Floor Talk November 3

[marketeye]

At the close:

The Dec. corn futures closed 8 1/2 cents higher at $6.53 1/2. The Jan. soybean contract ended 24 1/2 cents higher at $12.27 1/4. The Dec. wheat futures closed 12 1/2 cents higher at $6.36. The Dec. soymeal futures closed $4.00 per short ton higher at $314.50. The Dec. soyoil futures closed $1.18 higher at $52.03.

In the outside markets, the NYMEX crude oil is $1.47 per barrel higher, the dollar is lower and the Dow Jones Industrials are up 179 points.

Mike

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At mid-session:

The Dec. corn futures are trading 8 1/2 cents higher at $6.53 1/2. The Jan. soybean contract is trading 16 1/2 cents higher at $12.19 1/4. The Dec. wheat futures are 19 1/2 cents higher at $6.43. The Dec. soymeal futures are trading $3.00 per short ton higher at $313.50. The Dec. soyoil futures are trading $0.86 higher at $51.71.

In the outside markets, the NYMEX crude oil is $1.21 per barrel higher, the dollar is lower and the Dow Jones Industrials are up 128 points.

Mike

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At the open:

The Dec. corn futures opened 4 cents higher at $6.49. The Jan. soybean contract opened 13 1/2 cents higher at $12.16 1/4. The Dec. wheat futures opened 4 cents higher at $6.27 1/2. The Dec. soymeal futures opened $3.30 per short ton higher at $313.70. The Dec. soyoil futures opened $0.43 higher at $51.28.

In the outside markets, the NYMEX crude oil is $0.50 per barrel higher, the dollar is lower and the Dow Jones Industrials are up 66 points.

Mike

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At 8:20am:

News & noise:

--80% of northeast China's soy crushers have shutdown, due to lack of farmer-selling.

--Argentina is expected to have 15.0 million metric tons of corn for exports this year.

--There are reports that U.S. farmer-selling has dwindled. Is this true in your area?

Mike

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At 7:40am:

USDA releases bullish corn export sales Thursday. But, it appears soybean and wheat sales 'missed'.

Corn=622,600 metric tons vs. the trade's expectation of 550,000 mt.

Soybeans=209,700 mt vs. the trade's expectations of 600,000 mt.

Wheat=320,100 mt vs. the expectation of 400,000 mt.

Soymeal=220,800 mt vs. the expected 125,000 mt.

What do you think?

Mike

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At 6:35am:

Early calls: Corn 6-8 cents higher, soybeans 15-18 cents higher, and wheat 6-8 cents higher.

Trackers:
Overnight grain, soybean markets=Trading sharply higher.
Crude Oil=$0.65 higher.
Dollar=Lower.
Wall Street=Seen trading higher, on talk the Greece government will not hold a referendum on the proposed bailout for its debt crisis.

World Markets=Asia/Pacific stocks are lower, Europe higher.

MF Global has admitted customer and company money was co-mingled. The question now is how did this happen? Some want to blame MF Global, CFTC, CME Group, and any other regulatory body that should have been on top of this issue.

More in a minute,

Mike

[marketeye]

There is so much talk and concern about the MF Global bankruptcy filing and the investigation into the company co-mingling customer and company money, the CME Group issued a statement on this yesterday afternoon. Take a look:

CME Group Press Release

CME Clearing is holding substantial excess margin collateral from MF Global Inc. ("MF Global") and therefore continues to be in a strong financial position, both with respect to MF Global and more generally.  MF Global's customer positions on CME Group exchanges were and continue to be substantially over-collateralized at CME Clearing. As of today, the proprietary positions of MF Global have been liquidated with no adverse market impact, leaving a substantial part of that collateral to be applied to MF Global's obligations at CME.

