Written Commentary
MORNING COMMENTS
Macroeconomics:
Evaluations for US stocks are much higher than the multiples for Chinese stocks. Some see that as an opportunity to move money from the US equity market to the Chinese market. After the 25 basis point rate hike that Japan made in early August we have seen the Yen gain strength against the dollar. Japan has not mentioned additional rate increases since, but they may be forced to raise rates because of improvements to their economy. Due to their proximity and trade relationship Japan and China’s economies are closely intertwined. Both nations are attempting to build economic health without increasing their money supplies. The unraveling of the carry trade in Japan shook the markets in early August. We may see more movement in equity and currency markets if Asian markets continue to make adjustments to their policies. China is spending money from their reserves to stimulate the economy.
Ag Fundamentals:
Tighter logistics in both the export and domestic pipelines is causing a squeeze on soybean meal values today. Spreads were not relieving the pressure of up front demand vs. available freight forcing the board to do the work today. In addition, fund managers are covering shorts heading into next week’s stock report. The US Small Grains and Grain Stocks Estimate Report will be release on Monday at 11:00 am CST. US 24/25 production estimates for corn and beans are expected to range from 14.88-15.394 billion bushels of corn and 4.145-4.22 billion bushels of beans. Average estimates for 23/24 corn production are slightly lower than the September WASDE and soybeans are expected to remain flat from the latest WASDE report. Corn ending stocks is expected to be reported below 2 billion bushels due to better than expected exports and steady usage. Soybean ending stocks are trending toward the low end of the estimate range with an average estimate of 350 million bu.
Weather:
The remnants of Helene move over the Ohio River Valley today, dumping much needed rain to the river system. Harvest across the southern half of the Midwest and north side of the mid-south will be delayed a couple days while farmers wait for fields to dry down. Brazil is expecting to see 1-1.5 inches of rain in their Central growing regions between October 7th and October 12th. They are still below normal precip in most areas (excluding the southern region) and they will need a few more rain events aside from this to satisfy producers attempting to plant beans.
Day 10-15 (October 7th-12th) Rain Forecast in South America is showing better chances of rain in Brazil’s major growing regions. Expecting just over 1 inch in some areas. (25mm = 1 inch of rain).
Calendar Spreads
Spread | Last | Chg | Full | % of FC |
CZ24/CH25 | -17 | +3/4 | -30 1/4 | 56% |
SX24/SF25 | -17 1/4 | +1 | -26 3/4 | 64% |
SX24/SN25 | -50 1/4 | +4 1/4 | -106 1/4 | 47% |
MWZ24/MWH25 | -22 | 0 | -30 | 73% |
WZ24/WH25 | -20 1/4 | – 1/4 | -23 3/4 | 85% |
KWZ24/KWH25 | -15 | – 1/4 | -23 1/2 | 64% |
Cost of Carry
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