CBOT wheat passing baton to soybean/oil as market leaders?

March 3, 2008

    By nature Chicago Board of Trade grain traders love talking about the markets. These days it just doesn’t happen much. Between volatile price moves, exacerbated by electronic trading and huge participation by Wall Street funds, there’s hardly a minute for them to catch their breath. Markets move faster than ever, with most of it, or 85-90 percent done on the screen.

    This week took the cake. A trade by a clearing customer of MF Global, the world’s largest futures/options broker, cost the firm $141 million and caused one of the most wicked moves in CBOT wheat history. That prompted veteran grain traders to ask: What’s next? And doubt whether or not they’ll survive another such move.

    All this happened before the CBOT grain markets enter their traditional volatile period — spring planting followed by the crop growing season. This year promises to hold lots of surprises. The combination of volatile e-trade, big volume and a bullish fundamental outlook with the different commodities competing for acreage are sure to fuel the red-hot grain markets.

    CBOT analysts and traders have no idea how high grain and oilseed markets will go. But they agree that prices will be on an upward roll until USDA releases its March 31 planting intentions report.

    Private analysts are starting to release their U.S. acreage estimates. Most are forecasting that U.S. farmers will plant more soybeans than the 63.6 million acres seeded last spring,  at least 70 million. Corn plantings will still be big near 90 million acres. But nothing is written in stone. The price action over the next few months and spring planting weather will impact the actual planted acres that will be reported in USDA’s June plantings update.

    Equally important will be spring wheat seedings. Current U.S. wheat stocks are projected at a 60-year low and spring wheat, the highest protein variety, is in the shortest supply. There’s hope among world wheat buyers that the United States will be planting a lot more than last year.

    At the USDA outlook forum held more than a week ago, the government’s preliminary forecast was for farmers to seed 2 million more acres to spring wheat (including durum) than the 15.446 million acres planted in 2007. Private analysts aren’t as hopeful as bean profits are looking more attractive than new-crop spring wheat, they say. New-crop CBOT November soybeans are hovering around $14.25 a bushel while Minneapolis spring wheat for new-crop delivery is near $11.25.

    “We’d be surprised if the spring wheat went up more than 1.25 million acres which is less than USDA’s 2.0-million-acre gain,” Rich Feltes, senior vice president and director of MF Global Research.

    The other interesting phenomenon that’s occurring is that soybeans and soybean oil are taking over as the Chicago leaders from wheat.

    Both soybeans and soyoil prices soared to all-time highs, led by soyoil this week. The product value of soyoil as a percentage of the soybean crush is rising — over 50 percent in the December contracts this week vs. near 40 percent a year ago. In contrast, the wheat markets deflated with the start of the March futures delivery period despite a lack of deliveries in Minneapolis and Kansas City.


Does anyone know anything about the Chinese conspiracy to ruin the soybean market? Reportedly, Minister Wei has internally ordered that many buy contracts be unfulfilled. The idea is to publically state that they will release edible oil reserves and then buy heavy on beans when the price drops while failing to honor earlier contracts at real-market pricing. Being such a big player, they do have the ability to manipulate the market. Who is going to control this massive corrupt giant? How can we keep them from (or minimize) controlling the market to the disadvantage of suppliers? Is it possible that the global market takes a stance against them, or do we simply have to suffer their dishonesty in sight of their buying ability and the need to move product?


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