Carrot or Stick Time
Dec 01, 2017
Market Watch with Alan Brugler
December 1, 2017
Carrot or Stick Time
Ag tradition has it that you can motivate certain animals (or people) two ways. You can use the carrot or the stick. Move them forward with a promise of a tasty treat (by the way, usually kept just out of reach on a string) or the threat of discomfort/pain via a stick, a buggy whip or $2.50 corn prices. The markets are well versed in using these techniques when producers are reluctant to sell the cash commodities. Small rallies are the carrot, while grinding declines or limit down days are the stick. The corn and wheat markets have been using the stick method, setting new life of contract lows this week after weeks of decline. At month end, we got a couple days of carrot action courtesy of spec fund profit taking. Cattle were going the other way, at least on Friday, with the cash market up for the week but futures suggesting a darker time ahead.
Corn futures posted life of contract lows early in the week, but were 2 ½ cents higher for the full week. The USDA indicated that weekly exports were down 6.4% from a week ago at 651,220 MT, but were 12.75% larger that the same holiday week last year. Mexico was the main destination with 268,800 MT shipped, as 114,700 MT went to Japan. Total export commitments are now 24.89% lower than last year, losing ground since last week. Ethanol stocks continued to build in the Midwest region with daily average production just slightly below record levels. The CFTC report on Friday night showed the spec funds reducing their net short position by 13,703 contracts in the week ending November 28. They were still net short 196,763 contracts at that time.
Wheat futures were going different directions. KC HRW gained 6 cents (1.45%) for the week, while nearby MPLS December was down 2.1% and Chicago Dec slipped 0.3%. US wheat export shipments rose 78.04% to 337,526 MT last week, which was 41.57% larger than last year. All wheat export commitments dropped to 9% lower than this time a year ago, due to a very small weekly sales numbers. The Friday Commitment of Traders report showed the big spec funds adding to their short Chicago SRW positions, tacking on another 14,1089 contracts in the week ending November 28. They were net short 122,774 contracts at that time.
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