Good afternoon friends!
Here is your weekly snapshot at grain performance for the day, week and month.
Follow-thru Friday is the theme of the day as prices in corn and wheat followed thru after yesterday’s reversal, making everyone who sold corn after July 18th now underwater on trades in December corn (assuming they are still short) and Wheat after Aug 26. Soybeans are coming along for the ride, but there is little in the way of short covering to extend the trade like it is happening in wheat and corn. Cotton is back above 70 cents, making this bear sweat a little. I remain on the look out to sell Dec 17 contracts in the 73 cent area.
Corn ran into some moving average resistance. CFTC showed significant short covering this week in corn, I assume we have seen much more since the Tuesday release. Its important to note that much of the US demand increases hinge on corn remaining cheap, speculators will hesitate to jump long knowing that. Brazil FOB port prices remain sideways or even down a little near 192 per MT. I think this move is just the first leg, I would expect a pull back from any rally action over the next week as producers sell the rally. I would buy breaks not strength. I’m not that into charts, but I hear the 200 day holding resistance on high volume isn’t bullish. That said, the spec short is still over 300 k contracts, that’s a big tree that would wreck a lot of bears if given the reason to cover.
Soybeans move to the back as the story moving corn and wheat doesn’t really include the soy complex. Bean oil has a story, but meal does not. I think beans have an equally difficult time breaking 900 as they do breaking 10.00 over the short term. Spec longs remain near the middle of 10 year range, which gives me no edge. Id prefer to wait out selling for 10+ but am aware the forward fundamentals could drastically change with more acres. A short position or two in 2017 beans is recommended. If this is your worst sale, things should have improved price wise on the corn side. To get that, we need a South American weather story. Speaking of…
The weather forecast in South America has trended drier in Northern Brazil. This is why we have seen the planting pace we have. The fast pace has folks happy, but the bears need to keep an eye on weather up north. . Better rain will be needed in Mato Grosso and Goias by early November to put some moisture in the soil ahead of key growing stages around the new year. The story in beans remains south of the equator for now, unless US harvest get disrupted.
Wheat fundamentals remain poor, but the outlook seemed to improve this week after the USDA report came in unchanged in the US. The short position is still HUGE, so I expect more upside but we need to see Russian wheat prices improve with the CBOT. HRW is lagging but I expect a change as we go into delivery. Stay long, buy breaks. The short covering we saw today was the tip of the iceberg. Collars are my strategy of choice.
Ill be interested in the cotton conditions report to see if conditions were harmed by Hurricane Mathew. The news that could affect yield has me worried for short positions I recommend, but the extended long OI position does not. The cotton is like wheat, only the opposite. When the flush comes, folks will be running out of longs like the shorts are in wheat. I am only uncertain if it will happen in this crop year or next. COT cotton report showed a paired position back to 55 k net long. I expect that number is back to above 70 K after the action from the last few days. I am prepared to get tested as someone on the short side in coming weeks, but like beans the managed money short position is small. Commercial buying could happen, but short covering will be limited. If you can not handle the heat and want to free up old crop sales, roll them into Dec 17. I’m more confident upside will remain capped around 73. I would be looking to hedge more there if you are inclined. I remain convicted short of cotton.
COTTON SPEC LONG AND SHORT
Check out the PODCAST below for more commentary. Thanks for following along this week, Ill be back on Monday. Go Cubs Go…
Podcast: Play in new window | Download
Subscribe: Apple Podcasts | Android | RSS
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.
