@sdelsad/commodity-desk-daily 1.0.30 → 1.0.32
This diff represents the content of publicly available package versions that have been released to one of the supported registries. The information contained in this diff is provided for informational purposes only and reflects changes between package versions as they appear in their respective public registries.
- package/covered.md +1 -0
- package/email.html +99 -95
- package/email.txt +642 -606
- package/ep10.html +752 -0
- package/ep10.md +312 -0
- package/ep10.script.txt +127 -0
- package/ep10_chart1.png +0 -0
- package/ep10_chart2.png +0 -0
- package/ep10_chart3.png +0 -0
- package/feed.xml +12 -0
- package/glossary.md +18 -0
- package/package.json +2 -2
- package/ep09.html +0 -722
- package/ep09.md +0 -275
- package/ep09.script.txt +0 -80
- package/ep09_chart1.png +0 -0
- package/ep09_chart2.png +0 -0
- package/ep09_chart3.png +0 -0
package/email.txt
CHANGED
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SOFT COMMODITY TRADING
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Episode
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Episode 10 · Friday 21 August 2026 · 12 min 35
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political decision into a standing bid for a crop, and why a fuel policy is
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always a protein policy.
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Freight: Dry Bulk and Chartering
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Why the smaller ship can be the expensive one, and why freight is the one
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leg of a hedged trade that stays open.
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Listen: https://
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Read online: https://storage.googleapis.com/podcast-audio-2647223968/commodity-desk-daily/
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Listen: https://cdn.jsdelivr.net/npm/@sdelsad/commodity-desk-daily@1.0.31/ep10.mp3
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Read online: https://storage.googleapis.com/podcast-audio-2647223968/commodity-desk-daily/ep10.html
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MARKET PULSE
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Corn took the session, and the most interesting price on the screen was not
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a grain at all.
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Commodity Contract Price Change
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------------------------------------------------
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Corn Sep (CBOT) 478¾ c/bu +5¾¢
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Corn Dec (CBOT) 503½ c/bu +5½¢
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Soybeans Nov (CBOT) 1236½ c/bu −¾¢
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Soybeans Jan (CBOT) 1251½ c/bu +¼¢
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Soymeal Sep (CBOT) — −1.0%
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Soyoil Sep (CBOT) — +2.0%
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Wheat SRW Sep (CBOT) 682¾ c/bu +2½¢
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Wheat HRW Sep (KC) 762¼ c/bu +¼¢
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Baltic Dry Index — 2,791 +15
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Corn was the clear winner and December closed above five dollars. The buying
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is coming from the Pro Farmer scouts, who keep walking out of fields with
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less than last year. Illinois was pegged at 184.2 bu/ac against 199.6 a year
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ago and a three-year average of 199.2. Indiana, Nebraska, western Iowa,
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South Dakota and Ohio all came in below average. Illinois soybean pod counts
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at 1,430 per three-by-three square were under last year's 1,479 but above
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the three-year average of 1,390, which is the split that keeps beans flat
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while corn rallies.
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Beans were narrowly mixed and the complex went the other way from Wednesday:
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meal off about 1%, oil up about 2%. Weekly export sales were unremarkable at
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41 m bu of corn, 66 m bu of beans and 14.5 m bu of wheat. New-crop Chinese
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commitments now stand at 5.69 mmt with a further 3.82 mmt to unknown
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destinations — still a promise on a balance sheet rather than a fact on a
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vessel.
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The geopolitical read: the missing thing is a ship, not a tonne. Ukrainian
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strikes have left Russia unable to move grain through the Sea of Azov. The
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transmission most people reach for is export capacity, and that is right,
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but the mechanism underneath it is vessel class. Azov is a shallow river-sea
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trade worked by 3,000–5,000 t coasters drawing under five metres. No Panamax
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can substitute into that water. The cargo has to be railed or trucked
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several hundred kilometres to deepwater at Novorossiysk, which is carrying
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its own constraints. Capacity does not shrink because tonnage vanished. It
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shrinks because the only ships that fit are the ones that cannot sail.
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[chart] The smaller ship costs more — A Supramax is roughly a third smaller
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than a Panamax and earned 1,687 dollars a day more. The classes are
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not one ladder — they serve different trades, and US Gulf Supramax
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routes have been firming while Asia-Pacific has gone quiet. — Baltic
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Exchange sub-index average earnings, Wednesday 19 August 2026. —
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https://storage.googleapis.com/podcast-audio-2647223968/commodity-
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desk-daily/ep10_chart1.png
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than sell it now. — MDEX crude palm oil futures, Wednesday 19 August
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2026, closing quotes. — https://storage.googleapis.com/podcast-
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audio-2647223968/commodity-desk-daily/ep09_chart1.png
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* The four vegetable oils are one market with four tickers. A refiner buys
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a melting point and a price, not a crop, so the spread between the oils
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is the switch that rations demand between them.
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* Palm is the volume leader because the yield per hectare is several times
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an oilseed's, and it is the only major vegetable oil with a futures
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contract denominated in neither dollars nor euros.
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* One cent per pound is $22.05 per tonne. That single factor is what lets
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a soyoil price in Chicago be compared with a palm price in Kuala Lumpur.
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* A mandate creates demand that does not respond to price. A food buyer
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walks away when oil gets expensive; a blender under a legal obligation
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pays.
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* Indonesia's 16.75 million kilolitre allocation is roughly 15 million
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tonnes of palm oil consumed at home — on the order of India's entire
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annual import demand, decided by one cabinet.
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* Never multiply a renewable volume by a feedstock factor without checking
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whether it is stated in physical gallons or RIN gallons. Biodiesel earns
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1.5 RINs per physical gallon, so the wrong basis overstates demand by
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half.
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* Oil demand and meal demand are joined at the bushel. A billion pounds of
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incremental oil demand drags in four billion pounds of meal that no fuel
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policy asked for, which is why the crush captures far less of an oil
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rally than the oil chart implies.
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* Vegetable oil balance sheets now contain an energy term. Discretionary
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blending is live when gasoil trades above the oils and vanishes when
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crude falls, and no crop model forecasts it.
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* Indonesia funds the blending subsidy from the export levy, and the
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mandate's purpose is to shrink the exports the levy is collected on. The
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levy rate is the honest indicator of whether the programme is still
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affordable.
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Term Meaning
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* Vessel class is chosen by draft, gear and lot size, and only then by
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price. Read the berth before you read the index.
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* Deadweight is not cargo. An 82,000 dwt Kamsarmax carries roughly 66,000
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t of beans once fuel, water and stores are aboard.
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* Baltic index points are not a price. They are a broker panel's route
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assessments converted into a time charter equivalent in dollars per day,
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and nobody can pay an index.
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* Dollars per tonne and dollars per day are the same freight under two
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different risk allocations. A voyage charter leaves the queue with the
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owner; a time charter buys it back onto your book.
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* A smaller vessel can be more expensive twice over — a higher day rate
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spread across fewer tonnes. On today's rates that is 30% more per tonne
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on the same cargo.
