This Week in Grain and Oilseeds 2/7-2/11

February 7, 2022 by John Payne

Good morning

twig 27

Ill be out of the office this week, attending the World Ag Expo in Tulare, California. Given the Pacific time zone, you may not hear from me everyday. I will be checking email frequently, but please call in orders this morning as I will be airborne. If you will be in Tulare, please look for the Stonex booth and swing by to say hi. Oh, and download the APP.
USDA WASDE and CONAB will be out with official adjustments to corn and bean crops on Wednesday. Expectations are baked in for a cut to S. Am production. I think the wild card is the Brazil corn number and early outlook on Argentina. I think the trade has built in expectations of a cut there to yields but I am not sure we get it tomorrow, if at all given recent rains. There is likely US demand changes as well, down in wheat and up in cotton, corn and beans would be my lean. In regards to wheat, any negative action on demand should be bought given future weather problems not priced in at this time.
US CPI numbers on Thursday should dictate the attitude of the macro trade into the March FOMC meeting. Inflation is driving the FOMC to want to tighten, CPI will give traders an indication of how aggressive they need to be. If CPI comes in under .5% per month, I think we could see a risk on type of trade. If its .5% or higher I think risk off is the theme as expectations will remain for a higher than expected rate hike pace. All asset prices will likely struggle in the short to medium term in my opinion, should we see a high CPI print on Thursday.
The yield on the benchmark 10-year Treasury note edged up to 1.92% on Monday, the highest in 2 years, as investors await US inflation data on Thursday and continue to expect the Fed will need to raise rates faster to tackle soaring consumer prices. Money markets are now betting on more than five quarter-point Federal Reserve interest-rate hikes in 2022, after a stronger-than-expected job gain last month. I am somewhat surprised we are seeing strength in commodities (and crypto) as this occurs, although given the US remains at negative real interest rates I should not be.

Both Russian Ruble and Brazil Real markets have been strengthening vs the USD of late. This is a friendly sight for US growers as one domino yet to fall is the currency competition between the US/Brazil for beans and corn and US/Russia for wheat. Weaker currencies support export demand, something the US grower has not had in their corner for nearly a decade
Hong Kong Braces for Curbs as Cases Double Every Three Days
Spec money is at the ag “party” right now but remain well below highs from last spring as well as ’10-12 runups. The “Goldman roll” begins this week. I would bet on some moves in the H vs K spreads given market participation.

CORN (March, Dec)

SOYBEANS (March, Nov)

COTTON (March, Dec)

July WHEAT (Chicago, KC, Minneapolis)

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)