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Futures Notes, Russia-Ukraine, Ethanol, Market Data & Rain Days 02/25/2022

First Notice Day for delivery assignments on March futures is Monday, February 28. Any long (buy) March CBOT contract could be assigned a delivery on Monday, meaning one’s long March futures position could be replaced by cash grain bushels in a CBOT approved grain warehouse (elevator) most likely on the Illinois or Mississippi River. Therefore, your futures broker and your cash grain merchandiser wants you to liquidate your March futures or basis contract today before the close of business. You can cash out or roll to a deferred month.

If you roll, the March futures will be sold and the destination month will be bought. If the March sell is above the buying price of the deferred month, you will make money.

Inverted markets are more bullish than markets with carry because the markets are saying, “Deliver your grain now! We are not going to pay you to store it. In fact, we are going to charge you to store your own grain.”

I was surprised to learn yesterday that some folks thought that once a market traded limit up, all trading ceased and that market had to settle limit up.

Limit up markets can trade at the limit up price if there is someone willing to sell at that price. If no one is willing to sell at the limit up price, then there will be no trading. It is impossible to buy something no one is willing to sell. If no one is willing to sell, that is called, “locked limit up”. However, as the day progresses, there are usually some traders who want to take profit on their long positions, some brave souls will want to short the market and some farmers will want sell some grain to their merchandiser. Those would all be futures market sellers and the thousands of wannabe buyers will fight like mad dogs to buy the few contracts offered for sale. A little bit of selling will encourage other longs to take profit by selling and that often starts an avalanche of selling as greed turns to fear. That is what happened yesterday in the wheat and the corn and to a lesser extent in the beans even though beans were not limit up.

Pay attention: Even if your broker or merchandiser will allow you to stay long a March contract into next week, be advised there is no daily trading limit during the delivery period. In other words, all March futures contracts on Monday have no limit as to how much money could be made or lost.

Our longer term price outlook is more bullish now than before the Russian attack.

Bloomberg reported that in the 24 hours after Putin recognized two breakaway Ukrainian republics, the US and its allies bought $700 million in Russian oil, gas and commodities.

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