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* The moment a CFR sale is made and no vessel is fixed, the seller is
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short freight. The grain hedge does nothing about it, and no position
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sheet carries freight at the resolution it carries corn.
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* Twenty dollars a tonne of freight on a Panamax cargo is about 22,000
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dollars a day of hire. That is an ordinary quarter in a market that has
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better than doubled inside twelve months.
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* FFAs hedge an index built from a basket of named routes, not your
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voyage. It is the same cross-hedge problem as pricing Black Sea wheat
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off Matif.
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* Bunkers sit underneath the freight. A Panamax burns about 30 t a day at
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sea, so a hundred-dollar move in fuel is seventeen percent of a sixteen-
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dollar margin, decided in the oil market.
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* Merchants charter rather than own because a ship is a twenty-five-year
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position taken to solve a sixty-day problem, and because knowing where
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the cargo is and knowing where the ship is are different businesses.
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Term Meaning
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Deadweight (dwt) The total weight a vessel can carry — cargo
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plus fuel, water, stores and crew — so
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always more than the cargo it can load
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Draft The depth of hull below the waterline,
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which rises as the ship loads and is the
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hard physical limit on which berths and
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rivers a vessel can enter
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Handysize The smallest mainstream dry bulk class,
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roughly 10,000–40,000 dwt, geared and able
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to work berths larger ships cannot reach
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Supramax A dry bulk vessel of roughly 50,000–60,000
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dwt, normally carrying its own cranes,
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which works minor bulks and shorter legs
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Panamax / Kamsarmax The 75,000–82,000 dwt workhorse of the
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grain and coal trades, usually gearless and
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drawing about fourteen metres fully loaded
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Capesize A bulk carrier of about 180,000 dwt and up,
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too large for the Panama Canal, used mainly
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for iron ore and coal
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Geared vessel A ship carrying its own cranes, which can
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therefore discharge at a berth with no
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shore equipment
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Part cargo Loading a vessel below capacity because the
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berth, river or canal cannot take her full
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draft
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Baltic Dry Index (BDI) The Baltic Exchange's headline dry bulk
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freight index, a weighted composite of the
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Capesize, Panamax, Supramax and Handysize
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route assessments
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Time charter equivalent (TCE) A voyage's economics restated as dollars
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per day, which is how a shipowner compares
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one employment against another
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Voyage charter Hiring a vessel to move a stated cargo
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between named ports for a price in dollars
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per tonne, with the owner carrying the
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voyage and delay risk
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Time charter Hiring the vessel itself for a period at a
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price in dollars per day, with the
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charterer taking speed, weather, port delay
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and usually fuel
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Fixing Agreeing the charter of a specific vessel,
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the moment a freight exposure stops being
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open
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Forward freight agreement (FFA) A cash-settled swap on a Baltic index route
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or basket over a calendar month, the only
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liquid way to hedge freight
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Bunkers The vessel's fuel, priced separately from
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the hire and carried by the owner on a
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voyage charter and by the charterer on a
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time charter
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P7 / P8 Baltic Panamax route codes for US Gulf to
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Qingdao and Santos to Qingdao, the two
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assessments that set the soybean origin arb
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River-sea vessel A small shallow-draft ship built to work
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both inland waterways and short sea legs,
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the only class able to load in the Sea of
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Azov
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Demand-to-supply ratio The Baltic's measure of tonne-mile demand
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growth against fleet growth, above 1.0 when
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cargo is outrunning ships
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CONVERSION DRILL 10 OF 12 — DOLLARS ↔ EUROS PER TONNE
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=====================================================
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Rule: divide by the EUR/USD rate to go from $/t to €/t
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Fast method: at 1.10, $ → €: take off 9% (÷1.1 ≈ ×0.91). € → $: add 10%. At
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1.05, it is 5% each way; at 1.20, take off 17% / add 20%.
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* $239/t wheat at 1.10 → 239 − 21 = €218/t
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* €205/t Matif at 1.10 → 205 + 20 = $225/t
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* $350/t at 1.05 → €333/t
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Why it matters: Matif quotes euros per tonne, Chicago dollars per bushel.
|
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Any Matif–CBOT arb crosses both a unit and a currency.
|
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181
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Q1. A trader has 66,000 t of soybeans to move from Santos to Qingdao and can
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use either a Kamsarmax at 18,964 $/day or two Supramaxes at 20,651 $/day
|
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188
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carrying 33,000 t each. Assume a 60-day round voyage for either class.
|
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Compute the freight cost per tonne both ways and state the difference in
|
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190
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total dollars. Then give the two physical conditions under which the more
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expensive option is the only option, and explain why the day-rate comparison
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alone is the wrong first question.
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Q2. A desk buys 66,000 t FOB Santos and sells the same cargo CFR Qingdao at
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a gross spread of $74.00/t. Freight is expected at $52.00/t and other costs
|
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run $6.00/t. The board is fully hedged and both differentials are fixed in
|
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197
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+
writing. The vessel is not yet fixed. Compute the expected margin in dollars
|
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198
|
+
per tonne and in total. Then recompute after freight rallies $20/t. Express
|
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199
|
+
that $20 as an equivalent change in daily hire, say which of the desk's
|
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risks was actually open, and name the instrument that would have covered it
|
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|
+
and the residual risk that instrument leaves behind.
|
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202
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+
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203
|
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Q3. Baltic assessments this week put US Gulf–Qingdao at $73.81/t and
|
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204
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Santos–Qingdao at $51.98/t. A Chinese crusher is indifferent between origins
|
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on delivered cost. US Gulf beans are offered FOB at a differential 15 c/bu
|
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|
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below Santos. Convert that differential to dollars per tonne, combine it
|
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207
|
+
with the freight spread, and say which origin wins and by how much. Then
|
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|
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explain what has to happen to the freight spread — not to the differentials
|
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209
|
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— before the US Gulf becomes competitive, and why a Brazilian exporter
|
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watches the Panama Canal draft restrictions more closely than he watches
|
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CBOT.
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213
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Q4. (Ep 9) Ep 9 established that a mandate creates demand that does not
|
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214
|
+
respond to price. Indonesia funds its B50 subsidy from a palm export levy it
|
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215
|
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raised from 10% to 12.5%. Explain why a rising levy rate is a bearish signal
|
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216
|
+
for the programme's durability even though it is a bullish signal for palm
|
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217
|
+
prices today. Then say what a freight desk would want to know about
|
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Indonesian export volumes before pricing a Panamax to Rotterdam six months
|
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forward.
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Q5. (Ep 9) On Thursday soymeal fell about 1% while soyoil rose about 2%.
|
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Using ep 9's point that oil demand and meal demand are joined at the bushel,
|
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223
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explain what that split does to the board crush and to the oil share, and
|
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say which of the two products a crusher would rather see lead a rally if the
|
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plant is running at capacity.
