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This Week in Grain- 2/3 AM Commentary

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

Corn (H17)  365’6   -1’6

Soybeans (H17) 1036’6

Chi Wheat (H17)  430’6

KC Wheat  (H17)  441’2   -2’2

Cotton (H17) 76.42   -.50

Today will be an early day for me, I have to run out to South Bend to appear as a guest on US Farm Report.  I believe it air’s this weekend, Ill be the guy on there with hot takes.  Beware….

CBOT markets and ICE cotton are lower across the board in the overnight.  Cotton opened lower and did not fill its exhaustion gap as of yet.  I have updated the cotton recommendations below to reflect a fill on additional hedges at 73.50.  I am aware some have sales in at the gap around 73.60, I assume we will see that filled at some point today as everything appears to be back and filling this morning. There are rumors everywhere about why cotton is rallying.  Lack of quality, ginned supply…the Indian situation…fall out from Chinese currency manipulation…the result has brought about a squeeze of sorts in the old crop contracts.  We could see that squeeze abating yesterday as bull spreads sold off dramatically.  July-Dec cotton sits .75 off its high from yesterday. Funds remain UBER long, as I imagine we will see this afternoon in the COT data.

This is why you hedge.  If you have done nothing on this run up over the last 30 days then you are winning….but I would be very careful to not look these prices in the face and do nothing.  The market is as bulled up as I have ever seen, does that mean a top is in?  No. But it encourages me to lock in some kind of downside risk.

South American weather forecasts have to be monitored with heavy rains slated for N Brazil in the next 10-14 days, but other than that we are pretty calm in the South American front. We are seeing some interesting action out of the SAM bean prices, that remain above US offers for the early spring. This is not bearish soybeans.   Indian wheat imports look to push to a 10 year high at 4.5 MMTs according to export and the purchase pace to date. India has already secured 3.0 MMTs. I look for wheat to remain constrained into the end of the delivery period but things feel a little more promising given the situation in Russia (sorry Putin, sanctions not lifted) and the demand out of Asia.  I think the funds see CBOT prices as cheap, I would be a buyer on breaks.

Hedge 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- HOLD THROUGH EXPIRATION
– Sold March corn near 370 –REMAIN SHORT THROUGH FIRST NOTICE.  WE WILL LOOK TO GET LONG AT THE END OF FEBRUARY
– Sell March KC wheat, look to re-own July via calls or collars-
– Hedge Dec 17 cotton at 70-71 cents.
-Sold another portion of Dec 17 production at 73.50
-Bought Dec 17 cotton 73 cent puts for 4.50
Spec Recommendation:
– Sold April Hogs between 68.70
– Sold June Hogs at 77.00
– Sold October Hogs- 67.00
–BUY FEB/SELL APRIL CATTLE AT 1.10 – ENTER PROFIT TARGET AT 2.70
– NEW Spread: Short April Cattle/ Buy August Cattle.  Risk a close above the trend high near 17.00 on a close. I would look to get in on a rally up to the 14.75 area.  Total risk on a 1 lot would be around 1,000 dollars. (no fill yet)
UPDATES ARE IN BOLD. 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)