@sdelsad/commodity-desk-daily 1.0.23 → 1.0.25

package/ep07.md

@@ -1,280 +0,0 @@
-# Market pulse
-
-**Monday belonged to soybeans, and they took it on demand rather than supply.**
-
-| Commodity | Contract | Price | Change |
-|---|---|---|---|
-| Corn | Sep (CBOT) | 465 c/bu | +6¢ |
-| Corn | Dec (CBOT) | 489½ c/bu | +6¼¢ |
-| Soybeans | Sep (CBOT) | 1201 c/bu | +23¼¢ |
-| Soybeans | Nov (CBOT) | 1216 c/bu | +23½¢ |
-| Wheat HRW | Sep (KC) | 758¾ c/bu | +4½¢ |
-
-Monday's session belonged to the soybean complex, which added better than 1¾%. Chicago soft red wheat was the exception, giving back part of a week in which it had gained 35 cents. Kansas City held its bid.
-
-Two things did the buying. China took another 136,000 t of US soybeans. And the crop split in two: the northwestern belt is dry, the eastern belt has had too much rain. Monday afternoon's condition ratings had corn at 60% good to excellent and soybeans at 61%, each a point lower on the week, with soybeans seven points below where they stood a year ago. Corn is 76% at dough and 4% mature, running ahead of the five-year average. The bean crop is 85% setting pods.
-
-**The geopolitical read: the buyer's clock.** Chinese purchases of new-crop US soybeans have been running far ahead of anything that has actually sailed. Vessel data through late July put US-to-China departures at roughly 11,000 t/day on a seven-day average — close to nothing against commitments running into the millions of tonnes. That gap is an instrument, not an accident. A commitment is a promise on a balance sheet. A loading is a fact on a vessel. The buyer decides when one becomes the other, and that timing is worth more than the price paid. It also lands on exactly one line of today's subject.
-
-```chart
-{"type":"line","mode":"index","unit":"index, Tue 11 Aug = 100",
- "title":"Corn led the week, beans closed on Monday",
- "x":["Tue 11","Wed 12","Thu 13","Fri 14","Mon 17"],
- "series":[{"name":"Corn Dec (CBOT)","values":[460.50,480.75,477.75,483.25,489.50]},
-           {"name":"Soybeans Nov (CBOT)","values":[1168.75,1183.25,1181.75,1192.50,1216.00]}],
- "caption":"Both jumped on the 12 August WASDE and neither gave it back. Corn has led since the report, but Monday belonged to beans, which added 2.0% against corn's 1.3% on Chinese buying and a dry northwestern belt.",
- "source":"CBOT settlements, 11–17 August 2026, from daily market wraps."}
-```
-
-# Key takeaways
-
-- A balance sheet is not a forecast. It is an accounting identity that has to close, and ending stocks is the line that closes it.
-- Production is roughly ten times the size of US corn ending stocks, so a 1% error in the crop is a 10% error in the carryout. Work that ratio out for every commodity you trade — it is different for each one.
-- Stocks-to-use maps to price on a curve, not a line. The same two-bushel yield move is worth almost nothing at 15% and an enormous amount at 9%.
-- Feed and residual is a residual inside a residual. When it moves, it is telling you about livestock or telling you the crop was never the size they said it was.
-- Analysts converge on supply and diverge on demand, because supply is surveyed and demand is inferred. That is why pre-report positions live in spreads.
-- The market does not price the yield. It prices the carryout, and area, demand and carry-in can each pay for a bad yield.