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Q6. (Ep 7) Ep 7 established that ending stocks is a residual roughly a tenth
|
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|
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the size of production, so a 1% crop error is a 10% carryout error. Pro
|
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Farmer has Illinois corn at 184.2 bu/ac against USDA's national 180.7.
|
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230
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Explain why a state number above the national number is not evidence that
|
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USDA is too low, and set out the two things you would need before letting a
|
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tour result move your own balance sheet.
|
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|
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Q7. (Ep 7) A desk's own corn sheet uses 88.6 m harvested acres and its own
|
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yield. It wants to test how much of a yield miss the export line could
|
|
236
|
+
absorb before the carryout falls below 1.400 bn bu. Starting from a carryout
|
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|
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of 1.653 bn, compute how many bushels of cushion exist, convert that into
|
|
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|
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bushels per acre of yield, and then explain why using exports as the
|
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239
|
+
offsetting line is a different kind of assumption from using feed and
|
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residual.
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Q8 — Conversion drill. A Rouen exporter is offered Matif November milling
|
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wheat at €218/t. A competing cargo is quoted CFR Rotterdam at $268/t. Assume
|
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EUR/USD at 1.16. Put both on the same currency and say which is cheaper, and
|
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|
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by how much in euros per tonne. Then, if freight from the Black Sea to
|
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Rotterdam is $18/t, compute the implied FOB Black Sea value of that cargo in
|
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247
|
+
both dollars and euros per tonne.
|
|
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248
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|
============================================================================
|
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@@ -258,416 +279,431 @@ answer in hectares and in acres.
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SOLUTIONS
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432
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434
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435
|
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437
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440
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446
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447
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448
|
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|
449
|
-
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450
|
-
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|
451
|
-
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|
452
|
-
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|
453
|
-
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|
454
|
-
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|
455
|
-
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|
456
|
-
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|
457
|
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458
|
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459
|
-
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460
|
-
|
|
461
|
-
Step Working Result
|
|
462
|
-
-------------------------------------------------------
|
|
463
|
-
Incremental crush 91,000,000 bu ÷ 36.744 2.476 m t
|
|
464
|
-
Area required ÷ 3.72 t/ha 666,000 ha
|
|
465
|
-
In acres × 2.471 1.65 m acres
|
|
466
|
-
|
|
467
|
-
Two-thirds of a million hectares of Brazilian soybeans, to feed one billion
|
|
468
|
-
pounds of American oil demand. It is worth holding that picture next to the
|
|
469
|
-
mandate that created it: a line in a regulation, denominated in gallons,
|
|
470
|
-
reaching across a hemisphere and asking for an area roughly the size of a
|
|
471
|
-
small country's entire arable base.
|
|
282
|
+
A1. Take the hire first, then divide by what actually loads.
|
|
283
|
+
|
|
284
|
+
Kamsarmax Two Supramaxes
|
|
285
|
+
---------------------------------------------
|
|
286
|
+
Cargo 66,000 t 2 × 33,000 t
|
|
287
|
+
Day rate $18,964 $20,651 each
|
|
288
|
+
Days 60 60
|
|
289
|
+
Total hire $1,137,840 $2,478,120
|
|
290
|
+
Freight per tonne $17.24 $37.55
|
|
291
|
+
|
|
292
|
+
The two-ship answer is roughly $20.31/t worse, or $1,340,280 on the cargo.
|
|
293
|
+
That is the compounding penalty: a higher rate spread over half the tonnes
|
|
294
|
+
each, twice.
|
|
295
|
+
|
|
296
|
+
The realistic version is a single 55,000 t Supramax at $22.53/t, $5.29/t
|
|
297
|
+
worse than the Kamsarmax — still about 31% more freight for the same job.
|
|
298
|
+
|
|
299
|
+
The two conditions that force the smaller ship are draft and gear. If the
|
|
300
|
+
discharge berth carries nine metres of water, a loaded Kamsarmax at fourteen
|
|
301
|
+
metres cannot enter, and part-cargoing her destroys the per-tonne advantage
|
|
302
|
+
anyway. If the berth has no shore cranes, only a geared vessel can
|
|
303
|
+
discharge, and Panamaxes are usually gearless. A third, softer condition is
|
|
304
|
+
lot size: a buyer who wants 55,000 t is not going to take 66,000 t to help
|
|
305
|
+
your freight.
|
|
306
|
+
|
|
307
|
+
The trap is the day-rate comparison. Freight per tonne has a numerator and a
|
|
308
|
+
denominator, and the denominator is set by physics — hydrography and crane
|
|
309
|
+
fitting — not by the market. The first question is what the berth can take.
|
|
310
|
+
Only then does the rate matter.
|
|
311
|
+
|
|
312
|
+
A2. The margin, twice.
|
|
313
|
+
|
|
314
|
+
As expected After the rally
|
|
315
|
+
---------------------------------------------------------------
|
|
316
|
+
Gross spread (CFR sale − FOB buy) $74.00/t $74.00/t
|
|
317
|
+
Freight −$52.00/t −$72.00/t
|
|
318
|
+
Finance, insurance, port −$6.00/t −$6.00/t
|
|
319
|
+
Margin $16.00/t −$4.00/t
|
|
320
|
+
On 66,000 t $1,056,000 −$264,000
|
|
321
|
+
|
|
322
|
+
A swing of $1,320,000 with the board never moving.
|
|
323
|
+
|
|
324
|
+
As daily hire: $20/t × 66,000 t = $1,320,000, spread over 60 days, is
|
|
325
|
+
$22,000/day. Hire would have to go from about $18,964 to roughly $41,000 —
|
|
326
|
+
near today's Capesize level. The Baltic Dry Index has ranged from 1,261 to
|
|
327
|
+
2,845 over the past 52 weeks, better than a double, so that is not an exotic
|
|
328
|
+
scenario. It is a bad quarter.
|
|
329
|
+
|
|
330
|
+
The open risk was freight, and it was open because the desk sold CFR.
|
|
331
|
+
Selling CFR means promising delivered cargo at a fixed price while still
|
|
332
|
+
having to buy the ocean leg. That is structurally short freight. It hid
|
|
333
|
+
because a position sheet has columns for bushels and lots and none for
|
|
334
|
+
tonne-miles.
|
|
335
|
+
|
|
336
|
+
The instrument is an FFA — a cash-settled swap on the Baltic Panamax index,
|
|
337
|
+
sized to the freight exposure, bought (long) to cover a short-freight
|
|
338
|
+
position. The residual is basis risk in a new suit. The FFA settles against
|
|
339
|
+
the P5TC basket average over a calendar month. The exposure is one voyage,
|
|
340
|
+
on one route, fixed on one day. The Santos route can move against the
|
|
341
|
+
basket, the fixing date can miss the settlement window, and the tonnage
|
|
342
|
+
mismatch is never exact. It is the Black Sea wheat problem from ep 5,
|
|
343
|
+
wearing shipping clothes.
|
|
344
|
+
|
|
345
|
+
A3. Convert the differential first. Soybeans run 36.7439 bu/t, so 15 c/bu ×
|
|
346
|
+
36.7439 ÷ 100 = $5.51/t.
