Good morning friends!
Corn (K17) 366’2 -‘6
Soybeans (K17) 942’6 +1’0
Chi Wheat (K17) 427’0 -1’6
KC Wheat (K17) 423’2 -2’2
Cotton (Z17) 75.25 +.01
The overnight trade was very slow on the CBOT as markets coil up ahead of what many think will be a quiet number today. The US new crop numbers that could really drive the trade through the summer wont be reported until May, hense fireworks are unlikely in corn and wheat. Soybeans are bracing for another Brazil production hike, this time to near 109 MMT. I wonder how much is baked in the cake with beans though, and given the bullish seasonals approaching in meal and soybeans, I might look to cover some risk if you have hedges that have worked out. This is our third USDA report in a little under 30 days, I think fatigue has set in for the funds and given the massive supplies available in corn, beans and wheat. The consolidation since the planted acreage/stocks report is no surprise. The markets do have some weather factors to contend with, Cotton markets probably have the most volatile set up today as the last few sessions have seen chart support taken out and then regained as we approach 11 am. This being holy week and markets being closed on Friday, I do not see much to break prices out of ranges from today’s numbers.\
CORN: We saw the first planted acreage numbers released yesterday. Corn saw 3% planted. Weather is not a factor yet, but the forecasts are pointing toward more moisture throughout the middle of April. It appears planting will be delayed. While it does not correlate with yield reductions, it does correlate with a lack of switching from beans to corn. I think acreage is at its highs. Argentina has moisture problems as well. Harvest there could be a while, which keeps the US the cheapest on the export terminals in the short run. Below is a chart of the Dec 17 corn futures. If the 394 level is taken out, we probably see a run to 4.00. Producers with little production priced for 2017 are encouraged to start there. Old crop sales for May should be made in the 380 area. I doubt we see March highs taken out (385). DO NOT WAIT UNTIL THE END OF APRIL FOR MAY BASIS CONTRACT PRICING!
BEANS: Increases in Brazil are expected, what the USDA does with Argentina is probably more of a wild card. Like I mentioned yesterday, Satellites are telling us the USDA is too high right now. For all the talk of a monster crop in Brazil, we could see near equal reductions in Argentina. The selloff has been sharp in soy, front month prices are hanging above the 937 “double bottom”. Bearish data probably takes that out and brings Nov down to the 930 level. US Soybeans are priced at 460 per ton in NOLA while Brazil is at 356 and Argentina is at 350. Export demand has been solid, shipments yesterday were much above last week, bucking the seasonal trend. That could be China coming off holiday though. If you have been a prudent hedger in the 10.00 range, use the break to peel off some risk if prices would fall a little further from a bearish number today. I still think we have another run back toward 1030 in Nov beans. I saw too many good sales made to make me believe we are all that smart.Bull seasonals for meal kick in next week.
WHEAT: Matif, CME and US futures ended slightly higher to start the week. Dry weather is observed in Spain and Western Europe. Weather projects rain over the next 7 days, if this comes to fruition prices probably fall into the May delivery. If now we could see a slight pop back up near 450. Market is record short, or darned close to it. US conditions are solid and expecting to improve in the coming weeks given the moisture. Much of that is probably priced in the KC side, while the world problems are priced in Chicago. I want to be bullish given the story in corn and the COT but its very difficult given the weak basis across KC.
COTTON: Old crop cotton is off the mat, with July making another push. If you are a gin sitting on old crop supply you should be looking at contracts or protection given the roll over by the funds and the negative seasonals approaching. USDA report today will probably have a bullish tilt as exports should be raised higher. If you exited or rolled hedges down yesterday, look to roll back up if you can make it work. Auctions in China have slowed dramatically and the acreage number is going to be an anchor until planting gets going in the bulk of the acres. Were 6% planted vs 5% last year. A short term trade idea would be to sell Dec 17 cotton at 7350 and risk above 7400 cents. That’s 250 dollars per contract before fees and the target would be a buy back near 7050.
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