Production came in 300kb above our estimate, so no big deal at 21.75 Mb. The only minor adjustment that we had not fully accounted for was the 2.4 Mb rise in world production to 120.75 Mb. Our calculation was 1.75 Mb more, so we missed this by Mb. Overall, the report was as expected. The USDA pegged exports at 61% of total available supply, a normal skew for this time of year. They are using +/- 60% even though the current cumulative is a record for this time of year, and in spite of other competing countries having bumper crops this year. If the USDA just looked at cumulative sales, the export figure would be higher, but if they just looked at our competitors, the number would be lower. Whats a bureaucrat to do?
With the passing of Irma, one can nibble at the edges of production, but the US figure now is pretty much known. Crops in India and China are probably going to be larger as harvest gets underway, and that means it will be harder for the US to export. This whole situation is nothing but bear but for one large unknown the ever-present theory of phantom stocks in India and China. This is the last safety line the bull can grab, other than some freak Mother Nature event, such as an early freeze on the Llano Estacado or perhaps hurricane number 3.
Hurricane hysteria began with Dec just above 66c, and that looks like where the market is headed. This is one of the few, maybe the only time, we can recall that the crop got much bigger during a double hurricane event. Going back to that Aug report, what in the world were those analysts smoking when they arrived at a 18.5 Mb crop? This thing today is 3 Mb above that estimate, over the protests of Harvey and Irma. Regards Irma, she is with us today, putting on a Delta crop that looks bountiful, is mostly not defoliated, and is 3 weeks late. As for trading, volatility has been stunning, even with the hurricanes. Two weeks ago we through the 7215 resistance would be an iron barrier. That sure didnt work. We remain very bearish, but are mindful of the tight carryin and late crop, and this nasty vol.
The rapid ascent and bull trend has come to a quick halt, but overall the Dec remains in its 6550/7550 price box since mid June 2016. Todays drop touched the 55 day avg at 6910. On the spot chart todays low runs into a cluster of averages, with the 21, 34 and 55 day all at 7075 to 7080. Todays low will be taken out on tonights open, but it would not be a surprise to see the market jump back above these averages after running stops. Strong support lies via a trend line across lows of the summer, crossing now at 6690. Dec may test this area soon, and spend some time consolidating between this support and the avgs. Sell rallies.
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