The numbers on this report were pretty much in line with our expectations for the November report. Wish we had stuck with our calculations a month ago. These pages wrote often that 72c was reflecting a carryout around 5.75 Mb, and sure enough, thats what we got. Yields were finally trashed in the hurricane paths, and taken down again in TX. That state was hammered on both variables of production, ie, yield and prevent acres. Even though this report confirmed suspicions a month ago, we accept these numbers and will move on.
Sales were outstanding at 416 krb. China was high at 159 and Pak 2nd at 76. New crop sales were also good at 49 krb, China was -13 and Pak was best at 44. Shipments were also very good at 350 krb. The week after Thanksgiving was a blowout. This was the 2nd best sales of this market year, and same for combined sales. Shipments were also 2nd best. Price seems to be a non-factor for demand, as traders are increasingly bullish over prospects for a booming 2021. Some traders surmise the US is getting love from China due to their disputes with Australia. Maybe so.
This year is in 1st place of the modern era, post 2004, in regards shipments at 4.53 Mrb. 2nd best all-time for this week is the 07/08 year at 4.07 Mrb, vs final of 13.48. 3rd best year was 08/09 with cumulative shipments at 3.74 Mrb vs final of 12.59. In 4th place is the Step 2 year at 3.97 Mrb, but this year is disregarded due to the data being heavily biased. The % of shipments vs final for this year is 31.0%; for 07/08 it is 30.2%; and for 08/09 it is 29.7%.
A guess as to why it took the USDA so long to confirm the hurricanes really did hurt production, is that the crop was so late. We thought this hit to production would show up last month, and when it didn't, we tried to change the balance sheet to reflect price. A 5.75 Mb carryout and a ratio of 32.5% indicates an avg of 68.5c. Given a +/- 10% swing, that would get a high/low of 7535/6165. What is most interesting is that the futures for this year have an average price of 6800. Thats a pretty good bellweather for hitting a price range on the nose. Also, consider the futures low for the year at 6178. That figure is also dead center. If there is a surprise today, it is that demand has been, and is, very good. We are not bullish, but have been in and out and getting dinged for small losses. If this balance sheet is finally true and blue, a futures price in the mid 70s may be a bridge too far.
A breakout all round, especially in the lagging spot chart. For 9 months the spot contract has traded 6750/7250, and now is +2c above that high. We do see one similar timing pattern, between the Apr/Jly rally and the Jly/Oct rally. From low to high, both were exactly 67 days. The earlier move was +1375 points, the 2nd move was +1301 points. A correction of 513 points came after the first rally (37%), and a correction of 436 points came after the 2nd (34%). If there is now a 3rd similar move up underway, the target is ~8250. We are not advocating for this event, but do want to make known the timing similarities. Spot Mar is at a new high, and like the high of 11/23, momentum is diverging.