Good morning friends
Corn (H17) 359’2 -1’6
Soybeans (F17) 1021’0 -7’0
Chi Wheat (H17) 413’4 -4’0
KC Wheat (H17) 412’2 -3’0
Cotton (H17) 71.96 -.08
Grain markets were lower across the board amidst a tight trading range last night. Corn and bean markets are focused on moisture approaching the parched areas of Argentina while the cold weather in this country and Russia should buoy the wheat market for now. The US FOMC is expected to raise its lending rate for the first time in a year as the US economy rebounds. The news of the rate hike today is not what traders will be looking for, they will be keeping an eye on the rhetoric they put out in the statement and press release for more signs of future tightening. I would be careful getting too excited about US economic recovery trades, much of what is pushing this rally could be taken away by a stingy congress, but that’s talk for 2017.
Corn charts look fantastic with last week’s high being taken out yesterday. I expect a choppy but upward sloping corn and wheat chart as we get into 2017. I remain bullish corn but would look to move toward the sidelines if DEC 17 would get through 4.00. The fundamentals are bearish in grains, yet the charts are bullish , with OI being so short in wheat and corn the fuel for a rally is there. Beans sit in the middle of historical OI range which makes recommending hedges difficult. It does not take a genius to look at SAM production and acreage in the US and say SELL, but I’ve been in this rodeo too long to hear everyone say the same thing and know it will work out. If inflation is what is driving this bus, then corn and wheat probably come to beans, not the other way around. That said, I do like shorter term hedging strategies in soybeans to help lock in insurance at higher levels. I can explain that better in person so give me a ring if you have questions.
Cotton is a sentiment trade right now, much like the stock market. Sentiment has formed a little bit of a bubble with Trump in his honeymoon phase, I can’t imagine the Dems in congress are going to make it easy for him. I’ve already heard a lot of shade being thrown on this new infrastructure plan. That said, fighting cotton from the short side has been a difficult endevour, if you took my advice and rolled hedges into DEC 17 then the shelter has been helpful. I look for cotton to correct at some point in the next few weeks, the gaps above the chart may get tested though. I wholeheartedly recommend get some hedges on for 2017 cotton if you are making an acreage switch. I like buying shorter term puts from the spec side as well if you are inclined, the record long spec OI calls for it.
Ill be back with audio this afternoon, post FOMC at 1 pm central. Energy traders should also be on the lookout for the inventory report that comes out today at 10 am. US energy stocks are really high, spec length is as well. I like buying crude but I would wait for a pullback.
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