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Midwest Marketing Solutions

January 11, 2019
By BRIAN HOOPS - Columnist , Farm News

MGEX sees record volume

MGEX concluded 2018 with a total of 2,335,284 contracts traded, which is the second highest calendar year volume in history. Alongside this achievement, December 2018 reached a total volume of 140,453 contracts, and an options volume of 1,997 contracts, which are both higher in comparison to December 2017. Additionally, open interest at market close on the 31st was recorded at 68,468 contracts. .

TPP goes on without the U.S.

The Trans-Pacific Partnership (TPP) has gone into effect at the end of the year without the United States.

North Dakota Wheat Commission executive director Neal Fisher says U.S. wheat must prepare for a worst-case scenario.

"Tariffs with a country like Japan become less for those involved," explains Fisher. "Eventually, Canada and Australia will have a $2/bushel advantage over the U.S. That's the worst case scenario." Fisher is hopeful a bilateral trade agreement can be worked out between the U.S. and Japan, also with other southeast Asian countries.

Corn analysis

Corn closed the week $.07 3/4 higher. Last week, private exporters did not release any export sales due to the temporary government shutdown.

Weekly export inspections for the week ending December 27 came in at 35.974 mb for corn. To reach the USDA export forecast, corn needs to average 45.2 mb each week. In the weekly EIA report, crude oil stocks were unchanged versus an expected drawdown of -3.0 mb.

Ethanol production averaged 1,011k bpd versus 1,042k the prior week. Ethanol stocks rose 100,000 barrels to 23.2 million barrels. Export demand is starting to improve but ethanol demand is weakening.

The January stocks, crop production and supply/demand report should be a major market mover. A bullish report should be sold by producers. This month's supply/demand report has the potential to be a major market mover as the USDA will issue the final production forecast for the 2018 crop and update the demand figures. Traders are going to look for the USDA to decrease their final corn production estimate and slightly lower demand estimates. Farmer selling should increase after the first of the year as farmers will need to move some corn to maintain the quality of the stored crop, but basis levels should narrow through the winter months.

Strategy and outlook

Producers should look to sell the carry for spring or summer months and use options to re-own and manage risk. Don't store unpriced crop.

Soybeans analysis

Soybeans closed the week $.26 3/4 higher. Last week, private exporters did not release any export sales due to the temporary government shutdown.

In the weekly export inspections report, the USDA reported inspections for soybeans at 24.90 mb. Soybeans need to average 35.0 mb to reach the USDA forecast. Trade has been disappointed with the Chinese soybean purchases so far.

China is likely to only buy hand to mouth from the U.S. as the trade war continues. In fact, there are rumblings that China will release product from their strategic reserves until South American crop is available in the spring and not buy any more U.S. soybeans.

The market has been anticipating a record soybean crop in South America and updates on this year's production from South America will be a major driving force for prices throughout the winter. This month's supply/demand report has the potential to be a major market mover as the USDA will issue the final production forecast for the 2018 crop and update the demand figures.

Traders are going to look for the USDA to decrease their final soybean production estimate and to slightly lower their demand estimates. Farmer selling looks to be a minimum this winter as producers are more interested in selling corn and holding onto their soybeans in case another weather problem develops in South America and prices move higher.

Strategy and outlook

Producers should look to sell the carry for spring or summer months and use options to re-own and manage risk. Don't store unpriced crops.

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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