|
|
347
|
+
|
|
348
|
+
US Gulf Santos
|
|
349
|
+
-----------------------------------------
|
|
350
|
+
FOB differential −$5.51/t reference
|
|
351
|
+
Freight to Qingdao $73.81/t $51.98/t
|
|
352
|
+
Delivered, relative +$68.30/t +$51.98/t
|
|
353
|
+
|
|
354
|
+
Santos wins by $16.32/t. The freight spread is $21.83/t and the FOB discount
|
|
355
|
+
recovers only a quarter of it.
|
|
356
|
+
|
|
357
|
+
For the US Gulf to compete, the freight spread has to close by more than
|
|
358
|
+
$16.32/t on its own — the differential is not going to do it, because 15
|
|
359
|
+
c/bu is already a serious concession and $16.32/t is another 44 c/bu on top.
|
|
360
|
+
Freight spreads move for structural reasons: Panama Canal transit
|
|
361
|
+
availability and draft restrictions, Capesize demand pulling Panamax tonnage
|
|
362
|
+
out of the Atlantic, US Gulf river levels forcing part cargoes, and the
|
|
363
|
+
seasonal ballast pattern that leaves ships positioned in the wrong ocean.
|
|
364
|
+
|
|
365
|
+
The Brazilian exporter watches canal draft because it is the cheapest lever
|
|
366
|
+
on his competitor's cost. A draft restriction at Gatún adds days and dollars
|
|
367
|
+
to every US Gulf–Asia voyage, or pushes it around the Cape of Good Hope, and
|
|
368
|
+
every dollar of that lands on the delivered price of the beans he is
|
|
369
|
+
competing with. CBOT moves both origins together and nets out of the arb.
|
|
370
|
+
The canal moves only one of them.
|
|
371
|
+
|
|
372
|
+
A4. The two signals point in opposite directions because they are about
|
|
373
|
+
different horizons.
|
|
374
|
+
|
|
375
|
+
Today the levy is bullish palm: a higher export tax raises the FOB price a
|
|
376
|
+
foreign buyer must pay and withdraws exportable supply, which is a supply
|
|
377
|
+
shock decided in a ministry rather than in a plantation.
|
|
378
|
+
|
|
379
|
+
For the programme it is bearish, because the levy is the funding mechanism
|
|
380
|
+
and the mandate's purpose is to shrink the export base the levy is collected
|
|
381
|
+
on. A subsidy funded by a tax on the thing it is designed to reduce has to
|
|
382
|
+
raise the rate as it succeeds. The rate is therefore the honest gauge of
|
|
383
|
+
affordability. A rising rate says the per-tonne burden on a shrinking export
|
|
384
|
+
volume is climbing, which is exactly the path toward a mandate that gets
|
|
385
|
+
quietly deferred.
|
|
386
|
+
|
|
387
|
+
A freight desk pricing a Panamax to Rotterdam six months forward wants
|
|
388
|
+
export volume, not price. Freight is paid on tonne-miles. If B50 plus the
|
|
389
|
+
levy takes several million tonnes a year out of the Indonesian export
|
|
390
|
+
programme, that is Panamax and Supramax cargoes that stop existing on the
|
|
391
|
+
Indonesia–Europe and Indonesia–India legs, and tonnage that has to
|
|
392
|
+
reposition or accept lower rates. The palm price can rise while the freight
|
|
393
|
+
demand it generates falls. Those are not the same trade.
|
|
394
|
+
|
|
395
|
+
A5. Oil up 2% and meal down 1% moves the oil share up and does very little
|
|
396
|
+
for the board crush, which is a weighted difference rather than a level.
|
|
397
|
+
|
|
398
|
+
Meal is the larger revenue line for a US crusher — a bushel yields roughly
|
|
399
|
+
44 lb of meal and 11 lb of oil — so a 1% loss on meal is close to offsetting
|
|
400
|
+
a 2% gain on oil in absolute dollars. Beans were roughly unchanged, so the
|
|
401
|
+
crush was roughly unchanged: a flat day disguised as a two-way move.
|
|
402
|
+
|
|
403
|
+
If the plant is running at capacity, the crusher would rather see meal lead.
|
|
404
|
+
Meal is where the tonnage is, and meal has to be sold locally into a feed
|
|
405
|
+
market that cannot be arbitraged across an ocean cheaply. An oil-led rally
|
|
406
|
+
is the one the crusher captures least of, because meeting the oil demand
|
|
407
|
+
forces out four pounds of meal for every extra pound of oil, and that meal
|
|
408
|
+
has to find a home at whatever price clears it. This is the joined-at-the-
|
|
409
|
+
bushel constraint: at capacity there is no volume response available, so the
|
|
410
|
+
only thing that helps is the price of the product you are already making the
|
|
411
|
+
most of.
|
|
412
|
+
|
|
413
|
+
A6. A state yield above a national yield is not evidence of anything,
|
|
414
|
+
because they are different populations. The national number is an area-
|
|
415
|
+
weighted average across all producing states, and it includes the ones the
|
|
416
|
+
tour has just called below average — Nebraska, South Dakota, Ohio, Indiana,
|
|
417
|
+
western Iowa. Illinois is usually one of the strongest corn states in the
|
|
418
|
+
country. Its yield sits above the national average in almost every year, so
|
|
419
|
+
184.2 against a national 180.7 says nothing until it is compared with
|
|
420
|
+
Illinois's own history, which is 199.6 last year and 199.2 on a three-year
|
|
421
|
+
average. On that basis it is a very large miss, not a beat.
|
|
422
|
+
|
|
423
|
+
Two things are needed before a tour result moves a sheet. First, the
|
|
424
|
+
methodology gap: Pro Farmer counts ears and measures grain length in a
|
|
425
|
+
sample of fields on a fixed route in mid-August, then applies a fixed
|
|
426
|
+
kernel-weight factor. USDA's August number comes from a farmer survey plus
|
|
427
|
+
objective plot counts, and it will be revised as kernel weight is actually
|
|
428
|
+
measured in September and October. The tour is a good early read on ear
|
|
429
|
+
counts and a poor read on final kernel weight, and kernel weight is where
|
|
430
|
+
the last ten bushels live. Second, the weighting: a yield is worth nothing
|
|
431
|
+
without harvested area behind it. Moving Illinois down fifteen bushels
|
|
432
|
+
changes the national number by roughly the ratio of Illinois harvested acres
|
|
433
|
+
to the US total, so the arithmetic has to be done state by state and
|
|
434
|
+
weighted, not intuited from a headline.
|
|
435
|
+
|
|
436
|
+
A7. The cushion first.
|
|
437
|
+
|
|
438
|
+
Bushels
|
|
439
|
+
-----------------------------
|
|
440
|
+
Carryout, USDA 1,653,000,000
|
|
441
|
+
Target floor 1,400,000,000
|
|
442
|
+
Cushion 253,000,000
|
|
443
|
+
|
|
444
|
+
Across 88.6 m harvested acres that is 253 ÷ 88.6 = 2.86 bu/ac. A yield of
|
|
445
|
+
180.7 falling to about 177.8 takes the carryout to 1.400 bn, all else equal.
