Good morning friends!
Corn 351’6 -‘6
Soybeans 995’0 +12’4
Chi Wheat 413’6 -1’0
KC Wheat 422’4 +1’0
Cotton 68.82 -.23
The schedule this week is light on grain specific data other than the normal weekly reports. On the Macro side, we get another Mario Draghi speech on Tuesday, and US GDP on Friday. I expect a quiet week with cotton and soybeans susceptible to pull backs and corn, wheat susceptible to surges.
Soybeans took off on a Sunday night when November found itself with a bunch of new positions because of option expiration on Friday’s close. Going forward, January soybeans will be tracked in the price updates listed above. November beans look poised to break above 10.00 which is a really good sign long term for bulls. The idea prices can close near highs of the 3 month range following a record harvest is one the bulls will be happy to except. I remain skeptical of soybeans longer term at these levels if corn and wheat are to remain depressed, but in the short run 1020-1050 is in the cards given the amount of demand out there from China and the shortage in the global market for edible oils. I remain more bearish the new crop 2017 contracts, soybean planting estimates will be record in the US. Much of this price action is driven by Malaysian palm oil, so be careful.
Corn and wheat are quiet following expiration of the serial Nov options on Friday. The soybean price action is promising for the other row crop markets as it gives optimism that prices can get to levels where producers can turn a profit. Managed money remains short in corn and wheat, but much less so than a few weeks ago.Fundamentally, what we are seeing makes sense. Grain prices have only partially followed the soy complex, but struggle amid expanding harvests. Non-commercial traders since early October have covered a net 123,000 contracts of corn and 50,000 contracts of wheat in Chicago. A further lasting rally requires new bullish input, like a weather problem in South America?
Cotton is giving bears like myself fits as the price action remains choppy. Cotton is down this morning as data from China does not support the argument for further demand. I am not here to argue that China or Pakistan or India will not be in the market for US cotton supplies. I am here to tell you that its becoming priced in that they will be in the market for US supplies, but the data doesn’t support. Dec cotton on Friday fell to a 1-week low on weak Chinese demand after Chinese Customs data showed China Jan-Sep cotton imports down -44% y/y to 654,277 MT. Maybe they are waiting to see how harvests develop but demand shouldn’t be that drastically different in Q4.
I would remain short cotton, looking to establish short positions for 2017 soybeans and remain long corn and wheat, buying on breaks and selling calls on rallies.
(Sorry, no pod this morning, Ill be back this afternoon)
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