@sdelsad/commodity-desk-daily 1.0.25 → 1.0.27

package/package.json

@@ -1,6 +1,6 @@
 {
   "name": "@sdelsad/commodity-desk-daily",
-  "version": "1.0.25",
+  "version": "1.0.27",
   "description": "Soft Commodity Trading - Ep 8: The Soybean Complex and the Crush",
   "license": "CC-BY-4.0",
   "keywords": [

package/ep08.script.txt

@@ -1,80 +0,0 @@
-Sixty pounds of soybeans go into a crush plant. Forty four pounds of meal and eleven pounds of oil come out. ||| 0.4
-The crusher does not get to choose that ratio. He sells both, every day, whether he likes either market or not. ||| 0.6
-This is Soft Commodity Trading, episode eight. The soybean complex, and the margin that runs it. ||| 0.8
-Tuesday split the board. ||| 0.4
-Chicago December corn settled four eighty eight, down a cent and a half. November beans finished twelve sixteen and three quarters, up three quarters of a cent. ||| 0.5
-Wheat took the damage. Chicago September wheat fell ten and a quarter cents to six sixty four and a half. Kansas City September fell fifteen cents to seven forty three and three quarters, down about two percent. ||| 0.5
-But the move that mattered was inside the bean complex. September meal was up a quarter of a percent. September oil fell nearly two and a half percent. ||| 0.6
-Beans went nowhere and oil fell out of bed. That is not a bean story. That is an energy and policy story. ||| 0.5
-Crop ratings came in at sixty percent good to excellent for corn and sixty one for soybeans, each a point lower on the week. Eighty five percent of the bean crop is setting pods. China bought another five million bushels of new crop U S beans. ||| 0.6
-Now the geopolitical read, and today it is a policy read. More than half the value of a soybean depends on a regulatory decision. ||| 0.5
-American soybean oil is priced off biofuel rules. The renewable fuel volumes, and the clean fuel production credit the trade calls forty five Z. When those rules wobble, oil trades like a fuel and not like a food. ||| 0.5
-And in Argentina the government is cutting export taxes on a published schedule. Soybeans sit at twenty four percent, heading to twenty one by the end of twenty twenty seven and fifteen by the end of twenty twenty eight. ||| 0.5
-Meal and oil are taxed below the bean. That gap is not an accident. It is a subsidy for crushing at home instead of shipping the seed out whole. ||| 0.5
-Which is a good place to begin, because today's subject is the margin that gap exists to protect. ||| 0.8
-One seed. Three markets. ||| 0.5
-Beans are the raw material. Meal is a protein market. It competes with fishmeal and with corn in a feed ration, and it lives and dies on livestock. ||| 0.4
-Oil is a vegetable oil market. It competes with palm and canola in a fryer, and with diesel in a tank. ||| 0.5
-Those two markets have almost nothing to do with each other. The crusher is exposed to both, in a fixed proportion, forever. ||| 0.7
-Now the units, because the arithmetic does not work without them. ||| 0.4
-Chicago meal is quoted in dollars per short ton. A meal contract is one hundred short tons. ||| 0.4
-Chicago oil is quoted in cents per pound. An oil contract is sixty thousand pounds. ||| 0.4
-So one bushel of beans, one meal price in dollars a ton, one oil price in cents a pound. Three units, one plant. ||| 0.5
-Here is how you collapse them. Forty four pounds of meal out of a two thousand pound ton is zero point zero two two. Multiply the meal price by that and you have meal value per bushel. ||| 0.5
-Eleven pounds of oil, priced in cents, divided by a hundred, is zero point one one. Multiply the oil price by that and you have oil value per bushel. ||| 0.5
-Add the two. Subtract the bean price. That is the board crush. Zero point zero two two and zero point one one. Learn them. ||| 0.7
-Tuesday's numbers. December meal, three hundred and twenty one dollars sixty a ton. ||| 0.4
-Three twenty one sixty times zero point zero two two is seven dollars and eight cents of meal in a bushel. ||| 0.5
-December oil closed Monday just under seventy one cents a pound, and came off about two and a half percent on Tuesday. Call it sixty nine and two tenths. ||| 0.4
-Sixty nine and two tenths times zero point one one is seven dollars sixty one of oil in a bushel. ||| 0.5
-Meal, seven oh eight. Oil, seven sixty one. Gross product value, fourteen dollars sixty nine a bushel. ||| 0.5
-November beans, twelve sixteen and three quarters. Twelve dollars and seventeen. ||| 0.4
-Fourteen sixty nine minus twelve seventeen. Two dollars fifty two a bushel. That is the board crush. ||| 0.6
-In the units the rest of the world uses, multiply by the thirty six point seven bushels in a tonne. Ninety two dollars and fifty cents a tonne of beans. ||| 0.7
-Now look at what sits inside that number. Oil is seven sixty one of the fourteen sixty nine. ||| 0.4
-Fifty two percent. The desk calls that the oil share. ||| 0.6
-For most of the last century meal was the point of a soybean and oil was the by product. Meal ran sixty five percent of the value, sometimes more. ||| 0.5