-
-# Vocabulary
-
-| Term | Meaning |
-|---|---|
-| **Balance sheet (S&D)** | The one-page supply and demand statement for a crop and a marketing year, which must close |
-| **Marketing year** | The crop's own accounting year — September to August for US corn and soybeans, June to May for US wheat |
-| **Carryout** | Ending stocks, spoken as a single word on the desk |
-| **Total supply** | Carry-in plus production plus imports, the top block of the sheet |
-| **Total use** | Domestic use plus exports, the bottom block |
-| **Feed and residual** | The inferred demand line that absorbs both livestock feeding and every measurement error in the sheet |
-| **New crop / old crop** | The marketing year about to begin versus the one ending, priced by different contract months |
-| **Trade average** | The mean of analysts' pre-report estimates, published in advance, and therefore what is already in the price |
-| **Whisper number** | The expectation the market actually trades, which can sit away from the published trade average |
-| **Crop Production** | The NASS report published alongside WASDE, carrying the survey-based yield and area |
-| **Grain Stocks** | The quarterly survey of physical inventories, from which feed and residual is backed out |
-| **NASS** | USDA's National Agricultural Statistics Service, the body that runs the surveys behind the numbers |
-| **Implied disappearance** | Use derived by subtraction rather than measurement, the technique behind the residual lines |
-
-# Quiz
-
-**Q1.** Build one. A desk runs its own 2026/27 US corn sheet with carry-in of 1.945 bn bu, imports of 25 m bu and harvested area of 88.6 m acres, but uses its own yield of 179.0 bu/ac. It carries domestic use at 13.100 bn and exports at 3.350 bn. Compute production, total supply, ending stocks and stocks-to-use. Then compare the percentage gap between the desk's carryout and USDA's 1.653 bn with the percentage gap between the two yields, and explain the difference.
-
-**Q2.** The quarterly Grain Stocks survey lands 90 m bu below what the trade had modelled, with no change to production or exports. Which line absorbs it, what are the two competing stories for why, and how would you use the futures *curve* rather than the flat price to work out which story the market believes?
-
-**Q3.** Going into 12 August the trade carried new-crop corn carryout at roughly 1.725 bn bu. USDA printed 1.653 bn. December corn rose 20¼¢ on the day and closed Monday 17 August at 489½, above its report-day close. Explain why "the report was bullish and the market went up" is a lazy reading of those three sessions, and state precisely what a trader had to be right about to still be paid on Monday.
-
-**Q4.** Ep 6 said corn's demand curve has steps in it. USDA carries corn exports at 3.275 bn bu and domestic use at 13.055 bn. Suppose a rally takes December corn from 489½ to 560 c/bu and nothing else changes. Name the two demand lines that respond first and the direction each moves. Then explain why a balance sheet that leaves demand untouched after a 70-cent rally is internally inconsistent.
-
-**Q5.** Ep 6 taught that a weather premium decays on the calendar rather than on the forecast. It is 17 August. Corn is 76% at dough and 4% mature. Soybeans are 85% setting pods and rated seven points below last year. A trader wants to be long the weather. What is actually left to be long of in each crop, which would you rather own, and how does Monday's tape support the answer?
-
-**Q6.** Ep 4 established that risk passes at loading under FOB, CFR and CIF alike. You have sold 60,000 t of beans CFR Qingdao. The vessel is three days late arriving after a typhoon diversion, and your buyer's letter of credit expires in four days. Separate the voyage risk from the documentary risk, say who carries each, and identify which of the two actually threatens your P&L.
-
-**Q7.** Ep 4 priced three days of demurrage at $24,000/day as 11% of a $660k margin. Do it in the other unit. A 60,000 t soybean cargo is valued off Monday's November board of 1216 c/bu, and demurrage runs three days at $26,500/day. Convert the cargo to bushels and dollars, then express the demurrage in cents per bushel and as a percentage of cargo value. Why do desks insist on the cents-per-bushel version?
-
-**Q8 — Conversion drill.** Over the weekend an eastern Corn Belt station recorded 82 mm of rain, while a western Kansas station is forecast 0.35 inch for the week ahead. Convert each figure into the other scale. Then say which of the two matters more for the balance sheet that moved this week, and name the line it lands on.
-
-# SOLUTIONS (spoilers)
-
-**A1.** The arithmetic first.
-
-| Line | Desk | USDA (Aug) |
-|---|---|---|
-| Carry-in | 1,945 | 1,945 |
-| Production | 15,859 | 16,013 |
-| Imports | 25 | 25 |
-| **Total supply** | **17,829** | **17,983** |
-| Domestic use | 13,100 | 13,055 |
-| Exports | 3,350 | 3,275 |
-| **Total use** | **16,450** | **16,330** |
-| **Ending stocks** | **1,379** | **1,653** |
-| Stocks-to-use | 8.4% | 10.1% |
-
-All figures in million bushels. Production is 88.6 × 179.0 = 15,859. (USDA's published 16,013 is about 3 m bu above 88.6 × 180.7 — rounding in the acreage and yield they print. Worth noticing the first time you try to rebuild a published sheet and cannot make it tie.)
