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Home / Futures Blog / This Week in Grain and Oilseeds 6/26-6/30

This Week in Grain and Oilseeds 6/26-6/30

June 26, 2017 by John Payne

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

Corn (N17) 360’2  +2’4

Soybeans (N17) 910’2  +5’6

Chi Wheat (N17)  453’4  -6’2

KC Wheat  (N17) 457’4  -6’6

Cotton (Z17)  66.83  -.19


Good morning friends!

I am back in the saddle this morning after a week away.  Markets moved like they normally do when I am off the screen, I hope you took my advice and bought volatility.  July options expired Friday at the CBOT and the market action did not disappoint.  Corn fell 25 cents or 5 strikes last week, putting the 360’s in the money which were trading almost for free last Monday. Soybeans traded into new lows, July futures did hold off the 9 strike which would have put many more shorts in the market this morning. Wheat was quiet last week but has taken the downside volatility mantle with KC wheat falling almost 9 cents in the overnight. CBOT FND is on Thursday afternoon, so if are holding on to July basis or delivery contracts you will be put to a decision by then. Cotton continues its free fall on the back of fund short covering. Fund net length sat at 50 K net long on Tuesday, almost half of where it was a month ago.

I suspect this is just the beginning of the volatility as we have a monster couple of weeks ahead, this week especially.  Grain stocks and acreage updates come on Friday, which happens to be the end of the quarter and first notice day. Hog traders have a massive report on Thursday to pay attention to, and oh yeah…the weather bares watching.  If you have been working with me for a while you know I am fond of looking for trend changes around USDA reports and the end of the quarters, we have both this week. Given the massive shift in sentiment over the last few days, I would not be shocked to see a big time turn around after the break for the 4th of July.

I was somewhat out of it last week, here is a quick run down of where i see things as I get back in the thick of it:

CORN: The open interest from a week ago Tuesday showed a massive shift in sentiment among fund traders.  Those new longs were crushed late last week as forecasts for the next week showed little to worry about over the short run.  The Sunday night forecasts showed little as well stateside. We are about two weeks from pollination starting across the belt, the forecasts will dictate the price action when things are quiet. Overseas forecasts are supportive. I think the break last week had to do with new longs selling as well as farmer selling into July delivery.  Corn bulls do have a trade-able story coming into Friday’s report though.  Acreage will be scrutinized with the late planting pace, if the acreage comes in under the March report number (90 million), grain stocks is not bearish and forecasts would show hot/dry…watch out.

SOYBEANS: The story of beans, or the lack thereof is what is pressuring price.  Carry spreads have widened out to contract lows (nov/nov) as the cost to store beans goes up.  I would not chase the price here though as we are approaching crop insurance levels for many and the open interest in near record to the short side. Grain stocks for beans looks to be somewhat supportive and should offset an increase in acreage. Conditions for soybeans appear to be solid, yields should start somewhere close to trend for the USDA.  I expect some short covering this week or next, July delivery should attract some supply but after that I expect the doors to shut for a while.

WHEAT: The story in wheat is multi-layered.  European forecasts are hot and dry over the short run, we expect a smaller crop there.  Then you have the Minny wheat story, which has been supportive of the entire complex, sits almost 1.70 over the KC offer. Open intrerest in Chicago wheat is almost neutral at this point with total outright longs near where they were at the highs in 2012. I think you gotta look at protecting wheat over the next few weeks given harvest pressure and July delivery approaching.  I would be a seller of Chicago over Kansas City, but either is probably a decent play.  You have to wonder how much more  negativity can be priced into Minny to support. I will say this for beans and corn, wheat and oats stayed firm last week which should give bulls some support.  That said, I would avoid re-owning wheat until after July delivery, I expect we will see a lot of grain sold off harvesters and from storage over the next few weeks.

COTTON: Markets had something going this morning with a push back toward 68, but that fell apart.Friday saw a reversal on the charts, but I think that is short lived.  Friday’s report should show more acreage, and the WASDE two weeks later should show good prospective yields.  West Texas is looking at .5 to 1.25 inches of rain as well.  Long liquidation is the theme right now with more ahead. I look for a test of 65 cents some point soon, maybe by this week.  Given higher US acrage and yields, combined with the lack of a global growth story has this long position looking to fall. July delivery could provide some upside like it did in May, but bulls need either exports to pick back up or weather to affect conditions.  Without that I look for lower prices by harvest.  I do like rolling protection down with the hope of re-selling a push back toward 70 if those factors occur.

 

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.

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.

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.

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.

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