Good morning friends
Corn (H17) 354’6 -1’4
Soybeans (F17) 1025’6 -11’0
Chi Wheat (H17) 410’6 +1’4
KC Wheat (H17) 417’6 +3’0
Cotton (H17) 70.85 -.82
CBOT session started this holiday week (the holiday is next week, but the volume will reflect this week as well) on a sour note in soybeans and cotton, while the wheat and corn markets are mixed. Weather will be the topic early in the week, Argentina mostly got the rain that was expected and wheat belt in the US is under extremely cold temps. The livestock markets will take their turn on the podium this week with Livestock slaughter on Thursday. Cold Storage, cattle on feed, and a very important Quarterly Hogs and Pigs report on Friday. Other than export sales and wheat conditions the grain reports are done for 2016.
The overnight CBOT trade was a bit of a dud considering the close on Friday. Needed rain fell across Argentina and S Brazil on the weekend, the bears will claim trend yields are in tact. Given that corn and wheat OI has come back in the bulls favor over recent weeks, another push down is probably in the cards. I am hearing producers are very slow to sell corn, but that will change in coming weeks when bills are due. The bulls will point to zero old crop stocks in Brazil as support, along with another dry forecast in the days ahead. . The next chance of rain across Argentina is late Friday/Saturday when another inch is expected/ S Brazil has rain chances every day this week while the drier areas of NE Brazil stay dry for the next 10 days. High temps look to range from the mid 80’s to the mid 90’s. Beans are going to be the most susceptible to bearish news given the long position and the acreage story.
From an open interest standpoint, beans remain long while the corn has paired its short position substantially since October. Wheat shorts have come out as well. Wheat should have preformed better on this cold snap, but physical supply is just too much right now. Seasonals in wheat pick up to the negative side as we get into January, bulls hope for a Christmas rally. I look for July 17 KC wheat to rally into the 450 level.
Cotton enters the second to last trading week on the year with a record net long position for the 4th week in a row. This leaves the price extremely vulnerable to quick short covering if news would support. Given that cotton harvest is done, there is little out there that will push price besides macro conditions, which would make me even more nervous. A close under 70.25 would be ominous in my opinion. Short term traders might look to buy some extra puts ahead of the next WASDE reports. Call Donna or myself if you have questions.
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