This is a sample entry from Craig Turner’s email newsletter, Turner’s Take, published on June 24, 2014.
In this issue:
- Corn: Stocks and Acres on Monday. Hold CZ/CU
- Wheat: EXIT WZ/WN
- Soybeans: Stocks and Acres on Monday. Bearish Nov Beans
- Crude Oil: Still bearish on Crude Futures Spreads
STRATEGIES USING COMBINATIONS OF POSITIONS, SUCH AS SPREAD AND STRADDLE POSITIONS MAY BE AS RISKY AS TAKING A SIMPLE LONG OR SHORT POSITION.
STOP ORDERS DO NOT NECESSARILY LIMIT YOUR LOSS TO THE STOP PRICE BECAUSE STOP ORDERS, IF THE PRICE IS HIT, BECOME MARKET ORDERS AND, DEPENDING ON MARKET CONDITIONS, THE ACTUAL FILL PRICE CAN BE DIFFERENT FROM THE STOP PRICE. IF A MARKET REACHED ITS DAILY PRICE FLUCTUATION LIMIT, A "LIMIT MOVE", IT MAY BE IMPOSSIBLE TO EXECUTE A STOP LOSS ORDER.
1) CORN: Hold CZ/CU
We exited July/Dec corn at +1.50 cents last week for a 7 cent gain. We continue to hold the Sept/Dec bear spread (short dec, long sept) and I’m comfortable holding it into the USDA report on Monday.
As for the report, I’ve updated my corn supply and demand table. I did not make any changes to old crop from last report. Even if we get some bullish surprises in old crop stocks, the new crop harvest in the South will be here sooner than you think so at this point old crop has to be under 1.000 billion bushels to really get me excited.
New crop can rally big IF we have a major weather event, but at the moment that seems unlikely. If you look at the supply and demand table below, the first column on the left is the USDA old crop projections and the second is the new crop projections from the June WASDE. The next three columns highlighted in yellow are my lower production, average production, and high production scenarios for corn. If we do add on a half million acres or so of corn and get a great yield (170?), corn can break $4.00 by harvest. If we get an average year based on trend line yields and no change in acres, I think corn is in the $4.10 to $4.25 area. What is very interesting about this crop is if the yield only drops to 160 we start to have some supply concerns. A major drought or wide spread flooding could cause the yields to drop below 160 and that would be a very real reason for corn to rally back up to $5.00 or higher depending on the damage.
Turner’s Take US Corn Supply and Demand Table:
Open Position: Long Dec Corn and Short Sept Corn at 0.00 cents. Last traded at -4.00 cents (up $200 per spread). Stop working at 6.00 cents (6 cents = $300), and profit target at -15.00 cents (15 cents = $750). Margin is $300 per spread.
Sept/Dec Corn Spread:
Dec Corn Chart:
2) WHEAT: EXIT WZ/WN
We are short this spread from -23 cents and we are at -31 now, up about 8 cents. First Notice Day is Monday, June 30th as is the Quarterly Stocks and Acres report. Acres should not be a factor for wheat but stocks could be a price driver.
At this point it looks like the move we wanted has come but it was not as big as I hoped. We are up 8 cents ($400 per spread) which is not bad when you consider the margin for the spread is $450. I think it is time to take this one off the table and move on.
EXIT Position: Buy July Chicago Wheat & Sell December Chicago Wheat at -31’0 cents, premium to Dec. In at -23.00 and out at -31.00 is a gain of 8 cents or $400. Margin was $450 per spread.
WN/WZ Daily Chart:
3) SOYBEANS: Stocks and Acres on Monday. Bearish Nov Beans
Based on the weather and relatively high prices of Soybeans this year, many traders are expecting acres to increase when the USDA releases their acreage report on Monday. The stocks for soybeans should remain tight and I don’t think we will see lower June 1 stocks than we did last year. Last year the June stocks were at 435 million bushels and we finished the year at 125. I think this year we are at 450 million and finish at 140.
