Good morning friends!
Corn (H17) 349’6 +4’0
Soybeans (F17) 1001’4 +12’2
Chi Wheat (H17) 399’2 +5’6
KC Wheat (H17) 412’2 +6’0
Cotton (H17) 69.95 +.05
CBOT and cotton markets have awoken from holiday slumber in a good mood this Tuesday morning. Cotton is relatively unchanged while soybeans, wheat and corn are pressuring newly executed shorts from Friday’s option expiration. Markets prep for another holiday shortened week as very little grain news-flow is expected to leak. We will get the normal reports (conditions, exports) a day later than normal and we will see little on the macro markets that will change outlook. Expect livestock markets to rock and roll though, as COF and the Quarterly Hog number should have more trading to do before moving on from the latest round of data.
The hogs report showed a massive crop, which is beneficial for feed markets given the higher consumption numbers, the USDA could adjust feed numbers higher in the next WASDE. There is little indication of massive liquidation in the breeding herds, even as producers struggle for profitable margins.
Dry/warm weather is forecast for the northern Brazil for the next two weeks. We are hearing that most of the northern Brazil production will receive an average of 1.00” of rainfall over the next 10 days, which will be some 30-45% of normal, leaving the crop exposed to further drought conditions. . A trend of drier than normal weather has already been established here during December. Across the web, soybean bears have been calling for much lower prices in the weeks ahead given the estimates so far, I would tell them to pump the breaks.
US export prices remain at the bottom of the food chain in corn and wheat, and feels like the only game in town for cotton and soybeans.COT conditions have become favorable for the bulls. Corn markets saw close to net 30 k shorts tacked on between the 13th and 20th of December. Wheat shorts were not down as much as one would think, although were back near historical lows. Cotton longs have backed off a bit, but remain in record territory. Soybeans remain in the middle of historical ranges, but well below last week. Check out the net short/long conditions. This will matter as funds look to re-balance when we get to 2017.
I remain bearish cotton, bullish new crop corn and new wheat and neutral for soybeans.
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