Dealing With Futures Contracts
A holder of buy or sell futures contracts has several choices of how to deal with the legal obligations of a futures contract before the last trading day of the delivery month. The 2 most common ways of dealing with futures contracts are:
Subject to rules established by the exchange, the sell position holder initiates delivery of the actual commodity against a futures contract. The threat of physical delivery is meant to drive convergence between the futures price and the cash price in the delivery month. However, although physical delivery regularly occurs to a limited extent with CME group contracts, delivery against an ICE canola futures contract is difficult at best because of way the contract is written. The vast majority of futures contracts are dealt with by an offsetting trade.
Us Grain And Oilseed Review: Canola Down With Cbot Soy Oil
Winnipeg, May 12 ICE Futures Canada canola contracts were weaker on Thursday, pressured by spillover losses in Chicago Board of Trade soy oil and soybeans.
CBOT soybeans were weaker on Thursday after export data from the United States Department of Agriculture.
Soys export sales fell 74 per cent from last weeks levels, which is bearish.
The Canadian dollar gained ground against its US counterpart on Thursday, supported by US crude supply data.
Gains in the loonie have a bearish effect on canola as it makes the commodity less affordable to foreign buyers.
Traders say farmers have increased selling due to higher prices, which added to the declines.
Beneficial rains in parts of Manitoba and Saskatchewan eased some trader-concerns, but dryness in Alberta continues to underpin the market, which limited losses.
About 37,866 canola contracts were traded on Thursday, which compares with Wednesday when 48,339 contracts changed hands.
Milling wheat was revised higher after the close, while durum and barley were untraded and unchanged.
Settlement prices are in Canadian dollars per metric tonne.
SOYBEAN futures continued to correct lower Thursday, falling 4 to 7 cents per bushel, on the heels of a massive rally earlier in the week.
Some traders took light profits, according to a report.
The Rosario grain exchange in Argentina slashed its 2015/16 soybean crop projection to 55 million tonnes. That is 4 million tonnes less than its initial projection.
Corn Soybean Futures Reach Six
CHICAGO, ILLINOIS, US Worries about dry weather in Argentina attracted speculative buyers to soybean and corn futures, causing prices to reach 6-1/2 highs on Jan. 6, Reuters reported.
Chicago Board of Trade March soybeans were 14½¢ higher at about $13.61½ per bushel after earlier hitting $13.78¼ on a continuous chart of the most-active contract since June 2014.
CBOT March corn added 3¼¢ to $4.95 per bushel after reaching $5.02¾ in mid-session trading, the highest benchmark corn price since May 2014.
Along with dry weather in Argentina, labor issues are causing supply concerns, Reuters said.
The CME Group, parent of the CBOT, said it would raise the margins to trade its soybean, corn and wheat futures after the close on Jan. 6.
We have shaken some shorts out of the market with the CME increasing their … If we continue to see a rally in this market, margins could potentially go up again, Terry Reilly, senior analyst with Futures International, told Reuters.
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Description Of Cbot Soybean Futures
Soybean oil is an extract of soybeans that you and I know as vegetable oil. Soybean oil is the most widely used culinary oil in the United States and around the world, partly because of its healthy, nutritional characteristics. It contains about 85 percent unsaturated fat and very little saturated fat, which makes it appealing to health-conscious consumers. In addition to its gastronomic uses, soybean oil is becoming an increasingly popular additive in alternative energy sources technology, such as bio-diesel. An increasing number of cars in the United States and abroad, for example, are being outfitted with engines that allow them to convert from regular diesel to soybean oil during operation. Because of their economic fuel mileage and low environmental impact, these soybean oilenabled cars, known as frybrids, are becoming more popular.
Demand for soybean oil has increased in recent years as demand for these cleaner-burning fuels increases and as the automotive technology is more able to accommodate the usage of such bio-diesels. According to the Commodity Research Bureau , production of soybean oil increased from an average of 15 Billion Pounds in the mid-1990s to more than 22 Billion Pounds in 2003. If you want to trade soybean oil, you need to go through the Chicago Board of Trade , which offers the standard soybean oil contract. Here is the contract information:
Delivery Or Price Reference Points
Delivery or price reference points are important for the proper functioning for each futures contract. These physical locations are designated by the exchange. For example, the ICE canola contract prices physical delivery of Canada canola free-on-board at primary delivery points in eastern Saskatchewan, with additional delivery points across the Canadian prairies.
This price reference point is referred to as the FOB Par region. This means that all buyers and sellers of ICE canola futures know that they are negotiating a price for canola at or within the Par region.
Find other discounts or premiums based on transportation costs on the ICE website.
