Good morning friends!
Corn 340’4 (unch)
Soybeans 960’4 (+2’0)
Chi Wheat 396’4 (+’2)
KC Wheat 407’2 (+2’2)
Cotton 67.56 (-.06)
This week has seen incredibly slow overnight trading ranges, last night was no different. In grains, but British pound traders need to be on the lookout this morning. That market got hammered a few hours ago, so be on the alert for wacky price action today.
Markets for corn, beans and wheat appear content to trade within ranges until either we get validation of heavy US supplies or some story out of South America to get the global supply side nervous. Neither came clear this week as US producers sit idle in fields waiting for moisture levels to fall. The South American story saw some fog lifted yesterday with CONAB giving us a baseline from which to work, but that story is still in the first chapter.
European cash wheat traders are reporting that the Ukraine has sold at least 400,000 MTs of wheat to India. The Ukraine wheat selling pace has increased this week which accounts for the slight rise in Black Sea fob wheat prices. Im hearing that India could be in the market for more. I do not expect them to come to the US for any product, but residual buying from Ukraine should help our prices compete with others who are buying from the same market. I like buying KC/Chi March contract spreads on breaks toward even money and KC wheat outright in the July contract. Collars are my weapon of choice.
November soybeans have bounced on both sides of unchanged in the overnight. We saw another round of killer US export sales yesterday, while CONAB’s first soybean production estimate showed a record large soybean crop of 101.9-104 MMT. . It’s been a range bound market, caught between big exports and what looks like large global supplies. I like selling beans ahead of the USDA report as it feels like everyone is waiting for supply confirmation before heading to the elevator. With November soybean expiration upon us (2 weeks from today), I would look at buying volatility ahead of the numbers on Wednesday if you have beans to sell in weeks ahead. Telluslabs KERNEL satellite has bean yields near 52.5. I don’t think the USDA will come in that high, but I expect a hike.
Corn is seeing farmer pressure limit gains that technical traders and short covering are willing to provide. Telluslabs KERNEL satellite has shown yields improving over the last week, hiking to 173.0. Corn downside feels limited, I am trading under the assumption that a break back into the 320 level for December will see aggressive buying in futures. The trade is still very, very short and the longs got some good news yesterday, the CME is lowering margins by about $100 per contract. Margin pressure wont be a problem for the longs, it will for the shorts. I remain bullish corn, buying July on breaks into the 350 price area.
The Adjusted World Price (AWP) for cotton will be 58.71 cents per pound, effective October 7, down from 60.09 cents per pound the prior week. The AWP has now been under 60 cents per pound six out of the last seven weeks. Cotton producers would need the ICE board price to fall below that level to collect LDP payments. For 2016 crops, so far only wheat producers have collected LDPs, with payouts on 406 million bu. totaling $76.5 million. For the 2015 crop year, upland cotton producers collected LDPs on 5.115 million bales totaling $139.6 million. Cotton producers should have a decent year in Texas, thanks to the margins provided by the speculators but I think the party is coming to an end over the short term. US cotton stocks to use will hit 8 year highs, hedge what you plan to sell this winter now if possible.
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