Tuesday Morning in Grain and Oilseeds 6/19- Cotton joins the meldown

Good morning friends

The carnage continues at the CBOT after President Trump announced plans are in the works for a tariff plan to hit back at China with tariffs on a list of another 200 billion dollars of import tariffs.  Every market on my screen with the exception of the dollar and copper (oddly) are red.  Stock markets over in China are off 5% while the US equity indexes are off 1% this morning.  Cotton is now fully on board the selloff train as December trades 4 cents lower, now below 84 cents.  Cotton has a monster long position, and as we have seen in corn, fundamentals don’t really matter in this environment. I suspect cotton will continue this selloff in the short term.  Soybeans made a new low last night, now trading at almost decade lows as we sit just above 9 dollars on November.  Front month July trades 883, the low we saw in 2015, sits just below 850.  Corn is below 350 July and 370 December, I can’t believe I’m saying this but a July 330 price point is probably in the cards by the end of the week.  Wheat markets are just starting to tip over, they probably have the most to fall in my opinion, considering the weak US fundamentals with delivery starting in 10 days.  That’s the important thing to remember, delivery in two weeks should show some demand as spec selling slows.  I would like to think the lows are at hand, but I would have probably said that last Friday as prices ripped higher on the open.  Corn is down 20 cents from mid-morning on Friday.

Crop conditions came out last night, they were pathetic for cotton as we saw conditions fall 4% in the G/E category and go up 5% in the P/VP category.  That big chunk of cotton listed as fair in the initial reports is getting worse. Soybean ratings fell 1% but sit at a very quality level near 73%.  Spring wheat conditions are fantastic as well as we saw an 8% jump in the overnight. Conditions in cotton are as bad as they are good in the corn and bean markets.

I am very jammed up this morning as you can imagine, I wish I could talk about the other factors moving the trade but as of right now they simply don’t matter. Normal US and world grain fundamentals are nearly worthless as US trade war rhetoric is ramping up against the world’s largest agricultural importer in China. The losers in all of this so far are the US producers and the Chinese consumers.  Trade war headlines are the market moving force right now, even though in a market like corn really have little factor.  Below are some monthly continuous charts so you can get some reference of how far we have fallen relative to historical lows. IN the case of wheat and cotton, we are closer to the top of the mountain than the middle, in the case of corn we have a little more to go before hitting historical support near 330.  For beans, it feels like we are there given the last time we traded a front month contract in the 8’s, soymeal was trading in the 280’s.  It trades 330 this morning, which gives bulls hope.










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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:

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