Positions to take:
in the neutral market, selling options is a good idea. In our last research video we talked about selling the 340 or 330 straddle. Here is how the 330 would work:
Sell Dec Corn 330 c and sell 330 put. Collect 35 cents. As long as the market expires in Nov above 295 or below 365, you get to keep some or all of the 35 cents.
If expiration price is 320, then you have to give the owner of the 330 put 10 cents, so you keep 25. Get the math?
If you are concerned about a move above 365 or below 300, you can spend 3-7 cents and cover that risk. For example, today you could buy a 300 put for 3 cents. That would mean you have zero risk if the market were to drop below $3. If your concern is the market will be above 365, you could buy a 360 call or 7 cents. That would mean you would have zero risk if the market rallied. Protecting the side that you feel is vulnerable would make this position very attractive.
Corn farmers should also consider the following position if your percentage of farm sales is low.
Buy 2 330 September short dated puts and sell 1 340 call for 5 cents. This would allow you to put a floor under your corn market at 330 on 100% of the bushes you commit. However if the market rallies you are only 50% committed at a price of 340 . These options expire 08/21. You might also look at Nov or Dec options
We have clients doing variations of this in order to fit each customer’s needs.
Overnight trade has SRW unchanged, HRW down 2; HRS Wheat unchanged, Corn is up 3 cents; Soybeans up 4, Soymeal unchanged, and Soyoil up 40 points.
For the week, SRW Wheat prices are up roughly 1 cent; HRW down 6; HRS down 9; Corn is down 4 cents; Soybeans up 5; Soymeal down $6.00, and; Soyoil up 145 points. Crushing margins are down 2 at 85 cents; Oil share up 1% at 33%.
Chinese Ag futures (Sep) settled down 21 yuan, up 2 in Corn, up 15 in Soymeal, up 104 in Soyoil, and up 70 in Palm Oil.
Malaysian palm oil prices were up 56 ringgit at 2,576 (basis October) at midsession looking at strong weekly gains and supported today by concerns over heavy rains in Malaysia, Indonesia, and China affecting supply.
U.S. Weather Forecast
Enough rain is expected in a majority of the Corn Belt the next two weeks for favorable crop development; though, there will continue to be pockets that are drier than preferred with some crop stress. Last evening’s GFS model run added meaningful moisture into the eastern and northern Corn Belt July 26 – 28.
Last evening’s GFS model run was notably drier in many U.S. crop areas east of the Rocky Mountains (though, it was also drier in New Mexico) July 29 – 31. The decreases were partially due to an overdone cool and dry air mass shown to shift down into the southeastern states and then stall.
The player sheet had funds net sellers of 12,000 contracts of SRW Wheat; net bought 15,000 Corn; bought 7,000 Soybeans; net bought 1,000 lots of soymeal, and; bought 5,000 Soyoil.
We estimate Managed Money net short 3,000 contracts of SRW Wheat; short 175,000 Corn; net long 97,000 Soybeans; net short 28,000 lots of Soymeal, and; long 22,000 Soyoil.
Preliminary Open Interest saw SRW Wheat futures down roughly 9,200 contracts; HRW Wheat up 2,100; Corn down 12,100; Soybeans up 990 contracts; Soymeal up 5,600 lots, and; Soyoil up 8,800.
There were no changes in registrations—Registrations total 95 contracts for SRW Wheat; ZERO Oats; Corn ZERO; Soybeans ZERO; Soyoil 2,981 lots; Soymeal 511; Rice 260; HRW Wheat 47, and; HRS 1,387.
TODAY—COMMITMENT OF TRADERS—
Tender Activity—Japan bought 125,957t U.S./Canadian/Australian wheat—S. Korea bought 60,000t optional-origin corn; bought 138,000t corn thought to be either South American or South African origin—
China’s been buying wheat recently with reports of 7 cargoes of Australian wheat and several cargoes of U.S. wheat, says senior Asia commodity analyst at StoneX; the combination of these wheat purchases shortly after harvest, along with the recent large purchases, makes me think China is ensuring it fills the tariff rate quotas it set this year; notes that last year it bought just 33% of the quota; adds he doesn’t see anything that indicates China needs to dramatically increase wheat imports due to some market condition within China so it suggests China could be making a deliberate effort to fill the quotas this year to show the extent of its reforms.
