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Home / Futures Blog / TWIG Morning Minute – 9/08

TWIG Morning Minute – 9/08

September 8, 2016 by John Payne

This is a sample entry from John Payne’s newsletter, This Week in Grain, published on Thursday September 8, 2016.


Corn and wheat are slightly higher in overnight trading this Thursday morning, while soybeans continue their positive week/month with another push toward 10.00. News flow this morning is going to be driven by the outside markets after the ECB announced they would continue QE through March 2017 at the earliest. This is bullish the USD in the short term as the Euro will fall, but it could turn out to be bearish the USD and bullish commodities longer term as the lower the ECB sets rates (currently negative) the harder it will be for the US FOMC to raise rates here. Gold and silver are up 30% for the year, I think this is a good harbinger for things to come in the commodity space. Keep in mind the time table for this could be 1-2 years. Economic law should dictate that as supply of a good remains constant and money supply goes higher, that prices should eventually go up. This is the central bank argument, so far they haven’t had much luck in inspiring inflation anywhere, but I think it’s coming which is why I like buying wheat at these levels.

Corn continues its price march as the fund position remains very, very short. The market’s issue ahead of next week’s WASDE is whether the USDA confirms a yield near 175. If we do not, then we see new crop end stocks falling albeit slightly. This should be good enough to confirm a harvest low. You have to think the USDA also brings Brazil production down which would be helpful for world carryout cuts. If you want to play the weak seasonal through September, take a look at the OCT puts on Dec futures. I like buying them so I can have the confidence to get long on a break. I look for potential rallies to stall out in the 350-360 area, if the USDA would drop yield for some reason.

Wheat is being dragged higher by the corn markets. Short covering on low volume is being observed everywhere, wheat has been no different. The managed money is still really shorts in corn and wheat, these rallies on low volume tell me weak hands are moving toward the exit. I’m bullish because quality has not improved in Europe and quality is being more hotly debated in the Black Sea, and huge yields in Canada and likely Australia may result in less than desired protein levels. Russia’s 11.5 pro contract remains the cheapest in the world at 135 per MT FOB. Until that moves higher, wheat is probably stuck below summer highs. Export sales will be monitored to see if there’s any response to the recent plunge in US fob offers, but we won’t see those until tomorrow.

Any hope the soybeans have to rallying back above 10.00 will depend on the weather forecasts over the next few weeks and the USDA outlook on yield come Monday. My satellite guys are still near 51, based off this and the USDA crop progress numbers I think we will see yields come in above 50 at least, but if they want to take the tact they took in corn a few weeks back, they may raise higher than that. I remain skeptical of any short term rallies here as I don’t know who is going to be buying these levels from the spec long and the farmer once the harvest gets going. I look for a test of the 4- hour resistance near 10.00 but I would be looking at short term put options at those levels to protect what is coming off the combine. If anyone has any questions on strategies in beans, give me a call.

4hourbeans

December cotton is trading just below 70.00, a two week high but down from yesterdays close. China’s market appears to be softening a bit. You know my thoughts if you have been reading for a while. The only thing that makes this rally from here is crop loss. The specs are long and the crop conditions are average, a push back into the mid 70’s will depend on the crop in and around Lubbock, Texas over the next few weeks. USDA crop progress has been essentially sideways since the last WASDE, I wouldn’t bet on any yield drop especially with the funds already betting that way.

This Week In Grain

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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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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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