-
-Now the comparison the question is really asking for. The yields differ by 1.7 bu, or **0.94%**. The carryouts differ by 274 m bu, or **16.6%**. That is a factor of roughly eighteen, not ten, and the extra leverage comes from the demand side: the desk is carrying 120 m bu more use than USDA. Decomposed, the 274 is 154 m of yield-and-rounding and 120 m of demand. The trap the question sets is the assumption that a carryout gap is a crop-view gap. Most of the time it is half a crop view and half a demand view, and only one of those two halves gets discussed on television.
-
-**A2.** **Feed and residual absorbs it,** and ending stocks falls 90 m bu — from 1.653 to 1.563 bn, taking stocks-to-use from 10.1% to 9.6%. Nothing else in the sheet is allowed to move, because feed and residual is the line derived by subtraction.
-
-The two stories:
-
-1. **Real demand.** Livestock ate more than modelled — bigger herds, cheaper corn, better rations. This is a genuine tightening and it should persist into the next quarter.
-2. **Phantom supply.** The crop was never as big as printed. The stocks survey is measuring physical inventory, so if it comes in light, either use was higher or production was overstated. A production overstatement gets revealed slowly, through the residual, quarter by quarter.
-
-The curve tells you which one the market believes. If the trade takes it as real, present demand is tighter *now*: the nearby month bids relative to the deferred, spreads firm, and a carry market flattens or inverts. That is bull spreading, and it is a statement about physical availability. If the trade takes it as a statistical artefact likely to be revised away, flat price wobbles on the headline and the spreads do not move — the curve is saying nobody is short of corn today. **Flat price reacts to news. Spreads react to grain.** A move in one without the other is the market telling you how much it believes.
-
-**A3.** The surprise was **72 m bu**, not the 159 m bu that the 1.8 bu/ac yield miss implies on 88.6 m acres. Half of it was absorbed on the way down the page by higher area and higher exports. In stocks-to-use terms the trade went in at 1,725 ÷ 16,330 ≈ 10.6% and got 10.1% — about half a point of tightening. That is what the 20¼¢ paid for, and it is a reasonable price for it.
-
-What happened afterwards was a different trade. Corn did not hold its gain and then add another six cents on Monday because of the report. It did so because Black Sea export capacity stayed impaired, because the eastern belt turned too wet, and because the whole complex was being pulled up by soybeans on Chinese demand. None of that was in the WASDE.
-
-So a trader long into the print was paid twice, for two separate reasons, and needed to be right about both to still be there on Monday. Being right about the report bought about a day. Staying long required an independent view on export capacity and August weather. The lazy reading — "bullish report, market up" — conflates an event that resolved in ninety seconds with a trend that has been running for two weeks. The discipline is to book the event P&L, then re-underwrite the position on the trend as a fresh decision.
-
-**A4.** **Exports fall, and the ethanol grind inside domestic use falls.** Both are price-elastic on a timescale of weeks.
-
-- **Exports** are the fastest. US corn competes with Brazilian, Argentine and Ukrainian corn at destination. A 70¢ rally is about $27.50/t; the buyer simply calls another origin. This is ep 5's flow substitution, running on the demand line instead of the supply line.
-- **Ethanol grind** is a margin, not a preference. The plant buys corn and sells ethanol and distillers grains. Corn up 70¢ with ethanol unchanged compresses the crush, and marginal plants slow down. Demand stops appearing at the bid.
-
-Feed is the third lever but the slowest and, right now, the furthest away: ep 6 put Chicago wheat about $54/t above its feed-switch level, so the substitution bid is nowhere near being triggered.
-
-The inconsistency is this. A balance sheet is a set of **quantities at an assumed price**. If you tighten stocks and let price rise, you must also let the demand lines respond, or you are counting the tightening twice. That feedback is why carryout estimates converge rather than diverge: tighter stocks lift price, higher price rations demand, rationed demand rebuilds stocks. Rationing is not a metaphor — it is the arithmetic by which the sheet closes at a higher price. The analyst's edge sits almost entirely in how fast and how far they think that response runs.