|
|
446
|
+
|
|
447
|
+
Using exports as the offsetting line is a behavioural assumption. Exports
|
|
448
|
+
are a competitive outcome: they depend on what Brazil has, on freight, on
|
|
449
|
+
FX, on Chinese buying policy. If the crop shrinks and the price rises,
|
|
450
|
+
exports should fall, so the two lines are genuinely linked and the offset
|
|
451
|
+
has an economic story behind it. But it is a forecast about other people's
|
|
452
|
+
decisions, and it can be wrong in either direction for a whole season.
|
|
453
|
+
|
|
454
|
+
Using feed and residual is a different animal, because that line is not
|
|
455
|
+
measured at all. It is backed out of the quarterly Grain Stocks survey, so
|
|
456
|
+
it absorbs both real livestock feeding and every measurement error in
|
|
457
|
+
production and in stocks. Flexing it is not a demand forecast — it is an
|
|
458
|
+
admission that the sheet does not balance and a decision about where to put
|
|
459
|
+
the difference. Both are legitimate. But one is a view on the world and the
|
|
460
|
+
other is a view on your own arithmetic, and confusing them is how a desk
|
|
461
|
+
convinces itself it has an edge when it only has a rounding error.
|
|
462
|
+
|
|
463
|
+
A8 — Conversion drill. Cross the currency first.
|
|
464
|
+
|
|
465
|
+
Quote Conversion Common currency
|
|
466
|
+
------------------------------------------------------------
|
|
467
|
+
Matif Nov milling wheat €218/t × 1.16 $252.88/t
|
|
468
|
+
CFR Rotterdam cargo $268/t ÷ 1.16 €231.03/t
|
|
469
|
+
|
|
470
|
+
The Matif value is the cheaper of the two, by $15.12/t, or €13.03/t.
|
|
471
|
+
|
|
472
|
+
Now back the freight out of the imported cargo. CFR Rotterdam $268/t less
|
|
473
|
+
$18/t of freight leaves an implied FOB Black Sea of $250.00/t, which at 1.16
|
|
474
|
+
is €215.52/t.
|
|
475
|
+
|
|
476
|
+
Which is the useful part of the exercise: the imported cargo looked $15
|
|
477
|
+
expensive on a delivered basis, but its FOB value sits €2.48/t below the
|
|
478
|
+
Matif quote. The freight was carrying the entire difference and then some.
|
|
479
|
+
Any Matif-versus-origin comparison that skips the freight leg is comparing
|
|
480
|
+
two prices that were never quoted on the same terms.
|
|
472
481
|
|
|
473
482
|
|
|
474
483
|
THE EPISODE, IN WRITING
|
|
475
484
|
=======================
|
|
476
485
|
|
|
486
|
+
Yesterday a Supramax bulk carrier earned $20,651 a day. A Panamax, about a
|
|
487
|
+
third bigger, earned $18,964. The smaller ship was the more expensive ship,
|
|
488
|
+
and it was the more expensive ship per tonne by a much wider margin than
|
|
489
|
+
that gap suggests.
|
|
477
490
|
|
|
491
|
+
That inversion is a good place to start, because it breaks the intuition
|
|
492
|
+
that the dry bulk fleet is a ladder with cheap small ships at the bottom and
|
|
493
|
+
expensive large ones at the top. It is not a ladder. It is four separate
|
|
494
|
+
markets that happen to be measured on the same page.
|
|
478
495
|
|
|
479
|
-
|
|
480
|
-
|
|
481
|
-
|
|
482
|
-
|
|
483
|
-
|
|
484
|
-
|
|
485
|
-
almost nobody in the chain wants the crop.
|
|
486
|
-
|
|
487
|
-
A refiner in Rotterdam, a bottler in Mumbai, a snack manufacturer in Jakarta
|
|
488
|
-
— each is buying a liquid with a melting point, an oxidative stability and a
|
|
489
|
-
price. Within limits, the recipe is a choice. Below a certain spread they
|
|
490
|
-
reformulate toward the cheaper oil; above it they do not. That switching
|
|
491
|
-
behaviour is what welds four crops into one system, and it means the
|
|
492
|
-
substitution spread between two oils is more informative than either flat
|
|
493
|
-
price.
|
|
494
|
-
|
|
495
|
-
Palm is the volume leader. An oil palm produces several tonnes of oil per
|
|
496
|
-
hectare where a soybean produces well under one, which is why a crop grown
|
|
497
|
-
in a narrow equatorial band supplies more vegetable oil than any other
|
|
498
|
-
single source. Its benchmark is the FCPO contract on Bursa Malaysia
|
|
499
|
-
Derivatives.
|
|
500
|
-
|
|
501
|
-
The unit moment. One FCPO lot is 25 tonnes of crude palm oil, quoted in
|
|
502
|
-
Malaysian ringgit per tonne, with a minimum tick of RM 1 — so RM 25 per lot.
|
|
503
|
-
It is quoted in ringgit because it settles against Malaysian physical
|
|
504
|
-
delivery. That is a detail with teeth: it is the only major vegetable oil
|
|
505
|
-
benchmark denominated in neither dollars nor euros, so every non-Malaysian
|
|
506
|
-
hedger acquires a currency position that no part of the underlying trade
|
|
507
|
-
asked for.
|
|
508
|
-
|
|
509
|
-
Crossing into Chicago requires one number. Soybean oil is quoted in cents
|
|
510
|
-
per pound, 60,000 lb to a contract, and 1 c/lb = $22.05/t. Commit that to
|
|
511
|
-
memory and the two halves of the oil world become comparable in a single
|
|
512
|
-
multiplication.
|
|
513
|
-
|
|
514
|
-
Market Quote In $/t
|
|
515
|
-
--------------------------------------------------------------
|
|
516
|
-
Palm, Sep BMD RM 4,648/t at 4.08 RM/$ $1,139
|
|
517
|
-
Soybean oil, CBOT, mid-August 69.00 c/lb $1,521
|
|
518
|
-
Spread $382/t
|
|
519
|
-
|
|
520
|
-
Nearly four hundred dollars a tonne between two liquids that a refiner can,
|
|
521
|
-
within limits, use interchangeably. That gap is not a mispricing waiting to
|
|
522
|
-
be arbitraged. It is the price of two different national policies, and the
|
|
523
|
-
rest of this edition is about how those policies get there.
|
|
524
|
-
|
|
525
|
-
Reading the palm curve
|
|
526
|
-
----------------------
|
|
527
|
-
|
|
528
|
-
Wednesday's palm board also carries a shape worth reading, and it is a
|
|
529
|
-
chance to apply the curve grammar from ep 3 to a market that behaves nothing
|
|
530
|
-
like Chicago wheat.
