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BRIAN HOOPS

By Staff | May 2, 2014

CME Group

The Board of Trade of the City of Chicago Inc., on Thursday, started applying variable price limits for grain and oilseed futures.

Also effective at the same time, the Exchange will remove price limits for all grain and oilseed options.

Daily settlement prices are collected for the July contracts for each of the CBOT grain and oilseed futures products over 45 consecutive trading days before and on the business day prior to April 16.

Average prices for each contract will be calculated based on the collected settlement prices and then multiplied by seven percent.

The resulting number would be rounded to the nearest 5 cents per bushel for corn, soybeans, CBOT SRW wheat, KC HRW wheat, and oat futures; $5 per ton for soybean meal futures; 5 cents per pound for soybean oil futures; and 5 cents per hundredweight for rough rice futures to determine the new initial price limits for futures.

The second reset date would be the first trading day in November.

The November price limit reset will be determined in a manner similar to the first reset in May.

The only difference would be that December contracts (November contracts for soybeans and rough rice futures) will be observed over 45 consecutive trading days before and on the business day prior to Oct. 16.

Cargill merger

Cargill expects the merger of its flour mill operations with ConAgra Foods within the next two months.

The combined entity will join Con Agra’s milling business with Horizon Milling, which is a joint venture between Cargill and CHS.

The merger is being investigated by the antitrust division of the U.S. Justice Department.

Cargill executive chairman Greg Page said that process has gone on longer than expected, but should be resolved soon.

Cold storage

In the monthly cold storage report, the USDA reported total red meat supplies in freezers were down 8 percent from the previous month and down 14 percent from last year.

Total pounds of beef in freezers were down 1 percent from the previous month and down 21 percent from last year.

Frozen pork supplies were down 12 percent from the previous month and down 11 percent from last year.

Stocks of pork bellies were down 9 percent from last month, but up 55 percent from last year.

Kansas crop tour

Next week, the Wheat Quality Council’s annual Kansas crop tour will commence.

Traders will be watching the results closely after hearing reports of drought, frost and high winds that have damaged the crop.

Last year the tour estimated the Kansas crop at 313.1 mb and the final USDA figure was close to the tour estimate at 319.2 mb.

2013 also saw an unusually high abandonment rate as nearly 12 percent of the crop went unharvested.

CORN ANALYSIS

Corn closed the week 12.25 cents higher.

Last week, private exporters announced 240,000 metric tons of corn has been sold to Mexico and 120,000 mt of sorghum to China.

Weekly export sales of corn showed a total of 24.4 million bushels, and well above the 5.4 mb needed each week to reach the USDA annual forecast of 1.75 billion bushels.

Corn has scored a technical breakout, but is finding selling resistance after a small rally on the weekly charts.

Cool and wet conditions has pushed corn higher as the conditions are not ideal for seeding the corn crop.

Corn won’t make new highs on slow plantings, but slow emerge could push prices high enough to start making some hedges.

With 4 million less corn acres this year, the market will be more sensitive this year compared to last year to poor growing conditions.

Highs for corn are likely to be scored during the summer.

The weekly crop progress report showed corn plantings nearly identical to last year at only 6 percent completed, compared to 4 percent last year and 14 14 percent on average.

Strategy and outlook: Producers are 100 percent sold of 2013/14 crop. Producers are 10 percent sold of the 2014/15 crop. Sell another 15 percent at $5.24.

SOYBEANS ANALYSIS

Soybeans closed the week 8 cents lower from last week.

Last week, private exporters did not report any private sales.

Weekly export sales of soybeans showed 0.7 mb for old crop and bringing total commitments to 1.639 bb, and are well above the current USDA estimate of 1.58 bb.

While this was a marketing year low, it is still fundamentally constructive as it did not reflect net cancelation.

The USDA is assuming foreign buyers will eventually cancel U.S. purchases in favor of cheaper South American product.

However, we have never seen net cancelations in the second half of a marketing year.

Like with corn, technical breaks should be well supported by commercial entities as they begin to position long ahead of the growing season as they wish to extend coverage in case prices rally sharply on a weather-related event.

Soybeans closed above major weekly resistance, which may signal to traders another round of strong technical buying.

Look for beans to test and make new highs as we still have not solved the demand puzzle that has pushed soybeans higher than expected this spring.

Strategy and outlook: Producers are 100 percent sold of the 2013/14 crop. They should re-own 50 percent of the 2013/14 crop when prices reach $13.78.

Producers are 10 percent sold of 2014/15 production. Sell another 15 percent at $12.50.

This material has been prepared by a sales or trading employee or agent of Midwest Market Solutions and is, or is in the nature of, a solicitation. This material is not a research report prepared by Midwest Market Solution’s Research Department. Brian Hoops can be reached at (605) 660-1155.

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