-
-**A5.** For **corn**, very little is left. Pollination determines ear count and it is long finished; 76% dough and 4% mature means kernel number is set and the crop is filling. What remains is test weight, late-season disease, and an early frost risk that is still weeks away and low-probability. The weather premium has largely decayed, exactly as ep 6 described, and it decayed whether or not the forecast improved.
-
-For **soybeans**, the crop is genuinely still open. Beans set pods and fill seed through August, so August rainfall and August heat still move the yield. With 85% setting pods, a rating of 61% good to excellent and seven points of deterioration against last year, there is a real distribution left to price.
-
-You would rather own the beans — and Monday's tape is the evidence: beans +23½¢ against corn +6¼¢ on the same weather map. The sharper version of the answer is that you would rather own *optionality* on beans than futures, because the same decay clock that has already emptied the corn premium is running on the bean premium too, and it accelerates from early September. A long call spread pays for the distribution without paying carry to the calendar.
-
-**A6.** Two different risks, and the question is whether you can tell them apart under pressure.
-
-- **Voyage risk** passed to the buyer at the ship's rail in Santos. A typhoon diversion mid-ocean is the buyer's risk of loss, not yours. Under CFR you contracted the freight, so a late vessel is your dispute with the carrier under the charter party — but it does not move cargo risk back onto your book.
-- **Documentary risk** is entirely yours, and it is the live one. A letter of credit is a bank's undertaking to pay against **conforming documents presented before expiry**. Miss the expiry and the undertaking lapses. You are then an unsecured creditor of the buyer, holding a cargo already at their risk, in a market where they may prefer to renegotiate.
-
-**The documentary risk is what threatens the P&L.** Nothing has happened to the beans. The practical moves are to request an L/C amendment extending expiry and the latest shipment date before it lapses rather than after, to present documents early if the bill of lading and quality certificate are already in hand, or to ship documents against a letter of indemnity if originals are chasing the vessel. Ep 4's point restated: the cargo is fine, and the paper is what pays.
-
-**A7.** Convert first. 60,000 t × 36.744 bu/t = **2,204,640 bu**. At 1216 c/bu the cargo is worth **$26.81 m**.
-
-| Line | Value |
-|---|---|
-| Cargo | 2,204,640 bu |
-| Cargo value at 1216 c/bu | $26,808,422 |
-| Demurrage, 3 days × $26,500 | $79,500 |
-| Demurrage in c/bu | 3.6 c/bu |
-| Demurrage as % of cargo value | 0.30% |
-
-Desks quote it in cents per bushel because that is **the same unit as the margin**. A cargo bought at "November minus 20" and hit with 3.6 cents of demurrage was really bought at minus 23.6. In dollars, $79,500 against $26.8 m looks like a rounding error and gets waved through. In cents per bushel it sits next to the differential that the entire trade was argued over, and 3.6 cents is a fifth of the twenty. Execution costs only become visible when they are expressed in the unit the trader negotiates in — which is why the execution desk reports in cents, not in invoices.
-
-**A8 — Conversion drill answer.** 82 mm ÷ 25.4 = **3.23 inches**. 0.35 inch × 25.4 = **8.9 mm**. The fast method gets you close enough to trade on: 82 ÷ 100 × 4 = 3.28, and 0.35 × 100 ÷ 4 = 8.75.
-
-The **82 mm** is the number that matters this week. Excessive rain across the eastern Corn Belt in mid-August, with corn 76% at dough and beans 85% setting pods, brings lodging and disease pressure into crops that are filling, and it is behind the one-point slip in both condition ratings on Monday. It lands on the **yield term of production**, on the supply side of the 2026/27 sheet.
-
-The 8.9 mm in western Kansas is a soil-moisture story for hard red winter seeding in September. It reaches a balance sheet too — but the 2027/28 one, through planted area and abandonment. Same week, two rainfall figures, two different marketing years. Keeping them apart is most of the skill.
-
-# Written edition
-
-## The object every grain desk argues about
-
-A balance sheet is one page. Supply on top, demand underneath, and what is left over at the bottom. It is not a forecast and it is not a model. It is an accounting identity, and it has to close.
-
-Supply is three lines.
