Grains had some massive moves today with soybeans sharply higher and corn/wheat sharply lower. May soybeans finished 31 cents higher at $14.16 ¾! This is 7 ¼ cents below the last screen traded price. May corn settled 9 cents lower at $6.12 ½, and May wheat 9 cents lower at $6.15 ¾.
Why the strength in beans? For one it was option expiration and we ran "into-the-money" on the $14.30, $14.40, and $14.50 strikes for a total call OI of 15,601 contracts. The front month soybean contracts had the largest rallies. The July – November spread was particularly strong after it surpassed its September 2011 high of 83 ½ cents, it quickly rallied its way up to $1.00 (see chart)! Besides these technical reasons for the rally, we also had rumors of Brazil pulling soybean offers. This is a little hard to believe as soybeans just made fresh highs today in Brazilian Reals. They are making plenty of money at these levels and for them to be pulling offers it would be for very serious supply reasons. If we get confirmation of this before Sunday night we should be sharply higher on the opening. If they turn around and deny this rumor, we could see a retracement. This reminds me of the Chinese corn purchasing rumors, more of the rumor mill. It could be they are just looking for potential reasons to explain this massive technical move on a Friday which is also option expiration day.
Corn was the opposite today with heavy "bearspreading". It almost looks like someone or fund was heavily bullspread corn and bearspread soybeans and is blowing out of positions. We will have to see what open interest does on Monday morning, but this is a possible answer to these moves. Today’s Commitment of Traders report showed a HUGE drop in net longs for the "managed money". They reduced their net long position by 47,242 contracts bringing them to a net long of only 146,590! The "managed money" left their soybean position mostly unchanged only reducing the massive net long position by 1899 contracts and still holding a net long of 240,774 contracts! That’s 1.642 long soybeans for every long corn!
Cattle-on-Feed was very neutral and won’t likely be a major mover for next week. We will have to watch the headlines over the weekend for Sunday night / Monday direction. For now we like staying with the current EHedger recommendations. To receive a free trial of the EHedger research including hedge recommendations, please sign up using the link below. Thanks and have a great weekend!
Chart: July-Nov Soybean spread (Daily)
Chart: July-Nov Soybean spread (Weekly)
Chart: Novemer Soybeans
Chart: December Corn
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