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Category Archives: Blog

Corn vs Soybeans for Net Short

Corn has yet to recover from its 2012 high of 843’6. It has been trading in a sideways channel from September of 2014 with current market forces appearing to be tilted to go to the current channel support price near the last major low of 312’0. The major grains opened lower this trading week, with all hope for bad weather to damage the crops gone out the window as the temperature for the Midwest is set to be higher this week.

 

With no recent good news for corn it might be surprising to see from the Commitment of Traders report that Money Managers are decreasing their already net short position. On 12/19/2017 Money Managers were net short 223,405 contracts, coming down to 198,493 contracts on 12/26/2017, and they are now net short 189,536 contracts as of 1/02/2018. What is interesting to note is that while they are decreasing their net short position for corn, they are increasing their net short position for soybeans, even though both have been struggling recently. One can only guess that there must something more enticing about shorting soybeans over corn right now.

 

Regulators to Discuss Bitcoin Futures Trading

The CFTC announced that they will meet on Jan. 31 to discuss the trading of cryptocurrency futures contracts.

 

“With the rapid development of financial technology products, including cryptocurrencies, and the corresponding demand for new and novel price discovery and risk management tools, the CFTC is poised to utilize its authority and expertise to ensure that the markets we oversee innovate responsibly within an appropriate oversite framework,” said CFTC Commissioner Rostin Behnam. The agency’s technology & risk committees will meet to discuss the self-certification process for such derivative contracts, focusing on “oversight, surveillance, and monitoring” of listed cryptocurrency derivatives.

 

The meeting comes after the launch of bitcoin futures by the CME & CBOE exchanges. Regulators & financial institutions have been very wary of cryptocurrency futures, due to the price volatility.

 

The SEC and the NASAA have both issued warnings about the potential dangers of investing in cryptocurrencies. The CFTC is currently the regulatory authority of cryptocurrencies in the U.S. and treats them as commodities. The SEC has also begun to regulate portions of the market, however they focus primarily on what they believe to be unregistered securities masquerading as cryptocurrencies.

Oil Futures Approaching 2 ½ Year Highs

Oil Futures Approaching 2 ½ Year Highs

Crude Oil futures are pushing up near 2-½ year highs during early Tuesday trading, possibly supported by a continuing outage in the North Sea. Speculators have been keeping a close eye on the outage of the Forties Pipeline System in the North Sea. A crack in the line has ceased the flow of 450,000 barrels a day earlier this month. The line isn’t expected to be back to usual operations until sometime after the New Year.

 

If prices stay steady, we will end the year near the highest levels we’ve seen since July of 2015. Most of the fundamental support for the higher prices we saw in 2017 seem to have come from almost constant supply disruptions, and efforts by members of OPEC and other major producers like Russia to curb production. At the same time, we also saw strong growth in U.S. shale output, taming some of the gains.

 

OPEC previously agreed in November to extend production cuts through 2018, as it looks at lowering global stocks. Meanwhile, U.S. shale production hit a record high of 9.789 million barrels a day in December, according to the EIA.

Corn Market Volatility at 10-Year-Lows

Corn Market Volatility at 10-Year-Lows

According to the CFTC’s Commitment of Traders report, money managers raised their net-short position to 198,920 corn contracts, up from 155,061 contracts in the prior week, increasing their bearish bets by about 28%. This marks the biggest net short position since the week that ended on November 28th, when corn prices were only a matter of a couple cents higher. Since the end of the U.S. harvest, traders have been eyeing domestic demand news, along with South American weather forecasts. Unfortunately, neither seem to be giving strong enough signals to either direction to spur any meaningful level of volatility in the market. U.S. export sales have been slightly weak compared with the same time frame a year earlier, and South American weather, while not great, hasn’t been concerning enough to spark bullish sentiment. According to most technical studies, the corn market hasn’t seen this little volatility since 2006.

CBOE Bitcoin Day 1 Recap

CBOE, one of the world’s largest exchange holding companies, announced that CBOE Bitcoin Futures (XBT) traded a reported 4,127 contracts in their first day of trading. XBT futures debuted Sunday, December 10, at 5:00 PM CST; the beginning of Global Trading Hours. The first session closed at 3:15 PM CST on December 11.

 

During their first trading session, XBT futures settled 19.9% higher at $18,545. Expectations of high volatility and traders short selling were contrasted by a relatively smooth debut. CBOE’s website was initially overloaded by those trying to see delayed quotes, however no trading systems were affected. About two hours into the launch, the futures climbed 10 percent, triggering a two-minute trading halt. A second halt of five minutes was triggered once the futures had moved 20% higher from the open. According to CBOE, about 20 trading firms participated in the first day of bitcoin futures trading.