This is a sample entry from John Payne’s newsletter, This Week in Grain, published on Friday, May 30, 2014.
Grain bears take the month of May in a route, as new crop prices close on their monthly lows. December corn was down 53 cents for the month, July KC wheat was down close to 90 cents in May and July beans were off a modest 15 cents. This is not encouraging for next month as crop condition reports begin to come out amidst fantastic growing conditions in corn and beans, and an apparently improving wheat crop (we will see).
With WASDE still 8 trading days away, there appears to be little that is getting in the way of lower prices. Corn saw fantastic export numbers today, which were ignored as more selling hit the tape. Part of me could be convinced that the reason why corn prices are lower is because of old crop selling, except I don’t buy that because July closed near its highs against December corn in the spreads. This tells us that end users need better prices to help get corn out of the farmer hands. Lower prices won’t inspire that, but higher basis levels will. I might look at basis contracts for producers who are still holding on to grain. 20+ the board in areas along the river in the northern Corn Belt seems pretty attractive.
Corn wasn’t the biggest loser of the month, wheat was. The Ukraine and weather driven hysteria from a few weeks back is completely gone from the rhetoric I read. This has been replaced by fantastic yield reports from out east. With harvest still a few weeks away, I look for wheat to continue to slide. Money flow is negative and looks to be getting worse every day. The saving grace for the bulls is the massive premium that is holding in KC over Chicago. If this were truly the end, I would assume that KC wheat would be giving back a lot of that premium to Chicago. Unlike corn, WASDE has been brutal to wheat prices. Every month we get a reminder about how much supply is on hand. Wheat bulls will be looking for reductions to supply, hopefully for them the USDA changes its tune.
Beans maintain their massive premium over Corn and Wheat on relative scales. There appears to be a bit of a protein bubble developing, with soybeans and its cousin soymeal holding strong on the board (old crop) and the meat markets remain highly elevated. Demand appears to remain strong across the board in all protein markets. I don’t look for that story to change anytime soon, and it may help keep beans strong into next year.
Check out the weekly wrap up video for my take on the close to the week and month.
Equities remain the place to park your money, as they rallied again this week. The S&P appears to be bulletproof as a horrible GDP report on Thursday was shrugged off. Durable goods orders were also weak as was pending home sales that resulted in a positive week for the equity indexes again, with the ES closing the week at all-time highs. Eventually, this kind of strength in equities should encourage buying in commodities- especially as interest rates remain artificially depressed. Grains will be the story again, but for now they remain stuck in a nasty bear trap or a fantastic bear trap depending on how you are positioned. For next week, the macro reports will be large as we have G7 meetings along with a myriad of Chinese data. The grain reports will remain quiet until the following week when all eyes will focus on WASDE.
THE CHARTS – MONTHLY CONTINUOUS!
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Futures Traders’ Guide to the WASDE
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