BUYING 1 MAY 73 COTTON PUT

SELLING 1 MAY 81 COTTON CALL

EVEN MONEY

 

 

Good afternoon friends!

Corn (H17)  363’4   -1’4

Soybeans (H17) 1037’4   +10’4

Chi Wheat (H17)  423’0  -7’2

KC Wheat  (H17)  435’6  -4’6

Cotton (H17) 75.67   -.74

Below are the latest COT position reports, as updated every Friday by the CFTC.  They represent the net spec position of managed money in the trade.  If you want to learn more about this, click on the audio below. I refer to the posted charts within the commentary.

  

 

Good morning friends

Corn (H17)  369’4   -‘2

Soybeans (H17) 1062’0  -5’2

Chi Wheat (H17) 429’2    +1’0

KC Wheat  (H17)  441’4   -1’4

Cotton (H17) 73.80   +.76

CBOT Markets are slightly lower this morning after little volume in the Sunday night session, while ICE cotton trades higher- led by front  month March’s push toward 74 cents.  The news flow this week should be dominated by the myopic coverage of the president’s first days in office. Here’s hoping the rhetoric of the last year is over with and the news focuses on action instead of innuendo. Other than Cattle on Feed (Friday), there is little USDA data we can bite our teeth into. Exports will be monitored closely, especially for cancellations from China.  The Chinese New Year has begun, the market will expect little in the way of purchases into February while the celebrations begin overseas.

The government economic data releases will be slow as well, so more emphasis should be put on COT placement, as funds probably look to adjust with the inauguration behind us.   CFTC data on Friday showed that funds piled into commodities like Soybeans, Corn and Cotton.  Check out the charts below while you listen to the audio at the bottom of the newsletter.  I try to point out a few things I notice with fund participation lately.  I also updated the latest trade recs and fills.  Please call with questions.

We see rain fell across some of Argentina’s driest southern crop areas overnight with totals ranging from 1/2 of an inch to 2 inches in some areas. The rest of the Arg was dry over the weekend. The forecast has not changed, hot and dry weather will prevail this week under a high pressure Ridge, with limited additional rain chance offered until the 12-15 day period on the current runs.   Brazilian weather will feature dry weather for much of S Brazil over the next 10 days with ongoing moderate to at times heavy rainfall across N Brazil which could cause some early bean harvest delays. NE Brazil will hold in a drier weather trend. No extreme heat is expected through Feb 4th. It will be an interesting day with the charts all pointed up and uncertainty remaining regarding South American crop sizes. We that any CBOT break will be sustained until South American crops are better known in February. Argentina is likely to remain in a drier/warmer weather trend that could pose some additional upside market risk. That said, COT reports show funds are jumping on the weather story.  IN the case of corn and wheat, this may just be the beginning but in the case of cotton and soybeans, we are hitting loftly levels in participation that are difficult to want to buy.

SOURCE CFTC

Trade ideas:

– Buy July corn- Sell Dec Corn (see Turner’s Take)- FILLED NEAR 12 CENTS

– Buy March short dated Bean puts to protect crop insurance prices

– Sell March corn near 370 –FILLED ON MARCH CORN SALE AT 370 ON FRIDAY

– Sell March KC wheat, look to re-own July via calls or collars

– Hedge Dec 17 cotton at these levels and more near 73 cents.

Spec Recommendation:

– Sell April Hogs

– Sell June Hogs

– Sell October Hogs

-Buy Feb hogs/Sell April on a spread  (EXIT THIS SPREAD AT 2.25, FOR A PROFIT OF APPROX 1.85 POINTS)

-NEW: BUY FEB/SELL APRIL CATTLE AT 1.10

Please call or email if you have any questions.

