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GRAINS | It has been a slow couple of weeks. Not a whole lot to write or talk about. As we head into harvest I think corn remains range bound and I continue to like short straddles. Wheat is probably going to find a bottom soon. There are production issues in Argentina (too wet) and Australia (drought) and that is going to lead to increased demand for US wheat. We will not have shortage of wheat but we will see increased demand. The wildcard of the bunch is soybeans. All eyes will be on the field reports for harvest. Currently harvest reports are better than expected but it is still early in the game. A better than expected harvest could send SX to $9.00. I can’t get too bearish on beans at $9.00 because SAM growing season is getting started and La Nina is could be a factor this year.
Below is monthly chart of KC Wheat going back five years. We are starting to see stocks come down on the USDA balance sheet, acres get smaller in the US every year, and I think we are going to see better exports due to the issues going on in Argentina and Australia. We are going to keep an eye on Wheat and will be having recommendations in Turner’s Take Market Alerts
ENERGY | Natural Gas stocks are starting to tighten and we could have tighter stocks this winter. A cold winter and tighter stocks could lead to a really. We will be keeping an eye on Dec NG and looking for ways to get long. Below is chart of Crude Oil. It is a weekly chart that goes back to 2012. The top part of the chart shows the old range crude traded in when OPEC dictated prices. The bottom part of the chart shows the “new normal” after the Shale Revolution. Above $50 a lot of the shale companies are profitable and they will produce enough supply to meet demand. When crude gets to $40 a lot of the shale companies are not profitable. The term structure for crude is bearish right now and does not present much opportunity with bear spreads. I like selling futures, selling call spreads, and buying put spreads. Stay tuned!
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