Good afternoon friends!
Corn 337’2 -3’0
Soybeans 984’2 -1’6
Chi Wheat 394’0 -9’0
KC Wheat 402’6 -7’4
Cotton 68.90 +.46
Feed grain markets were on the run today as “high supply” doesn’t appear to be meshing well with “higher interest rates”. That is probably a lazy correlation but one has to assume the higher cost of capital will hit markets where capital represents supply, which is the case when looking at wheat and corn. The CBOT selling has been based on a surging US dollar/ rising US interest rates and selling in the emerging markets as the cost to participating in the markets of the developed world is getting more expensive.
US grain export inspections for the week ending November 10th were again solid for soybeans. Corn and wheat inspections came in less than expected, while weekly soybean exports were the 2nd largest on record, just behind the 2014 record total of 104 Mil Bu. Year to date, the US has shipped 82% over last year in corn,17% higher in soybeans, and 28% higher in wheat. The soybean export pace is surpassing the USDA annual forecast with over 1.4 billion to be shipped out by the end of January. Total export estimates are just over 1.8 billion for next year alone! We got more sales announced this morning as USDA reported that US exporters sold 175,000 MTs of sorghum to China for delivery in 2016/17 along with 456,000 MTs of US soybeans sold to China and unknown destinations. I am reading that China will be looking to move forward contracts to Brazil in the near future. We will see.
Cotton futures remain locked in a sideways battle as December moves into the delivery period. Dec options expired on Friday. Fundamentally, things appear to be at standstill right now between the bearish production hikes out of Texas against better demand out of the biggest two global producers and a weaker Chinese currency. Over the medium term I remain on the defensive with the spec long position above 70 k and the supply growing. Harvest will speed along in coming weeks, I look for a break of the trendline going back to Q1 to happen sometime around the acreage reports that will show better plantings. Cotton and soybeans are two markets that I get scared to be short for too long because of the pain I have seen them inflict over recent seasons. But in this environment of potential higher interest rates and thin (non existent in some cases) profit margins in other row crops, I would lock in 70 cent Dec 17 corn if given the chance. Folks waiting for a more extreme rally should have sale orders in for Dec cotton at the chart gap near 73. I’m not sure we get the opportunity for a while. (Reminder, COT charts were taken PRE election)
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