Good morning friends!
Corn 356’2 +2’2
Soybeans 971’4 +9’2
Chi Wheat 423’2 +2’2
KC Wheat 419’6 +2’0
Cotton 69.99 -.58
Markets open the week in a positive mood after last weeks upside reversal in favor of the bulls. Other than today’s NOPA Crush report, this week will be outside market focused as the only USDA reports (other than the normal weekly stuff) will be in cattle with COF released on Friday. Chinese GDP data and an ECB meeting will dictate US price action along with headlines coming from the US election. November options expire on Friday, I expect November beans to be especially active this week as its a big expiration for that contract.
CBOT as funds continue to reduce their net short grain holdings. Soybean futures rose to sharp gains on the big overnight rally in palm oil futures to new highs in active volume. The US dollar is slightly weaker with crude. NOPA will release their crush estimates this morning with a crush rate of 126-128 MBu expected with a sharp fall in soyoil stocks due to strong export and bio diesel demand. The excitement in palm oil is good for soybeans and bean oil, but major rallies need to be meal driven. RIght now meal is lagging. We are hearing Mato Grosso has planted 32% of its 2017 soybean crop against 14% last year and 22% on average. The rapid seeding pace is expected to continue this week amid drier than normal weather conditions. The word out of Brazil so far is DRY, but there are rains in the forecast, Ill keep you in the loop on that.
Watch July corn at the 380 level, that is my key here. If the market gets a push and close through that level, we could see more short covering. The problem with rallies above these levels in Dec 17 is the bearish drag we will have with acres for next year. Dec 17 above 4.00 will probably bring another 92 million acres, which is enough to push carryout with a good yield.
Cotton needs more fuel to push price in the short run. The recent short covering run has brought Dec 16 to almost even money with Dec 17. If you are bullish cotton, this is a decent way to get long as the Dec 17 appears to be somewhat contained here as acreage will be an issue next year. If conditions deteriorate further, the commercials may jump in and push the front month through early purchases or buy backs. The spec longs are tapped out in my opinion.
I remain bullish corn and wheat (buy breaks), neutral-bearish beans and bearish cotton. The only outstanding recommendation I have is to sell Dec 17 cotton near 73 cents.
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