This is a sample entry from John Payne’s newsletter, This Week in Grain, published on Friday May 27, 2016.
Hello friends!
Here is a trade rec for you to chew on into the 3 day weekend!
December 16 Corn vs December 17 Corn
This is a trade idea for a producers or speculators alike. December 16 corn (growing in the fields right now) is at a 1 cent discount to December 17 Corn (planted next summer). One month ago, the spread between the two was at an 18 cent carry. Hedgers should look at selling this because if wrong, the rally to the risk point should be very beneficial for selling new crop corn above 420-440. If correct, you capture the established carry that should develop from prices falling back into the high 3 dollar range.
This is a bearish corn play that has retraced substantially in recent weeks. What has changed? Yes, demand is creeping up a bit but there has been little on the supply side in this country that should have folks worrying that carryout won’t be above 2 billion bushels. I feel this is money flow driven by an uber short soymeal market combined with speculative buying out of foreign markets as a way to bet against a US rate hike. There is plenty of corn around, this spread should be closer to 20-30 cents by the time we realize the crop in mid-summer, or larger if we have an above trend yield.
I recommend you look at shorting Dec 16 Corn and Buying Dec 17 Corn as close to even money as possible. This trade has little margin, 605 dollars initial/550 for hedgers. If we get in at even money and get stopped out at 20 cents, the risk will be 1000 dollars per position before commissions. IF correct, my target would be 25-30 cents which would be a profit of 1250-1500 before commissions.
Please contact myself or Donna Hughes (dhughes@danielstrading.com) for details.
STRATEGIES USING COMBINATIONS OF POSITIONS, SUCH AS SPREAD AND STRADDLE POSITIONS MAY BE AS RISKY AS TAKING A SIMPLE LONG OR SHORT POSITION.
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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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