Good afternoon friends!
Corn 348’6 -‘4
Soybeans 1055’6 +9’6
Chi Wheat 389’0 -6’6
KC Wheat 411’6 UNCH
Cotton (H17) 72.54 +.64
Before I get into the commentary, check me out on the US Farm report this week. I have to be honest, the tie is on fire. Thanks to my man Jim Burket for the loaner, it will never look that good again. This was my first experience in a studio like this, not sure what light on the wall got my attention here but I think I rebounded pretty quickly after the distraction.. Thanks to Tyne and the gang at Agweb for allowing me to spread my wings.
On to the markets, where beans probably get the headlines but my attention was on KC vs Chicago wheat. Holy Moses is Chicago Wheat a dumpster fire. Below is a daily chart of the spread between the KC-Chi. If you have been reading me for a while, you know that I have been telling everyone to wait until the delivery period to pass before jumping to long Chicago Strategies. Protein premiums are coming through the price structure in wheat. Chicago falls to the floor as Minneapolis wheat makes 5 month highs. This is wacky stuff, but the time in neigh to buy Chicago wheat. I like collar plays as its easier to handle the carry, call me if you need help with strategy,
Simply put, corn is going no where until ZW gets its butt off the floor. The good news is we have not seen Corn make its seasonal move lower (yet). The Dec spread between Wheat and corn is just above 40 cents, at levels not seen since corn was above 6.00 a few years back. I have been screaming from the roof tops that if you are bullish beans you should be bullish corn longer term, but the wheat story is not helping that cause. I look for corn to struggle through the delivery period, but stage a rally into 2017.
Soybeans saw a selloff early in the session after follow through technical buying fell apart just before the inspections report. Soybean inspections the week ended Nov. 24 of nearly 2.1 MMT were at the top end of expectations and represented the seventh straight week above the 2 MMT level. This, combined with fantastic Chinese crushing margins are keeping prices high. I’m skeptical in new crop contracts that Nov 17 has much fuel above 10.50. Get ready for stories about bean acres as we get into 2017. Demand is strong no doubt, but the strong demand is getting relatively weaker. We are falling back toward USDA projections with each week, and with Jan soybean offers in Brazil cheaper than US offers (US is cheapest in spot months) we may see that trend continue. The problem with selling here is there is little problematic Brazilian weather to speak of right now. If they lose production in coming months, this rally could just be the beginning. That said, with little risk comes little reward. If you want to sell these kind of profit margins is a record production year (2017), you are going to need some guts.
Cotton prices remain contained by harvest pace in Texas. The harvest report was just released, with pace harvested at 62% vs 76% average. Its hard to make the case for weaker prices given the short term seasonal, but the CFTC cotton report was just released and it shows spec traders back at record longs. (Ill have a better breakdown of OI in the morning). Continue to sell rallies in cotton, supply is coming. Outright spec shorts were below 10k a week ago and the total longs on the spec side have only been longer one time in the last 10 years, coinciding with the top in 2013.
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