Good morning friends
Corn (H17) 348’0 +’6
Soybeans (F17) 1040’6 +13’4
Chi Wheat (H17) 406’2 +2’0
KC Wheat (H17) 433’4 +1’0
Cotton (H17) 71.35 +.31
The story today is already developing for my friends over in Europe. I don’t pretend to be an expert on Italian politics but the PM of Italy has apparently resigned after his reforms did not pass. Many think this is a step closer to a Brexit event happening in Italy. The Euro sold off hard on the news but has reversed a little in the overnight.
Commodities are up across the board, led by soybeans. Soybean meal enters a bullish seasonal play today. There is still room for open interest to increase on the spec side in soybeans, I expect prices to continue to rally in the short term for the front month. I remain bearish longer term at these prices (relative to the rest of the grain complex). It probably comes down to weather over the next 40 days whether or not soybeans power higher and trade into the 11’s. South American weather forecasts are showing rainfall across Brazil over the next 10 days with crop estimates growing. RGDS will be short changed, but planting is still underway. 92% of the Brazilian soybean crop is now planted. The short answer to SAM weather is wet up north and dry down south. Argentina could use a rain, but its still early there.
Commitment of Traders report showed funds as net buyers in soybeans and meal which is obvious with the price action, and sellers in the soy oil market. This could be short covering or additional buying. NET OI remains muddled. Corn OI remains where it was a week ago. I shoot out the updated charts later this morning.
US Corn sits about $30 per MT below SAM offers. This should keep a floor under corn in the short term. Could we see 320? Sure, but I think the lows from September are in the rear view. We have a window in early Jan where the producer will need to move product to raise cash, so I wouldn’t get too bullish but once the calendar turns the fight for acreage should be on. We want to be long corn then.
COT reports put the managed fund position in Chicago wheat as of Tuesday at a net short 119,000 contracts, up 4,000 just slightly from a week ago. Given the fact we sold off into the first notice day after the survey was taken. I think we could have seen another run at the lows. US wheat has no story without a weather problem, but with delivery now in the rear view we can focus on colder weather and maybe a run at higher prices.
Cotton trades back above 71 cents. Reader Alec Torrey, a student at Texas Tech sent me the following image as he drove around the country outside of Lubbock. His comment was “bales for days”. Given the fact that COT data has funds record long again, we want to prepare for a break in price as the seasonal winds down during Christmas. The combined spec and fund long position has hit a new record level according to Hightower. I would exit long positions on a rally if you are inclined. The gaps in price remain above which has me wanting to be patient but the data and the image below doesn’t really support much of a price rally from here.
Podcast: Play in new window | Download
Subscribe: Apple Podcasts | Android | RSS
Risk Disclosure
This material is conveyed as a solicitation for entering into a derivatives transaction.
This material has been prepared by a Daniels Trading broker who provides research market commentary and trade recommendations as part of his or her solicitation for accounts and solicitation for trades; however, Daniels Trading does not maintain a research department as defined in CFTC Rule 1.71. Daniels Trading, its principals, brokers and employees may trade in derivatives for their own accounts or for the accounts of others. Due to various factors (such as risk tolerance, margin requirements, trading objectives, short term vs. long term strategies, technical vs. fundamental market analysis, and other factors) such trading may result in the initiation or liquidation of positions that are different from or contrary to the opinions and recommendations contained therein.
Past performance is not necessarily indicative of future performance. The risk of loss in trading futures contracts or commodity options can be substantial, and therefore investors should understand the risks involved in taking leveraged positions and must assume responsibility for the risks associated with such investments and for their results.
Trade recommendations and profit/loss calculations may not include commissions and fees. Please consult your broker for details based on your trading arrangement and commission setup.
You should carefully consider whether such trading is suitable for you in light of your circumstances and financial resources. You should read the "risk disclosure" webpage accessed at www.DanielsTrading.com at the bottom of the homepage. Daniels Trading is not affiliated with nor does it endorse any third-party trading system, newsletter or other similar service. Daniels Trading does not guarantee or verify any performance claims made by such systems or service.