|
|
531
|
-
|
|
532
|
-
[chart] The carry is front-loaded — Most of the 312-ringgit carry sits in
|
|
533
|
-
the first spread and it shrinks steadily thereafter. The market is
|
|
534
|
-
paying hardest to move oil out of September, which is a statement
|
|
535
|
-
about the next few weeks rather than about the fourth quarter. —
|
|
536
|
-
Derived from MDEX crude palm oil closing quotes, Wednesday 19 August
|
|
537
|
-
2026. — https://storage.googleapis.com/podcast-
|
|
538
|
-
audio-2647223968/commodity-desk-daily/ep09_chart2.png
|
|
539
|
-
|
|
540
|
-
The curve rises RM 312 from September to December, roughly $76/t, or about
|
|
541
|
-
6.7% over three months. On the ep 3 framing that is a carry market: the
|
|
542
|
-
board is paying you to hold oil rather than sell it prompt. But the
|
|
543
|
-
decomposition matters more than the total. The Sep–Oct spread alone is RM
|
|
544
|
-
139, and each subsequent spread is smaller. A carry that is front-loaded is
|
|
545
|
-
not a general statement that oil is abundant. It is a statement that oil is
|
|
546
|
-
abundant now, and that the market expects the fourth-quarter production
|
|
547
|
-
decline — palm's output falls seasonally into the northern winter — to
|
|
548
|
-
tighten things later.
|
|
549
|
-
|
|
550
|
-
A mandate is a standing bid
|
|
551
|
-
---------------------------
|
|
552
|
-
|
|
553
|
-
Ordinary demand curves slope downward. Somebody stops buying when the price
|
|
554
|
-
rises. This is the assumption underneath every balance sheet: the demand
|
|
555
|
-
lines are estimates of behaviour, and behaviour responds to price.
|
|
556
|
-
|
|
557
|
-
A mandate breaks that. A blender legally required to put 50% biodiesel into
|
|
558
|
-
the diesel pool does not walk away at a higher palm price. He pays, or he
|
|
559
|
-
does not sell fuel. That converts a political decision into a standing bid —
|
|
560
|
-
demand that exists regardless of price — and it is the single most important
|
|
561
|
-
structural fact about vegetable oils today.
|
|
562
|
-
|
|
563
|
-
Work the Indonesian number, because the arithmetic is the lesson.
|
|
564
|
-
|
|
565
|
-
Step Working Result
|
|
496
|
+
The fleet, and why the sizes are not arbitrary
|
|
497
|
+
----------------------------------------------
|
|
498
|
+
|
|
499
|
+
The classes, in deadweight tonnes:
|
|
500
|
+
|
|
501
|
+
Class Deadweight Typical cargo Gear
|
|
566
502
|
----------------------------------------------------------------------------
|
|
567
|
-
|
|
568
|
-
|
|
569
|
-
|
|
570
|
-
|
|
571
|
-
|
|
572
|
-
|
|
573
|
-
|
|
574
|
-
|
|
575
|
-
|
|
576
|
-
|
|
577
|
-
|
|
578
|
-
|
|
579
|
-
|
|
580
|
-
|
|
581
|
-
|
|
582
|
-
|
|
583
|
-
|
|
584
|
-
|
|
585
|
-
|
|
586
|
-
|
|
587
|
-
|
|
588
|
-
|
|
589
|
-
|
|
590
|
-
|
|
591
|
-
|
|
592
|
-
|
|
593
|
-
|
|
594
|
-
|
|
595
|
-
|
|
596
|
-
|
|
597
|
-
|
|
598
|
-
|
|
599
|
-
|
|
600
|
-
|
|
601
|
-
|
|
602
|
-
|
|
603
|
-
|
|
604
|
-
|
|
605
|
-
|
|
606
|
-
|
|
607
|
-
|
|
608
|
-
|
|
609
|
-
|
|
610
|
-
|
|
611
|
-
|
|
612
|
-
|
|
613
|
-
A bushel of soybeans yields 11 lb of oil and 44 lb of meal, in fixed
|
|
614
|
-
proportion. One billion pounds of oil therefore requires about 91 million
|
|
615
|
-
bushels of additional crush — and that crush produces about 4.0 billion
|
|
616
|
-
pounds of meal, or 2.0 million short tons.
|
|
617
|
-
|
|
618
|
-
That meal was not requested by anyone. It has to be fed to an animal,
|
|
619
|
-
somewhere, at some price, and the price is what adjusts. So the chain runs:
|
|
620
|
-
a fuel rule bids up oil, crushers raise run rates, meal supply floods, and
|
|
621
|
-
the meal price falls. Ep 8's board crush formula makes the consequence
|
|
622
|
-
arithmetic rather than opinion — meal × 0.022, plus oil × 0.11, minus the
|
|
623
|
-
bean. An oil-driven demand shock lifts the second term, depresses the first,
|
|
624
|
-
and raises the third as crushers compete for beans. The crush captures far
|
|
625
|
-
less of the move than the oil chart suggests.
|
|
626
|
-
|
|
627
|
-
The general principle is worth stating cleanly: any demand shock arriving
|
|
628
|
-
through one joint product must be released through the other. Fixed
|
|
629
|
-
proportions make the by-product the shock absorber, and the by-product
|
|
630
|
-
market is where the price damage lands. A fuel policy is always, whether it
|
|
631
|
-
intends to be or not, a protein policy.
|
|
632
|
-
|
|
633
|
-
Why balance sheets now have an energy term
|
|
503
|
+
Handysize 10,000–40,000 dwt Minor bulks, short Geared
|
|
504
|
+
legs
|
|
505
|
+
Supramax 50,000–60,000 dwt Minor bulks, grain Geared
|
|
506
|
+
part cargoes
|
|
507
|
+
Panamax / 75,000–82,000 dwt Grain, coal Usually gearless
|
|
508
|
+
Kamsarmax
|
|
509
|
+
Capesize 180,000 dwt and up Iron ore, coal Gearless
|
|
510
|
+
|
|
511
|
+
Deadweight is not cargo. It is everything the ship can carry: cargo,
|
|
512
|
+
bunkers, fresh water, stores, crew and their effects. An 82,000 dwt
|
|
513
|
+
Kamsarmax sailing Santos to Qingdao is carrying something like 3,000 tonnes
|
|
514
|
+
of fuel before a single bean goes in the hold. She loads roughly 66,000 t.
|
|
515
|
+
Treating dwt as cargo capacity overstates a cargo by a fifth, and that error
|
|
516
|
+
propagates straight into a freight-per-tonne number.
|
|
517
|
+
|
|
518
|
+
The classes exist because of draft — the depth of hull below the waterline,
|
|
519
|
+
which increases as the ship loads. A fully laden Panamax draws about
|
|
520
|
+
fourteen metres. A very large number of the world's berths, rivers and
|
|
521
|
+
approach channels cannot take fourteen metres. When they cannot, there are
|
|
522
|
+
exactly two options: load the big ship partly full, which is called a part
|
|
523
|
+
cargo and throws away the scale advantage, or take a smaller ship.
|
|
524
|
+
|
|
525
|
+
The second constraint is gear. A Supramax normally carries its own cranes. A
|
|
526
|
+
Panamax normally does not. If the discharge berth has no shore equipment,
|
|
527
|
+
the vessel class has already been decided, and no freight rate changes that.
