Happy Valentines day friends (and wife!)
Corn (H17) 373’6 -1’6
Soybeans (H17) 1050’2 -6’0
Chi Wheat (H17) 449’0 -3’2
KC Wheat (H17) 464’6 -2’0
Cotton (Z17)74.44 -.06
Overnight markets were slow with cotton trading in a very tight range, just above the summer highs. Cotton has been a leading market for this commodity move, bucking fundamentals and potential acreage data to push bears out of the trade. If you have fatigue from being wrong on the short side for a few cents (Dec 17), I don’t blame you. Cotton could stay on bid through March if the conditions are right, but I expect the spring seasonals to kick in at some point, especially if acreage comes in above 11 million acres (it has been in the 9 million range and carryout has been large). I encourage everyone to remain in their short positions, or exit and buy puts, OR perhaps think about rolling short futures into Dec 18. Call if you have questions.
Over on the CBOT- corn, wheat and soybean futures were lower overnight as markets correct somewhat. The markets have been very patterned of late, where we see slight price weakness in the overnight then a run up when Chicago awakes. The volume overnight has been solid once again. Preliminary CBOT open interest totals from Monday reflect the huge influx of new fund buying. In the past 2 trading sessions, corn open interest has been up a hefty 75,000 contracts while soybean open interest has been up nearly 35,000 contracts. The rally since the USDA February USDA crop report has not been based on bullish fundamentals, but a massive move based on new fund money into the ag markets. THIS IS DIFFERENT THAN LAST SUMMER, where supply losses drove gains. This is coming from a different place, DEMAND.
I think a short term high is at hand in corn and wheat, as March delivery looms. China’s Dalian corn futures fell for the first time in a while during the overnight. TThe rejection of the prior 6 month cash meal high has some Asian traders suggesting that the rally may have peaked. The slowing of cash meal demand within China and weakening price structure should show up on the CBOT with US cash meal prices at multi year lows when looking at basis.
Favorable South American weather is offered by the two major forecasting models which calls for a drying trend across N and C Brazil that should accelerate the soybean harvest and seeding of the winter corn crop, while the drier areas of Argentina will continue to see welcome and sometimes heady rains. South American crop sizes are rising, and commercial traders are betting that Brazilian farmers will sell more as the US offers rise. The market feels like it could be setting up for some near term weakness, that said the US offers in beans are below Brazil which should be supportive. They are not so for corn and wheat at these prices. Be on the lookout for confirmation of tops by weak exports at these higher prices.
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