Good morning friends!
Corn (H17) 378’2 -‘4
Soybeans (H17) 1059’0 -2’2
Chi Wheat (H17) 454’4 -‘2
KC Wheat (H17) 468’2 -1’0
Cotton (Z17) 75.52 -.19
For what seems like the 10th day in a row, the CBOT markets were weaker in the overnight. This market is becoming very cyclical: lower in the overnight on low volume, we close the overnight session slightly lower across the board, then as the US session opens the volume picks up and prices rally into the close- rinse, repeat. Over in cotton, the volatility has dropped to almost nothing as Dec 17 futures trade within a 50 point range this week. Open interest remains record high in cotton and is moving that way in soybeans. Corn and wheat are catching up as well, but have a lot of fuel to push price before getting record long.
USDA exports were just released, beans and wheat topped expectations while corn and cotton were within the expectations. It’s damn impressive to see the bean exports remain where they are. Its February and we are still seeing impressive numbers that many thought would only be possible from South America. China had another monster week in our markets. This is all very supportive, even more so if the dollar would weaken up as Trump tries to get the US economy to ramp.
The rally at the CBOT has little to do with fundamentals (outside of exports), although the acreage battle is real amist an inflationary situation that has developed of late in other markets (copper). This is a gift for producers, especially those selling into the March delivery. Corn has probably acquired a few acres of late, but I dont think its anything drastic. I spoke with a few producers yesterday talking about the desire for 4.00 old crop corn. Keep your eyes on July and Sep futures. They are pushing on 4.00. Use an HTA or a futures contract and leave the basis open, you might be able to do better than 4.00 if you can hold until after the 4th.
For today, we are due for a bit of consolidation after the recent move. It is undeniable the money flow that has moved into commodities was going to make its way into the CBOT ag markets. The fact the carries in corn, beans and wheat (and cotton too!) have stayed essentially flat tells me that the fundamentals have little to do with it. That could be bad, but it could also be good. What happens if good fundamentals show up from a weather problem? This could just be the beginning. I would take some profit on the rally, if not now definitely ahead of the end of the Q1.
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