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Home / Futures Blog / TWIG Weekly Wrap and Grain Stocks/Acreage Report Preview

TWIG Weekly Wrap and Grain Stocks/Acreage Report Preview

June 27, 2014 by John Payne

This is a sample entry from John Payne’s newsletter, This Week in Grain, published on Friday, June 27, 2014.


We have arrived at first notice day for all of the July grain contracts. If you are long July futures, you will be open to delivery starting on Monday. Also, it’s important to remind that once a market goes into delivery mode, there are no longer trading limits for that month. So be careful if you are in July futures come Monday at 11 am central time. That really goes for everyone trading the report.

TWIG Afternoon Edition for 2014-06-27

2014-06-27-JP

We had a consolidation week across all 3 major row crops, with corn beans and wheat all trading within ranges just off recent lows. There was not much I can find that has the capability of changing the supply story organically. Weather is still fantastic across the majority of the growing region, besides the endless rain in Minnesota and NW Iowa. Wheat harvests have been slow in the south, but weather looks to be drying out in coming days. I imagine we see a harvest jump next week. Other than that, everything looks great. The long term forecasts look very supportive for good yields. Thanks to the folks at Chicago Weather Group for all the hard work.

temp

prec

The trade is essentially took a breather this week as the report on Monday will have much more influence on grain and oilseed than anything we observed this past week. Below are the expectations for the outcomes per the Reuters poll. As you can see, the acreage estimates are really tight for corn. If we’re going to get a consensus surprise, I think it comes from lower corn numbers. I have been hearing a few reports from seed dealers and manufacturers that corn seed sales were down more than expected. This supports an argument I have that due to later plantings and economics, beans actually got more acreage than expected. The corn/bean trade has been so one sided over the past year, I just have a feeling that one of these days a surprise will cause a surge in the other direction. I am keeping an eye on the November/December 2015 contracts for better clarity on this. Both are sitting on long term support, but only Corn is at levels where any deterioration in price will cause loss of acres. I believe we still see 1100 beans get planted but I’m not so sure about sub 4.00 corn. This will be a theme I will be talking about over and over the next year, so get used to the story now so I you know what the heck I’m talking about.

When It comes to wheat, I’ll be watching the spring wheat acreage estimates along with stocks. Remember folks, the people who do the surveys for these reports are not the same ones who do the monthly WASDE’s. Why? Who knows, I’m not smart enough to explain how government bureaucracy works. Regardless, it is in these reports where we will sometimes see the USDA “lose” or “find” supply. Just take a look at these charts, the represent the moves in price following the numbers. As you can see, surprises are a normal occurrence (does that make them a surprise then?)

price-change

THE SCHEDULE

On to the schedule for this week, the grain report releases were somewhat as expected this week, besides a surprise in soybean exports on Thursday. Supplies in old crop beans are seen as fixed as of right now. Any shocks to demand through exports or shocks to supply through weather are going to send waves through the front month bean markets. We saw an example of that on Thursday.

The macro picture hit a bit of a rough patch with US 1st quarter GDP coming in worse than expected at negative 2.9%. This was about 1% below expectations and in my opinion a balloon popping dart at the argument that the US economy is in any position to tighten current monetary policy. I think this is why you have actually seen the equities markets hang in. It’s almost as if bad news is good news for the markets because it gives us an excuse to keep the iv drip that is Quantitative easing in a bit longer. From a grain and livestock standpoint, this is a long term supporter of prices. The biggest threat to commodities prices is always a more attractive alternative than holding them, the interest rate that is offered at banks represents that opportunity cost. When rates are near 0% like they are now, or even negative like they are in Europe, the better play for folks with sufficient cash positions is to hold on to product. Keep your eyes on Copper prices; I think they do a good job of forecasting Macro risk to commodities. A break over 3.25 or a break under 3.00 could be telling.

schedule

THE CHARTS

Dec Corn

dec-corn

Nov Beans

nov-beans

Sep Chi Wheat

Sep KC Wheat

sep-kc-wheat

LINKS OF THE WEEK

Dupont Cuts Earnings Outlook, Citing Soybeans and Bad Weather

US Corn Reserves Expanding Most Since 2005

Be Careful What You Wish for in China PMI Rebound

Good luck to everyone trading on Monday. I’ll be here nice and early on Monday to get an early start on the pre-report trade in grains and the post-report trade in the hogs. I expect madness in the hogs after this number gets released this afternoon after the close.

This Week In Grain

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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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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.

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Risk Disclosure

EXAMPLES OF HISTORIC PRICE MOVES OR EXTREME MARKET CONDITIONS ARE NOT MEANT TO IMPLY THAT SUCH MOVES OR CONDITIONS ARE COMMON OCCURRENCES OR ARE LIKELY TO OCCUR.

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.

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 third-party trading system, newsletter or other similar service. Daniels Trading does not guarantee or verify any performance claims made by such systems or service.

Filed Under: This Week In Grain

About John Payne

John Payne is a Senior Futures & Options Broker and Market Strategist with Daniels Trading. He is the publisher of the grain focused newsletter called This Week in Grain, along with being a co-editor of Andy Daniels’s newsletter, Grain Analyst. He has been working as a series 3 registered broker since 2008.

John graduated from the University of Iowa with a degree in economics. After school, John embarked on a 4 year career with the United States Navy. It was during two tours in Iraq and the Persian Gulf where John realized how important commodities are to the survival of society as we know it. It was this understanding that brought about John’s curiosity in commodities. Upon his honorable discharge in 2007, John’s intense interest in the world of commodities inspired him to move to Chicago and pursue his passion in a career in the futures arena.

After a three year position with a managed futures firm specialized in livestock trading, he was given the opportunity to join the team at Daniels Trading. Being in the business and seeing how other IB’s operated, it was the integrity and straightforward approach of the Daniels management team and brokers that attracted him to make the move. Since joining Daniels, John has broadened his fundamental and technical analysis of the markets even further. John has been writing his newsletter This Week in Grain under the Daniels banner since 2011.

Working in high pressure industries like the military and capital markets, John has learned the value of preparation in times of stress. He believes that instilling within his clients the value of a good plan and a cool head for dealing with the day to day swings of commodity markets. He treats every client as a teammate, understanding that his job is to help clients achieve their goals, whatever they may be.

John is a proud supporter of the Iraq and Afghanistan Veterans of America, the Veterans of Foreign Wars and the National Corn Growers Association. When he is not working, he enjoys athletics of all kinds and spending time with his wife and their two kids.

John’s commentary is featured in the following publications:

* All Ag Radio – Sirius Channel 80
* AM 880 KRVN – Lexington, Nebraska
* RFD TV
* Wall Street Journal
* Barron’s
* China News Daily (English version)

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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 third-party trading system, newsletter or other similar service. Daniels Trading does not guarantee or verify any performance claims made by such systems or service.

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