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By Staff | Jun 18, 2018

CME Group announced it reached average daily volume (ADV) of 20.1 million contracts during May 2018, up 22 percent from May 2017. Open interest at the end of May was 126 million contracts, an increase of 2 percent from the end of May 2017, and up 16 percent from year-end 2017. May volume was buoyed by an all-time daily volume record of 51.9 million contracts traded on May 29. Agricultural volume averaged 1.4 million contracts per day in May 2018, up 22 percent from May 2017. Highlights include: Record daily open interest for Corn futures of 1.97 million contracts on May 30. Grain and Oilseed futures and options ADV increased 28 percent to 1.3 million contracts. Corn futures and options ADV increased 32 percent to 484,000 contracts Soybean futures and options ADV grew 27 percent to 295,000 contracts. Hard Red Winter Wheat futures and options ADV rose 20 percent to 58,000 contracts.

Brazilian agriculture consultant Kory Melby says the trucker strike resulted in near chaos conditions in Brazil. “They got a little power hungry and are augmenting their demands. All of that is so out of Brazilian character. No one really knows what to do with it. It’s still very confusing.” A dramatic increase in diesel fuel prices was the original reason for the protest, which lasted 11 days and slowed economic activity throughout the country.

The Environmental Protection Agency is being challenged for granting three small refinery waivers to large processors. A coalition of farm groups including the National Corn Growers Association, National Farmers Union and the Renewable Fuels Association filed a lawsuit Tuesday saying the large refineries didn’t meet qualifications of the small refinery waivers. The waivers exempt the processors from compliance with annual Renewable Volume Obligations. In a statement, the farm groups say they need more transparency. In late April, EPA Administrator Scott Pruitt told reporters the small refinery exemption isn’t subjective in nature, it’s objective and is being addressed on a facility-by-facility basis.

The U.S. Justice Department has given its thumbs’ up for the Bayer-Monsanto deal. The antitrust regulators are demanding the two companies spin off $9 billion in assets, the largest sale of corporate assets ever required by the Justice Department. This deal has been in the works for two years and is valued at $66 billion.

(Reuters) – U.S. producers can sell pork legs and shoulders to Mexico via an import quota despite retaliatory measures taken this week after U.S. President Donald Trump imposed tariffs on steel and aluminum, the Mexican government said. Mexico published a long list on Tuesday of U.S. products it would subject to tariffs, including the pork cuts. The measures were a response to U.S. tariffs on steel and aluminum imports from Mexico, Canada and the European Union.

Corn analysis

Corn closed the week $.13 3/4 lower. Last week, private exporters did not announce any private sales. Weekly export sales of corn showed a total of 49.5 mb (1,256,900 mt) with 33.0 mb (838,600 mt) for the 2017 -2018 marketing year. This put total marketing year sales at 2.177 bb, 2 percent above the previous marketing year. In the weekly crop conditions report, NASS reported US corn crop conditions at 78 percent good/excellent vs 79 percent expected down 1 percent from last week but much better than last year’s 68 percent rating. US corn planting is 97 percent complete vs 97 percent expected, 92 percent last week, 95 percent last year and 95 percent average. In the weekly EIA report, ethanol production was the same as last week at 1,041,000 barrels per day. Ethanol stocks rose slightly to 21.9 million barrels. Near record high crop ratings have pressured prices, breaking the uptrend line. Producers will want to use options as a way to manage risk and provide price insurance. This will enable producers to make sales and cover the upside if weather is adverse. Unless adverse weather hits the majority of the crop, the seasonal highs are in place.

Strategy and outlook

Producers should have either made sales and re-owned with call options or bought puts to establish a price floor.

Soybean analysis

Soybeans closed the week $.55 lower. Last week, private exporters announced sale of 114,300 mts of soybeans to Mexico. Weekly export sales of soybeans showed a total of 7.3 mb (199,500 mt) with 6.1 mb (331,600 mt) for the 2017-2018 marketing year. This put total marketing year sales at 2.044 bb, 5 percent less than the previous marketing year. In the weekly crop progress and conditions report, US soybean crop conditions are 75 percent good/excellent vs 74 percent expected. US soybean planting is 87 percent complete vs 89 percent expected, 77 percent last week, 81 percent last year, 75 percent average. Near record high crop ratings have pressured prices. In addition, rains after June 15 will be viewed as beneficial to crop development and negative for prices. However, dryness in the month of June 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. Unless adverse weather effects the majority of the soybean belt or a monumental agreement is reached with China, seasonal highs have formed.

Strategy and outlook

Producers should have been making sales and reown with call options or bought puts to establish a price floor.

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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