|
|
528
|
+
|
|
529
|
+
This is why the Sea of Azov story is a vessel-class story rather than a
|
|
530
|
+
tonnage story. Azov is shallow water worked by 3,000–5,000 t river-sea
|
|
531
|
+
vessels drawing under five metres. When that trade is shut, the world's
|
|
532
|
+
spare Panamax tonnage is entirely irrelevant to it. The ships that fit
|
|
533
|
+
cannot sail, and the ships that can sail do not fit.
|
|
534
|
+
|
|
535
|
+
The screens: what a Baltic index actually is
|
|
536
|
+
--------------------------------------------
|
|
537
|
+
|
|
538
|
+
The Baltic Exchange publishes a headline index, the BDI, and a sub-index for
|
|
539
|
+
each class. On Thursday the BDI printed 2,791, up 15.
|
|
540
|
+
|
|
541
|
+
Here is the unit moment that matters most on this subject: those points are
|
|
542
|
+
not a price, and nobody can pay them. The Baltic surveys a panel of
|
|
543
|
+
shipbrokers each day on a fixed basket of named routes, then converts the
|
|
544
|
+
assessments into a time charter equivalent — TCE, in dollars per day. That
|
|
545
|
+
is the number a shipowner thinks in, because it is what lets him compare a
|
|
546
|
+
grain voyage against a coal voyage against a period fix.
|
|
547
|
+
|
|
548
|
+
Index Points Average earnings
|
|
634
549
|
------------------------------------------
|
|
550
|
+
Capesize (BCI) 4,376 $39,684/day
|
|
551
|
+
Panamax (BPI) 2,107 $18,964/day
|
|
552
|
+
Supramax (BSI) 1,634 $20,651/day
|
|
553
|
+
Handysize (BHSI) 867 $15,605/day
|
|
554
|
+
|
|
555
|
+
Read the middle two again. The Supramax is the smaller vessel and it is
|
|
556
|
+
earning more per day. They are different trades: Panamaxes live on coal and
|
|
557
|
+
large grain lots, Supramaxes on minor bulks and shorter legs, and US Gulf
|
|
558
|
+
Supramax routes have been firming recently while Asia-Pacific has gone
|
|
559
|
+
quiet.
|
|
560
|
+
|
|
561
|
+
[chart] Same cargo, two vessel classes — A 60-day round voyage at
|
|
562
|
+
Wednesday's rates. The Supramax costs 31% more per tonne — a higher
|
|
563
|
+
day rate spread across fewer tonnes, so the penalty compounds.
|
|
564
|
+
Nobody chooses this. The berth chooses it. — Worked example, episode
|
|
565
|
+
10, using Baltic average earnings of 18,964 and 20,651 USD per day.
|
|
566
|
+
— https://storage.googleapis.com/podcast-audio-2647223968/commodity-
|
|
567
|
+
desk-daily/ep10_chart2.png
|
|
568
|
+
|
|
569
|
+
The two currencies of freight
|
|
570
|
+
-----------------------------
|
|
571
|
+
|
|
572
|
+
Freight is quoted two ways, and fluency in both is not optional.
|
|
573
|
+
|
|
574
|
+
Voyage charter Time charter
|
|
575
|
+
----------------------------------------------------------------------------
|
|
576
|
+
Unit $/tonne of cargo $/day of hire
|
|
577
|
+
What you buy Carriage of a stated The vessel itself, for a
|
|
578
|
+
cargo between named ports period
|
|
579
|
+
Weather and speed risk Owner Charterer
|
|
580
|
+
Port queue and delay Owner (subject to laytime Charterer
|
|
581
|
+
and demurrage)
|
|
582
|
+
Bunkers Owner Charterer
|
|
583
|
+
|
|
584
|
+
Same steel, two prices, two completely different risk allocations.
|
|
585
|
+
Converting between them is what a chartering desk does all day, and the
|
|
586
|
+
conversion is never clean, because it requires a view on how long the voyage
|
|
587
|
+
will actually take.
|
|
588
|
+
|
|
589
|
+
That view is the whole argument:
|
|
635
590
|
|
|
636
|
-
|
|
591
|
+
| TRADER: Sixty-six Santos, first half October. What's it costing me?
|
|
637
592
|
|
|
638
|
-
|
|
639
|
-
|
|
640
|
-
because it is cheaper than gasoil, with no subsidy and no legal obligation.
|
|
641
|
-
Through the middle of this year that bid was live, because gasoil rallied
|
|
642
|
-
roughly 30% in a fortnight and inverted above both palm and soybean oil,
|
|
643
|
-
making the blend profitable on its own economics.
|
|
593
|
+
| CHARTERER: Fifty-two on voyage. Or I put you on a Kamsarmax, time
|
|
594
|
+
| charter, nineteen five.
|
|
644
595
|
|
|
645
|
-
|
|
646
|
-
dangerous for a crop analyst.
|
|
596
|
+
| TRADER: Which one do I want?
|
|
647
597
|
|
|
648
|
-
|
|
649
|
-
same tonnes.
|
|
598
|
+
| CHARTERER: Depends who you think eats the queue at Santos.
|
|
650
599
|
|
|
651
|
-
|
|
652
|
-
|
|
653
|
-
|
|
600
|
+
Neither of them called freight $52 and left it there. One number is a price;
|
|
601
|
+
the other is a transfer of risk. Whichever is cheaper depends on the line-up
|
|
602
|
+
at Santos in October, and neither of them knows the line-up in October. What
|
|
603
|
+
they are actually negotiating is who carries that ignorance.
|
|
654
604
|
|
|
655
|
-
|
|
656
|
-
|
|
657
|
-
|
|
658
|
-
|
|
605
|
+
The arb, and the leg everybody leaves open
|
|
606
|
+
------------------------------------------
|
|
607
|
+
|
|
608
|
+
Baltic route assessments this week put P7, US Gulf to Qingdao, at $73.81/t,
|
|
609
|
+
and P8, Santos to Qingdao, at $51.98/t. That $21.83/t gap decides whose
|
|
610
|
+
beans China buys far more often than the FOB differential does — 15 c/bu of
|
|
611
|
+
origin discount is only $5.51/t, barely a quarter of the freight spread.
|
|
659
612
|
|
|
660
|
-
|
|
661
|
-
|
|
662
|
-
understate demand, and book the missing tonnes to residual. Add the line at
|
|
663
|
-
the top of the cycle, then carry it forward through a 30% crude decline, and
|
|
664
|
-
you will overstate demand by exactly the amount you were previously missing.
|
|
665
|
-
Both errors feel like diligence at the time.
|
|
613
|
+
Now the trade that actually kills people. Buy 66,000 t FOB Santos, sell the
|
|
614
|
+
same cargo CFR Qingdao.
