RJO FuturesCast

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Transcript for: Daily Market Update – Grain Futures – 11/3/2017


I am Steven Davis senior market strategist RJO Futures. Friday morning here to talk to you about the grain markets.


Corn Market

Our first chart today, a daily chart of corn, you can see we’re in a sideways pattern here. And I think the most bullish thing you can say about corn is that the managed funds are short a lot of contracts of corn. So if we can’t take out this lower support level we’re going to have a short covering rally and I think that’s what’s going to happen. Okay we talked about China and their ethanol policy. There’s all this corn in the world and a lot of this corn is over in China. And its older corn, rotting corn, the quality is not that good. So why not open up ethanol plants in China and use a lot of this corn? Just like we do in USA. Sooner or later, China’s going to have to buy US corn to feed these ethanol plants. They have 22 percent of the world population, and only six percent of the water there. So for China to grow all this corn that it’s going to use and need in the months and years ahead, they’re going to have to buy US corn sometime. That’s a good story, we’re going to keep talking about it.  This ethanol cleans up the smog in Shanghai, and it’s good, and it’s going to continue.


Soybean Market

Our next chart of soybeans, you can see a daily chart of soybeans. It’s trending higher, different than the sideways that you have on the corn chart. Now it’s a little disappointing, yesterday I would have big move up in soybeans. We didn’t take out yesterday’s high here today, but it is November now people, and this is a bullish time of the year as we move into the end of the year November and December. I have some seasonal trades in soybeans later in the month that I do every year, call me we can talk about that. It’s just the wrong time of the year to be short. I think it’s the wrong time of year to be short both soybeans and corn. Demand is record large for soy, so we’re on the lookout here. Any production snafus, production in the world soy countries, South America, North America, we’re going to be on the lookout and soy is going to trade higher on this. There’s a 65% chance of La Nina this year, and what that correlates is perhaps hot and dry here in South America in a few months when all these soybeans get ready to pollinate. So markets will be ready for that.


Wheat Market

Okay the next wheat chart here you can see sideways. Hard red winter wheat is 85% planted, the markets saying don’t plant anymore. I mean wheat is really really low, perhaps low prices can stir some demand, and we need to see that. So we’ll see about that. Again, be careful being short wheat here, there’s probably some 20 cent upside but maybe that’s it.


Wrapping this up, the CRB markets are trending higher here led by crude oil, led by cattle, led by lumber, and led by the metals. And the Bloomberg commodity index for the top five are the  metals, aluminum, lead, copper, and zinc. This is good for GDP. GDP growth here in America three percent. When the middle classes of the world, when they get this disposable income, the first thing that changes is their diet. They buy meat which is corn and soybean meal sensitive. Good story here for our grain markets going forward. 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.