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Home / Futures Blog / Turner’s Take – The Bull Case for New Crop Corn & Soybeans

Turner’s Take – The Bull Case for New Crop Corn & Soybeans

April 8, 2014 by Craig Turner

This is a sample entry from Craig Turner’s email newsletter, Turner’s Take, published on April 07, 2014.


In this issue:

  1. Corn: Dec Corn Should Now Lead Corn Market. Stay Bear Spread CZ/CN
  2. Soybeans: November Soybeans Has Upside Potential. Looking at SX4/SX5
  3. Wheat: NASS Weekly Crop Conditions Start Today
  4. Energy: Stick with CL & NG Bear Spreads

1) CORN: Dec Corn Should Now Lead Corn Market

When you look at the corn supply from the March 1 stocks report and the estimates for the April WASDE, the market will gain confidence ending stocks will be around 1.400 billion bushels, give or take 100 million. This is significant because at 1.400 billion bushels, old crop supplies will be viewed as “adequate” for the rest of the year. The risk of uncertainty in Supply and Demand will now transfer over to December Corn.

Dec Corn should lead the market going forward. With old crop pretty much accounted for, it is new crop that can have the wide ranges in the Supply and Demand table. If the USDA uses a 165 yield then we have about 1.9 billion carryout for 2014-15. Keep in mind that 165 would be a record. If we have a 155 yield the carryout is more likely 1.0 billion. That could be the difference between $4.00 and $5.50 corn. A 150 yield could push to $6.00 and a 145 or lower brings us back to $7 and $8 corn from a couple of years ago. Keep in mind; this is only the supply side of the equation. This does not take into account any unforeseen increases in demand.

Moral of the story is Dec Corn should be the leader now. If plantings are delayed and the summer weather is hot and dry, we could see Dec Corn rally to $5.80 and maybe even $6.00 depending on the conditions. If the growing season is perfect, we add some acres, and the 165 yield comes in, we are making a charge to $4.00 by harvest.

We are bear spread CZ/CN from +8.50 cents. Given that old crop carryout will be adequate but the uncertainty switched to new crop, CN/CZ should be trading at a very small inverse to a modest carry. I think we go to -10 or -15 in the next few weeks.

STRATEGIES USING COMBINATIONS OF POSITIONS, SUCH AS SPREAD AND STRADDLE POSITIONS MAY BE AS RISKY AS TAKING A SIMPLE LONG OR SHORT POSITION.

Open Position: Long Dec Corn/Short July Corn from +8.50 cents (premium to July).

CN/CZ Daily Chart:

cn-cz

2) SOYBEANS: November Soybeans Has Upside Potential

The big picture for Soybeans is China increased imports about 10mm tons from last year (HUGE NUMBER) and they have a lot of room to expand when you consider the room for growth in per capita consumption. Some say the US and South America need to add about 5mm to 6mm acres a year to meet the growing Chinese demand.

This is a very long term trend, but when you consider old stock soybeans are tight, November is not even planted yet, and SN/SX is about $2.50 to July, and we need a big crop just to get to a 250 carryout, new crop beans could be setting up for higher prices this summer.

For the first time all year I am turning bullish SX. I like the SX14/SX15 spread. It is around +40 cents now (14 over 15). Last year we traded $2.00 over and the year before $4.00 over. Keep in mind if we get a huge crop and a 300mm carryout the spread could trade to -50, though that has not happened since 2008.

SX14/SX15 Daily Chart:

sx14-sx15

3) WHEAT: NASS Weekly Crop Conditions Start Today

The NASS will kick off their new season of Weekly Crop Condition reports today after the grain close. First up are winter wheat conditions, which we have been receiving reports on from individual states for a while now. Expectations are this year’s crop is a little better than last year’s crop at the same point in the growing season.

4) ENERGY: Stick with Crude and Natural Gas Bear Spreads

We are bear spread July/June Crude from +$1.00 and Oct/July Natural Gas from +0.015. The crude spread is about 20 cents ($200) in our favor and we are right where we got in for Natural Gas. I am bearish on Crude and Natural Gas due to the fundamental outlook, technical analysis, and seasonal patterns.

CLM/CLN Daily Chart:

clm-cln

NGN/NGV Daily Chart:

ngn-ngv

STRATEGIES USING COMBINATIONS OF POSITIONS, SUCH AS SPREAD AND STRADDLE POSITIONS MAY BE AS RISKY AS TAKING A SIMPLE LONG OR SHORT POSITION.

