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Home / Futures Blog / TWIG Morning Minute – 7/22

TWIG Morning Minute – 7/22

July 22, 2016 by John Payne

This is a sample entry from John Payne’s newsletter, This Week in Grain, published on Friday July 22, 2016.


Markets are softer in the overnight as the corn market makes a run toward the near term lows bear 318 (front month) and the 200 day MA in soybeans at 980. 6 trading sessions ago, soybeans were trading with an 11 handle. This morning the Nov contract is showing a 9 handle. It’s hard to say where the pressure is coming from, the removal of weather premium is to blame but the fact that the row crops and livestock markets are falling together has me wondering if we will hear of a major bankruptcy in coming days or some major event that is being missed. Today is option expiration for the August options so be careful for heavy moves in either direction. The release of the August weather models are one reason why prices are falling, there is really little to worry about right now when concerning yields.

In corn, forecasting models are changing as they add rain to the extended forecast and removing some heat from the upper Midwest. Exports were lack luster yesterday which throws a little more fuel on the fire. I expect the corn market to bounce here but I’m now thinking an eventual test of 318 in the front month is in the cards. I remain somewhat bullish down here as the drop below 360 July 17 and 370 Dec 17 futures represent major buy points for me. I have no interest in messing around in short term re-own strategies; I would rather play the deferred contracts with futures. With the basis in the NW corn belt near 80 under, its not too long until corn will be able to go under loan with the wheat. Throw in the crop insurance levels sitting right below here in December, I just see little incentive for corn to stay this cheap for too long. If it does, I imagine the corn carryout for the US peaking this year for many years ahead.

Finally some good news for the wheat bulls. The French crop took a pretty sizable downgrade yesterday and the other central European growers are expected to follow. We need to see follow thru from the Matif futures in coming sessions, so far they have paused today. The issue at hand will be whether or not French exporters will be able to meet export quotas with all of the production that has been downgraded due to moisture. I expect wheat to stay somewhat tied to the falling corn price in the short term, but I expect the spec short to make a move toward the exit at some point in the near future. I will remain bullish and patient at these prices near LDP levels.

I would probably wait for a test of 980 before getting bullish; I want to see where the net OI is as of last week. Soybeans remain a very long term bullish market with the way exports are going here stateside. If you are myopic and focus on the next 3-4 months, bean prices may not entice you. But if you can stick them in storage or buy the longer dated futures contracts and hold them, I think we will see prices higher in the long run. Short term though, a test of the 200 day near 980 is probably in the cards. I don’t see a major push below though as the old crop supply problem isn’t what it is in corn.

The spec position in cotton is relatively long as it was in soybeans or corn a few weeks back. I advise hedges in both 2016 and 2017 contracts before the next USDA WASDE or sooner. Chinese imports are slumping and there is a state auction in China that could flood their market. Indian problems are all we can really hang our hat on right now from the bull side, if those go away and the US crop conditions stay constant a run back into the low 60’s is probably in the cards.

Cattle on feed reports come out after the close today, the market expects another month of higher numbers. Bulls hope for a surprise.

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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.

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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