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Home / Futures Blog / US Row Crop Markets Mixed, Crude Oil Makes 9 Month Low

US Row Crop Markets Mixed, Crude Oil Makes 9 Month Low

November 13, 2018 by John Payne

Good morning friends,

US row crop markets are mixed this morning, while crude oil makes a new 9 month low. December corn and January soybeans remain in their tight ranges at 370 and 888, while cotton markets bleed lower as FND approaches for December futures at 76.66, up slightly. Wheat markets are making moves as December Chicago now trades 26 cents over KC as variable storage rates or VSR are decreasing in Chicago from 8 to 11 cents. Chicago trades 515 while KC trades 510. This basically means storage in SRW will become cheaper in the coming delivery period, which should prevent a lot of deliveries in the Chicago.  Crop progress reports were delayed yesterday due to Vets day, wheat planting pace should have been non-existent last week.  There is little price action worth noting outside of the continued slide in cotton prices and the sudden jump at the front of the curve in Chicago.

Learn 7 basic and out-of-the-box strategies for success in Guide to Smarter Ag Marketing: Fixed Risk Hedging. 

Talks between China and the US are starting up again as Treasury Sec Steven Mnuchin is back talking with his Chinese counterpart Liu He per reports from the South China Morning Post. The rumors are a framework for a trade agreement is being worked on. Terry Brandstadt, the ex-governor of Iowa and known friend of President Xi has been optimistic in his rhetoric in recent days, but I don’t know if I would buy into it. While the White House’s National Economic Council is reviewing what offers from China on agricultural tariffs, technology transfer, cyber security and intellectual property protection would be acceptable, the buck stops with Trump who insists current tariffs need to continue to get China to make necessary concessions. Brandstadt is obviously concerned about the soybean markets and I applaud him for doing all he can to close the communication gap but I don’t see this as anything concrete yet. Total soybean exports to China from global partners is off 30% from a year ago. The Chinese soybean markets are starting to reflect this tightness as crush margins sit near record highs.

Soybeans

Soy harvest is now coming to an end as cash basis has rallied at the river. IL River soybeans are now bid $.48 under the CBOT, and MS River bids in the QC are 39 under. Basis at both locations were close to a buck under several weeks ago. Jan soybeans have held above the 50-day moving average all month, and we expect that in the near term the market will be well supported on any breaks. The longer term outlook completely hinges on whether China lifts tariffs on US soybeans.

Wheat

Wheat markets have been enjoyable to watch in recent days from a volatility standpoint. Over the last week, December vs March futures has tightened up dramatically as short covering amidst the first reversal in VSR is years. KC is probably the buy here as much of the buying in Chicago has come via spreading against KC. Basis in KC wheat is increasing and well above last year’s levels at this time. World cash prices are holding. The Russian and US markets are the cheapest, offered in a range of $230-240 for the last several weeks. US wheat is competitive and should continue to see demand. Drought will be o going in Europe, Ukraine and Central Russia into late November. Whether seeding was completed last week across the US Southern Plains will be key in Tuesday’s afternoon Crop Progress report. Rains in Argentina are helping corn and bean development, but are hurting wheat. Santa Fe was reported to have received almost 9 inches in the last few days.

December vs. March Wheat

December vs. March Wheat
December vs. March Wheat

Cotton

Cotton markets just can’t get off the mat. Much like soybeans, a low-slow trade is expected until we find out more about trade. In the meantime, producers in Texas watch more rain fall as strippers and pickers remain idle. The outside market forces were particularly bearish for cotton yesterday with a sharp break in energy prices, a move to a new 16-month high for the US dollar and a collapse in the US stock market. The selling pushed the market down nearly 2% and down to the lowest level since October 25th. It was clear from the reaction after last week’s bullish USDA report news that the recent collapse in China’s stock market and concerns with the Chinese and emerging market currencies is a major near-term bearish force. Open interest has fallen sharply in the past several sessions to reach the lowest level since October 2nd. The long liquidation selling trend is seen as a short-term bearish force and the drop in open interest helps confirm that the long liquidation selling trend may be intensifying as support levels are violated. 10 more days until the bearish seasonal flips to a buy recommendation.

Corn

Corn futures are very tied to 370, with little news to break it away. US Gulf corn is again highly competitive for JFM delivery. The US corn harvest through Sunday is estimated to have reached almost 90% complete. The world cash market has printed its harvest low, I think we probably see this range through Thanksgiving. After that I think risks lie to the upside if there is a trade deal, while downside risks should be muted for now. Longer term downside risk is in play given the planted acreage uncertainty we could see in the US if there is not a bean deal.  That is a trade for a different day though, target 410+ as a place to start pricing some corn for next year.

This article originally appeared in the This Week in Grain (T.W.I.G.) Newsletter “Tuesday Morning in Grain and Oilseeds 11/13” at 11/13/18 07:33:38 AM CT.

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This Week In Grain

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This Week In Grain - This Week in Grain (T.W.I.G.) is a weekly grain and oilseed commentary newsletter designed to keep grain market participants on the cutting edge, so they can hedge or speculate with more confidence and precision.

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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.

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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