Weekly soybean export sales came in at 271 thousand metric tons down 34% from last week. Number one buyer China had a reduction of 110 thousand. In new crop year 2016/17, only 90 thousand was sold. Without China in buying large purchases, sales were poor across the board, old and new crop. The long awaited planted acreage report came out suggesting farmers will plant 82.2 million acres of beans. That is down 1% from last year. This leaves no margin for error in the growing season should it turn hot and dry. Some weather gurus have already projected that El Nino will bring a hot July through August in the Midwest. Though demand remains seasonally weak as Brazil and Argentina overtake us on exports, beans need to build a weather premium into planting for protection against an uneven growing season. Corn on the other hand benefitted from planting intentions. Planting is suggested to come in at 93.6 million acres up 6% from a year ago and the highest acres planted since 2013. This will give corn a little wiggle room since heavy rains in the delta states now are delaying planting. Corn will show a slowness to respond of too hot here and not enough rain over there rather than trading the fear of ominous growing season weather ahead. Beans will trade fear first before fact. The long and short of this report is it is not what you plant but what you grow. Each week we move forward in the planting season weather becomes more important.
Due to weather’s unpredictability I propose using this slide in corn prices last Thursday as a longer term buying opportunity. A conservative way to enter into a longer term bullish position in my view is to enter into a futures spread. I therefore propose buying the Dec 16 futures corn contract and selling the December 17 corn futures contract as a spread. Just last Thursday (3/31/16), this spread broke 11 cents to negative 18 cents (Dec 16 under) on report day. The market has held this level as it represents a long term support level. Should this level hold I propose buying this spread at negative 17 cents, December/16 under December/ 17. I propose using a 7 cent stop loss from entry, which in cash value is around $350.00 risk, plus all commissions and fees. Should adverse weather develop over this upcoming planting and growing season, we could see this spread trade 20 cents higher in my opinion.
For those interested in grains, Walsh Trading’s Senior Grain analyst Tim Hannagan hosts a free grain webinar each Thursday at 3:00 PM central time. Tim has been ranked the #1 grain analyst in the United States per Reuters and Bloomberg for his most accurate price predictions for soybeans and corn in the years 2011 and 2012. Link for next week’s webinar is below. If you cannot attend live, a recording will be sent to your email upon signup. Or please contact me at anytime at slusk@walshtrading.com
RISK DISCLOSURE: THERE IS A SUBSTANTIAL RISK OF LOSS IN FUTURES AND OPTIONS TRADING. THIS REPORT IS A SOLICITATION FOR ENTERING A DERIVATIVES TRANSACTION AND ALL TRANSACTIONS INCLUDE A SUBSTANTIAL RISK OF LOSS. THE USE OF A STOP-LOSS ORDER MAY NOT NECESSARILY LIMIT YOUR LOSS TO THE INTENDED AMOUNT. WHILE CURRENT EVENTS, MARKET ANNOUNCEMENTS AND SEASONAL FACTORS ARE TYPICALLY BUILT INTO FUTURES PRICES, A MOVEMENT IN THE CASH MARKET WOULD NOT NECESSARILY MOVE IN TANDEM WITH THE RELATED FUTURES AND OPTIONS CONTRACTS.
