Looking Ahead To 2016 - Thursday, 31 December 2015

The trade has been rather quiet as we enter week 2 of our extended holiday season and the markets will again be closed this Friday, January 1st, 2016.  Next week, the first full-week of January is likely to be active for prices.  The annual and highly anticipated January USDA Crop reports are scheduled for January 12th, China will be releasing key data as will the U.S. and Europe.  Additionally the U.S. Federal Reserve is publicizing minutes from the December 17th meeting, all of this is likely to cause the Funds to do a large amount of repositioning and reallocating during the early part of January. 

There hasn’t been a lot of news to move the market far in either direction lately but the flooding on the Mississippi River has been capturing the most attention.  Movement of goods on the river has been impacted significantly and is effecting exports as a result.  The river basis has collapsed due to this and deliveries are being held up into the interior market region which is negatively effecting basis values all across the Corn Belt.  A list of some of the current important issues to watch are compiled below:

Bullish Headlines

  • El Niño is beginning to weaken which could possibly turn into a La Niña by late spring.
  • Economic struggles in South America may impact their crop production in the coming years.
  • Smaller South American crop size.
  • El Niño presence in S.A. causing crop production problems.
  • Ethanol production rebounding, up +2.1% from 1 yr. ago
  • CRP acres expected to increase

Bearish Headlines

  • The January forecast for drought areas in South America is showing better chances for beneficial rainfall.
  • U.S. corn is still overpriced in the global market causing poor export numbers
  • Chinese bookings are 82 million bushels behind last year
  • Funds are short 88,000 corn and 43,000 soybean contracts

The Van Trump Report has generated a 25-year historical chart for both corn and soybeans.  The first graph shows the market changes for corn and shows that “prices are currently trading in the middle of the modern-era-support” according to Kevin Van Trump.  He pointed out in his report that for many years corn had a trading range of about $1.50 to $3.00 per bushel and now our new “modern-day-era” has a trading range from around $3.00 to $4.50 per bushel. 

 

Soybeans also seem to have adjusted over time to a new modern-era-support level of $8.00 to $12.00 from the previous range of $4.00 to $8.00. 

 

 

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