8.00 and $9.00 was much heavier in the puts (90K) vs. the calls (56K). The chart at the right shows that the $8.40, $8.20 and $8.00 puts each have as much or more open interest as even the biggest call strike ($9.00). This open interest below the market could work as a drag on soybeans for the remainder of the week. The US produced 301 million gallons ethanol in the week ending 10/19, up from 297 million in the week prior but 1.4% below the same week a year ago. This production used an estimated million bushels of corn. Strike 10/24/2018 Settle Change Low High CZ CH SX SF SMZ BOZ WZ KWZ MWZ Open Interest in November Soybean Options (10/23) Puts 20K 10K 0 10K Calls RJO Brien Service is our trade 1 P a g e

2 Negative ethanol margins run the risk of keeping ethanol production from ramping up in Oct-Dec as is usually seen. That would cause the corn-for-ethanol usage to start falling behind the pace implied by the USDA s 5.65 bln bu demand estimate. Even with the bigger production, US stocks declined in the last week. They remain very large at 14% bigger than a year ago, however. RJO s Dave Toth offered the following guidance on December SRW wheat (chart right): In sum, today's clear break below all of Oct's lows and support re-exposes Aug- Sep's downtrend to eventual new lows below Strength above at least 5.12 and preferably 5.27 is required to threaten this call. Per such a cautious bullish policy from the 5.04-area OB is advised with a recovery above 5.12 negating this specific call and warranting its cover. The market's downside potential may be significant. Ukraine has exported 12.1 mmt of grain since July 1, down from 12.9 mmt over the same dates a year ago. Wheat exports are down 10% at just 7.1 mmt but corn exports are up 53% at 2.3 mmt. Ukrainian sellers have been very aggressive with their corn offers in recent weeks which is now starting to show up in the export data. Algeria bought K tons of option-origin milling wheat in their latest tender at prices of $256-$258 C&F. In a mid-sep tender, they had paid $262-$263. Traders believe France will be the primary origin but Argentina could also participate. Weekly export sales are out in the morning. Trade estimates below. MMT Ukrainian Grain Exports, July 1-Oct 24 Wheat Barley Corn -10% -27% +53% 2016/ / /19 Weekly Export Sales-Mil bu. As of: 10/18/ /19 19/20 Actual Estimates Last Week Actual Estimates Last Week Corn Corn Beans Beans Wheat Wheat Meal Meal Oil Oil *-corn, beans, wheat in mil bu. Meal and oil in 1,000 metric tons. Source: Reuters Cash: Gulf corn bids were unchanged this morning at +35 Z for Oct and +40 Z for Nov but offers were down 1-3 cents. The Gulf bids fell 1-5 cents all along the curve on Tuesday. Barge freight was little changed (lower RJO Brien Service is our trade 2 P a g e

