Soy Supports All
An error was made in yesterday's letter, whereby we read the Gavekal chart on debt/assets "upside down." And didn't catch the error on a re-read. The chart implicates the household debt is as low as 1984, while the gov debt is record and rising. Sorry about that.
Sales were very good, again, redundantly, habitual. 5 of the last 10 weeks have been larger, and 5 have been smaller. At 316 krb, Viet was high at 128, Pak 2nd at 68, Turk 3rd at 48, while China hit the brakes at -22. New crop sales were good at 40 krb, Bang taking half. Shipments were very good at 331 krb, best in 6 weeks. Sales for soy and corn were also very good. No rationing of anything yet.
Going back to the basics (balance sheets) corn, cotton and wheat appear pricey in regards to their carryouts and ratios. The assumption here, is that the balance sheets are about right. Now that the Jan reports are behind us, chances are good that balance sheets are pretty accurate. For cotton, production and exports have seen drastic changes, as production was near 20.0 Mb in spring, and is now 15.0 Mb. Exports have seesawed from 16.0 Mb, to 14.6, back to 15.25. The next 6 months will not see nearly as many changes as the first 6 months. The soy market is the lonely one that has the same theoretical end stocks as did cotton in the 2010/11 year – nothing. If all the row crops do correct together, soy is the one and the only that can roar back like a lion.
One major trade house places cotton, corn, copper and silver as the most over-stretched with new longs.
Informa's new acreage estimate is 11.52 M, and Rabo's estimate is 12.5 M, as compared to last year at 12.18 M. These estimates can and will change dramatically once we know if the 2.0 M acres of dryland on the Llano Estacado get planted. Forecast is bare the next 10 days.
Tech commentary and chart from Dave Toth, RJO analyst. 11 Jan 7865 next larger degree corrective low remains intact as our short term key risk parameter as this is the level the market needs to break to confirm a bearish divergence in daily momentum below that would break the uptrend from at least 22 Dec 7428 even larger degree corrective low. The market has avoided the confirmation of a bearish divergence in daily momentum for months. Wed's 8060 low is the absolute smallest degree corrective low this market is not minimally required to fail below to even defer, let alone threaten the bull.