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Home / Futures Blog / This Week in Grain- 3/27 AM Commentary

This Week in Grain- 3/27 AM Commentary

March 27, 2017 by John Payne

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

Corn (K17)357’4  +1’4

Soybeans (K17) 975’2   -1’4

Chi Wheat (K17) 423’0  -1’0

KC Wheat  (K17) 424’4  -3’4

Cotton (Z17)  75.39   -.10


Happy Monday morning, its going to be a busy week here in Chicago with month ending so lets get to it.  Focus of the Ag markets will be the grain stocks/acreage report that will be released on Friday.  The markets outside of the Ag space may be a story as well with equities and the USD under fire as the week of trading begins.  I would have thought dollar weakness would have helped US row crop prices but the bears remain in control at this early juncture of the week. It will be very interesting to see how the markets handle additional bearish data given the amount of selling we have seen by the funds over the last 2.5 weeks.

The change in sentiment is amazing. Since Sunday night March 10, July KC wheat is off 60 cents on more anticipated (now realized) moisture in the KC wheat region. Total net short position as of last Tuesday equals what it was near the lows in October. December corn futures are off only 20 cents from the same period, while the net position has seen a swing of over 120,000 contracts. November soybeans have seen a similar shift of positioning with prices off almost 50 cents from the high 3 Sunday’s back, while funds have taken their long position  off the table and back to levels not seen since the US harvest.  Cotton….well cotton is the outlive.  Almost every market on the books is seeing selling or has seen selling over the last three weeks EXCEPT for cotton. Cotton is trading just off recent highs in December futures, and the net long position remains monstrous.  Bottom line, the CBOT markets have the bearish news basically baked in.  This is not the time to turn bearish in corn/wheat.  I would look at buy side collar strategies in both if you have interest in owning. Soybeans may have more push depending on the report.

Keep in mind the charts below do not include the selling seen across the CBOT in the latter part of the week. I think its safe to assume the charts are even more drastically tilted to the sell side. I think wheat and corn could be back near record lows while I imagine soybeans are closer to net neutral overall.  Cotton would remain record long of course.

So what gets things turning around?  Well, in the case of wheat its difficult to find much. Parched KC wheat regions received the projected moisture most expected, and the forward outlooks call for more.The wheat acreage data is probably going to be supportive, while the grain stocks will lean bearish.  I think we make near term lows in wheat this week, given all of the bearish factors priced in and the lack of a need to sell at these lows by end users.  Seasonals remain weak for wheat through mid April.  I remain long from the 450-460 area in July and am choking on it at this moment. I am prepared to hold longer term but a push toward 4.00 May appears likely.  Egypt announced that it will not allow private imports of wheat during the harvest season that runs from mid April through mid June. Private imports of wheat have already been sharply reduced following the Gov’t decision to allow the pound to float freely. This placed extreme financial pressure on private importers amid a lack of financing in US dollars. GASC has taken on a greater wheat and vegoil importer role as a result.

IN the case of soybeans, there are some wild cards out there.  The acreage data is the first one. Given the amount of selling while the survey was going on, I do not think its a stretch to think bean numbers come in below the Ag forum. There are also some weather problems approaching in Argentina where too much rain could slow the harvest.  This is worth noting.  The Chinese markets for soybeans have fallen to three month lows this morning, which is probably having more effect than anything else. I remain steadfast in the belief we see 10.30 nov beans again at some point in the future but it probably needs to come from US weather problems, which definitely could happen given the amount of projected moisture but the planting is so far down the road the market may not react for a while.

Corn markets feel like they are bottoming here, but a push down another dime wouldn’t shock me.  I want to buy the break in corn if we get the chance.  I will be buying Dec 17 corn at 370.  I think there is long term chart support in those areas and the potential fund position will be massive at those price levels.  Do not turn bearish here, this is the time to play the bottom side of the range that should be very supportive until US new crop supplies are better known.  Consider rolling hedges or adjusting them at those levels.

I expect cotton to shift its focus to the new crop in coming weeks.  Expecting tightness with 12 million + US acreage is a stretch.  Record OI makes this market very vulnerable to a break.  The average guess on Friday is 11.4 million acres but I highly encourage traders to be ready for the 12 number.  The expected jump would put new crop ending stocks as high as 7 million bales vs the 4.5 million right now and 3.8 million a year ago.  The technicals look bullish as anything I have ever seen which is very, very concerning but I think its prudent to cover risk here.  With the Trump optimism waning and the net OI record long (see above), folks should look at protection not aggression here. I know I have been a broken record on this but the seasonal highs for cotton are typically made between now and May 1.

Ill be back tomorrow and through the week with some strategies on how to get involved if you are still on the sidelines.  Have a great week!

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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