Good morning friends!

Corn 338’6   +1’4

Soybeans  984’4    +’2

Chi Wheat   397’0  +3’0

KC Wheat  405’4    +2’6

Cotton  70.20   +1.41

 

December cotton futures took off this morning as we head into delivery. December cotton futures are now above 71 cents followed by March trading above 70.25.  The key uptrend line that has been in place since early Q1 has been touched 7 of the last 8 trading sessions. Harvest is 41% complete vs the 56% average.  The spreads are telling me this is a delivery squeeze.  Maybe we have finally seen the breakout?  Seasonal traders would tell you yes, while guys following the OI might tell that this wil run out of steam.  All I can say is that the Chinese USD currency swap should help markets like cotton, even if the rest of the dollar complex trades higher.  Be ready for moves into the low 70’s in Dec 17 cotton.  That 73 cent price gap in the charts represents a fantastic place to get hedged for 2017 new crop.

Soybean traders need to be ready similar type of price action after the NOPA crush report today at 11 am central. Soybeans and cotton both represent Chinese demand and markets that have significant long positions built in from the spec trader. The National Oilseed Processors Association (or NOPA) will report they crushed somewhere in the area of 160.4 million bu. of soybeans in October, according to traders surveyed by Reuters. This would be the busiest October on record, easily topping last year’s record of 158.895 million bushels. It would also be the eighth highest crush on record for any month. The survey shows analysts expect NOPA to report Oct. 31 soyoil stocks at 1.323 billion lbs., which would be down 53 million bu. from the end of September and 85 million bu. under year-ago.  The crush is a negative factor on beans right now, the USDA lowered expected crush totals in the last WASDE.

South American Crop ALERT! I hate to be alarmist, but I want everyone to know when the crop downgrades come to Argentina or Brazil.  Yesterday consultant Dr. Michael Cordonnier lowered his soybean crop estimate for Argentina by 2 MMT to 56 MMT this week, citing a “cold, wet and delayed start to soybean planting.” He elaborates that flooding and saturated conditions have delayed planting and more rain is in the forecast. He left his corn crop peg at 35.0 MMT, and noted a neutral bias toward both corn and beans going forward. Cordonnier made no changes to his Brazilian soybean or corn crop pegs, which stand at 101 MMT and 86 MMT.

World wheat cash prices are steady. Russian wheat is offered at $183/MT for spot arrival, vs. comparable US HRW at $175 and EU  at $186. Expect SAM corn to stay above US offers.  The export markets are very supportive for price right now.  Black Sea feed wheat – previously the world’s cheapest grain – has rallied to $171/MT, up $12 in just two weeks. US corn is now the world’s cheapest grain through February, which should keep values above harvest lows especially given a strong basis on the river. Fair value in corn is seen at $3.20-3.60, basis spot, with beans at $9.60- 10.20, basis Jan, and with wheat at $4.00-4.30, basis CME/KC.

As US harvest ends, market direction will be a function of S American weather and crop conditions. The South American forecast this morning is unchanged, and mostly favorable through late Nov. A stagnant pattern lies ahead, and heavy rainfall will be centered on the northern half of Brazil’s Ag Belt. Moisture in E/NE Brazil will be particularly welcomed, and early season crop ratings will stay high. Very little rainfall is offered to Argentina through the next 15-16 days.