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Tidbits, Open Interest, Markets & Rain Days Update 04/25/2022


Grocery stores in the United Kingdom have started to limit the sale of sunflower oil.

About half of the wheat flour millers in Kazakhstan have ceased operations due to a lack of wheat imports from Russia.

The US Secretaries of Defense and State met face to face yesterday with Ukraine’s president in a closed door meeting in Kyiv. There was no comment about what was discussed or even why they met.


Open Interest Explanation

Open interest is the number of contracts “on the books” at the end of a trading day. All these “open” contracts must eventually be offset with an opposite futures transaction or a delivery. OI is a very important technical factor all people who market grain should follow.

Each Friday, we report the open interest (OI) for corn, wheat, beans futures contracts and options contracts combined.

If open interest is increasing with the price going up, that means new money is coming into that market. That is important to you because there is a lot more money in the world than the money already invested in any commodity futures & options market.

If open interest is decreasing with the price going up, that means the buying is being done by people already in the market and they are getting out of the market. The OI goes down because traders already short (sold) are buying to offset those short positions. There is a limited number of people already in the market to continue buying to offset short positions and when they are done, so will the uptrend be done.

Likewise, with prices in decline and OI increasing, that is a strong bear market. If the price is going down and OI is decreasing, it is long liquidation which will be relatively short-lived. It is what is called a “weak” bear market.

As open interest approaches it's all-time high or low, it is a warning that the price trend is about to change.

A sponge can only hold only so much water. In theory, a futures market has no maximum OI because there are 7 or 8 billion people in the world and every one of them could trade futures… in theory. We all know the number of people with the capability to trade futures is a very small percentage of the world population and there is a realistic subjective limit.

Last Friday, we reported the combined futures and options OI was 2,363,241 as of the previous Tuesday, up a huge 300,000 plus contracts the past three weeks. Again, we report futures and options contracts combined.

Note that on the same Tuesday last week, July corn made its contract high that very day at $8.14 and settled at $7.99½.

Three months ago, the combined OI was just 1,828,316 and July corn was $6.07. Get the picture?

A 30+ year client asked us over the weekend what was the all-time high corn OI? This guy is keeping his eye on the ball… I mean, the market.

For corn futures contracts only, the OI last Tuesday was 1.625 million (Apr 19, 2022).

On June 6th, 2018 CBOT corn futures only (no options included) open interest reached a record large 2,006,600 contracts. July 2018 corn settled that day at $3.78¼, down from $4.12 on May 24th and on its way to $3.39 on June 19th.

So, Rick, we can add another 100,000 futures contracts of OI every week for four more weeks before the OI will challenge the all-time high.

By the way, three weeks ago, July corn settled at $7.08, so 300,000 new contracts moved the corn market a dollar higher.

Last year's contract high of $7.35 on July corn was made on May 7th. Are you interested in what the OI was that day?

The futures and options OI was 2,557,937. We say again, the corn OI was only 2,363,241 last Tuesday when corn traded to $8.14!

And that, Ladies and Gentlemen, is why open interest is a number you need to track.


Market Data

This morning:

Crude oil is at $98.03, down $4.04

The dollar index is at 101.65, up 0.43

July palm oil is at 6,500 MYR, up 145. The contract high was made today at 6,799 MYR. Palm oil owns 36% and soybean oil owns 28% world market share.

December cotton is at $117.59, down $1.57 per cwt. The contract high was made April, 14th at $124.36 per cwt. Cotton competes with soybeans and corn for acres.

July natural gas is at $6.604, down 0.149. The contract high was made April, 18th at $8.279. Natural gas is the primary cost to manufacture nitrogen fertilizer.

July ULSD is at $3.3545 per gallon, down 0.1114. The contract high was made March, 9th at $3.7675. ULSD stands for Ultra Low Sulfur Diesel.


Rain Days Update

The Western Corn Belt has 5 more rain days in the 10 day forecast than yesterday and the Eastern Corn Belt has 5 more rain daysthan yesterday.


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