Good morning friends

Corn (H17)  370’0     +3’6

Soybeans (H17) 1067’6   -2’4

Chi Wheat (H17) 428’0   +’4’6

KC Wheat  (H17)  446’6   +1’4

Cotton (H17) 72.94   +.25

CHECK OUT THE AUDIO BELOW FOR COMMENTARY

Trade ideas:

-New trade idea- I would look to sell some September corn around 3.95.  It kinda feels like Dec 17 is going to test 4.00, but I cant imagine it gets broken by much. I like selling September as an old crop sale.  This position could definitely take heat, but I just cant imagine the corn market needs to encourage more production.  It could be a nice placeholder for that last sale before harvest.

– Buy July corn- Sell Dec Corn (see Turner’s Take)

– Buy March short dated Bean puts to protect crop insurance prices

– Sell March corn near 370

– Sell March KC wheat, look to re-own July

– Hedge Dec 17 cotton at these levels and more near 73 cents.

Spec Recommendation:

– Sell April Hogs

– Sell June Hogs

– Sell October Hogs

-Buy Feb hogs/Sell April on a spread

Please call or email if you have any questions.

Good morning friends

Corn (H17)  362’0  +3’4

Soybeans (H17) 1061’2   +15’0

Chi Wheat (H17) 430’0   +4’0

KC Wheat  (H17)  451’2    +2’2

Cotton (H17) 72.54   +.27

Anytime I leave for a vacation, I always expect chaos in the markets.  While “chaos” may be a little heavy of a term for the recent price action, the up move in soybeans certainly has my attention. The long weekend saw rains in Argentina turn into more flooding, which has caused private analysts to start to write down yields below where the USDA has Arg production near 57 MMT.  I am hearing some folks say with the expected acreage loss, we could see 48 MMT.  A 20% loss in Arg yields should keep beans on bid for a good while.  Sunday night price action has the shorts running for the hills as old crop ramps over new crop and 17/18 Nov bean spreads pop back up to recent highs.  Watch Nov 17-18 bean spreads, if they would take out the double top here, we could easily see front month beans take a run at 11.00.

The US Dollar Index is making headlines this morning for its severe selloff, adding to the correction that we have seen as the inauguration approaches.  Trump has been talking about the USD in recent days and the issues that could cause problems for US companies trying to compete with the emerging markets (China).   Adding to the USD weakness were comments from Chinese president Xi Jinping at the World Economic Forum in Davos in which he defended globalization and free trade.   It seems inevitable that trade relations between the two largest economies in the world will be strained moving forward which is dollar negative. The Russian Ruble is trading back below 60:1 against the USD this morning, the second time it has poked below the 60-handle since July of 2015.  As I have mentioned before, wheat producers need to be rooting for a stronger Ruble.

ANYONE WITH CORN TO SELL BY THE MARCH DELIVERY SHOULD LOOK TO PLACE HEDGES OR LOCK IN PRICE ABOVE 370 MARCH. 

Reuters reported Chinese buyers have canceled up to seven cargoes of ethanol due to arrive by the end of March as it looks likely the countries 5% import tax on ethanol will revert back to 30%.  While no official announcement has been made, ethanol was not on a list of products receiving preferential 5% duties in 2017, leaving most traders to assume the tariff would head back to 30%.    According to Reuters, domestic ethanol in China amounts to around $2.16 per gallon vs. US ethanol quoted at $1.46, but when a 30% tariff and freight are added in the import margin is erased.  China was one of the largest destinations of US ethanol in 2016 with the country taking 179.1 million gallons of US ethanol Jan-Nov 2016.

Cotton markets are slightly higher as the charts flag sideways.  The USDA report from last week was bearish in my opinion, sparking little talk about better demand down the road.  The record long position remains, which is good for bears given the potential for a selloff but does reinforce the bullish commodity story given the data and the lack of liquidation. The wheat acreage coming in so low on Thursday shoould have cotton bulls worried.  Those wheat acres will be switched to something, I expect cotton to pick up its fair share.

This week will be dominated by the Trump inauguration along with the talk about trade war from Davos. Remember, its a holiday week so the reports from USDA will be pushed back one day. We get some USDA livestock data at the end of this week but other than that, its probably weather/dollar watching when it comes to the row crop picture.  Expect outside market volatility this week as the world prepares for Trump to take his place as the leader of the free world.

