This is a sample entry from John Payne’s newsletter, This Week in Grain, published on Monday, May 26, 2015.
It was an ugly start to trading this week at the CME with corn, beans and wheat turning the three day weekend into a Tuesday downer for the bulls. Corn and soybeans both saw closes below key technical levels. Corn hadn’t closed below 3.60 on the front month contract since last harvest and new crop beans broke their October lows, with November sitting only 3 cents above 9.00. Wheat didn’t break any key levels in my opinion but that didn’t make their 23 cent down day any easier to take for this ag bull. Early in the weekend I knew grains were in trouble when Greece came out and declared intentions to miss payment on the money it owes in June to its creditors. The result saw a major push in the US dollar over the Monday holiday, with selling in anything not US Dollar going on throughout Tuesday.
This selling was not fundamentally related to anything grain specific in my opinion. What has changed since last week? Not much other than a few more folks done with planting, opening up time for grain deliveries. Here’s the rundown for this week:
- Funds remain short (as of Sunday) a record amount of corn (158 k contracts) and beans (95 k), and remain short 70 k contracts of wheat going into Monday evening open. The wheat number grew today.
- Flooding is the story in Texas and Oklahoma with more rain expected this week. Weather reports I’ve read show that 25% of the HRW belt has received an unstable amount of rain in the last two weeks.
- Corn will receive its first crop rating for the year; many expect G/E ratings to be over 75%.
- Trade expects 95% of corn plantings to be completed and 65% of soybeans. This would leave the US with about 8 million corn/bean acres to plant. Corn planting window for insurance purposes closes this week.
- In the past five years, the corn crop was 83%, 86%, 96%, 91% and 95% planted on the week of the first national condition report. Respectively, the crop was rated 43, 63, 77, 63 and 76 pct good/excellent on that date. The lowest rating being associated with the wet year of 2010 with only 83 pct planted. This year, of course, NATIONAL planting pace will appear “normal” thus prompting the trade to expect a robust national crop rating Tuesday night (best ever being 81 pct good in “91 and ’87”. (Thanks to RJO and Feltes for this data)
- The EPA is expected to announce its biofuel mandates for next year by the end of this week. It will be interesting to see if any end users come in and buy before the end of the week. There is no impetus right now for any end user to be too concerned with acquiring cheap grain, it appears to be abundant.
- Chinese domestic soymeal values fell to seven year lows to start the week with losses both on Monday and Tuesday. Record Chinese imports of soybeans and a lack of feed demand has pushed their soy crush margins into the red. This has slowed China’s import demand for soybeans in August/September. US exports of Soymeal are almost half of what they were one year ago.
- Russia is still discussing a floating export tax that would kick in around the $220/MT level basis fob. So far this is still just a rumor, but this would be bullish outside wheat markets if Russian wheat crops would not harvest well.
Observed Precipitation May 19-26
More Rain Expected This Week
Lowest front month close in 6 months looks like its breaking down from a test of the 200 day MA. TRADE IDEA: Sell Sep Futures combined with a purchase of an August 380 call.
New lows in new crop beans inspire more selling BUT were seeing some bullish move in the spreads. I’m selling into this price action. TRADE IDEA: I actually like selling the July futures against the September futures for the next few weeks. I would try to get into this as close to 21 as possible.
Wheat took it on the chin today, but the uptrend in the KC-Chi spreads remain in tact. If quality is an issue, it will be moreso out west. I want to own where there are floods and sell where there are not. TRADE IDEA: Buying Sep KC Wheat – Selling Sep Chicago Wheat.
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