×
×
homepage logo

BRIAN HOOPS

By Staff | May 13, 2016

April trading

MGEX reported a total volume of 212,021 from the month of April, making it the 12th-best month in the history of the Exchange.

This is the third-highest volume total ever during the month of April, falling short of last year’s record by just less than 8,000.

Electronic volume from April also finished at 12th best all-time, closing the month at 180,823 contracts traded.

Total volume for the year now stands at 761,352 with two-thirds of the year remaining. This is a three percent increase over last year’s volume to date.

Grain forecasts

The International Grains Council raised its forecast for this year’s global wheat and corn crops, with total supply reaching a record-high. World wheat production is up 4 million tons from last month, but two percent below last year. Global corn production is 5 million tons above last month and 2 percent above last year.

With soybean output projected to be broadly unchanged this year, and consumption increases, world-ending stocks could decline by 16 percent to the smallest in three years.

Last year’s soybean crop estimate is cut 5 million tons, reflecting poor weather in South America, notably Argentina. The IGC sees a much tighter scenario for rapeseed and canola in the coming marketing year. Supplies are projected to drop 20 percent.

Trade volumes

CME Group, the world’s leading and most diverse derivatives marketplace, announced that April 2016 volume averaged 13.8 million contracts per day, up 21 percent from April 2015.

April 2016 options volume averaged 2.6 million contracts per day, up 15 percent versus April 2015, with electronic options averaging 1.6 million contracts per day, up 31 percent over the same period last year.

Total open interest at the end of April was 110 million contracts, up 20 percent from year-end 2015.

Agricultural volume averaged a record 1.9 million contracts per day in April 2016, up 52 percent from April 2015. Highlights include:

  • Achieved Corn futures and options monthly average daily volume record of more than 658,000 contracts, up 55 percent from April 2015.
  • Set monthly average daily volume records for soybeans, soybean meal and soybean oil, with 80 percent, 59 percent and 44 percent year-over-year

growth, respectively.

  • Set monthly average daily volume record in hard red winter wheat futures and options, up 32 percent compared with April last year, and in cocoa futures.
  • Reached a record high in aggregate number of large open interest holders in CME Group agricultural futures of 3,988 on April 12, 2016.

Kansas wheat

The wheat harvest in Kansas will rebound 19 percent this year, according to findings from a crop tour, meaning favorable weather in the largest U.S. grower of the grain will likely exacerbate a global glut. Output will rise to 382 million bushels, according to the average estimate of participants on a three-day annual crop tour organized by the Wheat Quality Council.

That compares with the USDA 2015 estimate of 322 million, after growers planted 7.6 percent less last September. Before the tour, the average of analysts’ estimates compiled by Bloomberg forecast that production would decline to 319 million.

CORN ANALYSIS

Corn closed the week 2.5 cents higher. Last week, private exporters reported sales of 107,5000 metric tons of corn to Japan and 132,000 mt of corn to Israel.

Weekly export sales of corn showed a total of 32.7 million bushels (or 829,800 mt) with 30.3 mb (769,300 mt) for the 2015-2016 marketing year. This was a 12-week low.

The weekly crop progress report showed U.S. corn plantings at 45 percent complete versus expectations of 40 to 45 percent complete. This is ahead of last year’s pace of 45 percent and the 5-year average of 30 percent complete.

Key states includes Iowa at 57 percent planted Illinois 66 percent and Minnesota 59 percent.

U.S. producers should finish corn planting by the middle of the month and weather will then be 95 percent of the pricing influence.

The May 10 supply/demand report should be bearish with the first projection of new crop ending stocks forecast near 2.5 billion bushels.

After the report, weather will be the only thing left for traders to trade on during the last half of the month. If weather is warm with ample moisture, prices will retreat into the end of the month and the highs for the month should be in by May 10.

However, if weather becomes hot and dry, prices will have no choice but to trade higher. The month of May is too early to make annual highs if weather conditions are adverse as prices should peak during the June through August growing season.

Strategy and outlook: Producers should use weakness during May to re-own sales with options to manage price risk and summer volatility.

SOYBEAN ANALYSIS

Soybeans closed the week 1 cent higher. Last week, private exporters did not report any sales.

Weekly export sales of soybeans showed a total of 45.8 mb (1.245 million mt) with 30 mb (815,800 mt) for the 2015-2016 marketing year. This was a 15-week high for soybean sales.

The weekly crop progress report pegged U.S. soybean seedings at 8 percent done and the trade was expecting 9 to 10 percent complete.

Last year, producers were 10 percent done and the average pace is 6 percent.

Key states of Iowa and Illinois are only 7 percent and 9 percent planted, respectively.

Soybeans have rallied to test major weekly resistance, which has held prices in check since August of 2014. South American weather issues have rallied prices, which is expected to cut U.S. stocks to near 400 mb.

Still large, but not as burdensome as was thought two months ago. U.S. weather will become the number one pricing influence once 30 to 50 percent of the crop has been planted.

The negative scenarios are the possibility increasing planted soybean acres this spring and of good growing conditions into the last half of the month. If weather conditions are favorable, look for prices to retreat and funds to liquidate long positions if the technical trend turns lower.

The fundamentals determine price direction, so watch weather in the last half of the month.

Strategy and outlook: Producers should look to re-own sales with options to manage price risk and summer volatility during price weakness in May.

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.

Please Enter Your Facebook App ID. Required for FB Comments. Click here for FB Comments Settings page