CME Group

Preparing for USDA's Grain Stocks Report

Thu, 22 Sep 2022 02:34:29 GMT

As the week begins, Brian Splitt, a broker with Allendale Inc. , and Tommy Grisafi, branch broker of Advance Trading , are talking to AgDay host Clinton Griffiths to discuss what they’re watching in commodity markets.

Splitt says he’ll be watching USDA’s grain stocks number as the new marketing year begins.

“That is your carry-in number and we’re going to see what kind of job USDA has done managing this number throughout the course of the year,” says Splitt.

Grisafi says he’ll be watching the spring wheat side of that ledger.

“A lot of [Advance Trading Inc.] growers up in the Dakotas are wondering where all the abandoned acres are and I’m interested in how that is going to play out,” says Grisafi.

Recent strength in the crude oil market and trades above $50 per barrel.

“If $50 is the new floor instead of the ceiling maybe the structure is changing in the commodity markets as a whole for energy prices,” says Grisafi. “Isn’t corn energy at some point?”

Splitt says as the week wears on he’ll keep watching the spread between front month and back month futures contracts along with basis levels.

“The spreads and the basis have told us there’s plenty of crop,” says Splitt.

Winter Wheat Prices are Looking to Pop

Wed, 21 Sep 2022 07:44:42 GMT

Winter wheat planting has been slow this fall. The last report from USDA puts planting progress at 89% complete which is 5 percentage points behind the five-year average. Major producing states like Texas, Oklahoma, Kansas and Arkansas are all behind normal. Slow planting has also led to slow emergence.

“I mean the ship has nearly sailed in a lot of areas,” says Angie Setzer with Citizens Grain during an interview on AgDay TV with host Clinton Griffiths. “Parts of the Oklahoma panhandle and Kansas areas were able to finally get in a week ago 10 days ago.”

Michigan based Setzer says places to the north are now past their typical drop dead dates.

“I was under the assumption that we were going to see a five to 15 percent increase in planted acres in our trade territory,” says Setzer. “The reality is Mother Nature did not cooperate.”

She says that’s led to a snapback in futures prices in recent weeks.

“We went from thinking that we had this exceptional amount of wheat that was going to get planted meaning we would have a huge crop coming at us in July,” says Setzer.

A shorter crop coupled with vomitoxin issues in corn have suddenly changed many market fundamentals.

“The vomitoxin issue really encouraged a lot of traders, especially in Ontario, to increase their wheat feedings,” says Setzer. “Now we’re starting to see the Canadian market really firm up domestically because of that demand. “

Setzer says basis is starting to firm and futures are strengthening and that’s added a curve to the market.

“We’ve got to watch what’s taking place in Russia and there are some dryness concerns,” says Setzer. “Obviously, we’ll know in January with the USDA believes when it comes to actual planting numbers.”

Together, Setzer says it’s been less than idea this planting season for wheat and that could mean a more dynamic market as we head into a new year.

“You could see some really interesting pops happen,” says Setzer.

CME Quarterly Profit Falls as Pandemic Saps Demand for Rate Futures

Wed, 10 Feb 2021 19:27:22 GMT

By John McCrank

Feb 10 (Reuters) - Futures exchange operator CME Group on Wednesday reported quarterly earnings that beat Wall Street expectations, but revenue declined as the COVID-19 pandemic and its economic fallout hurt demand for some of its top products.

CME’s net income for the quarter ended Dec. 31 fell to $424 million, or $1.18 per share, from $469.5 million, or $1.31 per share, a year earlier.

Stripping out one-time items like acquisition costs, the Chicago-based company reported earnings per share of $1.39, which were 3 cents above the mean of Refinitiv IBES estimates.

Clearing and transaction fee revenue - the company’s biggest source of income - fell 6.4% to $843 million in the quarter as overall average daily volumes dropped for CME’s interest rate and energy futures amid renewed lockdowns in many parts of the world aimed at slowing the pandemic.

Equities and agriculture futures products gained, helped by growing retail participation in Asia, Europe and North America, the company said.

The number of retail traders using CME was up 50% last year, driven in part by the rollout of smaller contracts aimed at making futures and options trading more accessible to individual traders, the company said. The increase also came as younger investors entered the market, drawn by the ease of mobile trading apps and falling brokerage costs.

“There’s no question about it that the proliferation of social media, the proliferation of access to marketplaces is allowing people to participate more and more,” CME Chief Executive Officer Terry Duffy said on a call with analysts.