-
-| Line | What it is |
-|---|---|
-| Carry-in | What was still in store when the previous marketing year ended |
-| Production | Harvested acres × yield per harvested acre |
-| Imports | For US corn, a rounding error |
-
-Two things in that table are quietly load-bearing. A **marketing year** is the crop's own calendar, not the accountant's: US corn and soybeans run September to August, US wheat June to May. And production uses **harvested** acres, not planted. Around 8 million planted US corn acres never get cut for grain in a normal year.
-
-Demand is four lines: feed and residual, ethanol, food/seed/industrial, and exports. Then ending stocks, which is total supply minus total use.
-
-Ending stocks is not measured. **It is what is left.**
-
-## Building the real one
-
-The August numbers, in million bushels.
-
-| | 2026/27 US corn |
-|---|---|
-| Carry-in | 1,945 |
-| Production (88.6 m ac × 180.7 bu/ac) | 16,013 |
-| Imports | 25 |
-| **Total supply** | **17,983** |
-| Domestic use | 13,055 |
-| Exports | 3,275 |
-| **Total use** | **16,330** |
-| **Ending stocks** | **1,653** |
-| **Stocks-to-use** | **10.1%** |
-
-```chart
-{"type":"waterfall","unit":"million bushels",
- "title":"US corn 2026/27, supply down to carryout",
- "caption":"Ending stocks is the difference between two numbers that are both around sixteen billion. That is what makes it move so much.",
- "source":"USDA WASDE, 12 August 2026. Carry-in is the figure implied by the published stocks and use.",
- "steps":[{"label":"Carry-in","value":1945,"kind":"base"},
-          {"label":"Production","value":16013},
-          {"label":"Imports","value":25},
-          {"label":"Domestic use","value":-13055},
-          {"label":"Exports","value":-3275},
-          {"label":"Ending stocks","kind":"total"}]}
-```
-
-Stocks-to-use is the number a desk quotes out loud, because a bushel figure means nothing without the size of the market next to it. 1,653 over 16,330 is 10.1%.
-
-## Why the bottom line is a lever
-
-Look at the size of the terms. Production is 16.0 billion bushels. Ending stocks is 1.65 billion. Production is roughly **ten times** the line it feeds.
-
-So a 1% error in the crop is a 10% error in the carryout.
-
-Take the yield down two bushels, from 180.7 to 178.7. That is 1.1% on the yield line. On 88.6 million harvested acres it is 177 million bushels of production.
-
-| Yield (bu/ac) | Production | Ending stocks | Stocks-to-use |
-|---|---|---|---|
-| 178.7 | 15,836 | 1,476 | 9.0% |
-| 180.7 (USDA) | 16,013 | 1,653 | 10.1% |
-| 182.7 | 16,190 | 1,830 | 11.2% |
-
-```chart
-{"type":"bar","unit":"million bushels",
- "title":"Two bushels of yield, eleven percent of carryout",
- "x":["178.7 bu/ac","180.7 bu/ac","182.7 bu/ac"],
- "series":[{"name":"Ending stocks","values":[1476,1653,1830]}],
- "caption":"A 1.1% change in the yield input moves ending stocks by about 11% in either direction. The balance sheet is a lever, and the fulcrum sits very close to the crop.",
- "source":"Calculated on the August 2026 WASDE sheet, holding demand and area constant at 88.6 m harvested acres."}
-```
-
-Eleven percent either way, out of a one percent input. That is the whole reason a yield estimate is worth arguing about for six weeks.
-
-**A warning about that table, though.** It holds demand fixed, and a real balance sheet does not. A sheet is a set of quantities *at an assumed price*. Cut the crop, lift the price, and exports and ethanol grind both start to fall — which rebuilds part of the stocks you just removed. Rationing is not a metaphor. It is the arithmetic by which the sheet closes at a higher price.
-
-## Stocks-to-use bends
-
-The relationship between stocks-to-use and price is not a line. It is a curve, and it bends.
-
-From 15% down to 12%, price barely notices. There is plenty of corn either way and the marginal bushel is not scarce. From 10% down to 8%, price goes vertical, because at that level somebody has to be rationed out of the market and price is the only tool that does it.
