Good morning friends!
Corn (K17) 357’6 -‘6
Soybeans (K17) 965’6 -3’2
Chi Wheat (K17) 425’0 -‘4
KC Wheat (K17) 424’2 +’6
Cotton (Z17) 74.02 -.87
Here I sit a little less than 30 hours from the stocks/acreage report on a cold and rainy morning in Chicago as US FOB NOLA beans sit at 5 year lows as the Brazilian soy harvest brings competition to the market. The tone across the markets we cover each morning is as negative as I can remember, with little bullish outlook seen anywhere (ok, maybe cotton). On the docket today is the quarterly hogs/pigs report, if you are a hog trader you probably should be aware of. That report comes out at 2 pm central, after markets close so you need to get prepped today for what I think will be a very volatile trade in the coming days.
The Argentinian soybean harvest data is expected in the weekly report from the Buenos Aires Grain Exchange sometime in the coming sessions. But it doesn’t take a genius to look at the weather there to expect some sort of delay in the short run. The tech guys who work with us here tell me the bean markets are as oversold on shorter term basis as they have seen in sometime. I scratch my head at that given the fact we have only broken 7%-8% from the highs in Nov. Seasonally, there are bullish plays coming up in April, but I would only play those on a break from this report. I dont like getting bullish on bean rallies. IN fact, guys who want a short term play on beans might want to look across the pit at bean meal. Fund length is much higher there and given the competition for feed, I think meal has the most to fall (maybe as low as 270). Soybean sales did beat this week, with 681 K reported for old crop. We also had solid new crop interest.
Corn markets are essentially unchanged from Friday’s close as the Dec contract holds above 380. The bulls on the internet are following comments from Gulke yesterday, telling the market to expect bullish surprises from lower acreage. This was how I felt a year ago, fool me once USDA…..Yesterday ethanol data dropped showing higher than expected production. This is a good thing for ethanol use demand, but its a bad thing for the resulting DDG bi-product that will continue to undercut soy meal and the rest of the feed complex. Like I mentioned above in soybeans, buying cheap puts ahead of this number is something I would think about. 365 June SD puts are less than a nickel, that gives you a floor at 360 new crop corn through memorial day. I want to buy breaks going into the growing season, having these on will help my confidence to step in front of a train if the acreage numbers come out like they did last year (bullish beans, bearish corn). Corn exports came in near 716 K, just below expectations. Exports are beginning to slow.
New crop cotton finds its self south of 74 cents for the first time since March 1 as the shorts are coming out of the woodwork. Fundamental shorts are getting ahead of the acreage report, while the tech guys I follow are playing a break of the medium term trend line in place since the start of Q1. This could be just profit taking after the 10% run up from the beginning of the year, but I think there is a likelihood the top is in until we get new crop production hiccups. Planting for the bulk of the cotton crop doesn’t happen until May/June so there is not much to lean your hat on from a new crop perspective if the USDA report shows massive acres. AS i have been telling folks on the phone the tough decision is not to get short (record long oi, bearish techs) the tough decision comes on a break back below 70 cents. Friend of TWIG, US Farm report had a piece yesterday on surging prices for cotton equipment in Dixie, which is another indicator of acreage shifts. Cotton exports were solid again this week, almost above 400 K bales.
World wheat prices continue to fall as high protein offers drop across the world. US HRW is begging for demand, which did not appear to come this week with exports in the 460 K range right on expectations. FOB offers are only a few dollars above the prices offered around the delivery in December. The funds are assumed to be back near record short wheat so I don’t encourage getting too bearish here. We do get some shift going forward in the attention of the funds from new crop to old crop as we get into April. Seasonals remain bearish through mid April. I’ll remain long my July contracts for now, but I am a little nervous carrying them into the USDA tomorrow but not as nervous as I would be for corn. Weekly export sales came in near 460 K, near the top end of expectations.
Call the desk if you want to talk strategy ahead of tomorrow. Stay dry out there…
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