FRESH PODCAST ALERT | Hot off the presses is my latest Inside Commodity Futures podcast. In this episode we talk about the selloff in Gold, Silver, and Treasuries and how the most recent comments about interest rate hikes by two Fed Presidents kicked it all off. We also talk about the crude rally and why we have our doubts, the natural gas rally and why I’m a believer, and finally the grain markets and next week’s WASDE report.
If anyone has any questions or comments about Turner’s Take or the Inside Commodity Futures podcast then please send it in and we may answer it on the next podcast!
WASDE | The WASDE report is next week on October 12th at 11:00 am central time. The market is expecting corn production to stay the same but soybean yields to increase. We get a lot of reports from individual farmers about the yields in their fields. Based on those reports/conversations I would not be surprised to see the USDA decrease corn yields and increase soybean yields. I can see corn between 173 and 174 and soybeans between 51.5 and 52.0.
Harvest pressure in the futures markets seasonally ends in the begging of October. I know harvest is still in full swing during October but by now the market will have priced in how big (or small) the new crop is. Some traders are surprised we are not lower with such a big crop in both corn and soybeans but the market is also trading the strong demand we are seeing in the export markets.
After this October 12th WASDE report we should see more bullish cards in the deck for corn and soybean than bearish cards. After the WASDE report the market will price in the size of the new crop and then turn its attention to demand and South American weather. I think we will continue to see strong export demand for corn and soybeans. Some of the latest weather reports/blogs I’ve read are talking about La Nina conditions in Southern Brazil. That area is dry and the forecasts are calling for lower than normal precipitation. Central and Western Brazil sound OK but drought like condition in Southern Brazil could be a big problem for soybean production.
Turner’s Take WASDE Estimates
CORN | Corn looks like it trying to break out to the upside in the face of a 174 yield and an estimated 2.4 billion bushel new crop carryout. Fundamentally a lot of traders don’t see the reason for the rally but the charts tell a different story. Traders who want to take a more cautious approach on getting long corn should take a look at Dec 16 vs Dec 17. I like this spread also for farmers who want to re-own old crop and also have a hedge on for new crop in 2017.
Dec 2016 Corn
Dec 2016 vs Dec 2017 Corn
SOYBEANS | Soybeans are holding support well at $9.40. So many in the trade are expecting a 52 yield in the WASDE next week that I find it hard to take a big position before the report. A new crop carryout of 400mm+ is bearish but on the other hand demand has been great on the export market. South American weather issues can always lead to a rally and their season is just starting. I like building a small bullish position in soybeans here but you have to be prepared for a big sell off if the USDA comes out with a monster production number next week. In that case I would be buying the panic if we see a sell off to $9.00.
If being long Nov Soybeans is too volatile for you then I would look at the Nov 16 vs July 16 futures spread. It is trading at a 24 cent carry. If demand remains strong in the US and South America has production issues, the market’s job (in theory) will be to ration US supply and send that spread higher.
November 2016 Soybeans
November 2016 vs July 2017 Soybeans
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