I will be back and let you in the routine soon. This week, we just have a look at one of the important market in trading futures: Grains. There will be many things to notes on the grain market this week. I will not take much of your time. Let you be back with the notes by PitGuru Matthew Pierce
The Grains Market Review
For The Week of August 09, 2010
Late last week the market saw some lucidity come back into the wheat market with a limit down day allowing for expanded limits which will not be needed to start this week. Corn and beans remained flat after chopping around all session leaving both short of weekly range highs. The Goldman roll was uneventful with locals in place to take advantage of the volume flows with this continuing through Thursday this week. The bean market continues to see strong demand with China and unknown sources taking over 700TMT of new crop beans pushing the weekly total over 1.0 MMT with only new crop taken. The overnight session saw wheat collapse early only to regain a bit of ground following bullish information from Russia. Corn continues to chop due to bearish weather versus strong demand with beans moving moderately higher actually pulled by bean oil. Palm continues to rally moving over 15 month highs pulling bean oil higher continuing to widen the share with veg oils very popular right now. Meal chopped and closed virtually unchanged. The day session looks to open in line to slightly stronger in row crops with wheat in danger of fresh profit taking and bearish entries. Following today the market has to look for crop progress this afternoon with the traditional shift lower all but expected by the trade. On Thursday the WASDE should be very interesting for international crops, not ours. I do not expect any major changes from the USDA concerning yield or total production with this still too questionable to make dramatic changes. There is plenty they have to do on the international front with the obvious drop in Russia expected with the FSU and EU wheat production totals expected to fall drastically. South American crops should see another small increase in production with beans expected more than corn.
Looking at weather, there is no real threat to the US crop with beans getting a boost from 3 separate rain events forecasted over the delta in the next 10 days. This all but sets the crop in the northern half of the US and will set the delta if the expected rains do come. There is excessive heat to start this week but the long term forecast for temps is average to below average not offering any heat stress concerns after the greenhouse breaks camp early this week. Central Asian weather remains very dry with Russia concerned that if this trend continues, winter wheat will be affected when planting comes. This is something to keep a very close eye on as the market moves into the WASDE report on Thursday. Australia remains very dry in the NW offering a mild handhold for wheat bulls with that area responsible for a majority of the Australian crop.
Looking at options, I see only 18 DTE for Sep making the sale of straddles, strangles or straight volatility an interesting play in wheat and corn. The call slope is losing to the put slope in wheat which makes sense and I think it should continue through this week if wheat continues to move back to lucidity.
Overall the trade is caught between bearish domestic fundamentals for row crops and wheat, bullish international momentum for wheat, bullish momentum for crude and a weather problem possibly forming in NW Australia. There is growing talk of world inflation with foreign currencies gaining versus the USD at a solid pace. This is interesting to watch and will be led by crude, currencies, copper and movement in Gold. I like the downside in wheat with spreads looking to correct in a big way. I like corn to stabilize heading into WASDE with beans looking at new crop strength versus old crop time constraints. I favor bean oil over meal as I think spreads in meal are sure to fade with maturation. I think the overall trend should be higher into the report except wheat with the rest of the floor correcting relationships on profit taking moves.
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