It will be a busy day today in all markets as options in currencies, financials, equities and grains expire today. I heard someone say today could be the biggest one day of trading volume in US history when factoring in how many options trading out of the money two weeks ago are now deep in the money. This will cause a lot of gyrations. Grains are on the come right now, cotton not so much but I would be jumping in that contract if inclined.
Cotton futures were the only contract on the board in the red yesterday. Cotton is a total buy here in my opinion. I would avoid the old crop, though. Look at December 20 and even Dec 21 contracts right now. I would advise futures over options, they don’t even exist in the Dec 21 futures right now (don’t get me started on the joke that is the ICE exchange). Dec 21 is at 57 cents! Its basically trading at loan values and the Dec 20 crop is still in the seed bag. Export demand in cotton is on fire, with 350k bales moved last week. I just don’t get why it can’t get off the mat with everything else. I’m guessing it has to do with the Virus popping up in India (huge deal) but over the long run even that could be bullish. I would be taking off old crop hedges and looking at buying the contract via calls or futures. I discuss this in the video above near the end.
Wheat is on fire right now. Both Chicago and KC futures trade nearly 50 cents off the lows from Tuesday as millers jump into the market. 481 is weekly resistance on the July futures, we could easily see that tested today if the DX continues to sell off. I know things are tough right now, but Americans should thank their lucky stars we have massive supplies of food on hand. Countries in the middle east like Egypt are shutting down, they only have limited amounts. Just imagine going to the grocery store and being forced to ration instead of buying everything on the shelf without any regard. US wheat futures have jumped up over the EU and Black Sea competition, but that may not matter much right now. Watch Minneapolis wheat for confirmation. If KC and Chicago rally without Minny, I don’t think this will hold into May delivery at the end of April. The dollar is a huge wildcard here. A break in the dollar could send Wheat prices soaring.
There are rumors that China has been sniffing around in the corn markets at NOLA. Short covering has brought the May contract back to 350, the lack of available supply in the 330’s is evident. I would continue to buy July on breaks into the 340’s and sell out on rallies into the 360’s. The ethanol margins breakdown at that area. New crop beans are unlikely to pull acres from corn at these prices, cotton farmers are already talking about shifting to corn. We should see today that spec funds are near record short, who is left to sell? The farmer has to sell, but right now prices and the time from delivery will keep bin doors shut for another month. Producers should be looking at new crop corn hedges in the 380’s. I know that is incredibly cheap but I have no idea how the ethanol story plays out at these prices. Gasoline futures are below 80 cents until next year, if they stay there there plants will stay closed and bids will stay soft. Producers should be looking at pricing physical supply and re-owning with the board in a fixed risk manner to get you through the US summer growing season.
May soybean futures trade near weekly highs this morning, well off the Tuesday morning low. Yesterday news broke that the major Argentinian port in Timbues will be closed for at least two weeks as the quarantines take hold there. This will take Argentinian soymeal offline for a while and most likely push business to the US. This is also helpful for corn, but more so for soybeans given the lack of exposure to the energy sector like corn has to ethanol. There are also issues of crop deterioration due to the dry conditions there. 860 would be my initial target for soybeans, a break above that will likely require economic optimism or continued expansion of demand for soymeal in China. Soymeal is trading at a 5 month high this morning after touching a contract low 5 weeks ago.
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