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Risk Disclosure

STRATEGIES USING COMBINATIONS OF POSITIONS, SUCH AS SPREAD AND STRADDLE POSITIONS MAY BE AS RISKY AS TAKING A SIMPLE LONG OR SHORT POSITION.

THIS MATERIAL IS CONVEYED AS A SOLICITATION FOR ENTERING INTO A DERIVATIVES TRANSACTION.

THIS MATERIAL HAS BEEN PREPARED BY A DANIELS TRADING BROKER WHO PROVIDES RESEARCH MARKET COMMENTARY AND TRADE RECOMMENDATIONS AS PART OF HIS OR HER SOLICITATION FOR ACCOUNTS AND SOLICITATION FOR TRADES; HOWEVER, DANIELS TRADING DOES NOT MAINTAIN A RESEARCH DEPARTMENT AS DEFINED IN CFTC RULE 1.71. DANIELS TRADING, ITS PRINCIPALS, BROKERS AND EMPLOYEES MAY TRADE IN DERIVATIVES FOR THEIR OWN ACCOUNTS OR FOR THE ACCOUNTS OF OTHERS. DUE TO VARIOUS FACTORS (SUCH AS RISK TOLERANCE, MARGIN REQUIREMENTS, TRADING OBJECTIVES, SHORT TERM VS. LONG TERM STRATEGIES, TECHNICAL VS. FUNDAMENTAL MARKET ANALYSIS, AND OTHER FACTORS) SUCH TRADING MAY RESULT IN THE INITIATION OR LIQUIDATION OF POSITIONS THAT ARE DIFFERENT FROM OR CONTRARY TO THE OPINIONS AND RECOMMENDATIONS CONTAINED THEREIN.

PAST PERFORMANCE IS NOT NECESSARILY INDICATIVE OF FUTURE PERFORMANCE. THE RISK OF LOSS IN TRADING FUTURES CONTRACTS OR COMMODITY OPTIONS CAN BE SUBSTANTIAL, AND THEREFORE INVESTORS SHOULD UNDERSTAND THE RISKS INVOLVED IN TAKING LEVERAGED POSITIONS AND MUST ASSUME RESPONSIBILITY FOR THE RISKS ASSOCIATED WITH SUCH INVESTMENTS AND FOR THEIR RESULTS.

TRADE RECOMMENDATIONS AND PROFIT/LOSS CALCULATIONS MAY NOT INCLUDE COMMISSIONS AND FEES. PLEASE CONSULT YOUR BROKER FOR DETAILS BASED ON YOUR TRADING ARRANGEMENT AND COMMISSION SETUP.

YOU SHOULD CAREFULLY CONSIDER WHETHER SUCH TRADING IS SUITABLE FOR YOU IN LIGHT OF YOUR CIRCUMSTANCES AND FINANCIAL RESOURCES. YOU SHOULD READ THE "RISK DISCLOSURE" WEBPAGE ACCESSED AT WWW.DANIELSTRADING.COM AT THE BOTTOM OF THE HOMEPAGE. DANIELS TRADING IS NOT AFFILIATED WITH NOR DOES IT ENDORSE ANY TRADING SYSTEM, NEWSLETTER OR OTHER SIMILAR SERVICE. DANIELS TRADING DOES NOT GUARANTEE OR VERIFY ANY PERFORMANCE CLAIMS MADE BY SUCH SYSTEMS OR SERVICE.

GLOBAL ASSET ADVISORS, LLC (“GAA”) (DBA: DANIELS TRADING, TOP THIRD AG MARKETING AND FUTURES ONLINE) IS AN INTRODUCING BROKER TO GAIN CAPITAL GROUP, LLC (GCG) A FUTURES COMMISSION MERCHANT AND RETAIL FOREIGN EXCHANGE DEALER. GAA AND GCG ARE WHOLLY OWNED SUBSIDIARIES OF STONEX GROUP INC. (NASDAQ:SNEX) THE ULTIMATE PARENT COMPANY.