Welcome to 2017!

Corn (H17)  352’4   +’4

Soybeans (H17) 1001’2    -2’6

Chi Wheat (H17) 410’0  +2’0

KC Wheat  (H17)  419’0  +’4

Cotton (H17) 71.58   +.93

 

So far, the overnight price action in 2017 has been quiet at the CBOT and a little bullish in cotton as we get the year started. The currency price action is right where the trade left it, with a strong dollar dominating the trade.  It’s hard to see what changes this, at least in the short run. This week, the macro calendar has us getting FOMC meeting minutes (in the last meeting the Fed hiked rates) on Wednesday and then a whole bunch of employment data at the back end of the week.  On the ag newsflow side of things, official reports are relegated to the normal weekly reports (pushed back one day) and a focus on the WASDE report that comes out January 12th (Thurs).

Weather watching will be the theme until we get more data, and even after the data weather still will dictate price action. It sounds like there have been “too much moisture: problem talk coming out of Argentina. IN Brazil, everything appears to be copacetic except the extreme northern growing regions near Bahia.  I have yet to see any analysts write down production losses yet, until they do the market probably trades with that 100 mmt bean number in mind.  It will be very interesting to see how the funds trade this market early in 2017. Seasonally, wheat is a sell, corn and beans tend to perform and cotton peaks out after the first few weeks in the near year. Ill be back mid-week with the seasonal charts for ya’ll.

CHECK OUT THE AUDIO COMMENTS BELOW FOR COTTON AND CFTC REVIEW

Good morning and Merry Christmas friends,

Corn (H17)  346’2   -1’0

Soybeans (F17) 993’2   -‘2

Chi Wheat (H17)  399’4    -1’0

KC Wheat  (H17)  409’2  unch

Cotton (H17) 70.34   +.021

CBOT prices were quiet in the overnight, soybeans making a little news breaking below it’s 100 day MA and then retracing.  Soybeans have some MA support below, both on the Nov and the continuous front month March. Jan options go off the board today, there will be pin risk near 10.00 and 3.50 for beans and corn, the market could be volatile today as some folks shut it down for the year. Chicago wheat prices remain below 4.00, a test of the 390 area probably needs to happen to get the shorts satisfied with the recent move lower.  If that holds look for an opportunity to buy some wheat if July futures make a run toward 4.00.  Cotton futures are slightly higher amidst a very quiet overnight session. Yesterday’s disappointing export number should keep prices down in the short run.  It is hard to find a lot of bullish spin for cotton, yet the prices continue to hold these levels. The price gaps sit around 73 cents for December, which is an ideal hedge opportunity for new crop.

Livestock traders need to buckle up today, we get Cattle on Feed and the Quarterly Hogs and Pigs report out at 11 am.  I can’t remember the last time the meat markets were open for these reports.  Kirk Donsbach- the Cattleman- thinks if the COF report doesn’t provide a needle to pop this recent run up, the price action will continue higher.  He said to watch the placements number. The expectations are for big placements, if that would be bullish he thinks we could see front month trade 120+.

I hope everyone has a nice 3 day weekend.  I’ll be working next week if anyone needs anything.

Good morning friends

Corn (H17)  349’2   -1’0

Soybeans (F17) 1008’0  +2’4

Chi Wheat (H17)  401’4    -1’6

KC Wheat  (H17)  410’2   -2’2

Cotton (H17) 69.70  +.37

CBOT markets were quiet in the overnight, corn and wheat traded with little enthusiasm while new crop soybeans traded up a few pennies in an attempt to get back above 10.00. Cotton got off the mat somewhat with March making a run at 70 cents on the back of weak Chinese production talk.

