Unstructured Finance

USDA monthly report, weather in spotlight for CBOT grains

October 4, 2009

iowa-pods-2At this time of year there is generally a bearish sentiment in Chicago grain markets due to the onset of the U.S. harvest, a world bellwether for supply. That is particularly true this autumn as evidence mounts that U.S. farmers will harvest not only their largest soybean crop in history, as the government is currently forecasting, but perhaps a record-large corn crop as well. USDA’s next crop estimates will be issued on Friday. 
“It’s going to be a biggie — the big dominant feature. Where do you want to place your bets heading into those numbers?” said Dan Basse, president of AgResource, a Chicago-based ag markets consultant.
Last month, the U.S. Department of Agriculture forecast a 2009 U.S. corn crop at 12.954 billion bushels, with an average yield of 161.9 bushels per acre, and soybean production at 3.245 billion bushels, yielding 42.3 bpa. The record for the U.S. corn crop is 13.074 billion bushels in 2007, and for soybeans, the 3.197 billion bushels reaped in 2006. Two closely watched research firms updated their forecasts last week, with brokerage FC Stone of Des Moines, Iowa, and consultant Informa Economics in Memphis both expecting USDA to boost its crop estimates this Friday. 
“With the private survey guys all showing higher corn and bean production, you’ve got a negative yield psychology all week going into the report,” said Dan Cekander, a grains market analyst at brokerage Newedge USA in Chicago. 
That sentiment hit CBOT markets hard on Friday, especially soybeans, which fell below $9 a bushel to a 6-1/2-month low. Sobering U.S. jobs data issued by the U.S. Labor Department on Friday added to bearish sentiment and worries about a recovery in the economy. Employers cut 236,000 jobs in September, far more than the 180,000 that had been expected. 
It is an adage at the Chicago Board of Trade that “big crops get bigger” once the late stages of maturity are reached and corn kernels and soybean pods make a final “fill.” But if there is anything injecting caution to all the bears in the grain markets at the moment, it is the weather. That factor will remain in play as a possible brake on CBOT price weakness the coming week. The Midwest harvest is already running a couple of weeks behind given crop immaturity. But recent rains and forecasts are not likely to to give farmers a bigger harvest window in the coming week.
“It’s pretty much a supply watch,” Basse said. “When will Mother Nature allow for a combine to roll freely and for the cash markets to be resupplied?”
Most traders expect export announcements to be limited, notably for soybeans with top buyer China on vacation until late in the week. China markets reopen on Oct. 9,following National Day holidays. 
Wheat continues to struggle with large U.S. and global stocks and slid to new life-of-contract lows on Friday. But the biggest shake-up in wheat came in the spreads, the price differences between futures of various contract months.
These differentials jumped and fell violently — and expensively — for speculators as the grain industry, the CBOT and its regulator the Commodity Futures Trading Commission traded ideas back and forth about the best way to improve the hedging performance of the troubled CBOT wheat market. The trigger to the violent moves were competing proposals on the timing of when to adjust storage fees for wheat at CBOT- approved grain elevators. Some shell-shocked spread traders were threatening to file lawsuits by the end of the week. 
For the week, the CBOT December wheat fell nearly 2 percent to $4.41-1/4. Benchmark November soybeans fell 4 percent to $8.85 a bushel. December corn was near unchanged at $3.33-1/2.

The case for an uber-regulator

September 2, 2009

FDIC chief Sheila Bair banged the gavel loudly this week with her op-ed piece in the New York Times railing against calls for a single regulatory body to oversee the many complex and disjointed elements of the financial marketplace. It seemed a bit odd. Even before Obama backed Ben Bernanke for another run at the helm of the Fed, it didn’t seem that anybody was seriously pushing for the creation of such a mighty organ of government. White House moves to streamline banking regulation – which Bair supports – are probably at the root of concerns about overconsolidation.

CFTC takes a mulligan on oil speculator numbers

August 5, 2008

frustrated tiger woodsThe Commodity Futures Trading Commission has quietly bumped up the proportion of oil futures it thinks are held by speculators after going over its data. The agency now thinks speculators held 48 percent of oil futures and options -not 38 percent as it previously thought.