We do know one trader that graduated UT (Tenn, not the other UT), that nailed the US production. We only lament that our first estimate of 19.6 Mb was turned in, then the 2nd estimate showed 20.1 Mb and that was turned in to a different press service. Our bias was that crop indexes were pretty close to those of last year, but USDA yield so far was much below the year ago yield. Therefore, something had to give, and that meant most traders were lowballing yield. Recall last year that the USDA had to be bludgeoned into raising yield after good rains in July through early Sep. This year they swallowed hard and admitted this is a very good crop, all harvested in early Aug.
And check out the world numbers, as readers of these pages know we have been at 117 Mb for both production and consumption for a couple of months, after getting much verbal abuse and catcalling from our bullish friends. 117 both sides, imagine that! Which means our spring theory of a flatline world situation will come true. No change in world end stocks, they just shift from China to others.
First, we admit to thinking the correction from 6615 would end around 6900/6980, and were early and a little low. But now this market looks to shed the moderate long position, and perhaps move to net short. That means new lows. Another observation is that the USDA called this crop as it is on 1 Aug, and did not pull a 2016 habit of waiting till evidence was overwhelming to raise yield. This crop can get a little bigger, or smaller, but not by any great amount. We hit the Texas yield on the nose at 733 #/a, and see room for states of LA, Miss and OK to improve. Mother Nature could throw us a hurricane that may knock Mb off the crop, but we see 20.5 Mb as a good stat.
Old timers know that this market often sends signals via spreads, as the Oct/Dec spread peaked on 7/27, and the Dec/Mar spread topped on 8/02. Futures did not reach a high till 8/08, so once again the spreads gave us fair, and accurate, warning. We will call the 7121 the 4 wave high, finally, and look for a final low under 6615. Where that lies is unknown, but we have calculated targets from 6350 to 6550. Where to add to shorts? No good place, but 6950 was a spike intra-day low.
325 Cotton Row Cleveland MS 38732
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