Headlines:
- Markets ‘underestimating’ chance of higher cocoa demand
Plummeting cocoa prices could spur demand, with processing margins at their highest level in years, analyst Judith Ganes-Chase said. Ms Ganes-Chase said market were ‘underestimating’ the scale of current cocoa processing, suggesting the size of this year’s market surplus may less than thought. Cocoa prices in New York are plumbing their lowest level in over three years, under pressure from the big crop in West Africa. “More and more observers are expecting to see a sizeable oversupply in the current 2016-17 crop year,” said Commerzbank on Friday.
- US officials boost ideas of world grain stocks
The US Department of Agriculture unveiled larger-than expected upgrades to world stocks figures in its latest set of monthly supply-and-demand figures. Big upgrades to the Brazilian corn crop, and the Australian wheat harvest, left massive expectations for stocks by the end of 2016-17. “It was a riveting report with markets now trading mixed to lower after USDA raised world bean, corn and wheat stocks to new record levels,” said Kim Rugel, at Benson Quinn Commodities. Terry Reilly, at Futures International, said the report was “fundamentally bearish,” as “global supplies keep growing”.
Summary:
As expected there was little reaction to the onset of the USDA WASDE report release. Its production outlook for both Corn and Soybean were unchanged from its previous outlook projections. The Soybean production figures came in at 4.36 billion bushels on yields of 52.5 bushels per acre. The Corn production estimates were at 15.3 billion bushels on yields of 175.3 bushels per acre. The Wheat output was estimated at 2.31 billion bushels on yields of 52.6 bushels per acre.
The first 30-60 minutes after the USDA report was released all three markets seemed to simply consolidate in choppy action. From there they all began to find some strength finishing the day in positive territory. March Corn rose 5.25 points. March Beans was up double digits with an 11.75 point gain. March Wheat rounded out the day picking up where it left off yesterday adding 4.75 points of its own. Key support is at 402. It closed below that level on December 1st and barely on December 7th. As evidenced in the chart below it has great respect for that level. Our work suggested that it wanted to touch this level. Now that it has done so it may finally be on its way up.
Yesterday’s drop in Corn and Beans yesterday seems to have brought out some bargain hunting but as we have been saying all for some time now, we are looking for these markets to trade sideways to slightly up.
Crude Oil futures and the US Dollar continued to move higher today. According to our calculations, March Crude is poised to reach about 55 and the US Dollar to reach 103 as minimum price objectives.
