This is a sample entry from John Payne’s newsletter, This Week in Grain, published on Tuesday September 13, 2016.
September USDA WASDE came and went without major issue in corn and wheat. We got a little less uncertainty thanks to yield hikes in beans and cotton, which sent those markets reeling. The September report isn’t the end all for the yield, but it gives us a pretty good set of expectations. History says that for corn and beans, the furthest yields will fall or rise from here is 2%. For soybeans, I think yields could go up further from here within that range, in corn I think it will trend lower. Regardless, were probably looking at record production for both markets. The report for cotton eliminated some of the crop risk that has been on the table since the mid-summer.
NASS barely changed the US corn picture which was taken as bearish. NASS’s updated US corn yield was put roughly 2 Bu/Acre above the trade’s average guess at 174.8, vs. 175.1 in August, while end stocks came in higher than expected. Corn demand was basically left alone, which does give the bulls some ammo in future reports for a hike in exports, but I don’t think it makes much of a dent in carryout. Dec corn only fell a few pennies on the number, only to rebound and close almost unchanged. The trade is so short right now, the farmer will be the seller over the next few weeks. After the bin doors close though, I see a rally coming in corn as the shorts lift. Stay long if you are already long, if you aren’t I like selling put strategies on breaks or waiting to buy July futures near 355. The USDA painted over the story in Brazil, which will become more of a headline driver in reports ahead.
USDA increased their outlook of the US soybean yield by 1.7 bushels since the last month, to a record 50.6 BPA. Congrats to the satellite companies, they got this one right. Ill be continuing to watch their take on the trend from here, as of right now I think there is a chance yields grow from here. This was the largest September increase since 2006, and the 2nd largest September increase on record. With record yields and huge implied pod weights, the importance of the October report is increased, to see if actual harvest data confirms September estimates. Beans fell instantly back below the 200 day sma and will look to break even further this morning. There are still too many weak longs in this market to handle the amount of selling that will be coming from the farmer. What happens if the spec short decides to get involved? As of last week, they were back to base position with only 20 k shorts, that number was 100 k this spring. I look for a test of 9.00 at some point in the near future.
The wheat report was left untouched. This report was expected to be much, unlike the report at the end of the month that will better outline how much wheat is available and where. But, we did get a hike in exports of about 50 million bushels. That’s the first step toward a better price, but with Russian offers still well below US offers at the ports, there just isn’t enough fuel there to get things moving. Wheat will need a story to get this market moving, on the horizon the new crop offers that. Wheat sowings will get underway in a few fortnights, so that is our first chance at a new crop carryout. The short position in wheat remains record short, I still like buying July futures in KC and waiting it out.
In cotton, the USDA report was bearish against expectations. We saw a slight bounce in the overnight but there wasn’t much to keep prices higher and when the macros rolled over around mid-night, cotton fell with it. The report disappointed as ending stocks were raised against expectations for a cut. Stocks to use for wheat is the highest in 8 years, if the crop can be harvested in these conditions I see cotton priced way too high. I think we retest 60 before the Dec delivery and eventually could put that Dec 17 back into the 50s before planting. I look for the spec long position to bail here, and the market to reel as the harvest approaches. Keep hedges on and look for places to sell more Dec 17 on a bounce.
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