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Farm Futures - Afternoon Recap

Afternoon Recap - October 23, 2016

Oct. 21, 2016

Soybeans end with best close in a month

Grain futures closed mixed today after a session of two-sided trade buffeted by winds from outside markets ahead of what should be an active harvest weekend. Expiration of November options also was a factor in the back and forth, keeping some of the trading around strike prices where open interest lurked.

Strong gains in the dollar pressured U.S. stocks to losses early, with a denial-of-service attack on a big internet provider on the East Coast, increasing nervousness. Eventually Wall Street got its cat videos back, though another attack was reported on the West Coast.

USDA this afternoon reported steady numbers of cattle in feedlots as of Oc.1, while the trade was looking for an increase. That could help cattle prices Monday but raise questions about feed usage this fall.

Corn prices ended slightly higher today, paring gains ahead of the noon hour and keeping December futures to an inside day on its price chart. That left the market range bound for the past week, as it tried to avoid pressure from harvest over the weekend.

Much of the Corn Belt should be dry before storms emerge early next, focusing heaviest totals in the upper Mississippi River valley. That could kick of a shift to above normal precipitation for the first week of November.

Corn basis was mostly lower this week as buyers anticipated the arrival of new supplies. Freight costs also jumped along the Illinois River Thursday, adding a dime to the cost of moving grain to the Gulf. Margins at Illinois ethanol plants eased toward the middle of their range due to higher corn costs and slightly lower biofuel prices.

Funds were light buyers Friday as November options expired with December futures holding above the $3.50 strike price were there was significant open interest. The Commitment of Traders showed big speculators actively buying back their bearish bet on corn, cutting their short position by 65,395 contracts as of Tuesday.

Soybeans led the market higher today, sending November futures to its best close in a month with a firm finish after an inside day of trading. Export demand continues to underpin prices, though USDA announced no more new sales today under its daily reporting system for large purchases. Big speculators were light buyers this week, adding a net 14,017 contracts to their modest bullish bet.

Buying began to emerge this morning after a probe below the $9.80 strike price ahead of November options expiration today. That weak open was also pressured by outside markets that were selling off in part due to a stronger dollar. The greenback gained nearly .45%, a big move for a currency, reaching its strongest value since early February on the heels of a bullish breakout on the charts Thursday. Other currencies around the world remain under pressure for a variety of reasons. The British pound continues to lose ground based on the vote to leave the European Union. The EU’s central bank is expected to continue its loose monetary policies, even as the Federal Reserve begins tightening again. Traders see a 70% chance that will happen by the end of the year.

China’s yuan currency, meanwhile, weakened to a new six-year low today. So far that doesn’t appear to be affecting the country’s large book of soybean imports.

Buyers didn’t pay much attention to good storms moving through Brazil’s center-west, which received only 50% to 80% of normal precipitation over the past month. Growers there are making good planting progress, alleviating concerns about earlier delays.

Wheat prices lost ground today, posting small losses in all three markets. Winter wheat contracts held chart support but were never able to recover from Thursday’s bearish reversals lower. Minneapolis futures finally reversed lower too, closing below its chart support at the 200-day moving average.

The stronger dollar was blamed for at least part of today’s weakness. The stronger dollar doesn’t really hurt wheat exports because prices around the world quickly adjust to changes in their local currency values. That’s why wheat fell on a stronger dollar today, and Paris wheat moved higher on a weaker euro, despite beneficial rains in France.

Prices in Australia strengthened to end the week, boosted by both a weak currency and unexpectedly heavy storms on the eastern part of the continent, where flooding was a concern earlier.

Here in the U.S., the western Plains were dry this week in key areas for hard red winter wheat. USDA is expected to put out its first ratings of the winter wheat crop on Monday.

Big speculators covered 31,025 contracts of their short position in soft red winter wheat futures this week, helping lift prices.

More from Farm Futures:
Weekly Corn Review
Weekly Soybean Review
Weekly Wheat Review

Afternoon Recap by Bob Burgdorfer

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