Good morning friends
Corn (H17) 360’0 -‘4
Soybeans (F17) 1034’2 +3’0
Chi Wheat (H17) 415’6 -1’4
KC Wheat (H17) 413’6 -1’0
Cotton (H17) 72.14 +.45
Overnight price action was slow on the CBOT, but over on the ICE exchange in cotton a breakout appears to be something the market wants to try. Its a little baffling considering the spec long position sits where it is, but the gaps above near 73 cents in the March cotton appear to be in the sights of the bulls. Weekly export shipments yesterday hit a marketing year high, and mill buying was seen as well. I know I sound like a broken record but the structure of the market screams for risk management. US cotton supplies are at an estimated 8 year high and jumped from 4.5 to 4.8 million bales as of the WASDE on Friday. We are expecting higher acreage in this country and others next year. I highly encourage you get with Donna or myself to talk about some risk management strategies for next year. Could this just be inflation and a push toward a higher price point for everyone? Sure, anything is possible. But this feels more like the 2016 run up in corn than something sustainable over the long run. If you rolled out of March 17 and into Dec 17 shorts a month or so ago, you saved yourself about 2.00 cents on this rally. Aggressive traders should look to roll back before Christmas, especially if the spread gets above 3.00 cents (sits at 2.30 this morning).
FOMC meeting starts today and will release a statement along with a presser tomorrow around 1:00 pm. A hike of 25 bps is priced in. The trade will be keen on forward outlooks for next year. I would be careful with this one. Commodities have been on a tear since the bonds started to price this in a few months ago. Markets like cotton and soybeans are open to significant downside cover pressure if the market would take it as risk off. Corn and wheat may actually rally if the shorts bail into the dollar. Regardless, tomorrow is one of those days where moving to cash or buying volatility may be the move.
Dr. Michael Cordonnier has left his SAM estimates unchanged in his December report. There is significant squawking online about heat and lack of moisture in Argentina, but the market remains in a wait and see mode until the forecasts come to fruition. Corn is running into technical resistance near 360 while front month beans can’t get above 10.50. Wheat has gotten some upside love in recent days, but nothing has changed on the world export markets from our view. Cotton prices remain depressed from heavy supply and speculation. The former is pretty difficult to overcome, the latter is not. Spec buying into the end of the year is expected but that should only push wheat prices so far for now.
Its about the USD and the FOMC for the next few days, be ready.
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