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Weekly Basis 1/22/23

The Dow Jones Industrial Average (DJIA) settled at 33,375.49, down 927.12 points for the week.

Crude oil settled at $81.69, up $1.62.

The Dollar Index settled at 101.99, down 0.19.

The Baltic Dry Index (a shipping freight-cost index) settled at 763, down 183 for the week.



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

 

Corn


March futures at $6.76¼, up $0.01¼ for the week.


Basis (H = March; e.g. 10H means 10 over March) (Futures price + Basis = Cash price)

US national average basis is 8H, 1 cent weaker.

Dayton, Ohio Cargill’s Spot basis is 8H, steady, $6.84 cash price;

Iowa Falls Poet’s Spot basis is 15H, 3 cents weaker, $6.91 cash price.


COT Report (Commitment of Traders)

Big Spec Funds change is +36,411 to 113,865 net long.

Index Funds change is -3,500 to 352,318 net long.

Open Interest change is +70,079 to 1,552,011.


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. Open Interest is the number of contracts on the books. You can find our explanation of Open Interest and Funds trades here: www.wrightonthemarket.com/post/open-interest-of-specs


Crush Margin

Corn Ethanol Crush Margin was $1.89, $2.15 a week ago and $1.61 a year ago.

The price of corn subtracted from the value of processed products = ethanol crush margin.

 

Soybeans


March futures at $15.06½, down $0.21¼ for the week.


Basis (H = March; e.g. -20H means 20 under March) (Futures price + Basis = Cash price)

US national average basis is -30H, 2 cents weaker.

Iowa Falls Cargill: Spot basis is -45H, 15 cents weaker, $14.62 cash price;

Sidney, OH Cargill: Spot basis is even with H, steady, $15.07 cash price.


COT Report (Commitment of Traders)

Big Spec Funds change is +34,403 to 130,766 net long.

Index Funds change is+1,264 to 123,044 net long.

Open Interest change is +44,132 to 771,901.


Crush Margin

Soybean Crush Margin was $4.27, $4.84 a week ago and $3.93 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


Soft Red Winter Wheat (CBOT)

July 2023 futures at $7.51½, down $0.02¼ for the week.


Basis (N = July, H = March; e.g. -28N means 28 under July) (Futures price + Basis = Cash price)

US national average basis is -41H, 1 cent weaker.

Heritage Coop. at Mechanicsburg, OH: July basis is -50N, steady, $7.01 cash price.


COT Report (Commitment of Traders)

Big Spec Funds change is -811 to -74,270 net short.

Index Funds change is -1,513 to 96,721 net long.

Open Interest change is +10,818 to 405,665.



Hard Red Winter Wheat (Kansas City BOT)

July 2023 futures at $8.35½, up ½ of a cent for the week.


Basis (N = July; e.g. -40N means 40 under July) (Futures price + Basis = Cash price)

US national average basis is -30H, steady.

Producer AG at Canton, KS: July basis is -20N, steady, $8.16 cash price.


COT Report (Commitment of Traders)

Big Spec Funds change is +3,557 to -20,394 net short.

Index Funds change is -639 to 45,880 net long.

Open Interest change is +7,177 to 184,108.



Hard Spring Wheat (Minneapolis Grain Exchange)

September 2023 futures at $8.78¼, down 0.04 for the week.

US national average basis is -19H, 1 cent firmer.


 

What you should have noticed


Dow Jones was 2.7% lower with crude oil 2% higher. Both are considered indicators of the economy. One of them is wrong. We do not think the crude oil market is wrong because the crude oil is where the rubber meets the road. The stock market is greed and fear as much as anything.


Baltic Dry Index declined for the 3rd week, -19.3% this time to 763, its lowest in over two-and-a-half years. The lowest level ever reached was 290 on 10th of February 2016. Low ocean freight rates makes shipping ag products from the USA more competitive, but it also indicates world demand for ships is not so good.


Open Interest was confidently higher for all 4 commodities; +6.0% beans, +4.7% corn, +4.1% KC wheat, +2.7% CBOT wheat. It means new money coming into these markets.


Spec funds added a lot to their long positions in corn (47%) and soybeans (35%).


Spec funds increased their largest net short CBOT wheat position in 6+ years by 811 contracts, compared to 10,660 short contracts added a week ago.


Soybean futures made a major price correction, but settled above $15 anyway. The US average basis declined by 2 cents, which is to be expected with spot month soybean futures trading to a 7 month high. Most farmers are cash price sellers, not basis and futures sellers... big mistake. If you do not know what you are, you are a cash price seller.


Crush margins declined. And corn margin is less than $2 again, close to where it was a year ago.


 

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