Good evening friends!
Corn 337’2 (-8’2)
Soybeans 946’0 (-8’2)
Chi Wheat 396’2 (-11’0)
KC Wheat 397’2 (-9’0)
Cotton 68.90 (+1.54)
October WASDE is in the books, the three major row crops all took it on the chin while cotton jumped away from 67 cents on a production miss.
I didn’t find the report overly bearish in any market relative to expectations, but the action was bloody. Chicago wheat got pushed around, you could clearly see the covering of recent longs, volume was coming in as stops were hit below 4.00. KC powered back above Chicago wheat, the extreme open interest position where Chicago is right now, showed itself. I expect the corn and wheat markets to find some footing in the next few days. Dec could test 320 but Im a buyer down there for sure (July 350). The US numbers changed for the better in corn and wheat when looking at world ending stocks, and better for corn in the USDA domestic stocks number. The wheat saw carryout grow again but only slightly. As someone who likes the long side in some of the deferred contracts I found no reason to change plans in corn. In wheat I will remain long and willing to pay the carry charge to stay long. Eventually the short position unwinds itself but it I think the market is going to get closer to new crop before that can happen.
Beans are more of a wild card as I feel on a percentage basis they could probably fall the furthest.The world numbers grew from 72 MMT to 77 MMT, but you have to remember a new So. American crop was included. Those are objective carry outs that could dent the market longer term but in the short run, the increase does not exist yet. Beans actually rallied on the number release, only to be sold into as we broke 970. If beans break the 930 low from a few weeks back, its probably headed to 9 quickly. If you plan on selling in Dec, a position on the board makes sense. Supply changes should bring prices lower. There is room for longs to cover and shorts come in on the spec side, the OI and fundamentals support as well.
Cotton looked like it was making a run back to 70 cents, but then fell apart toward the close. Stocks to use in cotton fell from 32% to 27%. It remains above where it was a year ago at 22%. Forward carryout remains healthy. Like wheat, the spreads told the tale in cotton. Dec 16-17 spread was pushed intraday as longs came into the front of the curve. They failed on the push toward 70 cents, it just feels like the pool of longs is exhausted. Weather will remain key as the another reduction like this could squeeze the December 16 shorts again. I remain bearish and encourage hedges on Dec 17, the gap at 72-73 would be my ultimate goal. Bottom line is the higher the price, the more certainty an acreage hike will be.
Here are the numbers, Ill be back with the podcast tomorrow as I got a little jammed up with the WASDE today.
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