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Tidbits, Put Options, Export Inspections, BC Vote, Markets & Rain Days Update 04/26/2022

Highlights


Yesterday morning, the USDA announced the sale of:

66,000 mts of old crop soybeans to China

264,000 mts of new crop soybeans to China


Last Thursday, the USDA reported 34.6 million bushel of corn left the US the previous week. Corn exports need to average 12.3 million bushel a week to meet USDA export projections for the marketing year.


Two flocks are infected with the highly pathogenic H7N3 bird flu virus in the Mexican state of Coahuila, on Texas border.


India’s first shipment of wheat to Egypt will be 55,000 mt. The ship will arrive at the loading port of Kandla, India on Friday.


France’s Economy Minister said the EU will impose a full embargo on Russian oil within weeks. We suppose that means crude oil and natural gas.


Yesterday afternoon, Russian oil trader Rosneft was unable to sell 6.5 million tons of crude oil because it demanded a full payment in rubles.


After meeting with Ukraine's president in a closed door and highly secret meeting Sunday afternoon, US Secretaries of Defense and State met Monday with NATO leaders with very limited press coverage. The first press comment about the two Biden Cabinet members with NATO was they told NATO that Russia must be disarmed. That piece of news was quickly squashed.


Editorial comment: The Biden Administration encouraged the war between Russia and Ukraine then rallied Western Europe to send aid to Ukraine to keep it in the war against a superior military force and now, the stage is being set (we are being groomed, brain-washed by the Administration's lap dog, the mainstream media) for the American public to approve US military intervention in the name of defending NATO. The oldest political stunt in the "book" is for a nation's leader to find a way to go to war when his domestic approval rating is going down the toilet and/or he has legal problems. Joe Biden has both.


Yesterday was the 2nd day of exceptional heat in Northern Argentina, Paraguay and Southern Brazil. Temperatures reached 39C (101F) in Paraguay with night time lows near 30C (86F) and today 40C (104F) will be reached. Tomorrow’s temperature map below shows even more heat.


 

Put Option Discussion Continued


Yesterday, for the second day in a row, September CBOT wheat settled 2 cents lower. Also, for the second day in a row, the September $10 and $9 puts lost value. The $10 put lost 5 cents and the $9 put lost 1 3/8 cents.


As you should already know, puts are supposed to increase in value when the futures price goes down. So what is going on?


The puts are losing time value.


Every day, options lose one day of life. Therefore, the probability of that option making money also diminishes. When the futures move only 2 cents on a given day, the time value becomes the market mover for options.


On April 18th, September wheat settled at $11.23¼. The $10 put settled at 50 cents even.


If a person had exercised a $10 put (exchanged the option for a futures contract) on April 18th the put would become a short (sold) futures position at $10. With futures at $11.23¼, that short futures position at $10 would have a loss of $1.23¼.


Why would anyone pay 50 cents for the right to sell September wheat at $10 if September wheat is at $11.23¼?


Margin calls!


If a person sells futures at any price and the price goes up, the futures loss has to be matched penny for penny every day.


If a person buys a put option and the futures goes up, no margin calls.


It is really that simple. The prospect of margin calls is why most traders are willing to pay so much for options.


With September wheat futures price at $11.23¼ on April 18th, the futures had to decline $1.23¼ to be even with the strike price. That $10 put option was $1.23¼ out-of-the-money on the 18th.


With yesterday’s settlement at $10.71¼, the $10 put was 71¼ cents out-of-the-money.


In both situations, the premium value of the option was determined by the market’s assessment of the probability that September wheat will be below $10 on August 26th.


When an option is out-of-the-money, 100% of its premium is time value. Think about this: Was the $11 put out-of-the-money on the close Monday? The answer is between your ears.


 

Export Inspections Update



 

Market Data


This morning: Crude oil is at $99.22, up $0.68 The dollar index is at 101.69, down 0.06 July palm oil is at 6,403 MYR, up 174. The contract high was made yesterday at 6,799 MYR. Palm oil owns 36% and soybean oil owns 28% world market share. December cotton is at $118.79, up $0.51 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 $7.063, up 0.172. The contract high was made April, 18th at $8.279. Natural gas is the primary cost to manufacture nitrogen fertilizer. July ULSD is at $3.4760 per gallon, up 0.0412. 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 7 more rain days in the 10 day forecast than yesterday and the Eastern Corn Belt has 1 more rain daysthan yesterday.


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