RJO FuturesCast

Daily Futures Market News, Commentary, & Insight

Feel free to contact Stephen here to leave a question or comment on his video.


Transcript for: Daily Market Update – Grain Futures – 10/27/2017

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


Corn Market

Okay we’re winding down harvest here and it’s going to be November next week, so we’ve got to get going on this. Harvest a little bit delayed here, but nonetheless with the equipment and what they’re working with the US farmer can get this wrapped up very very soon. Our first chart today is corn, and I’m just wondering if we’re not getting into a little bit of complacency here in the corn market. Soon our harvest is going to be over with, and demand is very strong, so we’ll see if prices don’t try to rally here. I saw a headline last night, “China’s Ethanol Program” and this just makes sense. This ethanol that we create from our US corn to clean up the smog in the world cities. Mexico City, Shanghai in China, and China when you talk about corn reserves, and there’s a lot of corn here in USA we had a very good crop, China’s got record corn supplies as well. This is a good story, this ethanol demand for US corn, and whether you agree with it or disagree with it, and Big Oil is certainly against it, this could be a driving factor for corn. Our E10 that we use in our gasoline pumps in our country, if we were to go to E15, and we don’t have the infrastructure to do that right now, that would be a boom for corn prices and you’d see higher prices. So this demand story is good. Yesterday, corn exports very very good, so we’ll see. The demand’s good, I think we’re going to trade a little bit higher here as we move into the end of the year. We’ll see about that.


Soybean Market

Now here’s the market that’s really got the get up and go to rally. Our next chart is soybean, you can see it’s trending higher. A little bit disappointing this week in the short term, we’re kind of coming back down here a little bit and I’m a little bit concerned in the short term. But I think longer-term this is really good. We move in to the months of November and December, strong proximity for soybeans to rally. I was reading here on China’s soybean imports, we’re going to get about 40 percent here the rest of the year and into the quarters ahead. And that’s 75 million bushels of US soybeans. Well what if it’s a hundred million bushels of US soybean? And this is from China alone, what about the rest of the world? What if Portugal, Spain, Canada, Mexico, Australia, South Korea, come in and buy gigantic amounts of US soybean? This is going to be positive for the price of soy, so we’re going to keep talking about that. Now, a La Nina is something that can catapult soybean prices higher. Let’s talk about La Nina briefly. In 2012 we had the biggest drought in 50 years. Now last year, 2016, La Nina didn’t materialize and they’re saying this year we’ve got about a 60% chance of La Nina. So let’s be on the lookout for this. La Nina, the temperatures of the world, what I always say it’s easy to predict the weather here in the short term, longer term the predictability of weather is unpredictability of forecasting. But this La Nina nonetheless. And back in 2012, there was a coffee fungus in Colombia that stagnated coffee production from that big coffee producing country. So we’re going to talk about La Nina here in the weeks ahead a little bit more.


Wheat Market

Lastly wheat here. A chart, same chart like corn, we’re in very good support. Wheat is cheap, there’s a lot of wheat in the world, so we’ll just see if corn and soybeans don’t rally and that makes wheat rally a little bit.


Okay, crude oil, wrapping this up, crude oil is above 53 dollars and there’s all this crude oil in the world. Why is that? So I think soybeans, there are a lot of soybeans in the world, but look for them just to trade higher here too in the weeks ahead. 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.