CME Group Inc., the operator of the biggest U.S. futures market, has a spoofing problem.
Complaints about the practice – using fake orders to manipulate prices, then withdrawing them – are widespread. Enforcement is lax, and prosecutions are rare.
The arrest last week in London of trader Navinder Singh Sarao for allegedly spoofing the CME’s stock futures market was only the second time such charges have been brought since 2010, when the Dodd-Frank act made such abuses illegal.
“We get multiple complaints about spoofing every week,” said Aitan Goelman, director of enforcement for the U.S. Commodity Futures Trading Commission, CME’s main regulator.”It’s not a vanishingly small or infrequent practice.”
Sarao made about $40 million in 4 years.
Iowa, the top U.S. egg-producing state, found a lethal strain of bird flu in 3.8 millions hens at an egg-laying facility on Monday, the worst case so far in a national outbreak that prompted Wisconsin to declare a state of emergency.
The infected Iowa birds were being raised near the city of Harris by Sunrise Farms, an affiliate of Sonstegard Foods Co., the company said.
USDA said the Iowa flock numbered 5.3 million birds. The larger figure likely represents the capacity of the farm, while the company number was the actual number of birds on site, said Bill Northey, Iowa’s secretary of agriculture.
A loss of 3.8 million birds represents more than 6 percent of the egg-laying hens in Iowa and more than 1 percent of the U.S. flock, meaning “there definitely will be some customers that will be impacted by this,” Northey said.
The infections also have hurt the $5.7 billion U.S. export market for poultry and eggs.
Loan rates set
USDA has announced 2015 marketing assistance loan rates by county for wheat, corn, grain sorghum, barley, oats, soybeans and other minor oilseeds.
The rates are posted on the Farm Service Agency website. National loan rates for this year are $2.94 for wheat, $1.95 for corn, barley and sorghum; $1.39 for oats; $5 for soybeans; and 10.09 cents per pound for other oilseeds.
Corn closed the week 16.5 cents lower.
Last week, private exporters reported sale of 121,400 metric tons of corn to an unknown destination.
Weekly export sales showed corn sales at 34 million bushels, the second largest since Feb. 12.
Annual corn sales now have reached 1.554 billion bushels and sales are 8 percent below a year ago.
The weekly crop progress report, showed corn seedings behind expectations at only 9 percent complete.
The average pace is 13 percent done and the trade was looking for 10 percent-12 percent, however, last year’s pace was 6 percent at the same time a week ago and the U.S. would go on to produce a record crop. Therefore the market has no reason to add premium to prices or be concerned.
Illinois was 4 percent, versus the 5 five-year average of 21 percent; Indiana planting progress is 1 percent, versus the five-year average of 13 percent; and Iowa was at 2 percent, versus the five-year average of 7 percent.
The International Grains Council raised its forecast for 2015/16 global corn production by 10 million tonnes to 951 million tonnes, but lower than last year’s record 994 million tones.
Weekly charts show $4.08 as a chart breakout point the market will need to rally above to start a bullish trend.
Strategy and outlook: Producers are 100 percent sold of the 2014/15 crop, re-owned 50 percent with July options. Sold 10 percent of 2015 production.
Sell 15 percent at $4.65 December. Bought calls to re-own 50 percent of previous sales.
Soybeans closed the week .25 cents lower. Last week, private exporters did not report any private sales.
Weekly export sales of soybeans were 4 mb. Annual sales are still record large at 1.787 bb, up 9 percent from a year ago, and only 3 mb less than the current USDA forecast.
With the strong crush figure, the market will need to pry soybeans from producers. Look for basis to improve, while producers are seeding this year’s corn and soybean crops.
Seasonally, this has produced a rally in the futures market as well. The market is testing weekly support, which should hold and a rally is likely to unfold into the summer, providing a marketing opportunity for producers. Soybeans will need to clear $9.93 to turn the trend bullish on the weekly charts.
Strategy and outlook: Producers are sold 100 percent of 2014/15 production. Bought calls on 50 percent of 2014/15 production to re-own previous sales. Sold 10 percent of 2015/16 production. Sell 15 percent at $10.95 November.
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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