This is a sample entry from John Payne’s newsletter, This Week in Grain, published on Tuesday, May 27, 2014.
Welcome back from the 3 day weekend. The markets traded like I felt this morning, emerging from a three day fog of inactivity. They awoke last night in a sour mood with corn, beans and wheat making lows in the overnight. For all of you out there with access to platforms, check out the past week of overnight market action. I noticed that the selling was coming in the overnight, with lows being broken before the pits open in Chicago. This tells me fund money is driving this recent down swing. If the selling comes on the 830 open, I usually consider it farmer driven as the elevators do most of their trading on the open and closes of the US session. Regardless, it’s a negative trend that bulls need to see snapped immediately.
Bulls who are waiting for such trends to break may be disappointed tonight, as the USDA crop progress for the week showed substantial progress in plantings last week. You can see the entire report HERE.
My takeaway from the crop progress is BEARISH, especially for soybeans.
- Soybean planting progress was more aggressive than anticipated at 59% complete vs. 56% on average. Emergence is at 25% vs 27% ave.
- Corn planting advanced to 88% complete , in line with the 5-year avg. 60% of the crop is emerged vs 64% on ave.
- Spring wheat planting advanced to 74% complete, 8 points behind the ave. but 9 points above expectations. ND is 59% done.
- Cotton planting is 62% done, just 2 points behind the ave.
- Winter wheat conditions improved slightly with dry areas benefiting from rain. 30% is rated good/excellent, up 1 pt from week-ago.
All in all, this season’s plant has been a wild success. I always say, there are 3 major time periods for risk premiums to be put in:
- Planting – Check!
- Pollination (corn), pod setting (beans) filling (wheat) – This is the time period that is probably most crucial during the growing season. Without proper moisture during this time frame, the yields usually lag. For corn, pollination comes in mid-late July. For beans, pod setting is usually in late-July, early August. Wheat filling usually takes place later in the spring, after the last freeze. Wheat had a tough year out west during much of the fill period, but recent rains may have helped a few. By no means did these rains save the crop.
- Harvest – Farmers need to get it out of the ground to get to market. Early winter is very negative to harvest, as is early frost.
My point with this is that we have apparently gotten over the first hurdle. I have heard little in the way of acreage loss on the bean side, many corn farmers did switch later-especially up north.
So, what am I watching now on this news? You know…my favorite spread- the corn vs soybean 2×1 spread. Dec corn (x2) vs Nove beans has blown out. Does this news of fantastic soybean plantings bring this spread back into the stratosphere? This is what I call a black diamond trade; if you have ever been skiing you know what I’m talking about. It takes some serious gumption to short this up here, but no one has ever made a dime trading moves like this without taking the risk. Give me a call if you need a fixed risk way to play this. I think it has a decent shot at trading lower as the market begins to assume supply.
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This Week In Grain - This Week in Grain (T.W.I.G.) is a weekly grain and oilseed commentary newsletter designed to keep grain market participants on the cutting edge, so they can hedge or speculate with more confidence and precision.
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