Summary

Brazil benefited from rain across the region but the dry areas of Mato Grosso were not as fortunate. Forecasts are calling for scattered showers in the areas that need it most for the next few days. Last week the stressed crop area came in at 15%, if favorable climate does not enter the picture they could be looking at an increase in the crop stress area.

It does appear that the trade is building risk premium back into the market near-term. We are in the throes of the holiday season and it will be several weeks before we can really have a better feel as to how the growing season might play out. During the next 1-2 months, we should also get a better feel for how El Nino can is expected to affect the Midwest’s outlook for next summer. A NOAA publication said that November was the warmest on record going back to when records began in 1880. This occurred during the strongest El Nino on record.

Corn

After the dust settled last week, March Corn ended the week with a net loss of 0.75 cents. The narrow net move is consistent with holiday trading this time of the year. China appears to be up to old tricks in an effort to slow imports in their country. Distiller’s dried grains with solubles (DDG’s) are the nutrient rich co-product of dry-milled ethanol production. China is reportedly going to file an anti-dumping case with the World Trade Organization (WTO). As the world’s leading importer of DDG’s (most of which it receives from the US), this move stands to curtail the US export numbers significantly.

Informa updated their acreage estimates for 2016 reducing Corn acres to 88.9 million down from 90.1 million previously. The commitment of traders report continued to show short covering on the part of speculative positions. The specs have covered 65,000 contracts in the past 3 weeks with the current speculative shorts standing at 85,000 contracts.

Soybeans

We had been looking at a potential mid-month low for the Soybean complex and it looks like we got it. Our cycles were calling for a low about December 18th. Last week the November 2016 Beans contract gained 17 cents. It rallied off of key support after initially dropping post the WASDE report.

ABIOVE (Brazilian Vegetable Oil Industry Association) raised their estimate of the soy crop by almost 1 million tons to 99.4 million tons. Domestically, Informa has the 2016 Soybean acreage at 84.5 million which is down 0.2 million from previous estimates. If the short covering that we saw last week is not yet exhausted we could see a bit more of a price advance. Weather concerns for South America could at any time make for a round of short covering. Speculative positions probably locked in some year-end gains.

Wheat

The hot and dry weather brought on by El Nino has led to Rabobank cutting the Australian Wheat crop down from 25.3 million tons to 23.3 million tons. Meanwhile, the USDA has the Aussie crop at 26 million tons. The poor quality of Brazil’s current Wheat production may lead to their SAFRAS Group reporting that Brazil might need to import an additional 1 million tons of Wheat. Additionally, wet conditions in Argentina is hurting the quality of their Wheat. July Crude finished down 1.50 cents on last week.

Crude Oil

Crude Oil’s meltdown might finally find a pause according to our cycles. There is still a massive oil oversupply but the prices should stabilize and either consolidate or even advance a bit starting in the New Year. Current cycle work points to possible double bottom between now and February 9. The ideal set up would be a December low followed by higher double bottom.