grain spreaders

If you don't mind me asking, who'd you trade for?? I used to know a crush trader @ Bunge up in Kansas, but haven't talked to him in probably 4 years since he went to Cargill.

Some great opportunities out there lately in the entire grain/bean complex. Too bad I'm only "half trading" today...trying to get the home office repainted.
 
Quote from traderTX:

Yes...its just a factor of the crush and supply. Look at the crush...we've been seeing some EXCELLENT opportunity for crushers lately with these elevated meal prices. Meal was moving higher with the beans, etc etc...now that demand has been rationed, and crusher selling has come in, meal and meal/oil spreads should correct. The spreads however, should continue to stay inverse until harvest given the supply issues out there.
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So does this seem right? -- for old crop consecutive month spreads like july/aug or aug/sep, it's going to be first and foremost the front month generally leading the curve toward spot. Spot in turn will be determined by crush rates, and the demand for meal and oil. Is this right? So soy becomes a little like crude with its products -- the beans are the inputs for the products, meal and oil, like gasoline and distillate (heat/diesel/jet). The crush is like the crack with oil. So meal demand will come mostly from -- livestock? And oil demand from -- energy + food + industrial demand?

Of course this says nothing of certain macro influences like currencies or investment demand.


Also Keith Schapp's book on futures spreads has a chapter about the soy crush, it's very good if a little complicated. Shows a ratio for choosing soymeal or wheat to get protein to livestock. Basically if wheat is cheap vis-a-vis meal you'll use more wheat, and vice-versa. Soy is much richer in protein than wheat. The book has a little formula for figuring this out.

Then as to weather and how the new crop affects the old crop, I suppose if there are large inventories already in old crop then good harvest news will weigh on old crop as well. Whereas if supplies are tight... hmmm. Would, say, aug trade at a premium to july if supplies are tight now and harvest looks bad, b/c demand might seem tighter as we went along and more crop was used up? That disregards cost of carry, and hmm, in practice how has it been?

Am I totally missing the point? Or some point? Anyone here know a lot about this stuff? Any basis geeks in the house?
 
TraderTX, I don't think we can use the words exactly on that one.....hard to think about refining utilization of bean processing.....:D
 
Quote from henderson:

TraderTX, I don't think we can use the words exactly on that one.....hard to think about refining utilization of bean processing.....:D
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haha! yea...hence the "in the simplest of terms".
 
does meal lead beans or do beans lead meal ?

old crop vs new crop beans got nutty late in the week

perhaps this is positioning ahead of the USDA crop report

next week ?
 
That's a good question Seth, it probably varies year to year and crop to crop. Meal is relatively high to beans at this point in time for the near months. Also entered loan wheat:corn today.
 
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