“And I think it’s extremely encouraging for more and more young people to have interest in financial services and financial markets,” he said.

Total revenue at CME fell 3.5% from a year earlier to $1.1 billion.

Shares of CME were down 4.6% at $183.19 early on Wednesday afternoon.

China's Food Giant Emerges as Leading Exporter of Brazil Soy

Thu, 19 Nov 2020 01:28:22 GMT

(Bloomberg) -- Cofco International Ltd. has already overtaken some of the world’s oldest agricultural traders to become one of the biggest shippers of soybeans in Brazil, the top exporter. Now, the Chinese food giant is considering acquisitions that would extend its position even further.

The company is looking into buying warehouses and other facilities related to logistics deep in Brazil’s agricultural heartland, according to Valmor Schaffer, Cofco’s head for South America.

“There will be surgical investments in strategic areas,” Schaffer said in an interview at Cofco’s regional headquarters in Sao Paulo. Most of the spending will be in Mato Grosso, Brazil’s top soybean state that accounts for a quarter of the country’s total output.

While century-old traders took decades to build a leading position in Brazil’s oilseed market, Cofco has been able to amass a similar stronghold within just the last couple of years. Shipping line-up data signal that the Chinese company in 2017 exported more than Archer-Daniels-Midland Co., Cargill Inc. and Louis Dreyfus Co., -- the A, the C and the D in the so-called ABCD quartet that dominates global agricultural trade. It’s become the No. 3 exporter, trailing only Bunge Ltd., the B, and Tokyo-based Marubeni Corp.

Cofco exported about 7 million metric tons of soybeans from Brazil in 2017, including shipments also made by companies recently acquired by the Chinese group, according to line-up data from Williams, a Brazilian shipping agency. That’s jumped from 2.4 million tons in the previous year. The figures only account for shipments where the exporting agency was disclosed, putting the nation’s total at 67.7 million tons last year. Brazil’s grain exporter group Anec pegs the total at 68.3 million.

The Chinese company is still reliant on other trading houses when it comes to supplying its Asian crushing plants and is now seeking more ways to acquire crops directly from Brazil’s farms.

“We want to connect the farmer in Mato Grosso to the Chinese consumer,” Schaffer said. The company plans to double crop purchases from Mato Grosso farmers in the next few years, he said. “This should put us in a superior position.”

Cofco’s strategy has upended the traditional supply chain, where trading houses acted as middle men between farmers and consumers. The disruption comes at a tough time for the ABCD’s of the world, which are also contending with historically low grain prices and a prolonged period of subdued market volatility.

“China is just cutting out the competition at source,” said Alvin Tai, an analyst at Bloomberg Intelligence in Singapore.

China is the world’s biggest buyer of soybeans, used in everything from cooking oil to animal feed. Brazil’s dominance as a supplier has grown in recent years as bumper harvests made prices more competitive against the U.S. On Friday, soybean prices in Chicago fell to their lowest in two weeks amid prospects of another big crop in Brazil.

Cofco didn’t comment on Williams’ line-up figures, but Schaffer said the company exported about 7 million tons in the last year, while declining to specify how much came directly from farmers. Bunge and ADM declined to comment on Cofco’s expansion and on their export volumes. Dreyfus’s press office said the company’s purchases in Brazil are “much larger” than estimated by Williams’ line-up data, while declining to disclose the actual figures.

Cofco entered the Brazilian market through a $4 billion buying spree that saw the company take control of Hong Kong-based Noble Group Ltd.’s agritrading business as well as Dutch trader Nidera BV in 2014. Since then, it has focused on fully integrating the teams while also facing hurdles including a $150-million accounting hole in 2016 and allegations of slave-like conditions by Brazilian prosecutors last year. It also went on to buy the remaining minority stake in Nidera, with the deal closing in February 2017.

The company has since enacted a big cost-management program that made it more competitive, allowing it to grab a greater share of the exports, Schaffer said.

“We’ve left 2017 extremely prepared for the challenge of supplying China’s increasing demand and turning Cofco into not only a large-scale company, but also a profitable one,” he said.

Cofco’s soybean demand exceeds 20 million tons annually and that will likely top 30 million in the coming years, Schaffer said. The Brazilian unit is the main supplier for the parent company, accounting for more than half of volumes -- including those originally purchased by other traders. Still, the company wants that share to keep rising.

“We need to gain scale in origination to continue supplying Chinese demand and growing as suppliers inside our company,” Schaffer said.

