Midwest Marketing Solutions
MGEX makes history
MGEX announced its best February in history with a total volume of 261,762 contracts. Alongside this accomplishment, this past month also entered the record book as the 10th best month of all time at the Exchange. Electronically, a total of 233,609 contracts were recorded in February, making it the 9th best month of all time. Open interest at the end of February was 70,953 contracts, which is 14% higher compared to last year at this time.
CME Group sees record volumes
CME Group has revealed it saw a record average daily volume of 30.1 million contracts last month, with several new highs seen across its business. The U.S. derivatives exchange operator said the new record was up 58% from February the year prior, with total volume surpassing 25 million contracts for seven consecutive trading days over the period.
U.S. wheat to be shipped to Kenya
The U.S. Department of Agriculture says U.S. wheat may now be shipped to Kenya regardless of state of origin or port of export. This now includes wheat out of the Pacific Northwest like Idaho, Oregon and Washington. Risk of flag smut kept wheat exports from the PNW states into Kenya since 2006. Moving forward, APHIS will be working with stakeholders to watch for flag smut in wheat. Bigger picture, U.S. Wheat Associates says the restriction clears unresolved issues going into a Free Trade Agreement negotiation. U.S. Wheat says a tariff advantage is needed to compete and expand wheat market share in Kenya.
Corn closed the week $.08 higher. Last week, private exporters announced a sale of 211,336 mts of corn to an unknown destination and 234,688 mts of corn to Japan for 2019/20.
In the weekly export inspections report; U.S. corn export inspections, for the week ended 2/27/20, saw 35.3 million bushels inspected, little-changed from the previous week’s 35.9 mb and last year’s same-week exports of 34.1 million.
Again, this was below the roughly 39.8 million bushels/week average needed throughout the March-August period in order for the USDA’s 1.725 billion bushel export projection to be reached. Cumulative exports of 556 million bushels are still down 45% from last year’s 1.016 billion bushels at this time, but continue to claw back in an attempt to reach the USDA’s 16.5% annual decline target.
Corn exports from this point forward last year averaged 32.3 million bushels (mb)/week.
In the weekly EIA report; ethanol production rose to 1,079K barrels per day in the week ending February 28, versus 1,054K the previous week and 1,024K the previous year. This required corn processing of 109.2 mb, up from 106.7 mb the week prior and 102.1 mb last year. Ethanol stocks rose to a record 25.0 mb, up from 24.7 mb last week and 24.3 mb last year.
Strategy and outlook
A bounce off long term technical support should be seen as a selling opportunity. Any weather related rallies need to be sold as producers rid themselves of both old and new crop inventories.
Soybeans closed the week $.03 lower. Last week, private exporters did not announce any export sales.
In the weekly export inspections report, U.S. soybean exports last week of 24.6 mb were within market expectations and rose modestly from the previous week’s 21.9 mb, but were below last year’s same-week exports of 31.2 mb).
Cumulative exports of 1.086 billion bushels are now up just 13.8% from last year’s 954 million, after being up more than 26% on the year in early January.
Soybean exports will need to average roughly 25.6 million bushels/week through the end of August in order to reach the USDA’s 1.825 billion bushel export projection vs last year’s 27.9 million/week average from this point forward. U.S.-wide January soybean crush was reported 188.8 million bushels, above the average trade estimate of 187.3 million, up from 184.7 million in December and 3.1% above year ago January crush of 183.1 million bushels.
The January crush reflected a new all-time record in surpassing the previous record established in October 2019 of 187.0 million bushels. For the record, total crush in January was 6.7% above NOPA-member crush of 176.9 million bushels, the largest percentage increase since July 2019 and up from the 5.7% and 5.9% deviations the previous two months. 2019/20 marketing year to date crush of 898 million bushels is now unchanged from last year.
Strategy and outlook
A record South American soybean crop is hurting U.S. exports. Futures continue to test key downside support and may try and rally off of it, although the upside is limited until spring planting.
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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