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Transcript for: Daily Market Update – Grain Futures – 10/20/2017

Hello traders, I am Stephen Davis, senior market strategist, RJO Futures. Friday morning here to talk to you about the grain markets.


Corn Market

Okay we’ll start with the corn market. The bulk of this corn harvest lies ahead here, we’re about 26% finished on the harvest, a little behind schedule. Last weekend for example we had a deluge of rain in in northern Illinois here. I live 20 miles southwest in a beautiful suburb and my backyard was a lake last weekend! Saturday five inches of rain reported falling. We’re drying out a little bit, harvest moving along here, so remember I always say when corn harvest gets 50% complete a lot of times that’s a green light. The market will go on and try to rally here. US farmers seem to be storing corn and the soybean is the one that they’re selling off of the field going forward here. Our first chart of the day is the corn chart. You can see in very good support or a sideways market in corn waiting for something to happen. Again, I think exports are the key. We had good export sales in corn yesterday, good in wheat yesterday too, we’ll talk about that in a minute’s time. I think it’s really important, for example, that we keep selling US corn to Mexico. Very big customer down there, our neighbor to the south, and let’s just hope that this continues. We’ve got a lot of corn to sell and we need to sell it to everyone in the world.


Soybean Market

The soybean market. I think the key in the soybean market here is soybean meal, and what I’m looking for is a contango in soybean meal. You don’t really see that right now. Contango is where the front months are higher than the back months. Typically in commodities you get backwardation where the front months and then the backward months are higher because it costs to carry and insurance and things like that. So I’ll be talking about this in the weeks ahead. Our chart today is of soybean meal, you can see last week’s report, the big push higher in soybean meal. If we can get back to those levels, I think the demand story is here and you’ll see higher soybean meal prices and higher soybean prices. It’s the time of year now where we start focusing on Brazil, and where they’re at. Mana Grosso is about eight percent planted over there in soybean, the big soybean producing area region of Brazil. So they’re a little bit behind but it’s not to worry here, it’s a little bit early to start worrying about that. Export sales, again, key in soybeans. We had two announcements this week from USDA, China buying US soybeans. China are savvy traders, they buy soybeans when they’re cheap, so let’s see if this is right going forward here.


Wheat Market

Okay the wheat market. Kansas. Remember a couple weeks ago I mentioned Kansas farmers used to grow wheat to sell to Russia and that part of the world? Now Russia is the lowest wheat producer in the world today. So Kansas really off to a slow start here in winter wheat sowing. I don’t know if it means something, or what’s going to go on here. Typically Kansas grows 25% of our hard red winter wheat, which is made for bread. Strong demand there, and you know these low prices in wheat. You can see our next chart of wheat down here in very good support. Similar to corn. And the Kansas farmer is a little slow planting wheat, there’s not a lot of encouragement here with the price discovery of wheat getting these Kansas farmers to plant. So perhaps a lot of these wheat acres will be grazing of cattle. We do have a lot of cattle in our great country.


So that’s it, we’ll go into next week. Harvest is important here, we’ve got to get this finished, and this demand story is important as well.

Everybody have an excellent weekend!

Stephen Davis

Stephen E. Davis is a 25-year+ veteran of the markets, who has been a retail broker with RJO Futures since 1998. He is a graduate of the University of St. Thomas in Minnesota and started as a runner at the Mid America Commodity Exchange in 1981. Davis' past experience involved working with firms Stotler Grain, O'Connor Grain, Dean Witter, R.J. O'Brien and Rosenthal Collins. His trading floor experience in agriculture and financial markets is the foundation of his brokerage approach. Throughout his career, he has worked with clients ranging from retail clients to some very large institutional clients. "My focus is on price and my philosophy is that chart patterns will show you where the big money is made," he says. In his time as a broker, he has seen an evolution of the trading process. "As all of these markets move from the trading floor to the computer screen, we are all like locals on the trading floor-and we do not have to pay millions of dollars for our memberships." His advisory experience includes CQG, Moore Research, Dennis Gartman (The Gartman Letter), The Hightower Report, Financial Times and the Wall Street Journal.