Production = 20.67 MB

agricultural, Charts, Commentary, News, Technical Analysis

From our last estimate of 21.45 Mb, we cut Mb from GA, FL and AL, and cut 400 kb from TX and OK. Then we added about 125kb in the Carolinas. We have heard other estimates, but have not seen anything in writing yet. One estimate has the crop at 19.8 Mb, down 1.1 Mb from Oct. Some others fall between 20.0 to 21.4 Mb. Overwhelming consensus calls for a lower crop than the Oct number of 20.9 Mb. For the world, the cuts in the US were matched by increase in India. No idea what to do with Pakistan, as there are some wide guesses there. Acreage was up 14%, so with average yield that crop should be well above 9.0 Mb. Other countries showed little change.

 

Then there is the export number, which is like trying to catch a butterfly with bare hands. The simple thing to do, which requires no thinking or depending on unknown theories, is to use something around 60% of total available supply and be done with it. We took the easy way out and used 62% to get exports at 14.5 Mb. And freely admit that this number can change by miles. The resultant carryout ratio is 30%.

Varner View

We took the current annual futures spot low of 67.25c and the ratio of 30%, and ran trend lines on pinch points since 1973. That year was the first big blowout for futures, and data before that was deemed irrelevant. The excel function ran 5 methods for trendlines, which were exponential, linear, log, polynomial, and power. R squares were very low, from 22.5 to 30.0. Respective trendline calculated lows are: 54.50, 55.50, 54.00, 55.00, and 53.00. This years low stands out as a rare data point, one well outside the norm. However, with R values so low, one cannot put too much faith in these calculations. In order for this years pinch point to reach the norm, the ratio would have to be from 18% to 22%.

Technicals

The spot chart shows the 89 day avg held the Dec in check on 10/24 high. The 55 day avg is 6920, and that was the stopping point for Thur mini-rally. The high of 10/24 is exactly the 38% retrace from the early Sep high to the 10/20 low. Timing may be a more important price-maker for nearby, with a very reliable seasonal low due around 11/22.


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