Good afternoon friends!
Corn 341’4 +4’2
Soybeans 989’4 +5’2
Chi Wheat 399’0 +5’0
KC Wheat 405’4 +2’6
Cotton 70.69 +1.79
CBOT markets were slow today, little news flow kept things tight. I suspect it could be this way for a while. KC-Chi wheat spreads contracted which probably meant short covering. I remain bullish corn and wheat and bearish to neutral soybeans over the medium term, but expect weakness going into December deliveries.
The major action happened in the ICE Cotton markets, overnight we saw massive buying in the expiring Dec-March futures spread with Dec getting over 71 cents at one point. This is a seasonal buy recommendation from MRCI. I would advise you take it and roll anything you have sold in December to March futures if you have not already.
The harvest was 20% behind pace in Texas compared to a year ago which is driving commercials to hedge that risk of not getting what they need in the early delivery period.
The stocks to use ratio in cotton does not warn of supply issues but I wouldn’t be shocked to see March futures perform into the end of the year. I recommend you talk to Donna or myself about rolling hedges from this year’s production to next year’s production. There is a lot of risk lifting hedges at this time of the year, so I would prefer to either just cover short term positions or move short futures into December 17 contracts. There is a lot we can do. A conversation is important in the least, even if you stay the course. I worry at night about the pace of getting product to market combined with the euphoria of Trump taking markets higher into the inauguration. There are gaps above the price that I could see getting filled. If the market would correct, which I still think is possible given heavy long Cotton spec’s, the Dec 17 cotton will represent either sales for next year or sales for this year.If it does rally, your physical is free to appreciate. I would definitely make sales in the mid 70’s. Prepare for that. Bottom line, I think the market could trade higher through Christmas, especially if Chinese demand gets priced in. This could provide a fantastic opportunity to make new crop Dec 17 sales. 73 cents is my target. If you are short March and comfortable taking some pressure, then stay the course.
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