Know more about grain marketing by understanding market structures.
The Report
Keeping it simple, a 3.8 bushel reduction in corn yield shocked the market. The USDA revised the final corn yield for the 20/21 crop to 172. The December estimate was 175.8.
Market Structures
In previous posts, I’ve wrote about the market structure of the futures market. Market structure indicates the relationship between futures contracts in a crop year and signals movement of commodities or incentivizes commodities to be carried. Grain merchandisers are in tune to this market structure. There is another market structure that many follow.
Market structure of the traders is a different way of looking at the futures market. It shows the posture or position of different participants in the market. Two participants that people track closely is the Managed Money and the Producer/Merchant/Commercials.
Managed Money are registered speculators, if speculators are big enough they are required to report their positions to the government. Many folks call these participants the “funds.”
The Producer/Merchant/Commercials are the hedgers. The hedgers are producing, using, or transporting the commodity at some point in the the supply chain. They use the futures market to hedge their physicals positions.
The COT (commitment of traders) report is generally released on Friday for the previous Tuesday’s positions. I pay attention to the report. I look for the relationship between the hedgers and the funds. I like looking at a visual, see the visual of our friends at grainstat.com.
The relationship I look for is when the funds and hedgers positions are close together or far apart. See the blue and the red line. Right now the funds have large net long (bought) position and the hedgers have net large short (sold), this relationship happens in rallies. When their positions are close together, it indicates a market that is not trending and is towards the bottom of the range. I don’t use these signals to predict price but it helps me understand where the market structure is right now. This common knowledge for many but not all.

Final thoughts on market structures, I don’t want to just memorize market facts, my aim is to understand the reality of the market, right now. Looking at the future’s spread market structure and the market structure of traders at least weekly helps me understand the market better.
My backyard (SESD)
soybean cash
Soybean futures market structure continues to invert. Indication of the nearby demand and export shipment window. Basis premiums are flat to weaker with the futures trending higher and higher.


corn cash
We are seeing the market structure for corn building a small carry in for the nearby months. Seeing bid sheets posting small carries as well for Feb and Mar shipments. That’s a signal that corn is moving to satisfy nearby space and grind. Seeing basis premiums weaker with nice cash prices being bid at the scale.


Call to action.
In other news, I changed my twitter handle to @sanegrain. Social media is getting interesting lately. We the users are the product on social media sites. A valuable resource we all have is our time and attention. Social media is bidding for our attention. Eyeballs on screens is their aim. Not sure what my future is on the platform, I’m thinking of pivoting, engaging folks to this newsletter alone.
If you find value here, encourage a friend to subscribe. On a quick lunch break, got to jump for now.
-cw
Trading commodity futures and options on futures involves substantial risk and may not be appropriate for everyone. Past performance may not necessarily be indicative of future results.