This is a sample entry from John Payne’s newsletter, This Week in Grain, published on Tuesday July 26, 2016.
Grain and oilseed markets trade on both side of unchanged after another unchanged/stellar crop progress report for corn and beans, but are weaker into the AM session for wheat. Crop conditions out yesterday afternoon had corn rated at 76% good to excellent, unchanged from last week. Soybean ratings were noted at 71% GE, also unchanged from the week prior and like corn, basically sideways since early June. 76% of the crop was said to be blooming, while 35% is setting pods. Once pod setting is over, the risk to the crop yield falls dramatically. Wheat ratings came in at 68% GTE, a drop of 1% vs. last week. Winter wheat was reported as 83% harvested. I would assume most of those unharvested acres are in the northwest.
Below is a chart from AG RESOURCE showing the big 4 corn producing states and their late July crop ratings.
Cotton is the crop I am beginning to worry about. We saw an additional 2% fall from GE to PVP, which puts crop conditions lower than at any point last year. If you have been reading me for a while, you know I am bearish cotton at these levels based off speculative open interest (historically long), but one of the things that worries me now is the short covering from commercials or gins who might have made cotton purchases based off quality that isn’t there. The specs are almost tapped out to the buy side in my opinion, but the commercials wouldn’t be and could be a key to a leg higher. I remain bearish in the mid 70’s and would plan on hedging 2017 cotton production if a push toward the 80’s would occur.
Wheat prices are lower this morning as the Matif contract pulls back from its 100 day EMA. The good news is Russian wheat prices are up on the back of the jump in price from the EU. Black sea prices are up between 3-5 dollars per mt. This is big as in the past when we have seen jumps in price from other markets; the Russian prices weigh on the market as they continue to low ball. If Russian wheat could climb back above 170 per MT, we could easily see the US Dec board push back toward 5.00 in KC. I remain optimistically bullish of wheat and would be buying breaks that Sep delivery provides.
Cattle will open with expanded limits this morning after limit moves yesterday across the complex. The spec short looks to be moving to the sidelines as expectations about a larger and larger cattle herd every quarter going forward might be in question. I look for Nov feeders to make a run to 140 and Oct fats look to push to 115 on this move but I imagine they get rebuffed at the 100 day EMA. The specs are nonexistent in cattle right now; the fuel is there for this rally to continue.
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