|
|
666
615
|
|
|
667
|
-
|
|
668
|
-
|
|
669
|
-
|
|
670
|
-
|
|
616
|
+
Line $/tonne
|
|
617
|
+
------------------------------------------
|
|
618
|
+
Gross spread (CFR sale − FOB buy) 74.00
|
|
619
|
+
Freight −52.00
|
|
620
|
+
Finance, insurance, port −6.00
|
|
621
|
+
Margin 16.00
|
|
622
|
+
|
|
623
|
+
Sixteen dollars a tonne is $1,056,000 on the cargo. Sell the board against
|
|
624
|
+
the physical and flat price is gone. Both differentials are agreed in
|
|
625
|
+
writing. The trade looks locked.
|
|
626
|
+
|
|
627
|
+
Except the vessel is not fixed. Freight rallies $20/t before it is.
|
|
628
|
+
|
|
629
|
+
[chart] Santos to Qingdao, one Panamax — Freight is two thirds of the gross
|
|
630
|
+
spread before a single dollar of margin is counted. A twenty-dollar
|
|
631
|
+
rally on the unfixed leg turns 1.06 million dollars of profit into a
|
|
632
|
+
264,000 dollar loss, and the board never moved. — Worked example,
|
|
633
|
+
episode 10, freight from Baltic P8 Santos–Qingdao at 51.98 USD per
|
|
634
|
+
tonne. — https://storage.googleapis.com/podcast-
|
|
635
|
+
audio-2647223968/commodity-desk-daily/ep10_chart3.png
|
|
636
|
+
|
|
637
|
+
The margin goes to −$4.00/t, a loss of $264,000. A swing of $1.32 m on a
|
|
638
|
+
fully hedged trade.
|
|
639
|
+
|
|
640
|
+
Is $20/t an outrageous move? Spread over the 66,000 t cargo and the 60-day
|
|
641
|
+
round voyage, it is about $22,000 a day of extra hire — taking a Panamax
|
|
642
|
+
from $18,964 to roughly $41,000, which is near today's Capesize level. The
|
|
643
|
+
BDI has ranged between 1,261 and 2,845 over the past 52 weeks, better than a
|
|
644
|
+
double. Twenty dollars is not a tail event. It is a bad quarter.
|
|
645
|
+
|
|
646
|
+
The position nobody writes down
|
|
647
|
+
-------------------------------
|
|
648
|
+
|
|
649
|
+
Here is the sentence worth keeping: the moment a CFR sale is made and no
|
|
650
|
+
vessel is fixed, the seller is short freight.
|
|
651
|
+
|
|
652
|
+
It runs both ways. Buy CFR and sell FOB and the position is long freight.
|
|
653
|
+
Two trades can look identically flat on the grain and point in opposite
|
|
654
|
+
directions on the ocean.
|
|
655
|
+
|
|
656
|
+
The reason this hides is structural rather than careless. A position sheet
|
|
657
|
+
has columns for bushels, lots, months and locations. It very rarely carries
|
|
658
|
+
freight at the same resolution, and when it does, the exposure is often
|
|
659
|
+
booked at the expected rate rather than marked to the index. A book that is
|
|
660
|
+
flat in every grain column can be carrying seven figures of directional
|
|
661
|
+
freight risk that nothing on the page names.
|
|
662
|
+
|
|
663
|
+
FFAs are the answer, as far as there is one: cash-settled swaps on a Baltic
|
|
664
|
+
index route or basket, over a calendar month. A short-freight position is
|
|
665
|
+
covered by buying FFAs. But the hedge is an index built from a basket of
|
|
666
|
+
named routes, and the exposure is one voyage on one route fixed on one day.
|
|
667
|
+
The route can move against the basket, the fixing can miss the settlement
|
|
668
|
+
window, and the tonnage never matches exactly. This is the cross-hedge
|
|
669
|
+
problem from ep 5 — a Black Sea cargo hedged on Matif — wearing shipping
|
|
670
|
+
clothes.
|
|
671
|
+
|
|
672
|
+
Underneath the freight sits fuel. A Panamax burns roughly 30 t a day at sea,
|
|
673
|
+
so a 60-day voyage is about 1,800 t of bunkers. A hundred-dollar move in
|
|
674
|
+
fuel is $180,000, or $2.73/t on the cargo — seventeen percent of a sixteen-
|
|
675
|
+
dollar margin, decided in the oil market. On a voyage charter the owner
|
|
676
|
+
wears it. On a time charter, the charterer does, which is a large part of
|
|
677
|
+
what the two quotes in that dialogue were really about.
|
|
678
|
+
|
|
679
|
+
Why merchants charter rather than own
|
|
680
|
+
-------------------------------------
|
|
681
|
+
|
|
682
|
+
If freight matters this much, why does almost every merchant rent its
|
|
683
|
+
tonnage?
|
|
684
|
+
|
|
685
|
+
Three reasons, and only the third is about shipping.
|
|
686
|
+
|
|
687
|
+
A ship is a twenty-five-year asset and a cargo is a sixty-day problem.
|
|
688
|
+
Owning one to solve the other means holding a two-decade position to cover a
|
|
689
|
+
two-month exposure, which is not a hedge — it is a second business.
|
|
690
|
+
|
|
691
|
+
The merchant's edge is knowing where the cargo is, not knowing where the
|
|
692
|
+
ship is. Those are genuinely different information games, played by
|
|
693
|
+
different people, on different cycles.
|
|
694
|
+
|
|
695
|
+
And shipping is more violently cyclical than grain. A trading margin
|
|
696
|
+
financed by a shipping balance sheet stops behaving like a trading margin:
|
|
697
|
+
the freight cycle's drawdowns are deep enough to constrain the working
|
|
698
|
+
capital that the grain business runs on, at exactly the moments when grain
|
|
699
|
+
opportunities appear.
|
|
700
|
+
|
|
701
|
+
The houses that do own tonnage mostly own it for a narrower reason: to
|
|
702
|
+
guarantee access on the days when access, not price, is the binding
|
|
703
|
+
constraint. That is a real reason. It is just not a trading reason, and the
|
|
704
|
+
distinction is worth holding onto, because it is the same distinction that
|
|
705
|
+
separates owning an elevator from having a view on basis — which is Monday's
|
|
706
|
+
subject.
|
|
671
707
|
|
|
672
708
|
|
|
673
709
|
----------------------------------------------------------------------------
|
|
@@ -675,7 +711,7 @@ Soft Commodity Trading — a daily briefing on physical commodity trading.
|
|
|
675
711
|
|
|
676
712
|
GLOSSARY
|
|
677
713
|
Every unit and expression the show has introduced lives on the episode page:
|
|
678
|
-
https://storage.googleapis.com/podcast-audio-2647223968/commodity-desk-daily/
|
|
714
|
+
https://storage.googleapis.com/podcast-audio-2647223968/commodity-desk-daily/ep10.html#glossary
|
|
679
715
|
|
|
680
716
|
All episodes: https://storage.googleapis.com/podcast-audio-2647223968/index.html
|
|
681
717
|
RSS: https://storage.googleapis.com/podcast-audio-2647223968/commodity-desk-daily/feed.xml
|