The grain and oilseed markets are trading on fumes at this point in the year with little to move price other than rumor and innuendo.Weather is the main factor that is pushing prices, right now there is little worry in the trade.  A strong high pressure system will hold across E/NE Brazil in the coming days. Meteorologists are saying this could block moisture from the eastern part of Brazil’s growing region, while keeping rains in the south near the Arg/Brasil border. Short term all of this is seen as favorable, as the parched areas near the border will get plenty of moisture, but according to my weather guys, N/NE Brazil is more highly susceptible to drought longer term. The time to watch S American soil moisture more closely begins in early January. Normal/above normal temps (highs in the 80s, low 90s), and so regular rainfall is desired throughout the next 30 days. At this point it makes little sense to see any changes in yield forecasts, but that will change in the coming month.  Be ready! A corn market rally over the short run in this country hinges on problems in SAM.

November soybeans appear to be making a push toward the 100 day EMA near 9.83. US and Brazilian offers for shorter term product are pretty even, so I imagine the price has support from the commercial side.  From an open interest perspective, soybeans have seen significant covering in recent weeks as the long speculator moves toward the exits.  There is fuel for this market to move lower on spec liquidation.  Soybeans sit well off lows from last year record short position, so hedgers are still encouraged to get coverage if it makes sense from a profitability standpoint.  That said, I would not be chasing this selloff lower.  I look for a bounce as we get through a weak seasonal period that comes into play over the next month.  Weather will still dictate price and as I mentioned above, there is plenty to follow right now.

Wheat markets will follow corn and beans lower, amidst a record short position.  The newest piece of bearish news came from Egypt and their tender for wheat in recent days. Romanian/Russian wheat was purchased at $187 per ton, which is down a few dollars from recent purchases, but the Argentine wheat was bought at $173/MT, which is uber cheap. Algeria bought from Argentina last week, at below US offers as well. .US Gulf offers have fallen below Argentina now. The story in wheat will depend on what the global crop looks like this spring. The US is obviously not getting business in these conditions and need to drastically cut supply OR see competition markets cut supply.  Neither appears to be in the cards right now.  That said, the market remains record/insanely short. I wouldn’t be shocked to see some short covering in the weeks ahead.

Cotton is stuck between a bullish story out of China regarding production and a bearish story stateside regarding production.  The spec open interest remains really high even after the selloff we have seen in recent days.  Spread action is also weak with March giving gains back to Dec 17. Watch the close in March cotton today. If we would close above 70 cents, that would be a rejection of the 100 day EMA. At this moment I favor the short side of the trade due to the risk of spec liquidation.

Good morning friends

Corn (H17)  354’6   -1’4

Soybeans (F17)  1025’6  -11’0

Chi Wheat (H17)  410’6   +1’4

KC Wheat  (H17)  417’6    +3’0

Cotton (H17) 70.85   -.82

CBOT session started this holiday week (the holiday is next week, but the volume will reflect this week as well) on a sour note in soybeans and cotton, while the wheat and corn markets are mixed.  Weather will be the topic early in the week,  Argentina mostly got the rain that was expected and wheat belt in the US is under extremely cold temps.  The livestock markets will take their turn on the podium this week with Livestock slaughter on Thursday. Cold Storage, cattle on feed, and a very important Quarterly Hogs and Pigs report on Friday. Other than export sales and wheat conditions the grain reports are done for 2016.

The overnight CBOT trade was a bit of a dud considering the close on Friday.  Needed rain fell across Argentina and S Brazil on the weekend, the bears will claim trend yields are in tact. Given that corn and wheat OI has come back in the bulls favor over recent weeks, another push down is probably in the cards.  I am hearing producers are very slow to sell corn, but that will change in coming weeks when bills are due. The bulls will point to zero old crop stocks in Brazil as support, along with another dry forecast in the days ahead. . The next chance of rain across Argentina is late Friday/Saturday when another inch is expected/  S Brazil has rain chances every day this week while the drier areas of NE Brazil stay dry for the next 10 days. High temps look to range from the mid 80’s to the mid 90’s.  Beans are going to be the most susceptible to bearish news given the long position and the acreage story.

