This is a sample entry from John Payne’s newsletter, This Week in Grain, published on Friday May 06, 2016.
Thursday night/Friday morning markets were quiet as we broke the session with beans up 3, corn up 1 and wheat flat. Macro headlines are starting to bury the commodity trade of late with much talk about falling steel prices in China. Keep your eyes on copper, were seeing some technical weakness and a fall in copper might signal further weakness across the spectrum. US monthly unemployment numbers came in at 160,000, a little bearish as some were expecting 200,000. Equity markets are a little softer pre-open.
CORN – Corn had another solid week of exports, the USDA pace is in sights at this point. While corn exports normally peak at this time of the year, the smaller than expected Safrina crop could play into the US demand story. The fact of the matter is that US corn demand has been a pleasant surprise this spring. If it weren’t for the 93.6 million acre number hanging over the Dec futures right now, I think we could see the need for some demand rationing through higher prices. The real issue for corn right now is the looming WASDE report. Estimates for 2016-17 carryout are coming in between 2.1-2.4 billion; this year’s carryout is 1.8 billion at the moment.
SOYBEANS – Buy the rumor sell the fact price action marred what was a very nice export report from yesterday. Prices cascaded down through the short term supportive moving averages. This will have many calling for a seasonal top. I see where they are coming from but with the US weather not ideal for the start of the soybean planting season, we could see nervousness keep beans in the high 9’s. Longer term, beans are too high and/or corn is too low. At some point convergence will happen.
WHEAT – Kansas wheat yields are coming in the 46+ range, almost 25% higher than the 34 bu per acre last year. This will offset all of the production losses expected from smaller wheat acreage. Cash prices in the lower KC wheat regions are anywhere between 60-80 cents under at this point. Folks selling cash now for July delivery will most likely have a 3 in front of it. There is substantial dry weather to keep eyes on in the big sky country, but other than that there is almost nothing on the horizon that is bullish wheat. The only bullish indicator I see is the idea that everyone is bearish.
COTTON – December cotton EMA support sits at 60.75. I expect we see that level tested today. If we would see that level broken on the close, I expect prices to try to push on trend lines in the high 50’s. Cotton exports stink on ice right now and like wheat, supplies are large. Its been a macro trade that has pulled them higher, it will be a negative macro trade (stronger dollar) that leads them lower.
CATTLE – We’re finally seeing the price action we expected last week as corn prices broke. Feeder cattle have cut through the short term resistance levels; now the trade will focus on follow thru into the May 150’s. Moving average resistance sits way above here near 123 in June fats and 155 in the May feeders. I look for the EMA to get tested before May feeders expire.
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