3 Miss was weaker, others unchanged) so up river bids followed the Gulf lower. Interior corn basis was mostly firmer on Tuesday with 1-3 cent improvements seen. In most cases, only the October bid improved but in a few cases, improvements were seen thru Q4/Q1. We have also fielded reports of pushes over spot bids being paid. Corn harvest is expected to increase this weekend and into next week. Gulf soybean bids for Oct/Nov were down 1-2 cents this morning to +19 X and +23 X, respectively. Processor posted bids did not change much on Tuesday. The farmer is more concerned with harvesting soybeans than selling them. Soybean board crush margins have fallen to $1.37 from last weeks high of $1.57, near the lowest level since April, which may be reducing processors appetite. Meal basis remains weak due to big US soybean crush and falling world meal premiums. Weekly 2BXCc1 Gulf SRW & HRW bids were unchanged this morning at +65 Z and +120 Z. The US loaded over 20,400 railcars with grain last week according to the Association of American Railroads, this is below the 2018 average of 23K and the same week a year ago of 24K. Other Headlines & Notes: After MFG bought 138K tons of corn on Tuesday, two other Korean feedmakers bought corn overnight paying $202-$204 C&F for corn that will ship Dec-Feb. That price was even cheaper than the MFG business which traders had speculated would come out of Brazil. Tunisia bought 100K tons of soft wheat at $253-$256 C&F, 50K tons of durum wheat at $274-$276 C&F and 100K tons of feed barley at $264 C&F. Egypt bought 26k tons of soyoil at $671 C&F and 30K tons of sunflower oil at $702 C&F. Jordan bought no wheat in a 120K ton tender after receiving only one offer. China sold 88K tons of soybeans in a government auction, 85% of that offered, the lowest participation rate in 5 weeks. They also sold 163K tons of wheat in two separate government auctions overnight, only a small portion of what was offered. Brazilian sugarcane crushers pushed 68% of their cane towards ethanol production and only 32% towards sugar production in the first half of October as the crush season winds down. Since the season began they have produced 23% more ethanol than a year ago according to Unica. Truckers in Argentina have launched an indefinite strike to protest Nearby Soybean Board Crush-Weekly Coming Up: Thursday, October 25 th Weekly Export Sales-7:30 AM Friday, October 26 th November Option Expiration-1:15 PM CFTC Commitment of Traders-2:30 PM Monday, October 29 th Weekly Export Inspections-10 AM Weekly Crop Progress & Conditions-3 PM Tuesday, October 30 th Position Day-November Contracts Wednesday, October 31 st Weekly EIA Energy (Ethanol) Report-9:30 AM First Notice Day-November contracts Thursday, November 1 st Weekly Export Sales-7:30 AM Fats & Oils, Grains Crushings Reports-2 PM Friday, November 2 nd US Export/Import Data-7:30 AM CFTC Commitment of Traders-2:30 PM *-all times given in Chicago time. 8/27/ /11/2018 (CHG) Price USc Bsh Sep Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Q Q Q Q Q Q high inflation but officials at the port of Rosario said there has been no impact on ship loading as they are able to load grain already in the port. President Trump said that the acting EPA chief could be made permanent as he is doing well. The EPA is largely responsible for the implementation of the Renewable Fuel Standard. Argentina reported a trade surplus in September, their first since December of 2016, helped out by their sharply weaker currency. RJO Brien Service is our trade 3 P a g e /

4 The funds were estimated to be sellers of everything led by the beans and wheat on the day. They are short beans, beanoil and SRW but long soybean meal and have a neutral position in corn. The yellow row below corresponds to the CFTC as-of date for the report they will release on Friday. Estimated Managed Money Position 10/16/2018 Corn Soybeans SRW Soybean Meal Soybean Oil CFTC 20,154 (36,368) (16,793) 41,990 (33,106) Wk. Chng 54,186 5, ,226 8,012 Daily Est. Total Daily Est. Total Daily Est. Total Daily Est. Total Daily Est. Total 10/17/2018 (4,500) 15,654 2,000 (34,368) (3,000) (19,793) 2,000 43,990 (1,000) (34,106) 10/18/2018 (10,000) 5,654 (11,500) (45,868) (3,500) (23,293) (4,000) 39,990 (3,000) (37,106) 10/19/2018 (10,500) (4,846) (7,000) (52,868) 3,000 (20,293) (3,000) 36,990 3,000 (34,106) 10/22/2018 8,500 3,654 2,500 (50,368) (4,000) (24,293) (2,000) 34,990 1,000 (33,106) 10/23/2018 4,000 7,654 1,000 (49,368) 2,000 (22,293) (3,000) 31,990 (1,500) (34,606) 10/24/2018 (4,000) 3,654 (10,500) (59,868) (7,000) (29,293) (5,500) 26,490 (2,500) (37,106) PIVOT POINTS FOR 10/25/2018 Daily Pivot Points CZ8 CH9 CN9 SX8 SF9 SH9 SMZ8 WZ8 KWZ8 MWZ8 High Close Low R R R Pivot S S S THOMAS MEIEROTTO Commodity Risk Manager tmeierotto@rjobrien.com RJO'Brien 939 Office Park Road, Suite 225 West Des Moines, IA RJO Brien Service is our trade 4 P a g e

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