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Futures Cash Info Evening Comment for 10-19-16

 

                              FUTURES CASH INFO, LLC

 

 

Good evening.  The last of three Presidential debates will air tonight. I suspect most Americans are ready for this election to be done. That said, one would wonder why a billionaire, non-politician, non-political insider would go through such stress and pressure. No doubt, Donald Trump has been criticized and I am sure his family tried hard to talk him out of running. Tuesday evening I heard an interview with Donald Trump’s business partner of the past 20 years. As one would anticipate, he was very favorable and positive towards Donald Trump. However, he also commented that he really tried to talk “the Donald” out of running and I am sure Melania, Donald’s wife, was not totally on board in the beginning and maybe wishes secretly that he had not done this. So why? Why would “the Donald” run? He certainly does not need the income. Yes, he has written three books on the health of the U.S. I suspect “the Donald” is very passionate and believing that the U.S. is broken and “he believes he can fix the problem.” That is what his partner expressed in the interview. That belief shows a strong belief in himself and a very strong ego. After all, he is not a Washington insider.  What kind of people will Trump surround himself with should he be elected President? We can answer that question, we believe, by his selection of Mike Pence which was not in favor of Donald Trump to begin with and did not endorse him at first.  That shows “the Donald” can by-pass individuals who were not totally taken with him but shows he does have respect for others that don’t necessarily agree with him. Bottom line, that is healthy. 

 

I listened tonight to a video of Donald Trump addressing a group in New York where he totally talked about what he intends to do for the U.S.  Quite honestly, it was a great speech so, why hasn’t he talked this way before now and to the masses of the American public? Whatever, may God’s will be done on election day and whoever is president, may God enfold him or her and our country in his arms.

 

That said, markets are fairly quiet ahead of one of the most contentious elections in U.S. history.

 

Weather across Brazil crop areas over the past week has been raising some concerns on crop conditions with the northern areas being subjected to hot temps and declining rainfall which may be stressing recently emerged crops while Rio Grande do Sul is experiencing excessive rainfall over the past three days. This has resulted in flooding and a decline in winter wheat conditions.  That said, changes in weather patterns are coming that should bring rainfall to center west and northern areas of center south Brazil in time to improve spring planting conditions.

 

For the U.S., the Western Corn Belt is forecast to see average temperatures and rainfall over the next 6-10 day forecast. The same goes for the Eastern Corn Belt which is still dealing with too wet conditions which is especially true of Illinois.

 

CORN:    Corn closed higher today and is sitting just beneath the high of the past week.

 

Other daily trading limits have changed for soybeans and wheat but remains the same limit at 25 cents.

 

Corn export sales are estimated to be 700 tmt to 900 tmt for old and zero to 50 tmt for new.

 

Crude oil broke to new highs again today and this added support to corn which carries an energy focus as well.

 

That said, the rally will probably have to be much stronger to shake lose bushels into the commercial hands. However, the last third is where we see more bushels moving to the commercial this fall but note, we are seeing piles forming at elevators in Iowa.

 

Ethanol production rebounded to 998,000 bpd compared to 962,000 bpd last week but stocks declined to 19.0 million barrels which was down 0.4 million barrels.

 

We continue to view corn will move over 360 to the 38% retracement for December contract which is 366.

 

For tonight and tomorrow, Dec corn has resistance at 360 and 363 with support at 353 and 349.

 

SOYBEANS:    A Washington State University biologist has designed a way to increase the flow of nitrogen from specialized bacteria in soybean root nodules to the seed-producing organs. 

 

Soybean export sales are estimated at 1 MMT to 1.3 MMT for old and new at zero to 25 tmt.

 

Spot soy barges are trading today at +29 versus 5 year average of November +86 while Decatur, Illinois beans are +32 versus a 5 year average of November +2.

 

Soybeans closed up 9 cent today with soy oil giving support on its 33 cent gain.

 

Private exporters reported a sale today of 185 tmt of soybeans to unknown destinations for 2016/17.

 

Harvest is enjoying a good week of harvest thus far although, there still remains many fields of soybeans in the fields. That said, the past week’s freeze has been beneficial to strip leaves from the soy plants and beans are drying down. Harvest yields are continuing to be strong.

 

Hedge funds remain good buyers and continue to support their long position. In fact, funds are pushing futures through 10, 20, 50 and not against 200 day moving averages of some commodities all in support of funds buying agenda.

 

Soybeans are being led higher by soy oil and this type of rally usually does not hold as strong or as far as it would if led by soymeal. That said, it is interesting that soybeans are ignoring that soymeal has many alternative protein alternatives this year.  Should the crush slow, then soy oil will have more reason to rally as stocks decline. The oil share may reach 40%.

 

That said, Tuesday’s oil share closed at 36.6% which is still less than the normal share of years when soy oil leads the rally for soybeans in the vicinity of 38% - 49%.  Still, soy oil is at its highest level for breakout in two years. For soy oil, support is being drawn from Malaysian palm oil that has had a dicey rally this week with Monday the highest lift of 110 ringgits. Therefore, we note that the current oil share rally is a mere 3 months old when comparable years of 1994, 1998, 2008, 2011, and 2013 saw the rally last a minimum of 6 months and last as long as 29 months. The average is 19 months.

 

We expect the September high to be exceeded and possibly by Friday’s close which is taking the 994 September high out for Nov soybeans. Reviewing option strikes for November we note the $10 calls have high open interest while the 940 and 950 puts have huge open interest. No wonder 940 held the support on Nov soybeans last week. Therefore, Nov soybeans could rally to $10 and take all the premium worthless.  Note 995 is second resistance for this week.

 

For tonight and tomorrow, Jan soybeans have resistance at 995 and 10.00 with support on “Jan” at 983 and 976.

 

Lastly, daily limits have been increased from 65 cents to 70 cents. However, soy oil and soymeal limits remain the same.

 

WHEAT:    Black Sea wheat continues to be a major competitor for global wheat demand. Russia continues to be the feature of exports but Romania, and Ukraine are competitive as well. While production has moved to record levels for Russia this year, the country is on deck to become the world’s largest wheat exporter for the first time.  Estimates of Russian wheat production is 72 MMT which is sharply higher than 2012/13.

 

Egypt is in overnight for wheat with Egypt’s central bank has allocated $1.8 billion to ensure 6 months of reserves in all strategic goods. Concerns remain over the sugar shortages prompted talk of an impending food crisis. For now, Egypt has 5 months of wheat and vegoil reserves.

 

Wheat futures will see daily trading limits go from 35 cents to 30 cents.

 

Export sales are estimated at 350 tmt to 550 tmt for old and zero to 50 tmt for new.

 

Dec Chicago wheat has resistance at 422 and 426 with support at 415 and 412.

 

KC Dec wheat resistance at 430 and 433 with support at 420 and 413.

 

CATTLE:    As we cautioned our subscribers on the inner day indicators overdone in last night’s commentary proved to come to fruition today with futures caving on the heels of the cutout.

 

Today’s feeder cattle auction started out disappointing when the first five lots did not sell. However, sales started to pick up with 83% of the head count selling. Prices ranged from $97.75 to $100.00 and rumor has it that three of the big four packers bought the cattle today.

 

That said, the futures traders were oblivious to the cash market and sold the futures sharply lower as reports of a sharply lower cutout surfaced. With huge profit margins for packers this should not have had the impact that it did. However, the old-fashioned seasonal pattern continues to have a hold on how futures are moving and that is lower into tomorrow and then higher into the 23^rd.

 

 

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