Good morning friends
Full moon, Friday the 13th, talk of tariffs being lifted, Europe is back at the printing press….buckle up.
Corn and bean markets are higher this morning, the rally in corn following what I thought was a downer of a report is pretty telling that the short squeeze is on. Cotton saw carryout come in at 7.2 million bales, which is nearly 35% of what the US grows and prices have their best day since before Easter. The report showed little need for price increase in wheat futures, yet KC wheat trades 407. Price action like this tells me the lows are in for now, at least until the Dec delivery approaches. If you recall the ATM straddle ranges from earlier in the week, we are at the high end of that level for corn and wheat right now, while we have penetrated the highs for beans. To get follow thru on Corn, we need to see the President come through with the bio fuel package, the Japanese trade deal close and the USMCA agreement. Cotton is in the middle of its weekly Bollinger band, pausing almost exactly at the mid-range line. I hate selling this price, but I like the setup. If you flipped into calls on the lows, you should have heard from me to get back on the put side now. Look to roll 1 to 4 (paying 1 cent to roll up 4 cents) as we approach 68. I can’t imagine we see anything above that price, but again I have no idea what is going on behind the scenes.
Riding this carousel is getting difficult, trust me I know. I trade hogs. The back and forth action is making anything beyond a short term trade nearly impossible. It was only Tuesday, Trump said he wanted a complete trade deal, no partial trade deals would be acceptable and he preferred a total pact. He went as far as to say he was absolutely against a phased deal, and that nothing was agreed to unless all was agreed to. Last night, he changes his tone. He said to reporters in Baltimore late yesterday he would consider an interim trade deal with China. Now, the Chinese are doing the double talk. Two days ago they say they may consider leaving beans and hogs off the additional tariff list. Today, the Global Times/Communist Party media says President Trump has not done enough to produce a breakthrough in the talks and that future negotiations will be very difficult and a trade deal is far from certain.
I was quoted in Bloomberg yesterday (at the bottom), I think this may be the truest thing I have ever said. The rhetoric is positive right now, maybe it will be good from here forward. But we have seen this type of strong rhetoric twice in the last 9 months (G-20 steak party in Argentina and the May meeting in China). Could we see some big pact in the near future? Sure. But major questions remain around IP and Huawei. The demand China can bring to the table for soybeans is stout, but from what I hear they have ample reserves. The buy little wheat and almost no corn. The trade is going to reflect the action in the Yuan/USD in the short term but in the longer run we need to see actual purchases. Corn, wheat and cotton carryout’s continue to swell per the USDA yesterday. Soybeans had a bullish report, I could get behind a rally there but it has to be yield based as well. Dec corn trades this morning nearly 30 higher than where it did a year ago. Cotton sales yesterday came in under 100 k bales. Be careful chasing it here. Here are the rest of the weekly charts on this Friday morning. Remember, if it feels scary to sell it….you’re probably doing something right.
Subscribe to This Week In Grain
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.
The StoneX Group Inc. group of companies provides financial services worldwide through its subsidiaries, including physical commodities, securities, exchange-traded and over-the-counter derivatives, risk management, global payments and foreign exchange products in accordance with applicable law in the jurisdictions where services are provided. References to over-the-counter (“OTC”) products or swaps are made on behalf of StoneX Markets LLC (“SXM”), a member of the National Futures Association (“NFA”) and provisionally registered with the U.S. Commodity Futures Trading Commission (“CFTC”) as a swap dealer. SXM’s products are designed only for individuals or firms who qualify under CFTC rules as an ‘Eligible Contract Participant’ (“ECP”) and who have been accepted as customers of SXM. StoneX Financial Inc. (“SFI”) is a member of FINRA/NFA/SIPC and registered with the MSRB. SFI does business as Daniels Trading/Top Third/Futures Online. SFI is registered with the U.S. Securities and Exchange Commission (“SEC”) as a Broker-Dealer and with the CFTC as a Futures Commission Merchant and Commodity Trading Adviser. References to securities trading are made on behalf of the BD Division of SFI and are intended only for an audience of institutional clients as defined by FINRA Rule 4512(c). References to exchange-traded futures and options are made on behalf of the FCM Division of SFI.
Trading swaps and over-the-counter derivatives, exchange-traded derivatives and options and securities involves substantial risk and is not suitable for all investors. The information herein is not a recommendation to trade nor investment research or an offer to buy or sell any derivative or security. It does not take into account your particular investment objectives, financial situation or needs and does not create a binding obligation on any of the StoneX group of companies to enter into any transaction with you. You are advised to perform an independent investigation of any transaction to determine whether any transaction is suitable for you. No part of this material may be copied, photocopied or duplicated in any form by any means or redistributed without the prior written consent of StoneX Group Inc.
© 2021 StoneX Group Inc. All Rights Reserved