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BRIAN HOOPS

By Staff | Jul 25, 2014

Fewer trading hours

(REUTERS) – The Chicago Mercantile Exchange has started a review of electronic trading hours in its cattle and hog contracts.

Trade sources said talks have focused on reducing hours to keep contracts attractive.

Scaling back activity on the world’s biggest platform for trading cattle and hog futures would concentrate volumes, which should calm market volatility.

Contracts currently see wide swings in price after open-outcry trading has closed.

“We’re in the early stages … we’re beginning the process of conducting a review based on customer feedback,” ‘said CME spokesman Chris Grams in an email. He did not elaborate.

Currently, live cattle, lean hogs and feeder cattle electronic trade for futures contracts only closes from 4 p.m. to 5 p.m. CDT from Monday to Thursday.

On Friday, the trading stops at 1:55 p.m. CDT and resumes on Monday at 9:05 a.m CDT.

Open outcry trading runs from 9:05 a.m. to 1 p.m. CDT from Monday to Friday.

“I am assuming they will send out a survey soon. It will probably be something like open at 8:30 a.m., close at 4 p.m., open for a couple hours at night,” said a trader who had heard about the talks from customers and a CME board member.

Last month, the exchange cut CME lumber futures and options trading to 11 hours per session from 23 hours on some days.

CHS earnings

CHS Inc. reported earnings of $882 million through the third quarter of its 2014 fiscal year, a 1 percent increase from the previous year.

Third quarter earnings were almost $380 million, up 51 percent from last year, and reflected a one-time gain attributed to the new Ardent Mills flour milling joint venture, as well as stronger performance by CHS retail agronomy, wholesale crop nutrients and grain marketing businesses.

Year-to-date, energy segment earnings declined due to lower margins in refining.

CORN ANALYSIS

Corn closed the week 5.5 cents lower.

Last week, private exporters announced a sale of 210,448 metric tons of U.S. corn to an unknown destination for the 2014/15 marketing year.

Weekly export sales of corn showed 22.6 million bushels of old crop sales, and 19.5 mb of new crop sales.

In the weekly progress report, corn crop conditions improved to 76 percent good/excellent, up 1 percent compared to a week ago and well above last year’s 63 percent.

It’s the highest rating during this week in July since 1999.

Our key yield development timeframe is occurring now, but will be over for the majority of the Corn Belt by next week.

Typically, funds exit longs during the third quarter of the year as the market trades lower into harvest, before they buy into fresh longs in the last quarter of the year in hopes of a post-harvest rally.

Without a weather threat, funds look to remain sellers and pressure prices in the process. Look for foreign buyers to steadily book new crop corn as prices work lower.

Demand should improve as prices work lower. $3.25 looks like a possible downside target for December corn.

Strategy and outlook: Producers are 25 percent sold of the 2014/15 crop and own December puts on 50 percent of the crop.

Producers bought out-of-the- money December calls on 25 percent of sales as insurance.

SOYBEANS ANALYSIS

Soybeans closed the week 9.75 cents higher.

Last week, private exporters announced sales of 120,000 mt to China for the 2013/14 marketing year; a total of 828,000 mt to China for 2014/15 marketing year; 704,000 mt to an unknown destination for the 2014/15 year; and 116,000 mt of optional origin soybeans to China for the 2014/15 marketing year.

Weekly export sales of soybeans showed 1.4 mb for old crop and 20.6 mb for new crop sales.

In the weekly crop progress report, soybeans conditions remained unchanged from a week ago at 72 percent good/excellent and are above last year’s 65 percent rating.

This is the third highest soybean ratings on record for early July.

NOPA reported soybean crush among its members in June at 118.7 mb, slightly below the average estimate of 119.5 mb, down from May’s 128.8 mb, but nearly unchanged from last year’s 119.1 mb.

Soybeans are a crop of August, so there is still time for this crop to be harmed due to poor weather.

Weather cycles and the six-week cycle of cool and wet conditions ended around July 4, and a warmer and drier pattern should now be prevalent.

A sustained period of dry weather will be needed to change the trend of the market.

Otherwise, weekly support of $10.23 is likely to be tested soon.

Strategy and outlook: Producers are 25 percent sold of 2014/15 production. Producers own November puts on 50 percent of production.

They should exit puts at $10.25.

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. The risk of loss in trading futures and/or options is substantial and each investor and/or trader must consider whether this is a suitable investment.

Past performance, whether actual or indicated by simulated historical tests of strategies, is not indicative of future results.

Trading advice is based on information taken from trades and statistical services and other sources that Midwest Market Solutions believes are reliable. We do not guarantee that such information is accurate or complete and it should not be relied upon as such.

Brian Hoops can be reached at (605) 660-1155.

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