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This Week in Grain- 1/30-2/3

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

Corn (H17)  358’4   -4’0

Soybeans (H17)   1036’0   -13’2

Chi Wheat (H17) 416’2   -4’2

KC Wheat  (H17)  430’2    -4’0

Cotton (H17) 74.54    -.31

CBOT markets are weak in the overnight as new positions get adjusted after option expiration last Friday.  Cotton markets are slightly weaker as the rest of the commodity complex tumbles. It will be a busy week in the macro space with a bevy of economic releases and central bank speeches planned all week.  Bank of Japan will start us off with their rate updates this evening, book ended with US monthly unemployment reports released on Friday.  In between we get US FOMC and ECB statements. USDA data is relegated to the weekly reports, but those combined with the weather story out of SAM should keep the market jumpy.
US Cattle on feed was released on Friday and is viewed as VERY bearish for cattle futures. The January Cattle on Feed report is viewed as bearish for cattle futures at the start of next week’s trade. The December placement rate was far larger than expected, and well above the range of trade expectations. Cattle on Feed supplies were just above 100% of a year ago, versus the average estimate that called for 99%. The big surprise in the report was the December placement rate. The average trade estimate had called for placements at 108% of a year ago, though actual placements were at 118%, the largest Dec placement rate in 5 years. This was one of the largest misses by the industry and cattle futures are likely to open lower today.
This could be good news for the feed grain sector over the medium term as the idea that more feed is being used is supportive for markets like corn and wheat.  I believe we are seeing the same type of action by producers in the hog sector as well, I think we are going to see similar numbers when the next hog reports come around. From a spec perspective I remain short hogs and will encourage folks to try to short cattle today if they have the chance, I doubt they will though. I was out with The Cattleman, Kirk Donsbach over the weekend in Montana, he kept cow/calf guys were waiting for that price to move product to town, it appears they got it.
Cotton saw its highest close since August on Friday, as bull maintain the record long spec position. A marketing year for high for exports, combined with the higher prices is impressive.  That said, Dec 17 remains in the low 71 cent range while May and July are pushing toward resistance levels.  A decent spec/hedge idea for old crop hedges would be to buy the Dec 17 and sell the front month. This is only for folks with production waiting to be ginned and sold.
In the grains, markets start the week lower on weather and ongoing US political uncertainty. Spec bean positins are rather long and are unwinding this morning as new option shorts come into play. . Coming rainfall will trigger some moderation in Argentine temps beginning next week. Final South American crop sizes will be known only in late Feb/early March. Regular rainfall in Northern Brazil will continue to delay harvest progress. Brazilian soybean export commitments are to be record large in January , and amid harvest delays I cant imagine beans have a monster sell off in front of them.  I think we see Nov make a run at 10.00 but I wouldn’t chase it lower.
Trade ideas:
– Buy July corn- Sell Dec Corn (see Turner’s Take)- FILLED NEAR 12 CENTS
– Buy March short dated Bean puts to protect crop insurance prices
– Sold March corn near 370 –FILLED ON MARCH CORN SALE AT 370 ON FRIDAY
– Sell March KC wheat, look to re-own July via calls or collars
– Hedge Dec 17 cotton at these levels and more near 73 cents.
Spec Recommendation:
– Sold April Hogs between 68-70- FILLED
– Sold June Hogs at 77.00 – FILLED
– Sold October Hogs- 67.00- FILLED
-Buy Feb hogs/Sell April on a spread  (EXIT THIS SPREAD AT 2.55, FOR A PROFIT OF APPROX 1.85 POINTS, PROFIT TAKEN YESTERDAY)
–BUY FEB/SELL APRIL CATTLE AT 1.10
Please call or email if you have any questions.

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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)