-
-Which means the same two-bushel yield move is worth almost nothing at a comfortable stocks-to-use and an enormous amount at a tight one. At 10.1%, corn is close enough to the bend that the market is paying attention — and that, rather than the headline figure, is why an August yield print gets traded as hard as it does.
-
-## The line that hides the sins
-
-**Feed and residual.** Two words, and the second is doing real work.
-
-Nobody counts the corn a hog eats. Feed use is inferred: take the quarterly Grain Stocks survey, subtract everything that can actually be measured, and whatever remains gets called feed and residual. So every measurement error in the sheet — in production, in exports, in the survey itself — lands in that one line.
-
-Which means that when feed and residual moves, sometimes it is telling you about livestock, and sometimes it is telling you the crop was never the size they said it was.
-
-Ending stocks is a residual. Feed and residual is a residual sitting inside it.
-
-## Where analysts actually disagree
-
-Here is what the argument sounds like the morning before a report.
-
-> **Analyst:** I have got carryout at one six eight.
-> **Trader:** On what yield?
-> **Analyst:** One eighty-one. Same as theirs.
-> **Trader:** Then where are we actually different?
-> **Analyst:** Exports. You are carrying three three, I am at three two.
-> **Trader:** A hundred million bushels of Mexico. That is not a crop view, that is a freight view.
-
-Notice where the disagreement sat. Not the yield — they agreed on the yield.
-
-That is the pattern, and it has a structural cause. **Supply is surveyed.** Fields are walked, ears are counted, acres are measured from satellite imagery and from farm programme filings. Two analysts working from the same surveys land close together.
-
-**Demand is inferred.** Nobody surveys a feedlot's intentions. Export commitments are known, but shipment timing is a decision somebody else has not made yet — which is precisely what the Chinese soybean programme is demonstrating this month.
-
-So two competent analysts converge on supply and diverge on demand. Which is why the interesting positions ahead of a report are rarely outright: a demand view is a view about *when* and *where*, and that lives in spreads.
-
-## Trading the surprise, not the number
-
-On 12 August USDA cut the corn yield to 180.7 bu/ac. The trade average going in was 182.5. So the yield surprise was 1.8 bushels — 159 million bushels of production, gone.
-
-And the carryout printed only about 72 million below what the trade was carrying.
-
-| Line | Effect |
-|---|---|
-| Yield surprise, −1.8 bu/ac × 88.6 m ac | −159 m bu |
-| Area and demand revisions | +87 m bu |
-| **Carryout surprise** | **−72 m bu** |
-
-Half the surprise disappeared on the way down the page. This is the trap that catches anyone who trades one line: **the market does not price the yield, it prices the carryout**, and the carryout has an area term, a demand term and a carry-in term, any of which can pay for a bad yield.
-
-December corn added roughly 20¼¢ on the print. It then did not hand it back — it closed Monday 17 August at 489½, above its report-day close. But that was a different trade. The follow-through came from impaired Black Sea export capacity, a soaked eastern belt and a soybean complex pulling the whole board higher on Chinese buying. None of it was in the report.
-
-Which is the last honest thing to say about report days. The number is the shock. The market is what happens over the next three weeks, and it needs its own reason.

