NEW PODCAST | I recorded a podcast last night. I dive into our recent ideas in Lean Hogs and Crude Oil. All spec trade ideas come from the Turner’s Take Market Alert newsletter. For farmers, hedgers, and grain traders, the second half of the podcast talks about how we are begging to position ourselves for 2018-2019 marketing and hedging. We have a plan to use short option premium on old crop to pay for new crop hedges in corn. We see corn a range bound market and we should be able to use premium collected to pay for most (if not all) of our 2018-2019 hedges. All hedging and marketing ideas are publish in the Turner’s Take Ag Marketing newsletter.
MACRO MARKETS | US Stock Indices have been in the news as we make new highs while the latest round of earnings reports have been mixed. The stock market has been a bull market for over eight years (8 years!) and at some point we are going to have a downturn. Two big developments have the potential to send stocks lower. The first is if tax reform gets done. A material part of the rally since Trump became President is based on tax reform. The second part is how the Fed goes about unwinding their massive balance sheet. For now the market seems to want to go higher but if tax reform fails, earnings start to disappoint, and the Fed does not get the unwind correct, we could see a significant correction in the stock market.
Emini S&P Chart
GRAINS | We continue to see corn as a range bound market for the foreseeable futures. With large US and global stocks and moderate demand, it will be difficult for corn to break out. We continue to like using strategies that are beneficial for range bound markets. We have the same exact thoughts for winter wheat too.
The USDA report was bullish for soybeans last week. The reduction in yield should be supportive of soybeans and we would expect buying to come in on breaks to $9.50 to $9.60 until more is known about the SAM crop. If there are issue in South America we are buyers of soybeans. Beans have the best bullish potential of the three major ag crops this year.
LEAN HOGS | Hogs continue to trade in range and while the cash price has been strong recently, we are also expecting a large amount of supply coming to market. This should lead to a range bound market for the rest of the year. Hogs/pork are in highest demand during the summer months during bbq season. In the last fall and winter pork demand tends to decline while supplies build.
If you look at the chart below, you can see the reversal yesterday. We opened up higher the prior day’s close and then we closed lower than the prior day’s open. That is typically considered a bearish reversal.
CRUDE OIL | I know I sound like a broken record but I still like selling crude when we get into the $50s. In the past week we have had reports of OPEC extending production cuts and potential conflict in northern Iraq between the Iraqi government and the Kurds. Before the shale revolution (when crude traded between $80 and $110) the market could have rallied $10 or more. Now we are barely up $3. For me that just reinforces my belief that higher prices bring out production in the US shale industry and other nations that are not part of OPEC. Clients/Subscribers to Turner’s Take Market Alert should refer to yesterday’s email about how we are going to go about this.
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