This is a sample entry from John Payne’s newsletter, This Week in Grain, published on Friday April 22, 2016.
That sound you hear this morning is the relief of margin stressed short sellers in the grain markets after a major bean run up this week. Prices have plummeted in the overnight as producer selling and profit taking by the bulls hit the markets a day before option expiration. May grain options expire today, so I would expect a lot of back and forth action today. Do yourself a favor and learn something from the price action of the last week. This move was a gift for holders of old crop grain, is Christmas over? Depends on the US weather story, if we have problems with growing soybeans or corn this year, moves will be very similar.
CORN – Corn fell apart on the open yesterday and its demise was exacerbated by the massive amount of producer selling at the 4.00 price level. US export sales were solid yesterday, reflecting recent competitive corn offers by other exporters, but the SAM weather is improving and with Argentina to resume crop harvesting in the coming weeks we expect offers to pile up by Argentinian exporters. 100 day ema support sits down at 377, id look for that level to be defended in the short run. Holders of old crop corn held their grain and unloaded it on a rally. Those scars will hold for a while with hopes another comes around before July.
SOYBEANS – There were two soybean estimates released in Argentina yesterday after the close. The Argentine Ag Ministry estimated the soybean crop at 57.6 MMTs, down about 3.3 MMTs from the last guess in March before the rains at 60.9. This wasn’t much of a write down. The bulls I read were screaming about a 10 mmt loss. The Buenos Aires Grain Exchanged pegged the crop at 56 MMTs, or 4 MMTs less than their previous estimate, a bearish number as well. Be ready for the whipsaw in beans though, this move burnt the short sellers – especially hedgers who were under margined. I think we look for a sharp selloff for a day or two, but US demand has been strong so I look for new crop prices to hold the 100 day EMA. It’s all the way down at 913 right now but rising quickly.
WHEAT – Well, wheat buyers had their few days in the sun but the shorts came back ion force last night as the rest of the row crop story was being pummeled. The drought was eliminated in one week across much of the HRW Belt, and further moisture improvement is projected into early spring. Global climate forecasts are not showing any abnormal temps or precip across Europe and the Russia/Ukraine. The only concern is the potential for heat and dryness across W Canada. Look to see if KC July can hold 487, that’s the 100 day EMA. So far it has given it away, which might encourage more selling into the close.
COTTON – Dec cotton is falling back with the rest of the row crops this morning. Cotton futures are holding lows from yesterday this morning. The market doesn’t really know what to do with Cotton. Reuters reported yesterday that this week, China’s National Development and Reform Commission (NDRC) indicated it may increase its sales from state cotton reserves to more than 2 MMT this year due to the recent price surge. Previously, it indicated that level would cap sales set to kick off in May. NDRC said it would continue to increase sales if there is a big supply gap preceding September’s harvest. That is not bullish, but I think this is – China also plans to buy high-quality cotton at market prices from September to February to improve its reserve quality, the NDRC said. The statement did not indicate that the buying would begin this year but another document on the planned purchases will be published later, according to the statement. 100 day ema sits at 6040 this morning, I look for support there.
CATTLE – I’m not in the business of calling bottoms, but if I was I would think yesterday’s low of June at 116 and some change is the low on the June contract through expiration. The grains have reversed and all of the sudden the cattle crush looks drastically different. If today’s cattle on feed is bullish, watch out to the upside in front month feeders and cattle. That report will be released after the close at 2 central.
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