Highlights
The Canadian Premier of Alberta said yesterday afternoon that his province could add more than a million barrels per day for US refineries over the next two years. That turned crude oil lower yesterday after trading higher than any time since 2008 except for three days in March 2022. Last evening, the corn and bean basis at the Gulf was slightly weaker except soybeans for September and October, which was a bit firmer. Shanghai, the largest city in China and the primary port for container ships, has had three consecutive days with no new COVID cases outside quarantine zones, which had been the standard needed to begin to open the city. However, residents were told they have to remain in confinement for an unspecified while before resuming more normal life. They are not happy. CBOT wheat has gained 15% the past trading sessions and reached a price only attained five times before according to Karen Braun, Reuters Global AG Reporter.
About Soybeans
Total soybean production of the recently harvested crop in South America (Brazil, Argentina, and Paraguay) is more than 32 million mt lower than USDA’s expectations in December. That’s is 1.176 billion bushels, or a fourth of US soybean production. To put it into a better perspective, the old crop US carryover on August 31st this year is expected to be 235 million bushels, enough to meet the needs of the US domestic and export needs for just 19 days. The US domestic new crop soybean carryover is just 25 days and that will be reduced when the USDA reports ~2 million fewer acres of beans on the USDA Actual Planted Acres Report on June 30th.
The US old crop soybean exports were increased on May 12th by 25 million bushels and more increases in US exports are coming when Brazil runs out soybeans to load ships. Did you notice the soybean basis at the Gulf was firmer yesterday for September and October? That Gulf basis is all about export demand. It is the earliest and most reliable indicator of export demand. The Gulf basis impacts basis at every grain buying location in the Midwest.
Quincy, Illinois spot (nearby delivery, May) soybean basis was up 2 cents to 59 over the July last evening. The June delivery bid was up 4 cents to 63 over July. St. Louis basis was steady at +76 July, which a is penny firmer than two weeks ago.
Wheat Put Discussion
After the Close Tuesday May 17th.
September 2022 CBOT wheat futures settled at $12.78¾, up 27¾ cents. All puts should have decreased in value since the futures price was up significantly.
The $10 put gained 3/8 of a cent while the $9.00 put was unchanged at 7 cents. Interesting!
The $11 put that was bought Monday for 59 cents, when it settled at 46 1/8 cents settled at 39 3/8 cents, down 6 3/8 cents for the day.
A short futures short position lost $1,387.50.
The $11 put lost $318.75.
The $10 put made $18.75, but it should have lost $180.37 (3.6 cents per bushel) because its delta is 0.13.
The $9 put did not make or lose any money because its premium was unchanged. The delta of 0.06 indicates the premium should have decreased 1.66 cents, but nothing is 100% in this business.
The wheat in the field or bin gained about $1,387.50 because cash price = futures plus basis.
At this point:
Joe has $11,787.50 tied up in his options and futures account.
Dan has $14,787.50 tied up in his options and futures account.
Don has invested $2,600 in one $9 and one $10 puts. Same as yesterday.
Jr, has $5,900 invested in a $10 and a $11 puts. Same as yesterday.
Note that the value of the wheat in the field or bin gained $1,387.50.
Market Data
This morning:
Crude oil is at $113.30, up $0.90
The dollar index is at 103.42, up 0.06
July palm oil is at 6,365 MYR, up 20. The contract high was made April, 29th at 7,229 MYR. Palm oil owns 36% and soybean oil owns 28% world market share.
December cotton is at $131.70, down $0.66 per cwt. The contract high was made yesterday at $133.79 per cwt. Cotton competes with soybeans and corn for acres.
July natural gas is at $8.347, down 0.047. The contract high was made May, 6th at $9.052. Natural gas is the primary cost to manufacture nitrogen fertilizer.
July ULSD is at $3.6887 per gallon, down 0.0041. The contract high was made May, 5th at $3.9282. ULSD stands for Ultra Low Sulfur Diesel.
Rain Days Update
The Western Corn Belt has 1 more rain days in the 10 day forecast than yesterday and the Eastern Corn Belt has 4 less rain daysthan yesterday.
The 6 to 10 day forecast updated every day at: https://www.cpc.ncep.noaa.gov/products/predictions/610day/
Explanation of Rain Days