Grains –
I have no major news or data to pass along this morning. We have started the week following inline with last week’s late strength. Friday’s COT report showed larger net selling in ag futures than expected, and that might be viewed as somewhat supportive. There is also a viewpoint held by many that the Thanksgiving week is typically a week where ag markets rally. I haven’t yet gone through the data to verify, but whether it is true or not really doesn’t matter sometimes. If enough people believe it, perception becomes reality and we have a self-fulfilling prophecy.
On tap today we have weekly export inspections. It should be noted that soybean inspections should start to falter starting this week and will slowly but gradually decline in the weeks ahead. That is nothing unusual of course, it merely follows the standard trend. Still, I do wonder if the market realizes inspections this week are likely going to be somewhere in the 85-90 mil bu area rather than the 100-105 mil bu area we’ve seen in the past several weeks. Corn shipments should gain from the decline in soybean shipments.
One issue that will likely be a factor as the week progresses is December option expiration on Friday. Friday’s session will be shortened and likely low volume, potentially meaning better chances for fireworks. For CZ, I have attached a chart of key open interest levels. You can see that the 350 strike easily holds the greatest overall OI, and this could become a magnet this week (especially under the belief markets rally during Thanksgiving week). The 340 level also has significant OI, however, and we could end up in a tug-of-war between the two strikes.
One bit of data that somewhat surprised me when I noticed it this morning is the open interest in KW futures. The open interest has moved towards record levels in recent weeks, which I find somewhat surprising considering the relatively lack of movement on the board. In both corn and soybeans, OI over the past few weeks has been relatively steady. It is wheat OI that has been expanding over the past few weeks. KW wheat OI is hitting a new record high and Chicago wheat OI is at its highest level since 2011.
Note the chart below showing the MM breakdown in KW futures & options. Obviously some big bets are being placed in this market, with gross positions reaching historically large levels. It is somewhat “funny”, however, to see the net position remain relatively flat. This would imply to me that some very large spread bets are being placed here, but I’m open to other ideas. Interestingly, the Chicago wheat MM breakdown is not as mixed. We have a more one-sided bias in Chicago wheat with short positions expanding again last
week after a brief phase of buying.
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