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.
Subscribe to This Week In Grain
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.
Guide to Smarter Ag Marketing: Fixed Risk Hedging
Market participants understand the importance of protecting their hedges. Approach the markets equipped with a number of hedging techniques! This guide is designed for sell-side producers and introduces a number of basic and complex hedging strategies to avoid unlimited risk on your hedges.
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.