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Home / Futures Blog / TWIG Morning Minute – 9/13 WASDE Recap

TWIG Morning Minute – 9/13 WASDE Recap

September 13, 2016 by John Payne

This is a sample entry from John Payne’s newsletter, This Week in Grain, published on Tuesday September 13, 2016.


September USDA WASDE came and went without major issue in corn and wheat. We got a little less uncertainty thanks to yield hikes in beans and cotton, which sent those markets reeling. The September report isn’t the end all for the yield, but it gives us a pretty good set of expectations. History says that for corn and beans, the furthest yields will fall or rise from here is 2%. For soybeans, I think yields could go up further from here within that range, in corn I think it will trend lower. Regardless, were probably looking at record production for both markets. The report for cotton eliminated some of the crop risk that has been on the table since the mid-summer.

NASS barely changed the US corn picture which was taken as bearish. NASS’s updated US corn yield was put roughly 2 Bu/Acre above the trade’s average guess at 174.8, vs. 175.1 in August, while end stocks came in higher than expected. Corn demand was basically left alone, which does give the bulls some ammo in future reports for a hike in exports, but I don’t think it makes much of a dent in carryout. Dec corn only fell a few pennies on the number, only to rebound and close almost unchanged. The trade is so short right now, the farmer will be the seller over the next few weeks. After the bin doors close though, I see a rally coming in corn as the shorts lift. Stay long if you are already long, if you aren’t I like selling put strategies on breaks or waiting to buy July futures near 355. The USDA painted over the story in Brazil, which will become more of a headline driver in reports ahead.

cornyields

USDA increased their outlook of the US soybean yield by 1.7 bushels since the last month, to a record 50.6 BPA. Congrats to the satellite companies, they got this one right. Ill be continuing to watch their take on the trend from here, as of right now I think there is a chance yields grow from here. This was the largest September increase since 2006, and the 2nd largest September increase on record. With record yields and huge implied pod weights, the importance of the October report is increased, to see if actual harvest data confirms September estimates. Beans fell instantly back below the 200 day sma and will look to break even further this morning. There are still too many weak longs in this market to handle the amount of selling that will be coming from the farmer. What happens if the spec short decides to get involved? As of last week, they were back to base position with only 20 k shorts, that number was 100 k this spring. I look for a test of 9.00 at some point in the near future.

beanyields

The wheat report was left untouched. This report was expected to be much, unlike the report at the end of the month that will better outline how much wheat is available and where. But, we did get a hike in exports of about 50 million bushels. That’s the first step toward a better price, but with Russian offers still well below US offers at the ports, there just isn’t enough fuel there to get things moving. Wheat will need a story to get this market moving, on the horizon the new crop offers that. Wheat sowings will get underway in a few fortnights, so that is our first chance at a new crop carryout. The short position in wheat remains record short, I still like buying July futures in KC and waiting it out.

In cotton, the USDA report was bearish against expectations. We saw a slight bounce in the overnight but there wasn’t much to keep prices higher and when the macros rolled over around mid-night, cotton fell with it. The report disappointed as ending stocks were raised against expectations for a cut. Stocks to use for wheat is the highest in 8 years, if the crop can be harvested in these conditions I see cotton priced way too high. I think we retest 60 before the Dec delivery and eventually could put that Dec 17 back into the 50s before planting. I look for the spec long position to bail here, and the market to reel as the harvest approaches. Keep hedges on and look for places to sell more Dec 17 on a bounce.

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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