Weekly Basis 9/4/22

Wright Team
Sep 5, 2022
4 min read

The Dow Jones Industrial Average settled at 31,318.44, down 964.96 points for the week.

Crude oil settled at $87.25, down $5.72 for the week.

The dollar index settled at 109.61, up 0.77 for the week.

The Baltic Dry Bulk Index settled at 1,086, up 4 points for the week.

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

Corn

Futures

December futures at $6.65¾, up $0.01½ for the week.

Basis

(Z = December; e.g. 50Z means 50 over December) (Futures price + Basis = Cash price)

Dayton, Ohio Cargill

Old crop basis is 50Z, 12 cents weaker, $7.15¾ cash price;
New crop basis is -30Z, steady.

Iowa Falls Poet

Old crop basis is 95Z, steady, $7.61 cash price;
New crop basis is -20Z, steady.

COT Report

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.

You can find our explanation of Open Interest and Funds trades here: https://www.wrightonthemarket.com/post/education-open-interest-of-specs-01-23-2022

Big Spec Funds change: 26,200 to 147,114 net long.

Index Funds change: 2,042 to 375,863 net long.

Open Interest change: -131,893 to 1,716,908.

Crush Margin

Corn Ethanol Crush Margin was $2.61, $2.37 a week ago and $1.73 a year ago.

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

Soybeans

Futures

November at $14.20½; down $0.40¾ for the week.

Basis

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

Iowa Falls Cargill

Old crop basis is 110X, 15 cents firmer, $15.30½ cash price;
New crop basis is -30X, steady.

Sidney, OH Cargill

Old crop basis is 50X, 30 cents firmer, $14.70½ cash price;
New crop basis is -20Z, steady.

COT Report

Big Spec Funds change: -5,667 to 33,455 net long.

Index Funds change: 875 to 144,158 net long.

Open Interest change: -48,018 to 741,434.

Crush Margin

Soybean Crush Margin was $5.82, $5.74 a week ago and $2.79 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)

Futures

July 2023 futures at $8.38½, up $0.06¾ for the week.

Basis

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

Heritage Coop. at Mechanicsburg, OH

New crop basis is -40N, steady, $7.98 cash price.

King Milling in Lowell, Michigan is not posting a bid for 2023 wheat.

COT Report

Big Spec Funds change: 4,611 to -55,950 net short.

Index Funds change: 187 to 118,147 net long.

Open Interest change: -69,728 to 362,465.

Hard Red Winter Wheat (Kansas City BOT)

Futures

July 2023 futures at $8.68¾, down $0.03½ for the week.

Basis

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

Producer AG at Canton, KS

New crop basis is -30N, steady, $8.42 cash price.

COT Report

Big Spec Funds change: 2,541 to -9,156 net short.

Index Funds change: 919 to 51,924 net long.

Open Interest change: -17,531 to 159,411.

Hard Spring Wheat (Minneapolis Grain Exchange)

Futures September 2022 futures at $8.72¼, down $0.22¼ for the week.

What you should have noticed

The Dow was down nearly a thousand points again, but it is still about 1,400 points above the low for the year made June 17th.

Crude oil at 8 month lows. Low crude oil price is considered to indicate a faltering world economy and it does. Is it real or media overkill? But there is nothing like low energy prices to perk-up every business sector in the world... except oil companies.

With lower crude oil prices, one would expect the dollar index to be higher, and it was.

Open interest was lower for all commodities as investors take money out of commodities. That money is not going to the stock market or bonds (both are in decline). Where is it going? Probably sitting in liquid money market funds looking for a good investment opportunity.

The big spec funds and the index funds both increased their net long corn positions, but overall corn open interest was sharply reduced with December corn price very little change. As The Tech Guy says, this market is building a huge energy reserve to move sharply. Will it be a higher or lower move? Look at the basis, look at ethanol crush margin, look at livestock numbers, especially poultry and, of course exports, which are not as strong as last year, but last year was a record US corn export year with Brazil's (number 2 corn exporter) poor corn crop... and then the ongoing drought in the world's number 3 corn exporter (Argentina) and war in the world's number 4 corn exporter (yes, Ukraine).

The soybean basis is supposed to be weakening as we approach harvest, but it firmed in Iowa and Ohio. Clearly, merchandisers across the Corn Belt over-estimated the supply or underestimated the demand for bean products. Looks like both.

Corn ethanol crush and soybean crush margins were both higher than last week and much higher than a year ago. Why are so many media people bad-mouthing demand?

Steady ocean freight. Steady is good as it provides a consistent cost. Business people do not like volatile markets unless they are futures or stock market traders.

Share your market outlook for corn, wheat and beans. The more opinions expressed, the more reliable is the resulting Bullish Consensus results. Bullish Consensus saved the Kennedy fortune. It will help build your fortune if we get enough opinions shared every week.

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