Grains were mixed overnight as soybeans started the week in positive territory while wheat slid lower. Corn was mostly unchanged going into the start of the regular trade session. In outside markets, S&P futures and the dollar were lower while crude oil bounced back to hover around the key $45 a barrel level.
Trade ranges in grains will likely be limited in the next two sessions as traders await the latest Supply and Demand forecasts from USDA. For both corn and soybeans, traders look for better US production as compared to USDA in October. Analyst are penciling in higher yields which leads to an overall corn production estimate of 13.579 BB (with a range of 13.435-13.718) versus USDA’s forecast in October of 13.555. For soybeans, analysts look for 3.915 (range 3.895-3.955) versus USDA in October at 3.888 BB. Likewise, ending stocks are expected to be bumped up by USDA in Tuesday’s report, which will be released at 11 am CDT.
In Australia, harvest is underway for wheat but rains throughout much of the country are slowing the pace. Concerns on quality are appearing however in some locations but it is still too early to determine a bigger picture with just 15% of the crop received so far. The rains across the country will have an impact on quality however the extent of this will be only known over the coming month.
In outside markets, Friday saw a big jump in the US dollar as a stronger than expected jobs report put traders on alert for an interest rate hike at the Fed’s December meeting. The Dec US dollar index futures (DX-MZ5) reached its highest point on Friday since April 2014. The strong dollar makes US exports of commodities more expensive to foreign customers and is limiting export sensitive commodity gains.
In crude oil (GCLZ5 / QMZ5), prices recovered a bit in overnight trade as the US dollar weakened. China’s trade figures disappointed analysts’ expectations by a wide margin in October, reinforcing views that the world’s second-largest economy will have to do more to stimulate domestic demand given softness in overseas markets. According the CFTC data, hedge funds raised their bullish wagers on U.S. crude this week by the most in six months as speculators bought into oil contracts in forward months on the bet market fundamentals will take time to improve.
The risk of trading futures, hedging, and speculating can be substantial. Grain Hedge is a dba of Foremost Trading LLC (NFA ID: 0307930)
