With the hot wheat market, there has been a lot more mention of MATIF wheat. Marché à Terme International de France (MATIF) is a former futures exchange in France, which merged with the Paris Bourse, then with Euronext NV to Euronext Paris, which now belongs to the exchange operator Euro Next. So, that is where the MATIF came from, but it is simply milling quality wheat on the futures exchange in Paris, which is seven hours ahead of Central Time. So every morning, the first thing North American wheat and flour people want to know is what did MATIF wheat do overnight?
MATIF wheat gapped higher on Friday’s opening and advanced over €40 a mt (about $1.30 per bushel) before selling off sharply, filling the opening gap, traded €16 lower before ending Friday up €8.50.
It is very noteworthy that US wheat futures on Friday saw KC with five contracts limit-up most of the day, all moved off limit at mid-day followed by all the CBOT contracts except May. About 130,000 contracts of May CBOT wheat were bid into the close, which never came off limit-up. Option analysis (synthetic futures projection) indicates another 75 cent limit move is entirely possible Sunday night on the May CBOT contract. However, option volatility also indicates a top is near as does the fact eight wheat contracts came off and closed below limit-up.
It “feels” like wheat, by the end of tomorrow’s trading, will be sharply lower. However, it is reasonable to expect May CBOT will open sharply higher before crashing as it was the only contract to settle limit-up Friday with an estimated 130,000 contracts bid with no sellers after 33,461 contracts traded on Friday. The one thing that clouds the issue is there is a rumor, which we have yet to confirm, that a CBOT member firm failed to make its margin call on Friday.
If true, that firm, without a doubt, is heavily short May wheat, which would explain why May wheat was the only contract to stay limit-up through the end of trading Friday and the remaining contracts that firm holds will be bought at the best available price on the opening this evening (aka blown-out of the market in trader lingo). When that buying is done, who would possibly be foolish enough to buy May wheat? Every long May wheat position holder will want to be the first trader to sell once the May wheat comes off limit-up. We would not be surprised if May wheat opens limit-up and settles limit-down. That is more likely than closing up the limit.
Given all of the above plus the winter wheat is coming out of dormancy, it is time to price hard red winter wheat.. Winter wheat always looks a million times better when it starts greening up. We said several months ago to get the hard red winter wheat sold no later than 10 March. Not only has the seasonal trend been down since mid-January, it accelerates to the down side the last 20 days of March because wheat breaks dormancy. If you grow hard red winter wheat and it is not contracted, get 2022 and 2023 wheat sold on a HTA contract at-the-market as soon as you can get your merchandiser on the phone.
Note that as of the close Friday, reportedly there were no cash bid prices for hard red winter wheat market. We do not recommend a forward contract or a basis contract.
Lock-in the futures and nothing else. The only reason a merchandiser will not do that is because he is scared of the additional margin call exposure, which he will never admit.
I am sure we are not the only people to hear the rumor of a CBOT member firm failing to meet its margin call. True or not, such things send ice cold chills up and down the spine of every grain merchandiser and his banker. Hopefully, lower wheat futures will ease the fear of running out of money for your merchandiser.
Year-to-date price changes for May futures contracts:
Spring W: +18%.
Deliveries assigned for Monday are:
17 to 25 Feb 2022
62 to 28 Feb 2022
163 to 4 Mar 2022
0 to 2 Feb 2022
0 to 23 Feb 2022
0 to 28 Feb 2022
If you know how to read the above delivery info, you know the above information is somewhat bearish wheat and somewhat bullish for the soybean complex.
Brazil’s bean basis jumped 35 cents for April and up 30 cents for May as harvest winds down
The United Nations reports world food prices are up 24.1% from a year ago led by vegetable oils and dairy products.
The EU usually imports 200,000 mt of Ukrainian sunflower oil per month and uses 35% to 45% of the world’s annual consumption. The current EU inventory supply of veg oil is probably enough to meet 4-6 weeks of demand. Just as surprising as wheat’s rally last week is palm oil crashing on Friday given the news from the Black Sea. Another reason to sell wheat.
Rain Days Update
Yesterday, in the dry areas of South America: Santa Maria high temperature 102°F with 0.1 inches rain. Cordoba high temperature 75°F with 1.5 inches rain. Salto high temperature 86°F with 0.3 inches rain. Total rainfall and temperatures expected in the next ten days: Santa Maria 3.08 inches, 73 to 94°F. Cordoba 0.55 inches, 73 to 79°F. Salto 1.35 inches, 74 to 85°F. The Western Corn Belt has 5 less rain days in the 10 day forecast than yesterday and the Eastern Corn Belt has 4 less rain days than yesterday.