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Notes & Data Providers
Stocks: Real-time U.S. stock quotes reflect trades reported through Nasdaq only comprehensive quotes and volume reflect trading in all markets and are delayed at least 15 minutes. International stock quotes are delayed as per exchange requirements. Fundamental company data and analyst estimates provided by FactSet. Copyright © FactSet Research Systems Inc. All rights reserved. Source: FactSet
Indexes: Index quotes may be real-time or delayed as per exchange requirements refer to time stamps for information on any delays. Source: FactSet
Data on U.S. Overview page represent trading in all U.S. markets and updates until 8 p.m. See Closing Diaries table for 4 p.m. closing data. Sources: FactSet, Dow Jones
Stock Movers: Gainers, decliners and most actives market activity tables are a combination of NYSE, Nasdaq, NYSE American and NYSE Arca listings. Sources: FactSet, Dow Jones
ETF Movers: Includes ETFs & ETNs with volume of at least 50,000. Sources: FactSet, Dow Jones
Bonds: Bond quotes are updated in real-time. Sources: FactSet, Tullett Prebon
Currencies: Currency quotes are updated in real-time. Sources: FactSet, Tullett Prebon
Cryptocurrencies: Cryptocurrency quotes are updated in real-time. Sources: CoinDesk , Kraken
Calendars and Economy: ‘Actual’ numbers are added to the table after economic reports are released. Source: Kantar Media
Cme Resets Price Limits For Grain Oilseed Lumber Futures
In a recent press release, the CME noted that, effective Sunday, May 2, 2021, for trade date Monday, May 3, 2021, The Board of Trade of the City of Chicago, Inc. and Chicago Mercantile Exchange Inc. will reset price limits for grain, oilseed and lumber futures. This is the first of the two price limit resets in 2021 that are stipulated by the variable price limits mechanism pursuant to each product’s respective Rulebook Chapter.
The new futures price limits effective on trade date May 3, 2021, are shown in the table below and will remain in effect until the first trading day in November 2021, the press release noted. For financially settled Black Sea Corn, Black Sea Wheat, Black Sea Sunflower Oil, FOB Santos Soybeans, Thailand Long Grain White Rice, and Australian Wheat, and for Random Length Lumber, there shall be no price limits during the contract month for all other contracts below, there shall be no price limits on the current month contract on or after the second business day preceding the first day of the delivery month.
P D M OOP ADUNIT T
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Soybeans: Prices Rise Sharply In Br Following The Rise Of The Dollar Stable Chicago
The USDA reported a new sale of 106,000 tons of soybeans to China this Wednesday . Sales made on the same day, to the same destination and with a volume equal to or greater than 100,000 tons must always be reported to the US department.
China continues to look for soybeans to cover its domestic demand and the needs of its processing industries, which have low stocks, while soybean meal sales remain strong in the Asian nation.
The news, however, was insufficient to spur stronger gains and oilseed futures ended the day with small losses on the Chicago Board of Trade. The most-traded positions closed this Wednesdays trading session with small increases of 0.75 to 2.50 points, taking November to US$ 12.79 and March to US$ 12.95 per bushel.
The fuel that could come from the new Chinese purchase ended up finding limits in American terminals still out of operation on the Mississippi River after the passage of hurricane Ida, the favorable climate for the conclusion of the American harvest and the caution that the market tends to adopt before the arrival of the new monthly supply and demand bulletin from the USDA this Friday, September 10th.
In addition, the market still found room for a small recovery in prices after the lows recorded in the previous session, when Chicago ended Tuesday with more than 1% drop.
The producer is selling from hand to mouth, explains Sousa.
Registered Futures Commission Merchant Responsibilities
Individuals and companies cannot buy and sell futures contracts directly through commodity exchanges. A registered broker places futures contract orders on behalf of processors, producers or buyers. However, some brokerage companies do have electronic platforms that enable clients to enter their orders via computer.
Brokers are formally referred to as Registered Futures Commission Merchants , and are regulated and licensed by their membership through the commodity exchange.
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Settlement Or Closing Price
During any trading day, the price of most futures contracts will fluctuate up and down as transactions between buyers and sellers take place. In general, most volume of trading takes place over a very narrow range of prices near the beginning and end of the trading period on a given day.
Sometimes near the close of trading, few or no actual trades occur. In the instance when there is little volume traded near the close, there may be a bid price and ask price . In this case, the clearinghouse may use the end-of-day bids and asks to determine the settlement price for the futures contracts. The settlement price is also known as the closing price.
Recent Convergence Performance Of Cbot Corn Soybean And Wheat Futures Contracts
Futures markets play a key role in price discovery and risk transfer in many agricultural markets. Concerns have been raised about the performance of Chicago Board of Trade grain futures contracts in a number of recent forums, most prominently at the Agricultural Forum hosted by the Commodities Futures Trading Commission on April 22nd, 2008. Market participants have expressed concern that futures prices have been artificially inflated since the Fall of 2006, contributing to weak and erratic basis levels and a lack of convergence of cash and futures prices during delivery. In this article, we focus on the nature and consequences of recent convergence problems in CBOT corn, soybean and wheat futures contracts. We also briefly comment on proposals for changing the contracts to address the problems that have surfaced recently.
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