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 – 6/9/2017

Traders – I am Stephen Davis, Senior Market Strategist, RJO Futures. Its Friday here and it’s time to talk to you about the grain markets. Okay, hot and dry is in the forecast here. So, Monday, we’re going to be maybe 95 degrees here in northern Illinois, so we’ll see how the market responds to that. We’ve got a year report here at 11:00 a.m., Central Standard Time, two hours from now. This is supposed to be a supportive report for soybeans. We’ll see about that.


More than this report, I think here’s the four things that are really, really important here in the short-term:


          Number one is weather.

          Number two is the breakout in the corn market.

          Number three is the short covering to the degree to what this is going to continue.

          Then, number four is the end-user. How does he step up his purchases of the grain market?


One of the million dollar questions is how the end-user does respond. There’s a lot of grain in the world and if the weather or whatever can do something to change the end-user’s perception of purchasing this grain, that’s going to impact price discovery, so we’ll see about all of this.


July Corn Chart


Our first chart today is July corn. You can see the breakout to the upside, so here we are. This is the first time that the managed funds have been short corn, soybeans and wheat going into the growing season, so that’s a lot of risk to take on. Markets are really good at punishing the participants, so maybe there is one more push higher next week, on this hot and dry forecast. Okay, the soybean market. We’ve got export announcements today from the USDA to unknown destinations. Typically, this is China many times, but this is good news and you want to see this news on a daily basis.


Nebraska, Illinois, Iowa and Minnesota, they do 54% of corn production and they’re only 42% of soybean production. You can see soybeans a little more geographically diverse here. But it seems like some of these major states are in very good shape getting the acres in, so we’ll see how we go and some good heat here. It’s been wet and could dry things out. It’s supposed to rain later next week, so maybe that’s the key here in the forecast. We get this hot, hot weather here early in the week and then rain later in the week.


Tidbits on Grain Production


Mexico’s Beef and Hog Processing Plant

Here’s just some tidbits on grain production. Mexico’s building the biggest beef and hog processing plant in the world today. The demand there continues. These are big corn and soybean meal-sensitive.


Iowa’s Hog Plants

In Iowa, they’re building hog plants that are going to consume a lot of corn and a lot of soybean meal. This demand story keeps on going, and I think something that’s important to mention … I’ve been wanting to say this for a few weeks … is I think the lows in soybeans are going to be put in early this year.


Estimating Harvest Lows in Soybeans for 2017


Typically, harvest lows in soybeans come in September-October, during the harvest period. The demand for protein, demand for soybeans is very, very good here and I think markets are forward-looking mechanism. You’re going to see harvest lows early in the soybeans here as we get through the production. I’ll be talking more about that in the weeks ahead. So, here we go. It’s hot and dry early next week. We’ll see how this market responds.


Daily Chart of Soybean

Our second chart is a daily chart of soybean. Maybe yesterday’s high is key here in the short-term, if we can take that out.


Daily Chart of Wheat

Then, the third chart today is daily chart of wheat. Same kind of chart that the soybean looks like. If we could take out yesterday’s high, they’ll be some more short covering and we could trade higher yet.


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.