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Home / Futures Blog / This Week in Grain – AM Commentary 2/9- WASDE DAY

This Week in Grain – AM Commentary 2/9- WASDE DAY

February 9, 2017 by John Payne


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

Corn (H17)  369’2   -1’4

Soybeans (H17) 1053’2    -5’4

Chi Wheat (H17)  430’2  -2’2

KC Wheat  (H17)  439’4   -2’4

Cotton (H17)  75.47   +.22


USDA will release its Feb WASDE today at 11 am central.  This report is not a major market mover in most years as it is a precursor to the more important acreage numbers and stocks reports that come at the end of Feb and March. That said, the US carryout in corn and beans will probably see some adjustment. In the case of corn, I expect carryout to fall modestly.  Soybeans probably do not see much change in US carryouts.

Other than WASDE, CONAB came out with their Brazillian projections at around 6 am central this morning.  They projected the Brazilian corn crop at 87.4 mmt on approx 11 mil hectares. 28.8 for 1st crop, and 58.5mmt for 2nd crop. You are going to see headlines like this today, BRAZIL CORN CROP UP 30% FROM A YEAR AGO! But dont be fooled, while tthis number comes in just a  above expectations and less than what they produced a few years ago.  Last year was a brutal growing year for Brazil so this is just the rebound.  In soybeans, the number was a little more bearish with the soy crop estimated about 2-3 MMT higher than expectations, coming in at 105.6 MMT.  This makes up for the losses out of Argentina.  Rosario grain exchange estimated Arg bean crop near 54 MMT, down from earlier estimates near 58 MMT. These are large numbers, we are looking at 6MMT more soy produced from Brazil and Arg than a year ago. I assume the USDA follows today, so world numbers may creep higher in soy.

Both CONAB’s soybean and corn production estimates are slightly larger than the average trade guesses, and considered slightly bearish.  China’s soymeal trade remains on fire with solid interest from end users. Dalian corn finished higher overnight with May DCE corn gaining 8 yuan (3 cents/Bu) to settle at 1,608 yuan/MT ($5.93/Bu). Word is spreading China has been really active in the soy markets from SAM.  So active that their offers are now above US port offers.  In Dalian corn, the market has awoken after a substantial sell off over the last two years.  If Chinese corn markets rally, I expect the US to follow (see chart at bottom).

WASDE for wheat is not really that big of a deal today for US production as we are a month away from yield updates, but we could get some world adjustments. Russia news came out that their production for this year will be about 7% less than a year ago as Russian offers are 10$ higher than a year ago.  I think wheat is setting up to make a move but again, it might be a little early.  Delivery periods have brought about price weakness and I have to imagine that happens again.  I plan on buying more July on breaks.  If you sold March I encourage you do the same.  If I sell March KC wheat around 440, then I would try to buy May at that price on a break to try to eliminate storage costs.

Cotton WASDE will be very important given the structure of the trade.  The market is record long and we sit right at summer highs (not taken out for Dec 17 yet).  Tech longs may try to push through it, but without a bullish WASDE I don’t see it. Below is a chart from our boy Payne Sharpley from Texas Tech.  He sent me this last night.  The dates are cut off from the bottom but you can get the drift of the range of stocks to use in cotton over the last decade.

There remains consistency in the weather forecast models for South America. Heavy rain slated to drop across N Brazil while Argentina is dry before another round of heavy rain returns on Friday and the weekend. N Brazilian rainfall estimates range from 3-10.00” while N Argentina could again have to endure rainfall of 4-8.00”. The southern 2/3’s of Argentina look to receive .25-1.75” which would be favorable for row crops. No extreme heat is being seen at this time.

It is really interesting to see the board taking this bearish SAM news is stride. Markets for row crops appear to be very in demand right now. Commercials want to assure needs are met at these prices for the summer and funds appear to be willing investors.  Wheat should benefit from this at some point.  The chart below of Dalian (Chinese) corn is what gets me the most excited.  No, China is not importing much corn right now but according to USDA they sit on almost half of the worlds supply (I call BS) so if prices rally there, we could see a rising tide lift all boats.


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 June Hogs at 77.00 REMAIN SHORT
– Sold October Hogs- 67.00- REMAIN SHORT
– Buy July corn- Sell Dec Corn (see Turner’s Take)- REMAIN LONG SPREAD
– 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 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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