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Home / Futures Blog / This Week in Grain – AM Commentary 2/7

This Week in Grain – AM Commentary 2/7

February 7, 2017 by John Payne


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

Corn (H17)  363’4  -‘2

Soybeans (H17) 1034’0  -2’0

Chi Wheat (H17)  421’0  -1’4

KC Wheat  (H17)  433’2   -2’4

Cotton (H17) 75.47   -.016


Good morning friends

Another slow overnight at the CBOT as prices bleed lower ahead of WASDE on Monday evening/Tuesday morning.  The market is lacking headlines right now, which puts the impetus on the specs to keep prices elevated.  It sounds like fund managers have little interest in buying here, and with a really long trade on the books who can blame them.  Cotton is in the same situation,prices in Dec 17 futures have filled the price gap from this summer but have not yet tested the highs above 74.00 on this run up.  I assume it will get tested.  Weather is favorable for South American crops. Brazil’s CONAB and the USDA will be out with their updated crop and stocks estimates on Thursday. ARC maintains that CBOT prices will continue to chop in a range until the weather focus shifts back to the N Hemisphere in a few weeks. Brazil’s soy demand is record large which is helping to absorb the crop and corn supplies remain unknown. FOB Corn in NOLA remains cheaper than Brazil which should buoy prices for now.

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Wheat prices are on the retreat again as we expected would happen with delivery approaching.  We have seen the “reflation” of many other commodities driven by fund money, wheat has seen some of that action.  But this is a time when it feels like the trade wants nothing to do with wheat.  I plan on jumping in to buy near the end of the month.

South American Crop Consultant Dr. Michael Cordonnier raised his Brazilian soybean crop peg 1 MMT to 104 MMT, citing “good” early yield reports. He has a neutral to slightly higher bias going forward, though he remains concerned about “continued wet weather and the potential impact on the crop.” He noted high-moisture soybeans have resulted in long lines at grain driers and there have been some reports of moldy beans. As of Friday, AgRural reported soybean harvest was 10% complete in Brazil, which is in line with year-ago and four points ahead of the five-year average. He left his corn crop peg at 86 MMT, with a neutral to higher bias.

For those hedging cotton. This is where trading/marketing your crop is really, really hard.  Its psychologically draining to come in and fight the trend everyday but its a fight we must be willing to make if we want to hedge properly.  I usually go by the addage “if it feels wrong to make the sale, its probably a good time to sell”.   I have found people are  wired to trade with recency bias.  In this case, cotton continues to rally but I am finding producers are less inclined to want to sell now than 2 months ago when the trend was less clear.  Its time to scratch that from your plan.  I sat down with many of cotton farmers a while back and planned to sell these levels, so sell we shall.  Maintain your short positions, if you are inclined to want to exit, a sale of the physical OR a replacement put is highly recommended.  I say this because I feel the burn as well, but we are record long and the seasonals turn south on cotton in a month or so. The managed money has re inflated this commodity trade pretty quickly, a lot of markets find themselves in speculative bubble territory, cotton is one of them.


 

Hedge ideas:
– 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
– Hedged Dec 17 cotton at 70-71 cents.
-Sold another portion of Dec 17 production on Friday near 73.50. 
-Bought Dec 17 cotton 73 cent puts for 4.50
Spec Recommendation:
– Sold April Hogs between 68.70- Hogs traded into a new high in April on Monday, close the trade on the open. 
– Sold June Hogs at 77.00
– Sold October Hogs- 67.00
– Buy July corn- Sell Dec Corn (see Turner’s Take)- FILLED NEAR 12 CENTS
– NEW Spread: Short April Cattle/ Buy August Cattle.  Risk a close above the trend high near 17.00 on a close. Maintain entry at 14.75. 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.

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 TRADING SYSTEM, NEWSLETTER OR OTHER SIMILAR SERVICE. DANIELS TRADING DOES NOT GUARANTEE OR VERIFY ANY PERFORMANCE CLAIMS MADE BY SUCH SYSTEMS OR SERVICE.

GLOBAL ASSET ADVISORS, LLC (“GAA”) (DBA: DANIELS TRADING, TOP THIRD AG MARKETING AND FUTURES ONLINE) IS AN INTRODUCING BROKER TO GAIN CAPITAL GROUP, LLC (GCG) A FUTURES COMMISSION MERCHANT AND RETAIL FOREIGN EXCHANGE DEALER. GAA AND GCG ARE WHOLLY OWNED SUBSIDIARIES OF STONEX GROUP INC. (NASDAQ:SNEX) THE ULTIMATE PARENT COMPANY.

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 TRADING SYSTEM, NEWSLETTER OR OTHER SIMILAR SERVICE. DANIELS TRADING DOES NOT GUARANTEE OR VERIFY ANY PERFORMANCE CLAIMS MADE BY SUCH SYSTEMS OR SERVICE.

GLOBAL ASSET ADVISORS, LLC (“GAA”) (DBA: DANIELS TRADING, TOP THIRD AG MARKETING AND FUTURES ONLINE) IS AN INTRODUCING BROKER TO GAIN CAPITAL GROUP, LLC (GCG) A FUTURES COMMISSION MERCHANT AND RETAIL FOREIGN EXCHANGE DEALER. GAA AND GCG ARE WHOLLY OWNED SUBSIDIARIES OF STONEX GROUP INC. (NASDAQ:SNEX) THE ULTIMATE PARENT COMPANY.

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