From an open interest standpoint, beans remain long while the corn has paired its short position substantially since October. Wheat shorts have come out as well.  Wheat should have preformed better on this cold snap, but physical supply is just too much right now. Seasonals in wheat pick up to the negative side as we get into January, bulls hope for a Christmas rally.  I look for July 17 KC wheat to rally into the 450 level.

Cotton enters the second to last trading week on the year with a record net long position for the 4th week in a row.  This leaves the price extremely vulnerable to quick short covering if news would support.  Given that cotton harvest is done, there is little out there that will push price besides macro conditions, which would make me even more nervous. A close under 70.25 would be ominous in my opinion. Short term traders might look to buy some extra puts ahead of the next WASDE reports.  Call Donna or myself if you have questions.

Good morning friends

Corn (H17)  357’2  +’6

Soybeans (F17)  1032’2   +3’2

Chi Wheat (H17)  408’0 -1’2

KC Wheat  (H17)  411’0  -1’6

Cotton (H17)  71.22   -.45

CBOT markets were very slow last night while cotton markets opened slightly lower and remain so into the 7 am hour. Cotton and beans had impressive days yesterday given the amount of pressure the USD has been putting on markets of late. Cotton exports were decent but the pace of US exports lags the averages just slightly.   USDA doesn’t have the cards to raise demand projections in the next USDA report, which should keep a lid on things in the short run given the massive amount of length from the spec side. Cash remains solid with gins on the buy side, but I remain skeptical of prices above 70 cents for the long run.  69 cents remains a solid floor for Dec 17 cotton but in my opinion a break lower is only a matter of time in that market.

Equity options and cotton options expire this morning, they will be cash settled in equities.

Informa acreage and production estimates yesterday:

US 2016 production

Corn crop near 15,275 mil bu vs USDA est of 15,226 (yields near 176)

Soybean crop near 4,381 mil bu vs USDA est of 4,361 (yields near 52.6)

This sounds about right, although I would love to see a state by state breakdown.

2017 Acreage 

US 2017 corn acres near 90,151 mil vs 94,310 mil (2016) -4,159 mil

US 2017 winter wheat acres near 33,213 vs 36,137 (2016) -2,924

US 2017 soybean acres near 88,892 vs 83,648 (2016) +5,244

US 2017 cotton acres near 10,470 vs 9,950 (2016)  520

I expect cotton acres to be higher than this but its pretty close. Winter wheat acreage is about right, while i question the corn/bean numbers.  This is where many had it last year but the producers chose to chase corn.  Given yields were so good last year in corn, I wonder if the producer feels the same way this year.  90 million corn acres is bullish, especially with yield problems but I just can’t imagine the USDA agrees.

Informa est US 2017 corn crop near 14,10 billion bu est.yield 170.4

Informa est US 2017 wheat crop near 1,904  est yield 46.9

Informa est US 2017 soybean crop near 4,166 billlion bu. est yield 47.2

We will see on those yields.  The road to those production numbers will have bumps, given the corn and wheat acres and the short fund positions i think producers will see rallies in which to sell into.

The SAM weather forecast is unchanged overnight. Hot/dry weather will remain for another few days, needed showers breaking out across Argentina on Sunday, and pushing northward next week into Southern Brazil. Rain totals are estimated in a range of .25-1.25” with all sorts of rain indicated during the 6-10 day period with totals ranging from .5-2.00”.This could be a crop saver for now. The trade has begun to remove some of the weathe premium put in last week but there is a good chance the trade is disappointed.  I remain bullish corn with sales targets near 370 March and bullish wheat through 430 March. Soybeans are a monster right now. Chinese soy crush margins are at 3 year highs and China is expected to be active in new forward purchases as the value of the Chinese yuan continues to sag. South American crops are a long ways from being made and with US export demand still robust, it’s a big crop/big demand marketplace. The acreage numbers will hold new crop down, but think we could see another push into the mid -10’s on front month.  Cotton is a sale in the gaps near 73 cents March.