May contracts up

CME Group announced that May 2016 volume averaged 14.9 million contracts per day, up 6 percent from May 2015. CME’s May options volume averaged 2.8 million contracts per day, up 10 percent versus May 2015, with electronic options averaging 1.6 million contracts per day, up 13 percent over the same period last year.

Total open interest at the end of May was 113 million contracts, up 23 percent from year-end 2015.

Agricultural volume averaged 1.4 million contracts per day in May, up 22 percent from May 2015. Highlights include:

• Soybean futures and options average daily volume 71 percent to 402,000 contracts per day.

• Soybean meal futures and options average daily volume grew 45 percent.

• Achieved 23 percent growth in hard red winter wheat futures and options average daily volume grew agricultural options average daily volume 19 percent, with 44 percent growth in electronic agricultural options.

Farm exports down

Exports of U.S-made farm equipment dropped 8 percent in the first quarter, compared to a year ago. The Association of Equipment Manufacturers says exports to Europe and Central America each recorded double-digit gains, while other world regions saw double-digit declines.

Farm equipment exports were valued at $1.7 billion in the first quarter.

Emergency action

NFA announced that it has taken an emergency enforcement action against Apercu International PR LLC (Apercu), an NFA member commodity trading advisor located in San Juan, Puerto Rico, and Alvin Guy Wilkinson, a principal and associated person of Apercu.

This action was taken to protect Apercu and Wilkinson’s customers because of Apercu and Wilkinson’s failure to cooperate with NFA. NFA has concerns that Wilkinson may be operating Chicago Index Partners as an illegal commodity pool without being registered as a commodity pool operator or qualifying for an exemption from registration.

NFA also has concerns that Wilkinson may have misappropriated customer funds. Effective immediately, Apercu and Wilkinson are suspended from NFA membership and are prohibited from disbursing or transferring any customer funds without NFA’s prior approval.

CME moving?

Pending Illinois’ proposed trading levy of $1 or $2 per contract for trades at the CME Group and how it would effect business, Chairman Terry Duffy says. “I would have no other choice but to move the business. If you don’t have customers, you don’t have a business.”

CME Group believes the trading levy would drive customers away and CME is considering moving the historic trading center out of Illinois due to the pending levy.

CORN ANALYSIS

Corn closed the week 5 cents higher. Last week, private exporters reported sales of 116,360 metric tons of corn to an unknown destination.

Weekly export sales of corn showed a total of 66.1 million bushels (1.67 million metric tons) with 61.4 mb (1.56 mmt) for the 2015-2016 marketing year. This was well above the 2.1 mb (52,600 mt) needed to be on pace with USDA’s May demand projection of 1.725 billion bushels.

In the weekly crop progress report, NASS reported U.S. corn crop conditions 75 percent good-to-excellent versus 72 percent expected, up from 72 percent last week and modestly better than the 74 percent rating last year.

Iowa was rated 80 percent g/e with Illinois 76 percent, Minnesota 77 percent and Nebraska 78 percent.

The supply/demand report showed old crop corn stocks at 1.7 bb, well below estimates of 1.77 bb and down from 1.8 bb last month.

New crop stocks were well below expectations at 2.0 bb and down from 2.153 bb a month ago.

The USDA increased exports by 50 mb. Using current acreage figures and trendline yields, the U.S. will only produce a crop 260 mb larger than current usage.

No doubt the USDA will lower planted acreage, further cutting into the ending stocks and leaving no margin for error this growing season.

The end of the month will also have the quarterly stocks and planting intentions report from the USDA.

This report could be a shocker to the market as some reports have farmers decreasing seeded acres from the last report in March.

Seasonal highs are usually formed by June 23.

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

SOYBEANS ANALYSIS

Soybeans closed the week 42.75 cents higher. Last week, private exporters reported sales of 552,000 mt of soybeans to China and 388,000 mt to an unknown destination.

Weekly export sales of soybeans showed a total of 45.3 mb (1.234 mmt) with 27.9 mb (758,500 mt) for the 2015-2016 marketing year. This put total old crop sales at 1.76 bb, 2 percent above USDA’s May demand projection of 1.74 bb.

U.S. soybean crop conditions came in at 72 percent g/e versus 70 percent expected, which is up 3 percent from last year’s 69 percent rating.

In the supply/demand report, old crop soybean stocks came in at 370 mb, below expectations of 370 mb and down 400 mb from last month.

New crop soybean stocks were lowered 45 mb from the previous month at 260 mb as the USDA also increased exports by 15 mb to account for the change.

With current acres and trendline yields, the US will only produce a 3.8 bb crop while using 3.94 bb this marketing year. No doubt, producers will increase soybean acres in the June acreage report and increase ending stocks from current levels.

Dryness in the last half of June and into July will send prices sharply higher. Like the corn market, producers should use options as a risk management tool and price insurance.

The month of June is not the key reproductive month for soybeans, however, the market will be quick to add a premium into prices on less than ideal weather.

The acreage report at the end of the month could be a shocker to the trade.

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

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.