Good morning friends!
Corn 348’2 -‘6
Soybeans 999’2 +8’4
Chi Wheat 415’0 +’6
KC Wheat 412’4 +1’0
Cotton 69.33 +.80
Welcome to the BIG WEEK. To say its a big week is an understatement. Normally a week would be considered big by my standards if we get one major market moving report, this week we get two events colliding that should produce a decent move one way or the other. The first is the election on Tuesday and the second is the USDA WASDE report on Wednesday.
It sounds like there has been a modest shift in thinking by the market back to a Clinton victory. The FBI has apparently moved on from the latest findings and the early turnout of minority voters has some thinking Clinton has a few point edge right now. But remember, the battle for president is the main event, not the whole show. Congress could look much different as well, so be ready for everything. I would probably be buying volatility in the currency markets if I was inclined to put some money to work ahead of Tuesday. Here is a chart showing the different currency moves since the latest FBI Clinton story broke the week before last.
The second “main event” for the week is the USDA WASDE report, released at 11 am central on Wednesday. If you are looking for a worst case scenario for Ag, it would be a negative price reaction from the election (probably a trump win) and then a bearish yield jump in beans, corn and cotton alike. I doubt we see something like this but if the dominoes fall a certain way, you will probably be wishing you had some cheap protection on for new crop markets like beans and cotton as they hold the most yield risk. . I do not feel it is necessary in corn given the price relative to the cost of production. I am encouraging producers to look at cheap March short dated puts in soybeans and the outright puts in cotton (March). The key at this point is to protect insurance levels given the November.
After the election, its about weather! It sounds like rainfall will be increasing in Northern Brazil (drier area) while a drier trend evolves for Southern Brazil and Argentinian (sitting on decent soil moisture). Both are welcomed and will favor crop yields. With the bulk of the northern bean crop in the ground, the arrival of soaking rains will favor the soybean and 1st corn crops. The weekend was dry across S Brazil and Argentina with high temps ranging from the 70’s to the 80’s. The sunshine allowed soils to firm enough to support planting machinery. As of right now there is little crop threat to note.
US weather favors a resumption of cotton harvest activity this week along with a substantial warm/dry pattern holding over most of the US growing region, specifically out west. I expect wheat conditions to drop this week from the lofty numbers where the USDA pegged them to start the week. Look for the election and USDA report to dominate the price action though, especially through the back half of the week.
I remain bearish cotton, keeping sales in place near 68 cents and looking to sell Dec 17 on a push toward 73. I doubt it gets there anytime soon given the strung out spec position but weather should trump all if a reversal in the forecasts should occur. I would also recommend selling November soybeans and buying corn/wheat on breaks.
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