package/ep07.script.txt

@@ -1,117 +0,0 @@
-Two analysts. Same report, same spreadsheet, opposite conclusions. ||| 0.4
-Neither of them has made an arithmetic mistake. ||| 0.6
-This is Soft Commodity Trading, episode seven. Today, the balance sheet. ||| 0.4
-The one-page object every grain desk argues about, and the report that updates it. ||| 0.8
-First, the tape. ||| 0.5
-Monday belonged to soybeans. November beans closed at twelve dollars sixteen, up twenty-three and a half cents. ||| 0.4
-That is a one and three quarter percent day, in a market that had already run all of last week. ||| 0.5
-December corn added six and a quarter, to four eighty-nine and a half. ||| 0.4
-Kansas City September wheat added four and a half cents to seven fifty-eight and three quarters. Chicago wheat took profits. ||| 0.6
-Two things did the buying. ||| 0.35
-China took another hundred and thirty-six thousand tonnes of U S beans. ||| 0.4
-And the crop split in two. The northwestern belt is dry. The eastern belt is too wet. ||| 0.5
-Monday afternoon's conditions had corn at sixty percent good to excellent, beans at sixty-one. ||| 0.4
-Both down a point on the week. Beans are seven points below where they were a year ago. ||| 0.6
-Now the political read, and today it is not the Black Sea. ||| 0.4
-It is the buyer. ||| 0.5
-China's purchases of new-crop U S beans have been running far ahead of anything that has actually sailed. ||| 0.4
-Vessel data through the end of July had U S to China departures averaging around eleven thousand tonnes a day. ||| 0.4
-That is close to nothing. The commitments are large. The loadings are not. Not yet. ||| 0.5
-That gap is an instrument, not an accident. ||| 0.4
-A commitment is a promise on a balance sheet. A loading is a fact on a vessel. ||| 0.4
-The buyer chooses when the promise becomes the fact, and that timing is worth more than the price they paid. ||| 0.7
-Which is convenient, because a commitment lands on exactly one line of the object we are building today. ||| 0.8
-So. The balance sheet. ||| 0.4
-Supply on top. Demand underneath. What is left over at the bottom. ||| 0.5
-Supply is three lines. Carry-in, production, imports. ||| 0.4
-Carry-in is what was still sitting there when the previous marketing year ended. ||| 0.4
-A marketing year for U S corn runs September to August. Beans the same. Wheat starts in June. ||| 0.4
-It is the crop's calendar, not the accountant's. ||| 0.5
-Production is the line everyone watches. Harvested acres times yield per harvested acre. ||| 0.4
-Note the word harvested. Not planted. ||| 0.4
-About eight million planted U S corn acres never get cut for grain in a normal year. ||| 0.5
-Imports, for U S corn, are a rounding error. Twenty-five million bushels. ||| 0.6
-Demand is where the money is, and it is four lines. ||| 0.4
-Feed and residual. Ethanol. Food, seed and other industrial. And exports. ||| 0.5
-Then ending stocks. Supply minus use. ||| 0.4
-It is not measured. It is what is left. ||| 0.7
-Let me build the real one, with the August numbers. ||| 0.5
-Eighty-eight point six million harvested acres. A hundred and eighty point seven bushels to the acre. ||| 0.4
-That is sixteen billion and thirteen million bushels of production. ||| 0.5
-Add imports of twenty-five million, and a carry-in of about one point nine four five billion. ||| 0.4
-Total supply, seventeen point nine eight three billion bushels. ||| 0.6
-Now take the demand out. ||| 0.35
-Domestic use, thirteen point zero five five billion. Exports, three point two seven five billion. ||| 0.4
-Total use, sixteen point three three billion. ||| 0.5
-Ending stocks. One point six five three billion bushels. ||| 0.7
-And now the number the desk actually quotes out loud. ||| 0.4
-One point six five three, over sixteen point three three. Ten point one percent. ||| 0.4
-Stocks to use. Ten point one. ||| 0.7
-Here is the thing about that bottom line. ||| 0.4
-It is the difference between two numbers that are both around sixteen billion. ||| 0.5
-Production is roughly ten times the size of the ending stocks it feeds. ||| 0.4
-So a one percent error in the crop is a ten percent error in the carryout. ||| 0.6
-Move the yield by two bushels. Just two, on a hundred and eighty. ||| 0.4
-That is a bit over one percent on the yield line. ||| 0.4
-It is a hundred and seventy-seven million bushels of production. ||| 0.4
-And it takes ending stocks to one point four seven six, or up to one point eight three. ||| 0.5
-Eleven percent either way, out of a one percent input. ||| 0.5
-Stocks to use swings from nine point zero to eleven point two. ||| 0.6
-That is the whole reason a yield estimate is worth arguing about for six weeks. ||| 0.4
