Good morning friends!
Corn (K17) 365’2 -1’6
Soybeans (K17) 1005’2 -5’6
Chi Wheat (K17) 441’2 -2’6
KC Wheat (H17) 461’0 -1’4
Cotton (Z17) 75.25 -.29
Markets are lower following yesterday’s WASDE. While the US balance sheets offered little changes, the global balance sheet showed combined stocks of corn, beans and wheat 5% higher than a year ago. Not only is that bearish news being talked about, but the idea of future supply hikes due to acreage and good production are expected. If the US production year comes to fruition, this will be the 6th straight year of higher stocks to use from the global perspective. The recovery from the rough year of 2012 continues as US and world ag producers become more effective and efficient. Cotton markets saw similar stories, but the Chinese demand story is hard to ignore right now. Dec cotton is hanging out above 74 cent summer highs and refuses to fall, even as next year’s balance sheet continues to grow. The news was not bullish, but it wasn’t bearish for cotton either. At least not bearish enough to get the record long spec position to move aside.
Going forward, I imagine we see continued weakness over the coming days as the row crop markets get into rehab mode as recent longs blow out and dip buyers try to come in. The macro markets are not helping the bulls either as the bloodbath that is the crude oil markets is weighing on almost everything (except equities!). Even as crude bounces this morning, I expect this to continue in the short term as the outlook that the fed is going to hike interest rates on Wednesday remains. US jobs numbers will be out shortly,I do not expect any suprises there. Its difficult to see the bullish light through the bearish fog of late. The reflation trade that has been in place since the end of Q3 2016 appears to be crumbling. If you are bullish longer term, this is a correction to buy but I would be patient and see how copper and crude perform after this selloff. They pointed the way lower, I think they need to trade higher before the rest of the commodity space does.
Chinese soy and corn futures fell to fresh lows overnight which should keep the short term US trends down. I look for May corn to test 360 before too long and Nov beans to make a push to 980. I remain bullish longer term of wheat and look to buy July KC wheat between 450-460, which sits about 18 higher that that range right now. The weather remains a wild card as it always does, the next few weeks in Brazil will be watched closely as Safrina corn pollinates and the KCW region here in the US remains dry as well. We will be on the lookout for chances of rain.
I dont want to get too bearish down here though, the next month is chock full of reversal opportunities. The Fed will offer that chance on Wed of next week.
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