Good morning friends!
Corn 343’0 +1’0
Soybeans 988’2 -1’2
Chi Wheat 401’4 -1’4
KC Wheat 407’6 -1’0
Cotton (H17) 72.36 -.18
The US Dollar index is trading at decade and a half highs with the Euro leading the way down. 6E broke below 105 this morning as the perception that the Euro and US are heading opposite directions when it comes to monetary policy is creating some rough waters for commodity markets. CBOT markets have been holding up pretty well. The US is no longer the worlds cheapest offer for 2017 soybeans. Brazil has stepped down their offers. This combined with the trend of less exports to china (week over week) has many thinking we will begin to fall back toward the USDA pace when it comes to soy. I remain bearish soybean 2017 new crop soybeans, I have heard more than one seed salesman tell me that US producers are buying new crop seeds hand over fist. While I expect the ranges for corn and wheat to stay within ranges over the next week, I wouldn’t be shocked to see beans pull back to the 940 level for new crop to adjust with world prices.
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Cotton is rallying as the harvest in Texas slows. Folks I work with around Lubbock are telling me high winds have kept them out of the fields since Wednesday, and will be out of the fields today as well as winds continue out of the North. The rest of the US harvest is almost done, but the folks in the countries largest producing areas are on hold. I asked the guy if they thought they were losing production? He said not at all, its just delayed. Based of the way the curve has rallied, I recommend being ready to sell Dec 17 futures on a pop above 73 cents. Speculators may want to take a chance and establish a short position in March at the gap with stops above the highs from the summer. It’s a risky trade but the reward is large as well. I do not think we have seen the last of this trend line.
Corn and wheat markets remain very restrained by short term supply. Both long and short spec open interest is large. I expect the longs to cry “uncle” first, the corn and wheat seasonals point toward bottoming around the Dec delivery period. The delivery was nasty in September and I expect it to be the same in December, but this is a buying opportunity. Plan on lifting corn hedges before the end of the year and even look at getting long as we battle for acres in 2017.
Wheat markets in the US are moving opposite of the world values. Matif Wheat contracts are trading at several week highs this morning just below 165 Euro’s per ton, where the CBOT is down around 151. This, combined with higher prices from Russia and the US drought monitor showing dryness popping up more each week, I would be a buyer on breaks in July 17 KC wheat below 442. This is a long term buy and hold.
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