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CBOT Prices, ENSO, Put Options, Markets & Rain Days Update 05/04/2022

Highlights


The market expects the Federal Reserve will increase interest rates this afternoon by a half to three-quarters of a percent. In hind-sight, we can see the CBOT prices declined sharply yesterday a few minutes after that interest rate comment was made. Higher interest rates hurts grain price two ways:

  1. Raises the cost of storage, so more bushels are put on the market

  2. Higher interest costs reduce profitability of every business. Less profit means a weaker economy and that equals less demand for everything (except money).

Soon, there will be days when CBOT prices are smartly higher because of fears of inflation, which is why interest rates are increased. Inflation is a double edged sword and it is impossible which blade will be used on any given day. Some days, the market will think inflation is the result of a “booming” economy while other days, the higher interest rate to control inflation is a burden on the economy.


The National Association of Realtors reported its Homebuyer Affordability Index dropped to its lowest level since 2008.

 

Somebody is bullish corn. There were 14,500 September $10 corn calls bought yesterday at a price of between 10 and 13 cents a bushel. On the other hand, a lot of people think September corn will not be above $10 on August 26th.


Big fertilizer producer, Mosaic, said that it will take 2 to 4 years to resolve the potash deficit.


Nutrien said they are considering more production increases to boost potash production 1 to 15 million mt this year. That is not a typo, yes, 1 to 15 million mt.


Ukraine grain traders’ union estimated farmers have already planted 31% of the 2022 spring crops. Ukraine’s ag ministry expects that total sown area to be 80% of a year ago.


Futures will be pretty quiet until just after the CBOT closes this afternoon when the Fed speaks. If they increase interest rate 1%, it will create a great buying opportunity for crude oil. If they increase the interest rate a quarter of a percent or not at all, crude will probably be sharply higher and CBOT will be higher tonight.


 

The ENSO water temperature chart was issued yesterday:

To learn all about ENSO and its impact on world weather, go to:

https://www.wrightonthemarket.com/post/cause-and-effect-of-el-ni%C3%B1o-and-la-ni%C3%B1a-episodes-part-1

 

Wheat Put Discussion: Market Action on May 3rd.

September wheat futures settled at $10.49½ yesterday, down 8¾ cents. All puts should have increased in value since the futures price was lower.

The $10 put gained 1 3/8ths cent while the $9.00 put gain 1/8th of cent as another day of time was value lost. A short futures position made $437.50, the $10 put made $87.50 and the $9 put gained $12.50. The wheat in the field or bin lost about $437.50, because cash price = futures plus basis.



 

Market Data


This morning: Crude oil is at $103.94, up $1.53 The dollar index is at 103.55, up 0.08 July palm oil settled at 7,104 MYR, not trading due to May Day Holiday. 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 $126.16, down $0.02 per cwt. The contract high was made yesterday at $127.20 per cwt. Cotton competes with soybeans and corn for acres. July natural gas is at $7.987, down 0.038. The contract high was made April, 18th at $8.279. Natural gas is the primary cost to manufacture nitrogen fertilizer. July ULSD is at $3.7808 per gallon, up 0.0395. The contract high was made May 2nd at $3.8846. ULSD stands for Ultra Low Sulfur Diesel.


 

Rain Days Update


The Western Corn Belt has 6 more rain days in the 10 day forecast than yesterday and the Eastern Corn Belt has 2 less rain daysthan yesterday.


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