©2018 Bloomberg L.P.

Soybean Market Gets Jittery Over China After Solar Panel Tariffs

Tue, 17 Nov 2020 05:19:37 GMT

(Bloomberg) -- After six consecutive days of price gains, the rally in soybean futures in Chicago came to a halt Tuesday. One explanation may be the tariffs on imported solar panels and washing machines announced by President Donald Trump a day earlier.

China is the biggest maker of solar panels and expressed displeasure at the move. The country is also the largest buyer of U.S. soybeans, at a time when growing production and inventories have weighed on prices and intensified the battle between the U.S. and South America for market share. Could the crop get sucked into a China-U.S. trade dispute?

“My concern is there could be a spillover-effect on the soybean price” and China’s “willingness to buy our product,” Darin Fessler, a Lincoln, Nebraska.-based senior hedging adviser at Lakefront Futures & Options, said in a telephone interview Tuesday.

Trade isn’t the only bearish factor in the soybean market right now. U.S. exports are slower compared with a year ago and improving weather that may ease crop concerns in Brazil and Argentina.

©2018 Bloomberg L.P.

ADM Approaches Rival Bunge About Possible Merger

Sun, 15 Nov 2020 18:26:19 GMT

(Bloomberg) -- The world of agricultural-commodity trading could be upended with the merger of two of its biggest names. Archer-Daniels-Midland Co. has sought deal talks with Bunge Ltd., a person briefed on the matter said over the weekend. That’s less than a year after Glencore Plc approached Bunge about a deal.

ADM and Bunge have been around for 116 years and 200 years respectively and are among the very largest buyers and sellers of grains and other crops. But both companies do a lot more than that: they crush soybeans, produce vegetable oil and supply biofuels -- ADM even has a unit that manufacturers flavors. So, on paper at least, a combined ADM-Bunge would be both a commodity-trading giant, with an international network of barges and marine terminals, and a major industrial enterprise with factories and refineries.

Where they really differ is geographic footprint. Bunge has a much larger presence in South America, while ADM is bigger in the U.S. Combining the two would create a company that, at least in terms of revenue, would be approaching the size of Cargill Inc., the largest agricultural company.

First, times are tough for crop traders. A glut isn’t only depressing prices but also sapping volatility, which is bad news for grain merchants like ADM and Bunge, as well as Cargill and Louis Dreyfus Corp., the four storied trading houses known in the industry as the ABCDs. “Bunge is the smallest of the four traders and they’ve struggled to turn around the ship,” Seth Goldstein, an analyst at Morningstar in Chicago, said in a telephone interview.

ADM last year cut jobs and reshuffled management, while White Plains, New York-based Bunge slashed its profit guidance several times and unveiled a plan to eliminate $250 million in costs. A merger is an obvious way to accelerate and deepen such savings. Soren Schroder, Bunge’s chief executive officer, acknowledged last year that industry consolidation may be needed amid such challenging conditions.

Second, ADM is likely to be acting on the knowledge that Glencore could come back again after its initial approach.

ADM or Bunge have declined to comment on their potential merger. All eyes are also on Glencore, which up till now has been prevented from making a renewed approach to Bunge because of a standstill agreement. Could this turn into an auction for Bunge? For a company that is known for its aggressive and prolific dealmaking, Glencore is notable for almost never making a hostile takeover offer. It’s worth remembering, too, that Glencore saw off interest from ADM to acquire Canadian grain handler Viterra Inc. in 2012.

Bunge shares jumped 11 percent on Jan. 19 after ADM’s interest was first reported, giving it a market value of $10.9 billion (for comparison, Chicago-based ADM’s market capitalization is $22.9 billion). They were up 1.3 percent at $78.54 at 7:30 a.m. in New York before the start of regular trading on Monday.

While Bunge’s stock has yet to revisit the highs seen last year, there may be limited upside. Glencore bought Viterra for 10.1 times the Canadian company’s Ebitda, while Bunge is currently valued at 13.1 times earnings, according to data compiled by Bloomberg. Based on similar deals, Bunge could fetch anywhere between $84 and $104 a share, Goldstein said.

If an ADM-Bunge tieup were to happen, regulators are likely to take a close look at the combined company’s market share, especially in its domestic market. There could be criticism from farmers, just like there has been with another agricultural mega-merger, Bayer AG’s acquisition of Monsanto Co. Department of Justice lawyers have sought out farmers who are opposed to that deal.

©2018 Bloomberg L.P.