Grains –
The index rebalance looms large this week. I believe the rebalance efforts “officially” start tomorrow but I think we’d be fooling ourselves if we didn’t think some of the necessary actions have already been taken. We also have to remember that this is very well-advertised meaning a lot of players are front-running the activity. These players might provide an offset during the actual index period. Below is a breakdown of the latest estimates for activity I’ve seen, but keep in mind this is a moving target and nobody really knows for certain.
Chicago Wheat +30,000
KC Wheat +15,000
Corn +65,000
Soybeans +5,000
Soyoil –2,000
Soymeal +5,000
I do find it interesting to point out that right before a major buying effort starts this week (in most cases) the COT data on Friday showed that swap dealers and index traders mostly reduced their net long positions in wheat, corn, and soybeans.
Wheat spreads have turned a bit interesting in recent days. Some of this might be due to money flow issues relating to the index rebalancing and there is still a lot of time left during the VSR calculation period so anything can happen. Still, it is interesting to note that so far during the VSR calculation the WH-K spread has averaged roughly 50% of full carry. If the running average of full carry is 50% or less at the end of the calculation period (ends 2/24) then the storage charge will decrease from $0.00365/bu/day to $0.00265/bu/day. Its been a long time since we’ve even talked about the potential for a lower storage rate in wheat so I find this somewhat interesting. As noted, there is a long way to go so we’ll see what happens, but this is something to keep an eye on.
DISCLAIMER:
The information contained herein has been taken from trade and statistical services and other sources we believe are reliable. Opinions expressed reflect judgments at this date and are subject to change without notice. These materials represent the opinions and viewpoints of the author and do not necessarily reflect the opinions or trading strategies of Nesvick Trading Group LLC and its subsidiaries. Nesvick Trading Group, LLC does not guarantee that such information is accurate or complete and it should not be relied upon as such. Officers, employees, and affiliates of Nesvick Trading Group, LLC may or may not, from time to time, have long or short positions in, and buy or sell, the securities and derivatives (for their own account or others), if any, referred to in this commentary. There is risk of loss in trading futures and options and it is not suitable for all investors. PAST RESULTS ARE NOT NECESSARILY INDICATIVE OF FUTURE RETURNS. Nesvick Trading Group LLC is not responsible for any redistribution of this material by third parties or any trading decision taken by persons not intended to view this material.
