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Home / Futures Blog / This Week in Grain and Oilseeds 8/7-8/11

This Week in Grain and Oilseeds 8/7-8/11

August 7, 2017 by John Payne

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

Corn (U17) 362’2   -2’6

Soybeans (X17) 962’6   -14’6

Chi Wheat (U17)  458’2  -2’4

KC Wheat  (U17) 460’0  -4’4

Cotton (Z17)  70.21 -.13

 


Good morning friends!

 

CBOT markets along with cotton are green across the board as we cover new shorts ahead of a big couple of days.  This afternoon we will see crop condition updates, while on Thursday we will get the first look at yield data from the WASDE report.  I think today’s report could be as if not more important for the trading week as it should set the tone for what expectations should be on Thursday.  Conditions are still a relative mystery given the shift in weather conditions (mainly temperatures) over the last week. It is really weird to see the weather conditions on extremes like this. Normally hot and dry or cool and wet is the theme, cool and dry at this time of the year is an anomaly and I am not sure how the USDA is going to peg ratings today, especially in soybeans.

The next 10 days are not showing a large deviation from the trend.  Temperatures are expected to stay well below normal over the next week, with a warm up shown at the end of next week. The lack of heat could be a problem.  I am not an agronomist but I did grow up staring at rows of corn and soybeans. Things look pretty good, but I do not see things like I did a year ago, especially in soybeans.  The crops seem smaller and not nearly as over grown as a year ago.  Driving on i-88, you would see many fields where the 30 inch rows were not closed yet by the plant. The weather going forward does not inspire much confidence the crops are going to finish well. Here is a look at the 5 day precipitation outlook and the July precipitation % of normal.

Trading this week in corn and soybeans is likely to get wild. The COT reports show the funds remained long positions into last Thursday. I expect funds are set up the same way right now as they were a week ago. The COT set up should encourage folks to look at put options in corn ahead of Thursday.  If the USDA does not confirm a yield in the mid-160’s like many expect, there is a lot of fuel for this market to burn lower. As I have mentioned before, August is a time for setting lows in corn, but in the bigger supply years for the past (06,07,09,15,16) lows were posted in the back end of August.  I like the confidence the funds are showing right now and I think it reflects the conditions appropriately, but folks who are undersold should look at cheap puts (Sep 380 SD put for 4 cents) as a way to get in front of a surprise.  The funds are not as relatively long soybeans right now as they are corn and wheat.  960 was a level that gave bulls trouble on the way higher back in the winter/spring, it should provide some support as it is doing this morning.  I expect tonight’s report in soybeans to be traded heavily ahead of the USDA on Thursday.

The Monthly International Trade Report reflected June bean exports 7 million higher than was reported a month ago.  June bean exports from the US were the largest since 1983 and almost double of what they were a year ago. US corn exports came in 50 million lower than a year ago but above 15 and 16.  USDA corn export pace for corn and soybeans should be met or even exceeded in the case of soybeans.  We know the story for cotton\, exports have been on fire.  We are currently at 108% of expectations for current exports. There is good news in wheat as well, with exports coming in near 113 million bushels vs 88 million a year ago.  This year’s June total was the highest since 1987. US wheat is now the cheapest in the world, I expect this to continue.

COT reports for wheat scare me a little but I think with world cash markets set to rise post harvest, I would advise buying wheat at these levels.  US golf wheat is the cheapest in the world and Russian prices have not come down after news of very good production this year.  Seasonally, wheat prices tend to bottom at this time of the year. We know the story for spring wheat in the US, Canada faces similar problems on short acres.  Australia remains dry and should get dryer. A year ago lows in wheat were formed in late Aug, I expect the similar to happen again.  Stay long if you are still in the fight. COT shows the board is susceptible to selling but I think commercially things should hold in given the problems globally.

Lastly, cotton….70.90 is the 50% retracement of the May/June selloff.  That was almost the high last night.  A break of that level probably sees a test of the high 71’s.  Markets will be keeping an eye on Texas conditions tonight after a week of rain, around Lubbock.  According to MRCI.com , the 5 year seasonals show promise in mid August, but longer term seasonals would encourage selling.  COT reports show funds in a long position but its much, much less long than in the late Spring.  Indian crops should be better this year, as will Chinese and Pakistani crops.  There seems to be enough rain out there to show crop conditions at worst sideways.  WASDE on Thursday will probably be friendly old crop (great exports) and bearish new crop (acres, yields).  I would be selling any and all rallies into the 72 cent area.  Really short term traders might want to take a shot shorting this morning with a tight stop above 71.


Have a great week.  I was on Market Rally with Chip Flory on Friday, if anyone cares to take a listen you can do so here.  Thanks to Chip and the crew for having me, it was fantastic as always.  They will be embarking on a crop tour starting on the 21st of Aug. I look forward to following on this newsletter.

 

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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