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| Couple thoughts.
This "trade" has been in the works for days and or weeks. As is the next one. The futures market has been telling the trade by its behavior that business is working. What the market saw today was transfer of risk from those who knew.....to those who didn't.
Who knew? The arteries and veins of the cash trade. ABCDE grain companies
Who didn't? US producers, Virgin Specs, and the Jr High club,social media and the funds.
The uncovered risk to the commercial and to the international buyer ( China or otherwise) is basis. It is not flat px. They do not call and ask for flat px nor will they ask the seller to spot the board or go into the market for their account. They want basis values and most will xcfo (exchanges futures options ) to set ultimate flat price.
If some do want flat price it's generally a tender format over night with flat price offers through 9am CDT. More common on nickel and dime business.
They will call direct to commercials within established relationships as well as use some established cash brokers to do the leg work of price discovery.
Likely the futures ownership by the likes of COFCO and others has been going on for weeks/months.
Think of them simply as a rational end user. They also read charts, watch seasonal trends, and etc.
They want to buy low and sell high....changing the form of their coverage from paper to cash based on international values and options. They always have some sort of position leaning long. Especially when
the market is at a carry and the price starts with an 8 or 9.
Because Cash bean markets have been at a carry , the US cash side of this trade simply keeps the pipeline moving. Aggregatly nobody needs to blow their foot off to buy the cash. Basis ownership has been Trading 101 since harvest. Buy all you can hold or your paper position limit allows, sell when opportunity arises, replace asap.
This business trades all US Gulf. River bids moving 7-8 cents better. ( Bean trade and moderating weather) PNW markers showing no movement and in some cases no bid. Freight markets also weaker. ....supporting Gulf execution.
In short, futures market moves made on announcement day are a secondary response and likely have some level of participation from the buyers.....as sellers.
In contrast, I would estimate 40% of Mexican imports from US are traded flat price. Buyer and seller will spot the board and US seller will buy his futures back while Mexican is simply just a consumer at that given price level. Just a flat price short. Mexicans tend to have an auction that may last over a week.
Wheats can be more a flat price trade with sellers offering from various countries and time zones.
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Maize, RayJ, Rod, Kornkrush
