Soybeans Above 10.50

[agstar77]

Could be a bullish nearterm sign.

[charliep]

Informa Economics reduced the size of their Argentine soybean forecast today and highlighted harvest is much ahead of normal. Old crop supplies are tighter than expected

I note your comment about short term. An area that will have to continue to be watched is US soybean/corn acreage. Also note the drop in total seeded acres in the last USDA seeding intentions report. Will some of these acres come back? Tighter old crop and weather over summer does have potential to make things interesting.

[pilpilsner]

10.50 is huge,a few more ticksand closes and we get momentum traders.


Which are computerized black boxes.

[charliep]

I have to note we are looking at the front end month with an inverse into new crop.

Had to look at the soybean corn price ratio and impact on acres. currently about 2.3 ($9.50 ish Nov. soybeans and $4.15 Dec. corn). Googled and found one analyst who uses 2.1 as a place that will shift corn to beans. Article has some interesting graphs.

http://agecoext.tamu.edu/fileadmin/user_upload/Documents/outlook/feedgrains/2009/FG_04-09-2009.pdf

[boarderbloke]

weather will also be pushing corn to beans this spring, on U.S. Ag chat sites, there is plenty of talk about being behind, avg planting dates and wet soil. that just pushes acres to beans

[boarderbloke]

too bad most of the rally in global veg oils, is being absorbed into "wider basis" and higher crush margins. Unlike U.S. growers of veggie oil, Canadians growing oil crops are loosing out, Canadian canola crush margins will be close to $150/t, yes thats $3.40 per bushel net profit after you've risked to grow it! (with all the input costs you put in the ground in May)

[classicalliberal]

With regard to the basis getting wider, that will always happen when prices rally and you have a large supply of something, like oats for example. The delivery process is supposed to make it so that the cash and futures prices will converge which doesn't always work well but in the long run it will happen. When basis is cheap, it is up to arbitrageurs to buy the basis cheap and store it, if there are carries in the market and to sell it out when the spreads either flatten or inverse or the basis strenthens. Something that people have to keep in mind is that the cash price is the true value of grain, oil, commodities and the futures are just a tool that people use to hedge price risk as well as speculation.

[charliep]

I assume based on the COPA board crush margin.

https://www.theice.com/marketdata/reportcenter/reports.htm?reportId=2

[charliep]

Will note today's excitement (old crop mostly) came from the meal side. Soyoil actually down a bit. Also mainly off the May contract.

[boarderbloke]

yea, i'm surprised that canola moved up at all! couldn't open your crush margines. Here's yesterdays,

http://news.tradingcharts.com/futures/2/5/123344952.html

[LWeber]

"canola crush margins will be close to $150/t, yes thats $3.40 per bushel net profit"



Which grain company taught you that board margins equate to net profit?

[boarderbloke]

L.Webber,
I sell most of my canola through Pioneer(Richardson now days), and from what my local service centre manager(chem retailer) tells me, is that the crush margins posted at ICE are the avg reported crush margins for the crushing industry. Some companies are higher some are lower. He tells me that Richardson's are usually lower than the avg. and the crush margins posted represents the profit(wholesale value of the oil) over all the expenses associated with purchasing and crushing canola.
Do you understand crush margins to be something different than that?

[boarderbloke]

sorry, LWeber.

[charliep]

Actually the crush margin is a formula based on canola and
soybean meal/oil futures. Actual margins based on cash
business will be different. Has nothing to due with the
profitability of crushing canola on any given although
crushers will use futures to manage risk/lock in profits when
they can't match canola purchases from farmers against
canola oil and meal sales.

Formula used is below. (from ICE website).

The Canola Board Crush Margin is comprised of an oil and
meal contribution and a seed cost. It is calculated by
subtracting the ICE Futures Canada canola futures price from
the sum of the weighted value of the per tonne Chicago Board
of Trade futures price for soybean oil and soybean meal. The
calculation is based on a 40% oil contribution and 60% meal
contribution per tonne of canola seed crushed. The margin
calculation is currency adjusted using the Bank of Canada
noon rate and is published in both Canadian and U.S. dollars.

The margin calculation is a measure of the trend in core
processing returns at approximate industry yields. Actual
canola crushing margins are affected by numerous factors
including individual processing plant yields, actual oil content
of the seed, and the pricing basis for oil, meal and seed.

Crush Margin Calculation

Canola Board Crush Margin (Can $/tonne) = (BO * 22.0462 *
Noon Rate * 0.40)
(SM * 1.1023 * Noon Rate * 0.60 * 0.75)
- ICE Futures Canada Canola seed futures
In the above calculation:
BO = CBOT soybean oil futures settlement price in US dollars
per hundredweight (or cents per pound), 22.0462 converts
soybean oil to US dollars per metric tonne, and 0.40 reflects a
40% oil contribution.
SM = CBOT soybean meal futures settlement price in US
dollars per short ton, 1.1023 converts soybean meal to US
dollars per metric tonne, 0.60 reflects a 60% meal
contribution, and 0.75 is a price adjustment factor to account
for canola meal containing approximately 75% of the protein
in soybean meal.

[LWeber]

Board margins as Charlie points out are not actual profit.

Board margins have increased to over $150 yesterday and I have GROSS margins at just over $93.00. Net profit - you would have to see actual statements to go there.

But $93.00 is insane though - there should NOT be a negative basis anywhere in western Canada at a crush plant - but there is.

Fran is blowing an aorta over a $50.00 descrepancy in U.S./Can wheat - yet it is ok for $93.00 canola margins. Pipeline gross revenue on CWB wheat is less than $25.00.