The important thing to note about soybeans is that even a small miss can cause some significant price action. We are so tight that a miss of 10 or 15 million bushels either way could be a 50 cent move up or down.
Below I have my supply and demand table for soybeans. The first column on the left is the latest USDA old crop estimates. The second column is the USDA new crop estimates. The next three are my estimates in yellow. The first is the low production scenario followed by average and then high production.
When looking at this table, there are a few things you should consider. At 82 million acres and a 45.0 yield, we have carryout over 300 million bushels. If we have an incredible season 82.5 million acres, we could be over 400 million bushels. Even if we do not add any new acres and have only a 44 yield, the US should still end 2014-15 with a carryout around 250, based on my calculations. For me that puts Soybeans by next year harvest as high as $12.00 or as low as $9.50. Right now I am more on the bearish side than with the bulls based on planting, crop conditions, recent weather, and forecasted weather.
Turner’s Take US Soybean Supply and Demand Table:
Below is a weekly chart of November soybeans. Based on the long term trend line, resistance is about $12.65 and support is $11.00. The question is to get short ahead of the report. If you are thinking about buying Nov puts or a put spread, I like the idea. The $12.00/$11.00 is going for about 30 cents. I like selling futures but maybe not until after the report. If old crop is very bullish and new crop is only neutral, old crop could spike and bring new crop along for the ride.
November Soybeans Weekly Chart:
4) CRUDE OIL: Hold Bear Spreads
I still like the bear spreads in crude. I know some of you got out either because of the violence in Iraq, tighter stops, or you like trading around these positions. If you do trade around positions, I like selling rallies. If you are still in, I would stay short spread. I don’t think anything has fundamentally changed in the Crude market. The US has plenty of crude supplies. The bulls argue that the NYMEX delivery point at Crushing, OK is low and the violence in the Middle East commands a risk premium in Crude Oil. While that may be true, those are both short term issues and as they get resolved the longer term fundamentals should weigh on this market.
Open Position: Long Sept Crude and short August at +$1.00. Trading around +$0.70 (up 30 cents or $300 per spread). Stop at $1.35 (35 cents = $350 in crude oil). Target is $0.30 (70 cent profit target is $700). Margin per spread is $400.
AUG/SEPT Crude:
Open Position: Long Oct Crude and short August at $2.00. Trading around $1.65 (up 35 cents or $350 per spread). Risk to $2.60 (60 cents is $600) and profit target is $0.80 ($1200). Margin is $1100 per spread.
AUG/OCT Crude:
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Futures Traders’ Guide to the WASDE
Designed exclusively for futures traders, this comprehensive guide will help you understand the USDA World Agriculture Supply & Demand Estimates For Corn, Soybeans and Wheat reports.
Risk Disclosure
STOP ORDERS DO NOT NECESSARILY LIMIT YOUR LOSS TO THE STOP PRICE BECAUSE STOP ORDERS, IF THE PRICE IS HIT, BECOME MARKET ORDERS AND, DEPENDING ON MARKET CONDITIONS, THE ACTUAL FILL PRICE CAN BE DIFFERENT FROM THE STOP PRICE. IF A MARKET REACHED ITS DAILY PRICE FLUCTUATION LIMIT, A "LIMIT MOVE", IT MAY BE IMPOSSIBLE TO EXECUTE A STOP LOSS ORDER.
STRATEGIES USING COMBINATIONS OF POSITIONS, SUCH AS SPREAD AND STRADDLE POSITIONS MAY BE AS RISKY AS TAKING A SIMPLE LONG OR SHORT POSITION.
EXAMPLES OF SEASONAL PRICE MOVES OR EXTREME MARKET CONDITIONS ARE NOT MEANT TO IMPLY THAT SUCH MOVES OR CONDITIONS ARE COMMON OCCURRENCES OR LIKELY TO OCCUR.
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