-Biofuel demand inverted it. Today more than half of what a crusher sells is a product whose price is set by fuel policy. ||| 0.5
-Which is why Tuesday matters. Beans did not move. The crusher's margin did. ||| 0.8
-Here is how the trade actually gets put on. ||| 0.5
-CRUSHER: Where's December board crush? ||| 0.25
-BROKER: Two fifty two, two fifty five. ||| 0.25
-CRUSHER: I'll pay two fifty three for two hundred. ||| 0.25
-BROKER: Done. Two hundred at two fifty three. Long beans, short meal, short oil. Ten, eleven, nine. ||| 0.7
-Notice he named one price for three contracts. ||| 0.4
-Buying the crush means buying bean futures and selling meal and oil futures against them. ||| 0.4
-His plant is naturally long that margin. It buys beans and sells products every single day. ||| 0.4
-The paper position is the mirror image, so the margin stops moving. He has fixed two dollars fifty three on two hundred lots of throughput. ||| 0.5
-And notice the ratio. Ten bean contracts, eleven meal, nine oil. Fifty thousand bushels makes eleven hundred short tons of meal and five hundred and fifty thousand pounds of oil. The ratio is not a convention. It is the seed. ||| 0.8
-Now the part that separates a trainee from a crush trader. ||| 0.5
-That two dollars fifty two is not what a plant earns. It is a paper number built from three futures prices. ||| 0.4
-A plant does not buy futures beans. It buys beans at its own gate, from farmers and elevators, at futures plus or minus a differential. ||| 0.4
-It does not sell futures meal. It sells meal to a feed mill two hundred miles away, at futures plus or minus a differential. ||| 0.4
-Same for the oil. So the plant crush is the board crush, plus three separate bases, minus the cost of turning seed into products. ||| 0.6
-That conversion cost is real money. Natural gas, electricity, hexane, labour, maintenance. Call it thirty five to fifty cents a bushel of variable cost at a modern plant. ||| 0.5
-Take the friendly end. Two fifty two of board crush, minus forty cents, is two dollars twelve, before a single basis number is added. ||| 0.7
-So why is a two dollar margin not competed away? ||| 0.5
-Because you cannot make more crushing capacity this week. A new plant is two to three years and hundreds of millions of dollars. ||| 0.5
-When margins are wide, every plant already runs flat out. The constraint binds. And a binding constraint holds a margin open. ||| 0.6
-What actually adjusts is the bean basis. Plants bid harder for cash beans at the gate to keep the line full. ||| 0.4
-So the board crush stays fat on the screen while the plant crush quietly compresses. ||| 0.5
-That is the most common mistake made reading this market. The screen shows a wide margin. The plants are not earning all of it. The farmer is taking a slice, in the basis. ||| 0.8
-And when the crush goes negative? ||| 0.4
-The textbook says the plant shuts. The plant usually does not. ||| 0.6
-Two reasons. Stopping and restarting a crush line costs money and days. And most of the meal in next month's beans is already sold forward. ||| 0.5
-The plant is not choosing between running and not running. It is choosing between a negative margin, and a negative margin plus a default on its meal book. ||| 0.6
-So the real option is not on the board crush at all. It is on the variable margin, over cash costs, on the volume that is not already committed. ||| 0.5
-And the thing repairs itself. Run rates fall. Meal supply tightens. Meal rallies. The crush widens. The plants come back. ||| 0.5
-Which is why a deeply negative crush is usually a reason to buy meal, not to sell it. ||| 0.8
-One last number, and it is the one to carry out of here. ||| 0.4
-That margin is two dollars fifty two, sitting on fourteen dollars sixty nine of gross product value. ||| 0.4
-So a one percent move in the products is about fifteen cents. Fifteen cents is six percent of the entire margin. ||| 0.5
-Tuesday's oil move on its own, two and a half percent, one and three quarter cents a pound, was worth nineteen and a half cents a bushel. ||| 0.5
-Nineteen and a half cents against a two dollar fifty margin. Eight percent of a crusher's economics, from one afternoon in a market that is not soybeans. ||| 0.8
-Three things to keep. ||| 0.4
-First, the two multipliers. Meal times zero point zero two two, oil times zero point one one, minus the bean. Everything in this market starts there. ||| 0.5
-Second, the board crush is a quote, not a margin. The plant's number is the board, plus three bases, minus conversion cost. ||| 0.5
-Third, more than half a soybean's value is now a fuel. A crusher who only watches beans is watching the smallest of his three prices. ||| 0.7
-Tomorrow, vegetable oils and biofuels. Palm, the export policies that price it, and how a fuel mandate reaches a fryer. ||| 0.5
-The written edition has the crush laid out as a waterfall, the sensitivity, and today's quiz with full solutions. ||| 0.4
-This has been Soft Commodity Trading. ||| 0.6