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BRIAN HOOPS

By Staff | Oct 24, 2014

CME Group Inc plans to cut 5 percent of its global workforce, or about 150 jobs, to reduce costs with most cuts hitting its technology operations, the world’s largest futures exchange operator said.

CME’s Chicago headquarters will suffer the majority of the layoffs, although this will affect global offices, a spokeswoman said. Corporate and administrative jobs will be among those eliminated.

CME declined to detail how much money the staff reductions will save the company, which owns the Chicago Board of Trade and New York Mercantile Exchange.

The cuts could add about 5 cents to the company’s earnings per share, said Rob Rutschow, an analyst for CLSA.

“While the financial impact isn’t huge, the signal it sends is,” he said in a note. “We have felt that CME as an organization hasn’t paid enough attention to expenses, and this announcement suggests that a greater focus on expenses is possible going forward.”

CORN ANALYSIS

Corn closed the week 12.5 cents higher. Last week, private exporters announced sales of 246,000 metric tons of corn to unknown destinations.

Weekly export sales of corn showed corn sales of 75.7 million bushels.

In the weekly crop progress report, the USDA announced corn harvest progress advanced to only 24 percent complete nationwide, well below the five-year average of 43 percent complete.

This implies at least 11 billion bushels of corn has yet to be harvested and placed into storage.

Plenty of carry is offered this year, giving producers an incentive to place corn into storage with the opportunity to earn a higher price later. Unfortunately, the current fundamental situation does not indicate the corn market will be able to meet the carry being offered.

Thus, producers should sell the carry if they have on-farm storage and look to re-own later if fundamentals change.

Informa projected the 2015 corn acreage at 87.8 million bushels, down from the 90.9 mb planted in 2014.

At some point in the spring, the market should try to rally to buy back a few acres.

Strategy and outlook: Producers are 65 percent sold of the 2014/15 crop and own December puts on 35 percent of the crop.

They should exit puts at $3.05 and sell 35 percent of the crop at $3.90 against the July contract and liquidate the same amount of puts if filled.

SOYBEANS ANALYSIS

Soybeans closed the week 28.25 cents higher from last week. Exporters did not report any private sales.

Weekly export sales of soybeans showed sales of 34.4 mb.

In the weekly crop progress report, the U.S. soybean harvest is 40 percent done compared to the average of 53 percent complete normally.

NOPA reported soybean crush in September at just 99.97 mb, sharply below the average market expectations of 107.6 mb, down from last month’s 110.6 mb, last year’s 108.7 mb, and the lowest monthly crush since August 2004.

It also resulted in 2013/14 U.S. soybean crush, on an October-September product marketing year basis, coming in around 1.725 bb versus the USDA’s last estimate of 1.73 bb.

With tight supplies and only limited harvest activity, crushers slowed crush efforts.

Informa estimated soybean acres in 2015 at 88.5 million, up from 84.2 million in 2014.

A rally during harvest is unlikely to be sustained as yields are huge and demand is soft. Look for prices to turn lower and eventually take out the previous lows.

The downside should be limited to the long-term weekly support of $8.75. Unlike last fall, there is a large carry offered for producers to sell into as the market is unlikely to meet the carry.

Strategy and outlook: Producers are 65 percent sold of 2014/15 production. Producers own November puts on 35 percent of the crop.

They should exit at $8.80, and sell 35 percent of the crop at $10.20 July and exit same amount of puts if filled.

Roll November options to January.

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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