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Weekly Basis 02/26/2022

The Dow Jones Industrial Average settled at 34,058.75, down 20.43 points for the week.

Crude oil was at $92.08 late Friday, up 51 cents for the week.

The dollar index is at 96.55, up 0.48 for the week.


 

May (K) corn settled at $6.55¾, up 3 cents for the week.

Dayton, Ohio Cargill is paying $6.41 for corn, 15 under the May futures, which is an 11 cent weaker basis than a week ago. Their fall delivery basis is steady at 30 under the December futures.

Poet at Iowa Falls is paying $6.51 for corn, 5 under the May futures, which is a 3 cent weaker basis than a week ago. Their fall 2022 delivery basis is steady at 30 under the December futures.

The March to July corn carry went from -7¼ to -15½ this week. Super 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 added 27,239 contracts to their corn position to bring them net long 286,692 contracts of corn. The index funds added 10,125 contracts to their long position to bring them net long 445,034 contracts of corn.

Corn open interest decreased by 115,356 contracts to 1,947,320 contracts.

Eastern Corn Belt ethanol crush margin is $1.36 today compared to $1.52 last week and $1.54 a year ago. The price of corn subtracted from the value of processed products = ethanol crush margin.


 

May (K) soybeans settled at $15.84½, down 19 cents for the week.

Sidney, Ohio Cargill is paying $15.78 for beans, 25 under the May (K) futures, which is 18 cents weaker than a week ago. Their fall delivery basis is 25 under the November, which 5 cents weaker than last week.

Iowa Falls Cargill is paying $15.05 for beans, 80 under the May (K) futures, which is 5 cents weaker than a week ago. Their fall delivery basis is steady at 35 under the November.

The big spec funds added 4,563 contracts to their position to bring them net long 144,862 contracts of beans. The index funds added 2,311 contracts to their position to bring them net long 192,662 contracts of beans.

Soybean open interest decreased by 87,897 contracts to 1,036,939 contracts.

The March to July soybean carry went from -½ cent to -17 cents this week. Super Bullish!

The soybean crush margin is $3.98 today, compared to $2.87 last week and $1.57 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 49¼ cents this week to settle at $8.50. The local elevator is paying $8.15 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 $8.37, 13 under the July for new crop, which is also steady with a week ago.

The big spec funds cut 15,662 contracts from their soft red winter wheat (CBOT) position to leave them net short 40,327 contracts. The index funds cut 1,125 contracts from their position to leave them net long 145,684 contracts of wheat.

Soft red winter wheat open interest decreased by 39,126 contracts to 471,913 contracts.

KC July wheat was up 40½ cents to settle at $8.81¼.

The big spec funds added 4,384 contracts to their hard red winter wheat position to bring them net long 16,997 contracts. The index funds added 923 contracts to their position to bring them net long 58,358 contracts of hard red winter wheat.

Hard red winter (KC) wheat open interest decreased by 15,063 contracts to 233,966 contracts.

September (U) 2022 spring wheat was down 8¼ cents this week to settle at $9.21¼.

The Baltic Dry Bulk Index settled at 2,187, up 301 points for the week.


 

What you should have noticed:

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

For the second consecutive week, the corn basis weakened in both locations. Not bullish!

Ethanol crush is looking sick and, worse yet, the ethanol inventory is near record large barrels. The soybean crush jumped $1.11 per bushel and is way more than double of a year ago.

The only thing above that would give a hint as to how wild this past week was the drastic reduction in open interest in all of commodities and, yet, both the big spec and index funds expanded (increased their open interest) their positions in all commodities except soft red winter wheat. That means the commercials and small spec traders liquidated a lot of hedges. Let’s take look at the changes in commercial traders’ number of contracts they shed the week ending last Tuesday:

Corn 63,739 total, liquidated 5 times more longs than shorts

Soybeans 43,252 total, liquidated 2 times more longs than shorts

SRWW 12,670 total, liquidated 10 times more longs than short

HRWW 134 total, about a wash

A commercial trader hedges his cash grain position.

That means when he buys something in the cash market, he sells futures (adds short positions).

It also means when he sells cash grain, he buys futures (liquidates short positions).

So, what does the above information tell us about commercials’ change in inventory of physical grain for the week ending February 22nd?

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