Tidbits
Agriculture futures markets will not trade until tomorrow evening at normal times. Crude oil will trade normal hours this evening through tomorrow.
Crude may get a boost higher as the Israeli military announced yesterday it killed the head of the Shiite group's air unit in Southern Lebanon, which is responsible for launching drones towards Israel. The Israeli Defense Force (IDF) claims that the commander repeatedly violated the ceasefire and posed a direct threat to Israel's security.
Tidbits
Question:
"Address the importance, or lack of, for the water temperature being significantly lower on the Pacific Ocean temperature? Especially regarding rainfall in the Midwest this summer."
Because the Equatorial Pacific water temperature has been more than a half degree C below normal for more than 60 days, the world weather is experiencing a La Niña episode. All we can expect with some confidence is the La Niña like weather will continue for another 60 days, which includes:
Drier and warmer than normal in the Corn Belt, Canada, southern areas of South America, Eastern Europe, and Southern China.
Wetter and cooler than normal in northern areas of South America, Western Europe, Australia, Northern China, Malaysia, the Philippines, and Indonesia (palm oil areas), Southeast U.S. and South Africa.
NOAA stated on Thursday: La Niña conditions are expected to persist through February-April 2025 (59% chance), with a transition to ENSO-neutral likely during March-May 2025 (60% chance).
Based upon the past 40 years of tracking ENSO conditions, we expect La Niña conditions to extend into May and probably into mid-June. Corn and beans will get planted in with no wet weather problem. If La Niña conditions continue through the first three weeks of July, corn yields will be reduced. If La Niña ends in late June, the U.S. will produce record yields.
The best weather forecast 60 days out is to follow the ENSO update we send you every Tuesday. For more about ENSO and how it impacts world weather, go to:
Question:
"I like reading your mailings every day. Not everything you guys suggested worked in this neck of the woods, but it gave me the courage to try more tools and I learned a lot.
Anyway, what actually is "open interest"? Is open interest an account that is neutral or sitting the futures out for a bit and does it matter?"
When it comes to grain marketing, open interest refers to the number of futures contracts "on the books" which must be eventually offset by an opposite transaction.
If you open a futures and option account, that gives you access to the Chicago Board of Trade (and all other exchanges) through the brokerage firm you chose to open your account. You have a brokerage firm and a broker with that firm takes your orders to buy and sell.
If you sell one futures contract of corn then, at some future date, you must buy that contract back or deliver the corn. You are "in the market."
After you buy that contract back or deliver the corn, you no longer have a futures contract; you are "out of the market."
For every seller there must be a buyer. When you sold that corn futures contract, the trader that bought it may have had no position in the market until your mutual transaction. If so, you and the buyer both were "getting into the market." Therefore, the open interest increased by one contract.
However, when you sold your one corn futures contract, the trader that bought it may have already been "in the market" with a short position, which is created by selling a futures contract before it is purchased. It is like his short position was transferred from him to you. If the buyer was already short one contract when he bought your contract, he was "offsetting" his short position and "getting out of the market." If so, there was no change in the overall open interest. You added one contract of open interest to get "in the market" and the buyer of your contract liquidated his short position to "get out of the market."
Open interest is simply the total number of contract pairs (bought and sold) that remain open in the market and must be offset at some future date with an opposite transaction or the physical commodity.
You can check it for yourself by opening CFTC’s legacy report for example.
Sum of all long positions (green) is equal to all the shorts (red), and it equals total open interest (yellow). Spreads are counted for green and red both.
Open interest does matter. It is an important factor to follow because each of those contracts must be offset with an equal, but opposite transaction or a delivery of the physical commodity. It shows how much traders want to participate in that market, it is their sentiment of interest in the market.
Situations with a record high interest are particularly important, as a lot of traders are already in the market and attracting more becomes less likely.
The following articles cover many different market situations dealing with how to use open interest, so there is a lot to read, but they are short stories within the articles. Here are examples of how to use open interest in specific situations:
Audio Version
Market Data
Corn futures in China is ¥2,305 per mt, it's $8.08 per bu., +11¢ for the week.
Soybean futures in China is ¥4,036 per mt, it's $15.15 per bu., -3¢ for the week.
Rain Days Update
The 6 to 10 day forecast updated every day at: https://www.cpc.ncep.noaa.gov/products/predictions/610day/
Explanation of Rain Days
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