There has been a flurry of farm commodity sales reported in recent days; since Friday, the USDA has reported 3.259 million tons in U.S. corn purchases by China along with 1.04 million tons of soybeans and 320,000 tons of hard wheat; China said it will stick to the Phase 1 trade deal it reached with the United States earlier this year but warned that it will respond to “bullying” tactics from Washington, as relations continue to deteriorate; but China would need to dramatically ramp up buying of U.S. farm products in the coming months to fulfill its Phase 1 commitment to import $36.5 billion in the first year of the deal, signed in January; U.S. government data shows that China imported just over $6 billion worth of U.S. farm goods from January to May.
|Trade estimates for 2019-20||Trade estimates for 2020-21|
U.S. Export Sales: Weekly Sales Totals – Jul 16
wk’s net chg total
in commitments commitments undlvd sales
this yr next yr this yr last yr this yr next yr
wheat 764.4 0.0 8324.6 7834.5 5427.7 0.0
hrw 349.7 0.0 3183.1 3152.2 1871.1 0.0
srw 14.4 0.0 743.1 1114.3 535.5 0.0
hrs 280.8 0.0 2452.1 1936.9 1680.0 0.0
white 103.0 0.0 1619.7 1398.4 1151.1 0.0
durum 16.5 0.0 326.7 232.6 190.0 0.0
corn 981.1 655.4 43489.8 49621.0 7508.6 5361.7
soybeans 313.0 767.6 46307.8 48660.1 7967.5 8086.5
soymeal 177.2 27.8 11364.9 11383.6 1878.4 470.2
soyoil 5.7 0.0 1223.9 825.7 242.8 11.0
upland cotton -17.5 29.1 17019.3 15370.1 3827.2 3525.9
pima cotton 5.8 0.0 583.0 723.6 126.5 37.5
sorghum 72.7 53.0 4283.2 1649.2 848.3 646.0
barley -3.0 0.0 38.7 51.8 36.9 0.0
rice 18.5 12.5 3351.4 3445.7 337.2 75.2
U.S. Export Sales: Weekly Shipment Totals-Jul 16
Export shipments Accum shipments shipments
this wk last wk this yr last yr this yr
wheat 641.4 410.1 2896.9 2889.6 25860
hrw 304.2 169.3 1312.0 1509.3 NA
srw 89.7 49.7 207.6 277.0 NA
hrs 184.6 123.3 772.1 639.8 NA
white 57.5 21.8 468.6 404.1 NA
durum 5.5 46.2 136.7 59.4 NA
corn 1014.3 1084.3 35981.2 44708.0 45090
soybeans 575.3 467.5 38340.3 39381.3 44910
soymeal 204.4 311.7 9486.5 9208.3 12200
soyoil 2.6 2.1 981.1 680.0 1230
upland cotton 311.7 329.3 13192.1 12276.7 13980
pima cotton 0.8 7.3 456.5 628.1 580
sorghum 70.6 51.1 3434.9 1447.7 5330
barley 0.3 0.2 1.8 5.5 110
rice 18.2 21.1 3014.2 2912.4 3050
For the week ended July 9th, U.S. All Wheat sales are running 6% ahead of a year ago, shipments unchanged with the USDA forecasting a 2% decline on the year
—By class, HRW wheat sales are up 1%, shipments 13% behind with a USDA forecasting a 2% increase
—SRW sales 33% behind, shipments 25% behind with a 2% decline seen
—HRS sales 27% ahead, shipments up 21% with a 1% increase seen
For the week ended July 9th, U.S. Corn sales are running 12% behind a year ago, shipments 19% behind with the USDA forecasting a 14% decline.
For the week ended July 9th,U.S. Soybean sales are running 5% behind a year ago, shipments down 3% with the USDA forecasting a 6% decline on the year
—Soymeal sales unchanged on the year, shipments up 3% with an unchanged forecast
—Soyoil sales 48% ahead of a year ago, shipments 44% ahead with a 47% increase forecasted
A knock to food consumption in a global recession triggered by a coronavirus epidemic could produce a “market shock” of tumbling agricultural prices, the U.N.’s food agency and the OECD said; with food production mostly maintained during the crisis, agricultural markets were facing the risk of swelling stockpiles that would weigh on prices; the macroeconomic shocks induced by the COVID-19 pandemic are expected to put downward pressure on agricultural commodity prices, adding there was potential for “a historically significant market shock” this year; the impact on vegetable oil and animal-based products would be greater than for staple crops like rice and wheat.
The United States generated more renewable fuel blending credits in June than in May, the Environmental Protection Agency said; about 1.07 billion ethanol (D6) blending credits were generated in June, up from 841 million in May; about 387 million biodiesel (D4) blending credits were generated last month, up 370 million the month prior.
