Weekly Basis 02/11/2022

The Dow Jones Industrial Average settled at 34,738.06, down 351.68 points for the week.

Crude oil was at $94.18 late Friday, up $1.99 for the week.

The dollar index is at 96.07, up 0.60 for the week.

March (H) corn settled at $6.51, up 30½ cents for the week.

Dayton, Ohio Cargill is paying $6.21 for corn, even with the March futures, which is a steady basis with a week ago. Their fall delivery basis is steady at 30 under the December futures.

Poet at Iowa Falls is paying $6.47 for corn, 4 under the March futures, which is a steady basis with a week ago. Their fall 2022 delivery basis is steady at 30 under the December futures.

The March to July corn carry went from -2 last week to -5¾ this week. Bullish!

The CFTC’s Commitment of Traders Report (COT) is issued every Friday afternoon. It reports open interest as of the close of business the previous Tuesday.

The big spec funds cut 35,693 contracts from their corn position to leave them net long 253,614 contracts of corn. The index funds added 6,127 contracts from their long position to bring net long 441,755 contracts of corn.

Corn open interest increased by 18,490 contracts to 1,998,012 contracts.

Eastern Corn Belt ethanol crush margin is $1.28 today compared to $1.24 last week and $1.16 a year ago. The price of corn subtracted from the value of processed products = ethanol crush margin.

March (H) soybeans settled at $15.83, up 29½ cents for the week.

Sidney, Ohio Cargill is paying $15.83 for beans, even with March (H) futures, which is a steady basis with a week ago. Their fall delivery basis is steady at 20 under the November.

Iowa Falls Cargill is paying $15.08 for beans, 75 under the March (H) futures, which is steady with a week ago. Their fall delivery basis is 35 under the November, which is a 5 cent firmer basis than a week ago.

The big spec funds added 7,039 contracts to their position to bring them net long 139,522 contracts. The index funds cut 4,123 contracts from their position to lesve them net long 187,798 contracts of beans.

Soybean open interest increased by 72,171 contracts to 1,078,690 contracts.

The March to July soybean carry went from 0 cents last week to -2 this week. Bullish!

The soybean crush margin was $3.22 yesterday, compared to $3.25 last week and $1.74 a year ago. Crush margin = value of the oil and meal extracted from a bushel of beans minus the cost of a bushel of beans.

CBOT July soft red winter wheat was up 36¾ cents this week to settle at $7.98½. The local elevator is paying $7.64 for new crop wheat, 35 under the July wheat which is a steady basis with a week ago. King Milling in Lowell, Michigan is paying $7.85, 13 under the July for new crop, which is steady with a week ago.

The big spec funds added 3,772 contracts to their soft red winter wheat (CBOT) position to bring them net short 50,234 contracts. The index funds added 3,493 contracts to their position to bring them net long 143,160 contracts of wheat.

Soft red winter wheat open interest decreased by 5,574 contracts to 486,477 contracts.

KC July wheat was up 37 cents to settle at $8.27¾.

The big spec funds cut 2,558 contracts from their hard red winter wheat position to leave them net long 11,865 contracts. The index funds added 1,564 contracts to their position to bring them net long 57,099 contracts of hard red winter wheat.

Hard red winter (KC) wheat open interest decreased by 5,794 contracts to 240,374 contracts.

September (U) 2022 spring wheat was up 44½ cents this week to settle at $9.25¾.

The Baltic Dry Bulk Index settled at 1,940, up 515 points for the week.

What you should have noticed:

Crude oil was higher again.

Despite all three commodity futures being sharply higher, basis was steady at every location. That is bullish!

Both corn and beans carry went deeper into negative return to storage. That is bullish!

Corn open interest decreased considerably, yet prices were up 30+ cents. That means traders who were short (sold) were getting out of the corn market (declining open interest), which they had to be buyers of futures contracts to offset their short contracts. Declining open interest with increased price is a weak bull market because there is a limited number of traders who are short. When they have liquidated their short position sufficiently, there will be few buyers.

Soybeans were the only commodity to have increased open interest with sharply higher prices. That means new money was coming into (increased open interest) market and they were buying (higher price). Since there is no end to the amount of new money that could come into any market, this is a strong bull market.

Soybean and ethanol crush were essentially steady this week. Given the sharp increase in corn and beans prices, the demand (and price) for the products kept up, which is very surprising.

Ocean freight rates were smartly higher.