-The balance sheet is a lever, and the fulcrum sits very close to the crop. ||| 0.8
-One more thing about stocks to use, and this is the part people quote wrongly. ||| 0.5
-The relationship to price is not a line. It is a curve, and it bends. ||| 0.5
-From fifteen percent down to twelve, price barely notices. There is plenty of corn either way. ||| 0.5
-From ten down to eight, price goes vertical. ||| 0.4
-Because at that level somebody has to be rationed out of the market, and price is the only tool that does it. ||| 0.5
-So the same two-bushel yield move is worth almost nothing at a comfortable stocks to use. ||| 0.4
-And it is worth an enormous amount at a tight one. ||| 0.5
-Ten point one is close enough to the bend that the market is paying attention. ||| 0.8
-Now the line that hides the sins. ||| 0.4
-Feed and residual. Two words, and the second one is doing real work. ||| 0.5
-Nobody counts the corn a hog eats. ||| 0.4
-Feed use is inferred. You take the quarterly stocks survey, subtract everything you can actually measure, and whatever remains gets called feed and residual. ||| 0.5
-So every measurement error in production, in exports, in the survey itself, lands in that one line. ||| 0.5
-Which means that when feed and residual moves, sometimes it is telling you about livestock. ||| 0.4
-And sometimes it is telling you the crop was never the size they said it was. ||| 0.7
-Ending stocks is a residual. We established that in episode two. ||| 0.4
-Feed and residual is a residual sitting inside the residual. ||| 0.6
-This is what the disagreement sounds like, the morning before a report. ||| 0.5
-ANALYST: I have got carryout at one six eight. ||| 0.25
-TRADER: On what yield? ||| 0.25
-ANALYST: One eighty-one. Same as theirs. ||| 0.25
-TRADER: Then where are we actually different? ||| 0.25
-ANALYST: Exports. You are carrying three three. I am at three two. ||| 0.25
-TRADER: A hundred million bushels of Mexico. That is not a crop view, that is a freight view. ||| 0.6
-Listen to where that argument actually sat. ||| 0.4
-Not the yield. They agreed on the yield. ||| 0.4
-They disagreed about demand. ||| 0.5
-And that is the pattern. Supply gets surveyed. Fields are walked, ears are counted, acres are measured from satellites and from farm program filings. ||| 0.5
-Demand is inferred. Nobody surveys a feedlot's intentions. ||| 0.5
-So two competent analysts converge on supply and diverge on demand. ||| 0.4
-Which is why the interesting positions before a report are rarely outright. ||| 0.4
-They are in the spreads, because that is where a demand view actually lives. ||| 0.8
-Last piece. Trading the surprise, not the number. ||| 0.5
-On the twelfth of August the U S D A cut the corn yield to a hundred and eighty point seven. ||| 0.4
-The trade average going in was a hundred and eighty-two and a half. ||| 0.4
-So the yield surprise was one point eight bushels, bearish for supply. A hundred and fifty-nine million bushels, gone. ||| 0.5
-And yet the carryout printed only about seventy-two million below what the trade was carrying. ||| 0.6
-Half the surprise disappeared on the way down the page. ||| 0.4
-Acres went up. Exports went up. The sheet absorbed it. ||| 0.6
-This is the trap that catches anybody who trades one line. ||| 0.4
-The market does not price the yield. It prices the carryout. ||| 0.4
-And the carryout has an area term, a demand term and a carry-in term, any of which can pay for a bad yield. ||| 0.7
-December corn jumped about twenty cents on the print. ||| 0.4
-And then it did not hand it back, because the Black Sea kept lifting the whole complex behind it. ||| 0.5
-It closed Monday at four eighty-nine and a half. Higher than it was on report day. ||| 0.6
-Which is the last honest thing to say about report days. ||| 0.4
-The number is the shock. The market is what happens over the next three weeks. ||| 0.8
-So. What to keep. ||| 0.5
-The balance sheet is not a forecast. It is an accounting identity, and it has to close. ||| 0.5
-Ending stocks is not measured. It is what is left, and that is exactly what makes it a lever on the crop. ||| 0.5
-About ten times the leverage for corn. Work that ratio out yourself for every commodity you trade, because it is different for every one. ||| 0.6
-Analysts agree on supply and fight about demand, because supply is counted and demand is inferred. ||| 0.5
-And the trade is never the print. It is the gap between the print and what was already in the price. ||| 0.7
-Tomorrow, the soybean complex and the crush. One seed, three markets, and the margin that runs the industry. ||| 0.5
-The quiz is in the notes. Today you build a small sheet and flex it, then go back to corn demand and to the physical chain. ||| 0.4
-Work them with a calculator, not from memory. ||| 0.5