Flooding slows barges
Flooding halted barge traffic on the Illinois River on June 17 and high water levels prompted futures market operator CME Group Inc to declare force majeure for all corn and soybean shipping stations for the first time in more than two years.
Barge lines have voluntarily stopped shipping traffic after heavy rains, river merchants said.
CME, which owns the Chicago Board of Trade and other markets, said a majority of shipping stations on the river were unable to load crops due to high water levels.
Traders said the disruptions would likely have a limited impact on grain trading because they will probably be over before the end of the month, when traders can begin delivering crops against futures contracts.
The Illinois River was forecast to crest at many locations earlier this week, according to the National Weather Service.
Supplies of corn and soy, shipped by companies such as Cargill Inc, Archer Daniels Midland Co and Bunge Ltd, are large after U.S. massive harvests last year.
Cargill, ADM and Bunge, which control the river, may advise CME at any time that loading conditions have improved, Rich Feltes, head of Market Insights for broker RJ O’Brien, said in a note.
The shipping stations are delivery points for crops traded on the CBOT, and the declaration of force majeure allows a delay of contracted deliveries. Under exchange rules, if barges cannot be loaded at a majority of shipping stations, shipments may be delayed for the duration of the problem.
Agriculture commodity traders will have five more minutes to get business wrapped up each day when the CME opens on July 6.
The closing time for the corn, soybean and wheat markets will be 1:20 p.m. Central Time rather than the current 1:15 p.m.
The added time will keep grain futures trading aligned with grain options trading, which will also extend its post-close trading session to 1:20 p.m. next month.
Because of the dominance of electronic trading, the CME is slated to end most of its pit trading on July 2.
CFTC authorized, finally
The U.S. House has passed the reauthorization of the Commodity Futures Trading Commission on a vote of 246-to-171.
The CFTC has been operating without congressional authorization for nearly two years.
House Agriculture Committee Ranking Member Collin Peterson, DFL-Minnesota, did not support the measure, saying it rolls back important financial reforms.
Corn closed the week 1.5 cents lower.
Last week, private exporters reported sales of 120,000 metric tons to Mexico and 100,000 mt to unknown destination for 2014/15.
Weekly export sales showed corn sales at 24.7 million bushels. Annual corn sales now have reached 1.721 billion bushels and sales are now down 154 mb compared to a year ago.
The weekly crop progress report showed corn conditions down 1 percent from last week at 73 percent good-to-ecellent and now 3 percent below last year.
Too much rain has been the culprit this year, which is hard to rally the market on as the trade has a “rain makes grain” mentality.
Yield potential remains high due to all the moisture, but there may be some areas that will not produce due to drowned out spors.
The next major market moving report will be the stocks and acreage report on Tuesday.
The USDA may recognize the slow planting pace of Missouri and Kansas as well as drowned out acres and lowered planted acres in that report.
Given the current crop conditions, the USDA yield estimate of 166.8 bpa seems reasonable.
Strategy and outlook: Producers are 100 percent sold of the 2014/15 crop, re-owned 50 percent with July options and 50 percent with September calls.
They sold 10 percent of 2015 production. Sell 20 percent at $3.93 December, 20 percent at $4.15 and buy December 400 puts on balance of production.
Soybeans closed the week 33 cents higher.
Last week, private exporters did not announce any private sales.
Weekly export sales of soybeans were 4.88 mb old crop and only 12.8 mb for new crop sales.
New crop sales are at a five-year low. The weekly crop progress report showed soybeans were noted at 87 percent planted with emergence at 75 percent, both figures are near normal, despite Missouri being only 42 percent seeded and Kansas only 57 percent seeded.
This leaves 4.9 million acres unplanted between the two states. The soybean rating was 67 percent g/e, down 2 percent from last week and below last year’s rating of 73 percent.
NOPA reported May soybean crush of 148.4 mb, coming in above market expectations of 147.3 mb, massively above last year’s May crush of 128.8 mb, and shattering the previous May record of 144 mb set in 2008.
With May being another record, 2014/15 has seen seven of the first nine months of the marketing year match or set records for the corresponding month.
Tuesday’s acreage report could be a shocker to the trade. The market has already anticipated larger seeded acres, however if producers planted more acres to corn than previously thought due to a record fast corn planting pace and some acres go unseeded due to wet conditions, prices could find strength after the report’s release.
Strategy and outlook: Producers are sold 100 percent of 2014/15 production. They bought calls on 50 percent of 2014/15 production to re-own previous
They sold 10 percent of 2015/16 production. Sell 20 percent at $9.75, 20 percent at $10.35 and buy 1000 November puts on balance of production.
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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