This is a sample entry from John Payne’s newsletter, This Week in Grain, published on Wednesday May 25, 2016.
Markets were positive in the overnight with July corn making another run at 4.00 and the July soybean contract making yet another push toward 10.80. Minnesota wheat sits on front month support near 5.20 while July KC and Chicago wheat contracts toil near contract lows, below the 100 day EMA.
THE 8-14 DAY FORECAST LOOKS FANTASTIC
Above normal temps and frequent rains are projected through the next two weeks, with widespread boosts in soil moisture from rains in the central plains. Rain follows again in the next week. The GFS in early June projects a trough of low pressure to sink into the Plains, which will trigger a modest cool-down and trigger needed rainfall across the Southeast. The EU model has the Trough farther east with better rains for the Delta and the Southeast.
SOYBEANS: Were hearing reports of weaker crush margins in China and better yields being seen in Argentina. The idea that spec longs have deployed resources to the long side in record numbers has me wondering how much can be left in the bullish price tank without a US weather story. As of right now there is little in the way of weather worry. Yes, the eastern belt is slow to plant but that could be bearish beans as if folks throw in the towel on corn, they move toward beans. I’ve heard the trade is looking at 2 million more acres of soybeans in the June report. I think that’s a little ambitious but I think we can assume acreage is above 82.5 which would be around a million acre increase (prices have rallies 1.80 since the March survey).
CORN: News flow has turned positive in recent weeks reports of end users screaming for supply in both Brazil and China. Livestock margins are fantastic if you aren’t feeding cattle, hogs and chickens especially. IN the case of hogs, I’m hearing profit margins are off the charts. This has caused producers to hit the gas to increase numbers produced. There is a need for soybean, cornmeal and DDGs. I think July corn eventually gets above 4.00 and settles there, but for how long? A test of 407 (April high) feels inevitable. I would be targeting 420 as a level for new crop corn sales.
WHEAT: There isn’t much to say about wheat that will cause buying. Spring wheat conditions are fantastic and moisture is expected in the KC region throughout the next 2 weeks which should finish off the crop. The only real bullish cards I see come in the way of higher corn prices (feed sub) and an acreage story developing next year. All US wheat acres are down 20% from 10 years ago. Next year could see the lowest planted total in a century. IF demand would creep up down at these prices, I’m not sure future supply is ready to adjust. That said, current supply looks so large right now it may not matter. The only wheat I’m buying here is Minnesota near the 100 day EMA.
COTTON: Prices jumped off the 100 day EMA yesterday. I look for tests of the recent highs near 6370 before the 100 day ema is challenged again. (60.83) I look for a move toward 65 before I look to put major hedges on at this juncture.
CATTLE: Bearish news across the board except in cash. Demand is slow and a holiday weekend won’t do sellers any favors, but the cash cutouts remain sideways. Many think production for the year is topping right now, which is hard to argue with. I can’t see supply numbers continuing to creep higher with the cattle crush doing what it’s doing. Feels like Q feeders and fats are headed back to recent lows. I wouldn’t be establishing hedges down there though, especially on the feeder side. I think the feed market is due for a correction and we could see feeder cattle catch a bump on that. I’ll let you know if the Cattleman says anything different.
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