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BRIAN HOOPS

By Staff | Aug 15, 2014

CME Group Inc. will cut costs by reducing hiring and employee travel to help compensate for weak trading volumes, the chief financial officer said after the world’s largest futures

market operator posted lower-than-expected earnings.

Net profits for the owner of the Chicago Board of Trade and Chicago Mercantile Exchange fell to $263.8 million, or 79 cents a share, from $311.2 million, or 93 cents a share, a year earlier.

Excluding a $14.5 million settlement of CME’s claim against bankrupt brokerage MF Global and other special items, earnings were 77 cents a share.

Revenue dropped 10 percent to $731.6 million CME has looked overseas to boost business.

The Chicago-based company plans to launch European natural gas futures this year and make a bid to administer the global price benchmark for gold.

The Chicago-based company said it will pay about $655 million for two units of derivatives broker GFI Group Inc. in an attempt to expand its reach in the European energy and global foreign exchange markets.

Trade volume up

MGEX announced last week a total volume of 141,562 from July, the highest finish for the month since 2010, and a 42 percent increase over the total volume from July 2013.

Total options during the month were 3,378, a 118 percent increase over last July, and the highest options total for any month since October 2011.

Electronic volume finished the month at 120,268, a 51 percent increase when compared to July 2013.

CORN ANALYSIS

Corn closed the week 2.5 cents higher.

Last week, private exporters announced a sale of 160,000 metric tons of corn to Columbia for the 2014/15 marketing year.

Weekly export sales of corn showed sales of 34.7 mb.

In the weekly progress report, the U.S. corn crop conditions slipped to 73 percent good-to-excellent, down 2 percent compared to a week ago and well above last year’s 64 percent and the highest rating in the last 10 years.

Ninety percent of the crop is silking versus 88 percent average and 36 percent is in the dough stage versus 29 percent average.

Crop ratings historically decline in August under warmer and drier conditions. This month, it doesn’t appear either will happen.

Weather must turn adverse before Aug. 25 as after this date, the key yield development time will be over.

On the flip side, an early frost during the kernel-filling stage would also send prices higher as a killing frost could potentially hurt yields.

Now that support of $3.79 has been broken, look for fund selling to maintain pressure against prices with $3.25 a likely possible downside target for December corn.

Expect foreign buyers to steadily book new crop corn as prices work lower. Demand should improve as prices work lower.

Asia is experiencing the worst drought in 17 years, meaning imports into Asia should improve this winter.

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

Exit at $3.25.

SOYBEANS ANALYSIS

Soybeans closed the week 24.75 cents higher.

Last week, private exporters announced sales of 110,000 mt of soybeans to China; 102,000 mt of soybeans to Taiwan and 113,000 mt of soybeans to an unknown destination; all for the 2014/15 marketing year.

Weekly export sales of soybeans showed sales of 40.6 million bushels.

In the weekly crop progress report, soybean conditions were unchanged at 71 percent g/e when most were expecting a 1 to 2 percent decline.

Eighty-five percent of the crop is blooming versus 83 percent average, and 57 percent is setting pods versus 48 percent average.

This is the highest soybean ratings on record in the last 20 years.

August is the key yield development month for soybeans, not July. For new crop soybean pricing, ignore demand signals as weather and its impact on the developing crop remains 95 percent of the pricing influence.

From Aug. 20 to Aug. 30, soybeans will have completely filled the pod, and seasonal highs will be in.

It is in this time frame that we will either produce a 3.5 billion bushel crop or a 2.5 billion bushel crop.

Beans need moisture in the pod-setting stage to achieve normal yields.

However, hot and dry conditions will force moisture to the root system, leaving the bean in the pod to develop small.

The soyoil content is what suffers most, leaving bean oil undervalued if hot and dry conditions set in across the Midwest.

Strategy and outlook: Producers are 25 percent sold of 2014/15 production.

Producers exited puts and bought September at-the-money calls.

If support at $10.55 is broken, exit calls and re-enter puts.

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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