Thanksgiving Update: Grains & Cattle
Nov 23, 2017
December corn futures were little changed on Wednesday as market participants left the screens early ahead of Thanksgiving. Option expiration has been the big event on the radar for us over the last week as we have been talking about high open interest strikes being a magnet for prices. Last week there were significant amounts of open interest in puts from 350 down to 340, those 340 and 345 strike puts that were in the money last week are now next to worthless. Although Friday will likely be quiet it is possible we could see a bid into the close as there are still 27,000 350 puts open. Where the trade goes post option expiration will set the tone as we round out the year. For clients who were able to capitalize on the grind higher this past week, we have recommended to flatten or reduce the long exposure (spec and producers). There is no trade today which means export sales will be pushed back to tomorrow. Export sales are expected to come in from 900,000-1,300,000 metric tons, last week’s number came in at 949,000 metric tons. There has been an increase in chatter with regards to weather concerns in Argentina over the past few days. Talks of La Nina and drier weather could put a premium in the market if we start to see weather patterns and forecasts trend in that direction. The weekly Commitment of Traders report will be released Monday.
Soybeans have been finding strength recently off of key technical support down at 968 ¼. The market managed to reclaim prices above the 50% retracement for the year at 984 ¾, this was an invitation for funds to extend their net long position. We are now in our major technical resistance pocket from 999-1004, a breakout above opens the door to another leg higher towards 1021 ½. The weekly Commitment of Traders report will be released Monday. Export sales will be released on Friday due to Thanksgiving. Expectations are for 1,000,000-1,400,000 metric tons; last week’s number was 1,104,000 metric tons. There has been more talk of La Nina which means we could see drier conditions in Argentina, this has helped put a premium into the market and keep the technical rally in play.
Cattle futures rallied on Wednesday with December live cattle ending the day up 1.225 at 119.05 and January feeders up 1.075 at 152.725. There were 955 head listed on the Fed Cattle Exchange with 119 passed on and no sales. There was a late day cash trade at 120.50 in Colorado, Nebraska, and Wyoming. 117.30 has been our “pivot” point, this represents the middle of the range from the August lows to the November highs. The market has grinded back towards 119.80 which is another technical indicator as well as previous resistance and the breakout point in October. A lot of people have been calling/emailing in wondering about the direction from here, and that remains to be the million-dollar questions; We feel a consolidation within this range would be healthy for the market.
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