Our primary focus is the protection of our customers and the integrity of our markets.  Our current efforts are focused on working diligently with the CFTC and the SIPC trustee to facilitate the transfer of customer positions to other qualified clearing member firms, with as much CME Clearing held collateral as will be legally permitted.  CME has no control over the disposition of customer segregated funds that are held by MF Global and not held by CME Clearing.  Those funds are now under the control of the SIPC trustee.  Nevertheless, we have urged the SIPC trustee to facilitate the transfer of such funds from MF Global to MF Global customers.

With respect to the apparent shortfall in customer segregated funds held by MF Global (and which were not on deposit with CME Clearing), it appears that any transfer of such funds occurred following the completion of CME audit procedures respecting such funds and in violation of CFTC Regulations and CME rules.  CME completed its on-site review last week.  At that time, the results of our review indicated that MF Global was in compliance with its segregation requirements.  It now appears that the firm made subsequent transfers of customer segregated funds in a manner that may have been designed to avoid detection insofar as MF Global did not disclose or report such transfers to the CFTC or CME until early morning on Monday, October 31, 2011.  CME fully discharged its auditing procedures in accordance with applicable procedures and standards and is working with regulators and authorities to investigate these transfers.

CME conducts regulatory financial examinations in accordance with the Joint Audit Committee procedures and standards. http://www.wjammer.com/jac/   The focus of these examinations is to effectively monitor the firm's financial records to determine the firm's full segregation compliance and to monitor any necessary corrective action.  CFTC regulations and CME rules require maintenance of excess segregated funds at all times. Clearing firms are not permitted to transfer funds from the segregated account which will result in an under-segregated condition.  CFTC Regulations and CME Rules also require clearing firms to calculate their customer segregated position daily and notify both the CFTC and CME whenever it knows or should have known that the customer segregated position was under-segregated.  None of MF Global's reports reflected any under-segregated positions.  The reports actually reflected excess segregated funds.  

Mike

[NCcorntrader]

Mike-

thanks for this update, Im sure it is welcome by any MF acct holders

in so far as blame- IMO it lands squarely on the shoulders of MF executives. some of them should GO TO JAIL including Mr Corzine himself as far as I am concerned. regulatory bodies certainly have their purpose, but to think we can deregulate greed and malfeasance is folly.

FWIW- based on what I have seen on this latest debacle and in the past the CME is one of the few agencies that really seems to have its sh!t together. i mean what are they supposed to do? control all money flows of all brokers?

[ne 50]

It's troubling to me that the discussion is going to the regulators actions or inaction...

what happened to honesty in business?... These people are getting large salaries not for their ethics but because they can find loopholes to gain bonuses, and monies for their bottom line..or operations. and in that lays the problem...

The "it's business" and not personal has to come to a stop... it's just business when it happens to someone else but it's very personal when your involved...

Prison and monetary punishments for unethical behavior by those committing the offensive behavior seems to be the minimum punishment for those committing these business crimes..

[farmersaw]

excellent post ne 50

the same "it's just business" mindset is a neat excuse now in the farming world as well to do whatever to whoever.  

a lack of proper balance is what i call it.

[sandiego77]

this will be a good test for the bulls on this gap up in the grains... SF the most oversold technically with key 20-day MA at 1230...in corn the ethanol crushers are working as fast as they can to get it done before the blenders credit ends 12/31 along with strong basis are the bull case...have a great day you'all!!

[sonoma72]

you are exactly right ne 50.  Call it what it is, crime.  The montra of "greed is good" or "it's just business,"  is the furthest thing from the truth there is.    Sadly, the anything for a buck crowd will continue on its present course until the pot is dry.

[sw363535]

Bigger question for CME would be how common a practice is this.----Waiting till the audit ck is run and transfering out---??  Like driving the banker around the section to inspect the same cattle.  

Tough job regulating these guys.

[Red Steele]

or having the banker inspect cattle and crops for collateral that you don't even own. Some cowboy did that one a few decades ago on some local banker here, and took off with the cash. THe cowboy later was found shot dead, I don't know if it was ever solved. Sometimes the people you mess with don't find it funny.

[sw363535]

Huge deal like that in texas when I was young----a guy named Billy Sol Estes.