Good morning friends!
Corn (K17) 362’4 -1’4
Soybeans (K17) 1005’4 -1’0
Chi Wheat (K17) 436’6 -3’6
KC Wheat (H17) 462’4 -5’0
Cotton (Z17) 74.99 -.30
CBOT markets are lower on follow thru selling across the board here in Chicago and in New York. The only markets i notice that are not lower this morning on my screen are deferred soybeans, natural gas, oats and the dollar. Everything across the 2017 CBOT space is down, lower than where prices traded a week ago.
This week is all about the US FOMC and the projected rate hike many believe will be announced on Wednesday afternoon. Its another big week for macro market traders as the 1st Quarter begins to wind down. ECB Chair Draghi has a press conference today, followed by Chinese industrial production numbers tonight. There is a whole lot of US pricing data out between now and the Fed release. The Bank of Japan speaks early Thursday morning to round out the big 3 central banks. Then on Friday, the G20 finance ministers will beet in Germany. The USDA are only scheduled to release the normal weekly reports, so expect the USD to be wagging the market tail this week. We do get NOPA crush on Wednesday in the bean markets.
As I mentioned above, crude oil is down again which is leading this fall in commodities. The market appears to be targeting the low made near 45 after the Trump win. The entire commodity complex is currently mired in a moved that is eliminating almost all of he gains made after the election was settled. Hopefully for the producers reading this, we are not headed back to the Nov lows. Front month contract lows in corn at that time was 3.30 (3.50 May), sub 4.00 KC and Chi wheat ( 4.30 May), 9.80 beans (9.75 Nov) and 67 cent front month cotton (67 cent Dec). While I do not see prices flushing to those levels, i think we see more blood letting early this week from the CBOT/ICE cotton. The corn option markets do not seem too worried, the 3.55 strike only 7 cents away is going for 1.5 cents. If you are nervous about positions, I recommend something cheap to keep you in the game through a potential Fed surprise. March options offer 2 weeks of protection (CBOT),
Wheat markets saw a very nice tender filled from Saudi Arabia last night, buying almost 750,000 MT of high protein wheat from US/French and E. Europe. The prices were all above 210 MMT which should support front month futures on breaks.
South American weather watching season continues, we will focus only on moisture and temps across Safrina regions in central Brasil. Another day has passed with near normal rainfall projected in this area throughout the two-week period included in operational model runs, and the lack of any blocking high pressure Ridge through the period is noteworthy. Decent moisture returns to Central Brazil in the next 48 hours or so and persists into at least the final days of March. Much focus in recent days has been on Brazilian soybeans, but the corn looks pretty solid as well. I do not foresee anything happening like we saw last year given the forecasts.
On the flip side of that, US export offers are still cheaper than Arg/Brasil which should keep US prices somewhat stable. Chinese soy imports to date have been impressive, and are still likely understated. This is the lynch pin of the markets right now. How much of a break is needed to bring demand back into the equation. Id argue we are almost there. July KC wheat buyers are faced with the levels I talked about a few weeks back. I’m a buyer between 450-460 July KC. Just like I caution folks to not get bullish on the CBOT rallies, I caution to not get bearish here. Value levels are approaching.
Over in the cotton markets, the market is set up for a fall given the macro conditions. The ability for prices to stay here as everything else seems to be falling apart. The Chinese auctions appear to be going well as aggressive buyers are taking it off their hands. Other than technicals, its difficult to find too much that will be bearish this week. That said, the boat is full of longs.
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