Good morning friends
Corn (H17) 356’4 -1’6
Soybeans (H17) 1012’0 -1’6
Chi Wheat (H17) 422’4 -4’0
KC Wheat (H17) 432’6 -5’4
Cotton (H17) 73.57 +.38
Good morning friends
CBOT and corn markets have been quiet in the overnight, wheat is the only market that has traded outside of yesterday’s range down about 1% in KC and Chicago markets. The USDA has been very unfriendly to wheat over the last year, I think we are seeing longs cover ahead of the report. The big news in the overnight was out of China regarding US DDG imports. The anti-dumping US DDG duties were hiked around 50% of the cost. . These duties will place a halt on US DDG exports to China going forward. China used to be the world’s largest DDG importer taking nearly 6 MMTs of US supply, although we have not seen them import much in the back half of 2016. This is bearish news, but much of it is probably baked into the ethanol cake at this point.
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This news, combined with the pre-report hedging in corn and beans will probably set us up for a negative day ahead of release tomorrow at 11 AM. It is a big number release with a lot of old and new crop moving parts. Wheat will get updated acreage data for what is in the ground right now (winter wheat). Corn, bean and cotton traders will get updated harvest data from last year, coming in the form of acreage and yield changes. We will also get World production estimates for the current growing year, which will include updates in Brazil, Argentina and South Africa. Lastly, we get carry IN updates via the Dec 1 quarterly stocks report. Needless to say, this report is a monster and has the capability of changing the narrative. That said, I do not see a lot of surprises that will change anything. The market feels like its locked in on the future, not the past when it comes to these carryout numbers.
For cotton, it feels like its going to take a bullish surprise to get prices moving higher. In my opinion, those suprises are going to need to come from the China/India data. Domestically, we have seen stocks to use go up in the last two reports. I think we see it again. I am reading that traders see US production estimates for tomorrow’s report remain unchanged,while they look for an increase in exports. If things are not supportive, the market is poised to break as spec length exits.
SAM weather forecast shows increased rain chances for Argentina this weekend and more rain late next week. The prospect of another round of moderate to heavy rain is not what Arg farmers want to hear. Needed rain will start to fall across N Brazil this weekend and continue for much of next week. The rains are timely and should help revive crop prospects in NE Brazil. So far, there is little to worry about in Brazil, I expect USDA crop projections to remain large.
Call if you have any questions about what to do ahead of the number. I like making bearish bets on corn, with the idea of using downside profits to pay for upside bets later in the summer. If you have been slow to make bean sales, a put or two in new crop short dated options is a good idea. I look for wheat to trade lower as well, but the break should be supported.
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