Filed Under: Turner's Take

About Craig Turner

Craig Turner is a Senior Broker at Daniels Trading, author of Turner’s Take newsletter, and a Contributing Editor for Grain Analyst. Craig is often quoted in the Wall Street Journal, Reuters, Dow Jones Newswire, Corn & Soybean Digest, and also makes appearances on SiriusXM – Rural Radio Channel 80 providing commentary for the Grain and Livestock markets. Craig has also been featured in FutureSource’s Fast Break series, Futures Magazine Online, and INO.com. Mr. Turner has a Bachelors from the Rensselaer Polytechnic Institute (RPI) where he graduated with honors and has worked at the NYSE and Goldman Sachs. While at Goldman, Craig earned his MBA in the NYU Stern executive program. Learn more about Craig Turner.

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Risk Disclosure

THIS MATERIAL IS CONVEYED AS A SOLICITATION FOR ENTERING INTO A DERIVATIVES TRANSACTION.

THIS MATERIAL HAS BEEN PREPARED BY A DANIELS TRADING BROKER WHO PROVIDES RESEARCH MARKET COMMENTARY AND TRADE RECOMMENDATIONS AS PART OF HIS OR HER SOLICITATION FOR ACCOUNTS AND SOLICITATION FOR TRADES; HOWEVER, DANIELS TRADING DOES NOT MAINTAIN A RESEARCH DEPARTMENT AS DEFINED IN CFTC RULE 1.71. DANIELS TRADING, ITS PRINCIPALS, BROKERS AND EMPLOYEES MAY TRADE IN DERIVATIVES FOR THEIR OWN ACCOUNTS OR FOR THE ACCOUNTS OF OTHERS. DUE TO VARIOUS FACTORS (SUCH AS RISK TOLERANCE, MARGIN REQUIREMENTS, TRADING OBJECTIVES, SHORT TERM VS. LONG TERM STRATEGIES, TECHNICAL VS. FUNDAMENTAL MARKET ANALYSIS, AND OTHER FACTORS) SUCH TRADING MAY RESULT IN THE INITIATION OR LIQUIDATION OF POSITIONS THAT ARE DIFFERENT FROM OR CONTRARY TO THE OPINIONS AND RECOMMENDATIONS CONTAINED THEREIN.

PAST PERFORMANCE IS NOT NECESSARILY INDICATIVE OF FUTURE PERFORMANCE. THE RISK OF LOSS IN TRADING FUTURES CONTRACTS OR COMMODITY OPTIONS CAN BE SUBSTANTIAL, AND THEREFORE INVESTORS SHOULD UNDERSTAND THE RISKS INVOLVED IN TAKING LEVERAGED POSITIONS AND MUST ASSUME RESPONSIBILITY FOR THE RISKS ASSOCIATED WITH SUCH INVESTMENTS AND FOR THEIR RESULTS.

TRADE RECOMMENDATIONS AND PROFIT/LOSS CALCULATIONS MAY NOT INCLUDE COMMISSIONS AND FEES. PLEASE CONSULT YOUR BROKER FOR DETAILS BASED ON YOUR TRADING ARRANGEMENT AND COMMISSION SETUP.

YOU SHOULD CAREFULLY CONSIDER WHETHER SUCH TRADING IS SUITABLE FOR YOU IN LIGHT OF YOUR CIRCUMSTANCES AND FINANCIAL RESOURCES. YOU SHOULD READ THE "RISK DISCLOSURE" WEBPAGE ACCESSED AT WWW.DANIELSTRADING.COM AT THE BOTTOM OF THE HOMEPAGE. DANIELS TRADING IS NOT AFFILIATED WITH NOR DOES IT ENDORSE ANY TRADING SYSTEM, NEWSLETTER OR OTHER SIMILAR SERVICE. DANIELS TRADING DOES NOT GUARANTEE OR VERIFY ANY PERFORMANCE CLAIMS MADE BY SUCH SYSTEMS OR SERVICE.

GLOBAL ASSET ADVISORS, LLC (“GAA”) (DBA: DANIELS TRADING, TOP THIRD AG MARKETING AND FUTURES ONLINE) IS AN INTRODUCING BROKER TO GAIN CAPITAL GROUP, LLC (GCG) A FUTURES COMMISSION MERCHANT AND RETAIL FOREIGN EXCHANGE DEALER. GAA AND GCG ARE WHOLLY OWNED SUBSIDIARIES OF STONEX GROUP INC. (NASDAQ:SNEX) THE ULTIMATE PARENT COMPANY.

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