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Home / Futures Blog / This Week in Grain-10/24 AM Update

This Week in Grain-10/24 AM Update

October 21, 2016 by John Payne


This Week In Grain (T.W.I.G)Good morning friends!

Corn      351’6   -‘6

Soybeans  995’0  +12’4

Chi Wheat   413’6  -1’0

KC Wheat 422’4   +1’0

Cotton  68.82   -.23


 

The schedule this week is light on grain specific data other than the normal weekly reports. On the Macro side, we get another Mario Draghi speech on Tuesday, and US GDP on Friday.  I expect a quiet week with cotton and soybeans susceptible to pull backs and corn, wheat susceptible to surges.

Soybeans took off on a Sunday night when November found itself with a bunch of new positions because of option expiration on Friday’s close.  Going forward, January soybeans will be tracked in the price updates listed above.  November beans look poised to break above 10.00 which is a really good sign long term for bulls. The idea prices can close near highs of the 3 month range following a record harvest is one the bulls will be happy to except.  I remain skeptical of soybeans longer term at these levels if corn and wheat are to remain depressed, but in the short run 1020-1050 is in the cards given the amount of demand out there from China and the shortage in the global market for edible oils. I remain more bearish the new crop 2017 contracts, soybean planting estimates will be record in the US. Much of this price action is driven by Malaysian palm oil, so be careful.

Corn and wheat are quiet following expiration of the serial Nov options on Friday.  The soybean price action is promising for the other row crop markets as it gives optimism that prices can get to levels where producers can turn a profit. Managed money remains short in corn and wheat, but much less so than a few weeks ago.Fundamentally, what we are seeing makes sense. Grain prices have only partially followed the soy complex, but struggle amid expanding harvests. Non-commercial traders since early October have covered a net 123,000 contracts of corn and 50,000 contracts of wheat in Chicago. A further lasting rally requires new bullish input, like a weather problem in South America?

Cotton is giving bears like myself fits as the price action remains choppy. Cotton is down this morning as data from China does not support the argument for further demand. I am not here to argue that China or Pakistan or India will not be in the market for US cotton supplies.  I am here to tell you that its becoming priced in that they will be in the market for US supplies, but the data doesn’t support. Dec cotton on Friday fell to a 1-week low on weak Chinese demand after Chinese Customs data showed China Jan-Sep cotton imports down -44% y/y to 654,277 MT.  Maybe they are waiting to see how harvests develop but demand shouldn’t be that drastically different in Q4.

I would remain short cotton, looking to establish short positions for 2017 soybeans and remain long corn and wheat, buying on breaks and selling calls on rallies.

(Sorry, no pod this morning, Ill be back this afternoon)

 

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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