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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.

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