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Weekly Basis 04/30/2022

The Dow Jones Industrial Average settled at 32,977.21, down 834.19 points for the week.

Crude oil settled at $104.41, up $2.96 for the week. The dollar index settled at 103.17, up 2.04 for the week.


Below is corn, soybeans and wheat basis situation this week.


 

Corn


July corn settled at $8.13½, up 24½ cents for the week.


Dayton, Ohio Cargill is paying $8.03 for corn, 10 under the July futures, which is a 10 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 $8.13 for corn, even with the July futures, which is a steady basis with a week ago. Their fall 2022 delivery basis is steady at 30 under the December futures.


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 13,736 contracts from their corn position to leave them net long 272,242 contracts of corn. The index funds cut 628 contracts from their position to leave them net long 485,653 contracts of corn.


Corn open interest decreased by 205,682 contracts to 2,157,559 contracts.


Eastern Corn Belt ethanol crush margin is $2.55 today compared to $2.77 last week and $1.95 a year ago. The price of corn subtracted from the value of processed products = ethanol crush margin.



 

Soybeans


July soybeans settled at $16.84¾, down 3¼ cents for the week.


Sidney, Ohio Cargill is paying $17.19 for beans, 34 over the July futures, which is a 34 cent firmer basis than a week ago. Their fall delivery basis is steady at 25 under the November.


Iowa Falls Cargill is paying $15.85 for beans, $1.00 under the July futures, which is steady with a week ago. Their fall delivery basis is also steady at 40 under the November.


The big spec funds cut 5,754 contracts from their position to leave them net long 97,798 contracts of beans. The index funds cut 12,246 contracts from their position to leave them net long 199,474 contracts of beans.


Soybean open interest decreased by 100,274 contracts to 904,744 contracts.


The soybean crush margin is $4.47 today, compared to $4.21 last week and $1.85 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.



 

Wheat


CBOT July soft red winter wheat was down 9½ cents this week to settle at $10.55¾.


The local elevator is paying $9.72 for new crop wheat, 84 under the July, which is a 42 cent weaker basis than a week ago. King Milling in Lowell, Michigan is paying $10.46 for new crop wheat, 10 under the July, 5 cents firmer than a week ago.


The big spec funds cut 545 contracts from their soft red winter wheat (CBOT) position to leave them net short 37,501 contracts. The index funds cut 2,507 contracts from their position to leave them net long 158,269 contracts of wheat.


Soft red winter wheat open interest decreased by 53,351 contracts to 431,253 contracts.


KC July wheat was down 43¾ cents to settle at $11.05¾.


The big spec funds cut 4,117 contracts from their hard red winter wheat position to leave them net long 11,913 contracts. The index funds added 2,326 contracts to their position to bring them net long 65,403 contracts of hard red winter wheat.

Hard red winter (KC) wheat open interest decreased by 16,096 contracts to 195,409 contracts.

September (U) 2022 spring wheat was up 2 cents this week to settle at $11.53¼.

The Baltic Dry Bulk Index settled at 2,403, up 164 points for the week.


 

What you should have noticed:

It has been a long time since the Dow settled below 33,000 points. It is down 10.7% from its high.

Ethanol crush margin was down 22 cents this week, but with corn up 24 cents, lower profit margins for corn users is to be expected.

The soybean crush was up 26 cents with beans a little lower. It is logical.

After the corn market added more than 300,000 contracts of open interest the previous three weeks. A truly massive liquidation of positions occurred this past week as corn open interest (OI) declined a 205,000 contracts as money was flying away from the corn market. In fact, all the commodities lost 9 to 12% of their open interest this past reporting week.

The declining open interest means people with futures positions were getting-out of the market. Was it the shorts or longs? The price of corn was up 20+ cents, so the traders with short (sold positions) were buying to offset those sold positions, pushing old crop, new crop and 2023 corn crop futures to new contract highs during this reporting week.

Think about this: Who will be buying after the shorts are finished liquidating? Unless the market can attract new money, there won’t be any buyers.

Prices moving higher as open interest declines is a key technical indication a market is about to turn lower. Will the weather, the war, or the demand bring investors back to the corn market?

Where is all this investment money from stocks and commodities going?

Did you notice the dollar index was up a huge 2.04? Investors are buying dollars. Why? Interest rates are higher than they have been in 10 years. The money flowing from stocks and commodities is flowing to interest bearing investments… bonds.

The past four weeks, the dollar index is up 4.72, a massive move higher in the big picture of world economics. Yet the past four weeks July corn is up 91 cents, beans up $1.20. Commodities are supposed to go down as the dollar strengthens.

The investment rules change during long term inflation. So also should your market plan.


 

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