Good morning friends!
Corn (H17) 369’4 +1’2
Soybeans (H17) 1037’2 +4’6
Chi Wheat (H17) 439’0 -2’0
KC Wheat (H17) 453’6 -2’4
Cotton (Z17) 73.99 +.23
Its a short week here in Chicago thanks to the presidents day weekend. The holiday pushes back all normal weekly reports back one day. The focus this week for Ag traders will be on the USDA ag forum that takes place Thursday and Friday of this week, out in D.C. The trade will be excited to see what the USDA projects for planted acreage in 2017 and some insight into what they think production will look like for the longer term. Most of this data will “drop” in the presentation the Ag sec. (not sure who does it when we do not have an ag sec) will give on Thursday morning. This is always a little wonky as they release the presentation to the public (usually a power point) right before the speech begins. I’ll be keeping my eyes on the wires Thursday morning around 8 am central time. Friday’s option expiration for March contracts at the CBOT should be fun.
Other than the forum, USDA exports will be watched carefully for cancellations or switching to Brazil. Cattle on feed is out on Friday, following slaughter and cold storage reports out Thursday as well. Throw in the expiring March CBOT options, we might have the recipe for a volatile week. On the macroeconomic side of the coin, it projects to be a somewhat slower week. FOMC meeting minutes are released on Wednesday, but other than than that we can probably expect some unknown to come from the battle between Trump and the press.
So far, the confidence in Trump to get these pro-market policies pushed through has been unwavering as longs have piled into the commodity trade. As of one week ago, with futures a little higher than where we currently trade in soybeans the net long spec position equaled what it did last summer. Corn net oi was seen higher as well, with a net long position seen almost 300,000 k higher than where it was at the beginning of September, but below last summer’s high by about 200k. I imagine we have seen a substantial adjustment in net oi as corn prices have come off a dime in the last week, but the “edge” we had from the buy side has been minimized. In wheat the story is similar, but still plenty short relative to the last 10 years. The net short position in wheat sits near 50 k short, the most neutral we have seen since late 2015. Wheat net short position on Tuesday sat at the most neutral it has been I imagine we see continued weakness in corn and wheat over the next week. Cotton net long position saw a small increase over the previous record week. We maintain our stance that this leaves cotton markets in a very precarious position if selling would come back in vogue from the commercial side.
Old crop cotton markets are falling into delivery. I’m baffled by the strength in the deferred contracts given the fact March is below December at this point. My boy Payne Sharpley says cotton is being help higher by promise from the world markets. That must be the case because the cotton appears available for delivery and acreage looks to be there. We will see this week.
China’s corn and soymeal futures markets rallied last night with soy meal able to recapture all of Monday’s loss. For the past 2 days, Chinese May corn futures are up 12 cents at $5.88 while May soymeal is up $1.00/MT at $423.00. This is really supportive for the US board post March 1. In the short term, I expect corn and meal markets to be pressured by the delivery though, so I would wait until March 1 or so to re-own if you wish.
The Brazilian soy harvest advanced to 25% completed as of Friday, according to Safras, with good weather in the forecast. Nothing in the wires I read tells me to expect further crop write downs. . Weekend Argentine weather did not feature flooding rains that were feared. . Like Brazil, Argentine crop sizes are increasing. The USDA Annual Outlook Meeting will be starting on Thursday with large end stock estimates expected from WASDE for a second year. There is nothing bullish in the news over the long holiday weekend. This is no place to chase a rally with delivery approaching. Stay short through Feb or wait until then to buy in corn, wheat and beans. I remain hedged for 2017 cotton, I will hold until I see some spec position relief.
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