Good morning friends
Corn (H17) 357’6 -2’2
Soybeans (H17) 1001’4 3’6
Chi Wheat (H17) 424’2 -3’0
KC Wheat (H17) 435’2 -3’2
Cotton (H17) 73.56 +.57
Cotton is higher in the overnight by a shade under 1%, as Dec 17 pops its head above 71 cents for the first time this week. Wheat, corn and beans are all red this morning giving back gains from yesterday. The big report on Thursday looms large for all 4 of the markets we cover. Rebalancing of index funds has been a bullish factor for CBOT markets, especially on the close, we expect more of that today. CONAB came out with their soybean estimates for 2017 production just above 103 MMT. USDA had Brazil bean production near 102. Yields are up slightly in since the estimate in December.
Cash fundamentals for cotton have been weak of late as the trade looks to protect the gains it has made after the 1st of the year. I can’t imagine we see any major USDA changes to the demand side of the cotton coin, and any changes to supply are likely to add in my opinion. The spec trade is just so darn long right now that bulls are finding a difficult time to get follow thru. Guys with un-ginned physical cotton for sale should remain in the hedged positions, new crop hedging is encouraged between these prices and the gap up at 73 cents. I think we will see that area but it may be fast.
There is some talk out of the Trump camp that the President Elect may be looking to roll back Russian sanctions once he gets in office. This newly developed “kinship” between the US and Russia is positive for corn and wheat markets, in my opinion. A strong Ruble is helpful for keeping the US competative on the export markets. Russian production is partly responcible for world prices being where they are, but the depressed Ruble is as well. Below is a chart of the RUB:USD, looks somewhat similar to wheat in structure. Many folks talk about USD strength post Trump, but in this case the Ruble has been more of a leader. In my opinion, this can only help wheat. That said, I would look to cover some gains in the wheat if you have them, I can’t imagine the USDA will be friendly to wheat markets.
The South American weather forecast calls for good rains over much of the Brazilian crop growing areas including parched NE Brazil for the next two weeks. However, Argentina will remain too dry across the south and too wet across the north. A more normal rainfall pattern is needed for N Argentina, but it will take 10 days of dryness to firm the soils enough to support large machinery. The window for reseeding or new seeding is closing in Argentina, which is where the crop threat lies at this point in time. US producers badly need yield write downs in Brasil or Arg, preferably both. CONAB Brazilian corn/soybean estimates are close to trade expectations and should not have much impact on CBOT prices today. It’s a waiting game on what the USDA will say on Thursday. Until then, we expect more chop at the CBOT.
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