Commodity Index
The CRB Index closed higher on the week and broke out of the topside of the recent range. It will be key that the rally carry through next week with the immediate upside price target of $425-425.6O. The US dollar fell with US tax legislation unlikely to gain much traction heading into the end of the year.
The world economic outlook is brightening at the same time that the US economy lacks a needed fiscal push. ARC would comment that China indicated that it will pay for its crude oil in yuan or gold, and not in US dollars. Many see this as a move for a further appreciation of that yuan and a continued debasing of the US greenback.
AgResource expects that spot crude oil will test $54 in coming weeks, with a close above this price causing a quick run at $60. ARC maintains that new investment will be heading into the raw material space heading into ’18.
Corn
December corn ended near unchanged. The USDA’s October report viewed as bearish as US yield was raised again and as major exporter stocks/use is now pegged slightly higher than last year. However, heading into the report, speculators held a rather large net short position, particularly for mid-October, and so new selling was absent. The general corn theme remains one of abundance, and as such clients should expect ongoing sideways price action through early winter – when South America’s climate pattern will be better known.
ARC does note that so far South American weather has been far from ideal. Soybean planting is delayed in Central areas amid abnormal dryness, which looks to continue into late October. A building La Nina also poses questions over longer term conditions in Argentina. We remain unwilling to chase breaks and rallies, but without a problem in S America, rallies will be capped at $3.75-3.80, basis March CBOT futures.