This is a sample entry from John Payne’s newsletter, This Week in Grain, published on Friday July 22, 2016.
Markets are softer in the overnight as the corn market makes a run toward the near term lows bear 318 (front month) and the 200 day MA in soybeans at 980. 6 trading sessions ago, soybeans were trading with an 11 handle. This morning the Nov contract is showing a 9 handle. It’s hard to say where the pressure is coming from, the removal of weather premium is to blame but the fact that the row crops and livestock markets are falling together has me wondering if we will hear of a major bankruptcy in coming days or some major event that is being missed. Today is option expiration for the August options so be careful for heavy moves in either direction. The release of the August weather models are one reason why prices are falling, there is really little to worry about right now when concerning yields.
In corn, forecasting models are changing as they add rain to the extended forecast and removing some heat from the upper Midwest. Exports were lack luster yesterday which throws a little more fuel on the fire. I expect the corn market to bounce here but I’m now thinking an eventual test of 318 in the front month is in the cards. I remain somewhat bullish down here as the drop below 360 July 17 and 370 Dec 17 futures represent major buy points for me. I have no interest in messing around in short term re-own strategies; I would rather play the deferred contracts with futures. With the basis in the NW corn belt near 80 under, its not too long until corn will be able to go under loan with the wheat. Throw in the crop insurance levels sitting right below here in December, I just see little incentive for corn to stay this cheap for too long. If it does, I imagine the corn carryout for the US peaking this year for many years ahead.
Finally some good news for the wheat bulls. The French crop took a pretty sizable downgrade yesterday and the other central European growers are expected to follow. We need to see follow thru from the Matif futures in coming sessions, so far they have paused today. The issue at hand will be whether or not French exporters will be able to meet export quotas with all of the production that has been downgraded due to moisture. I expect wheat to stay somewhat tied to the falling corn price in the short term, but I expect the spec short to make a move toward the exit at some point in the near future. I will remain bullish and patient at these prices near LDP levels.
I would probably wait for a test of 980 before getting bullish; I want to see where the net OI is as of last week. Soybeans remain a very long term bullish market with the way exports are going here stateside. If you are myopic and focus on the next 3-4 months, bean prices may not entice you. But if you can stick them in storage or buy the longer dated futures contracts and hold them, I think we will see prices higher in the long run. Short term though, a test of the 200 day near 980 is probably in the cards. I don’t see a major push below though as the old crop supply problem isn’t what it is in corn.
The spec position in cotton is relatively long as it was in soybeans or corn a few weeks back. I advise hedges in both 2016 and 2017 contracts before the next USDA WASDE or sooner. Chinese imports are slumping and there is a state auction in China that could flood their market. Indian problems are all we can really hang our hat on right now from the bull side, if those go away and the US crop conditions stay constant a run back into the low 60’s is probably in the cards.
Cattle on feed reports come out after the close today, the market expects another month of higher numbers. Bulls hope for a surprise.
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