Saskatchewan crop report
Warm weather and rainfall this week continued to support crop development; currently, 86 per cent of the fall cereals, 75 per cent of the spring cereals, 70 per cent of the oilseed crops and 82 per cent of the pulse crops are at a normal stage of development for this time of year; the majority of crops this week are in fair to excellent condition
The summer grain output in China’s major food-producing province Henan reached a historic high of 37.5 billion kg this year, according to the Henan Survey Organization National Bureau of Statistics Information Network; the figure is 83.5 million kg or 0.2 percent higher than last year.
Brazilian soybean farmers are expected to expand planted area to over 38 million hectares (93.9 million acres) in the season that will kick off in mid-September as demand for the oilseeds remains strong, agribusiness consultancy StoneX said; in the 2019/2020 harvest, Brazil sowed about 37 million hectares (91 million acres) with soybeans, according to government data, resulting in a record harvest of 120.9 million tons of Brazil’s most wanted export commodity; the record output came in spite of a drought in Rio Grande do Sul state.
A fifth of EU soy imports from Brazil may come from land illegally deforested, according to a study released that offers a detailed inventory of farms in the supply chain; that research, published in the journal Science, also opens the door for both international companies and Brazilian law enforcement to pinpoint specific farms violating rules against Amazon deforestation.
A thousand deaths a day; since late May, three months after Brazil’s first reported case of the coronavirus, it has recorded more than 1,000 daily deaths on average in a gruesome plateau that has yet to tilt downward; the country hit at least 75,000 confirmed deaths Wednesday and is expected to report 2 million confirmed cases of COVID-19 by Thursday evening; even as cases wane somewhat in the biggest and hardest-hit Brazilian cities, the virus is peaking in new locations across the largest country in Latin America
Russia saw unfavorable weather in the first half of July for its spring grains and may face a downgrade of its 2020 grain harvest estimates, the head of science at Russia’s Hydrometcentre said; Russia’s agriculture ministry on July 10 kept its forecast for the 2020 grain harvest unchanged – at 122.5 million tons, including 75 million tons of wheat; IKAR and SovEcon, the two leading agriculture consultancies in Moscow, downgraded their estimates for wheat earlier this week due to low yields in southern regions – to 76.5 million tons and 79.7 million tons, respectively.
Consultancy Strategie Grains further reduced its forecast for this year’s soft wheat harvest in the European Union to take account of lower-than-expected yields in southeastern Europe and a cut in estimated crop area in France; in its monthly cereal report, the French firm lowered its 2020 soft wheat output forecast for the EU plus Britain to 130.3 million tons from 130.9 million in June, or 11.5% below last year’s harvest
The latest harvest cut led Strategie Grains to trim its EU soft wheat export forecast for the 2020/21 season that started this month to 25.3 million tons from 26.1 million previously.
In contrast, Strategie Grains increased its estimate for the EU maize harvest by nearly 1 million tons this month to 66.6 million tons, now 3.7% above last year’s crop, because soil moisture improved significantly in June
|2018/19||2019/20||2020/21||2020/21||Change Month||Change 2020/2019|
French farmers had harvested 47% of this year’s soft wheat crop by July 13, up from 11% a week earlier, farm office FranceAgriMer said; the harvest pace was faster than last year when 26% of the crop had been gathered by the same week.
|Week 28 average in France||47|
|Week 27 2020||11|
|Week 28 2019||26|
|Week 28 average in France||81|
|Week 27 2020||36|
|Week 28 2019||64|
|Week 28 average in France||1||3||13||75||7|
|Week 27 2020||1||3||13||76||7|
|Week 28 2019||2||5||18||70||5|
Euronext wheat fell on Thursday as Chicago futures retreated from a surge the day before, with traders seeking confirmation of rumored sales of U.S. wheat to China and a clearer picture of an uneven harvest in Europe; September milling wheat settled 1.50 euros, or 0.8%, lower at 185.75 euros ($212.07) a ton.
Belarus is likely to increase its grain harvest to no less than 8.2 million tons this year from 7.33 million tons in 2019 thanks to better weather conditions, the country’s agriculture ministry said
Egypt’s strategic wheat reserves are sufficient for 5.5 months, the Supply Ministry said, according to a report by state news agency MENA
Asian palm oil producers, long at loggerheads with the European Union over curbs on imports of the edible oil, have offered to “work together” with the European Commission in drafting rules for the EU’s latest ‘Farm to Fork’ food supply policy; the EU, a major palm importer, has already decided to phase out palm-based transport fuels from its renewable energy sector by 2030, citing the environmental impact of the oil’s production, and is expected to set new limits on food contaminant 3-MCPD esters, found in refined fats and oils.Back