Play Turner’s Take Podcast Episode 163

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China Buying US Soybeans

China bought 1mm mt of soybeans this morning and the market is expecting at least another 1mm mt before the weekend.  2mm mt is just under 80mm bushels.  Assuming this is all in old crop sales, carryout goes from 950 to 870.  There is talk China will eventually buy 5mm mt or just under 200mm bushels. If true and it is all in old crop then ending stocks are about 750.  That is still a large carryout and argues for front month bean prices in the high $8s.  I have heard rumors of a possibility of China buying 8mm mt and also allowing private Chinese companies to by 2mm mt tariffs free.  10mm mt total is almost 400mm bushels. I doubt all of that would be in old crop.  If you think 300mm in old crop and 100mm in new crop, then old crop carryout is 650mm bushels.  At that point $9 soybeans sounds about right.

Farmers should be selling this rally or buying puts.  Speculators should look to sell the rallies after large sales announcements. The balance sheet is improving but global stocks will stay the same.  The South American crop is large and weather has been good.  Once the bullishness of the China trade deal wears off and priced in, I find it hard to get bullish soybeans.  If you look at the chart below the old support line (before soybean tariffs) is now the new resistance line.

NOVEMBER 19 SOYBEANS

Wheat  Breaks Out Higher

SRW Wheat (Chicago) is breaking out higher on the charts.  Cash prices are rising in Russia on the global export market.  If China buys some wheat from the US we can go even higher.  Below is a report on Paris wheat trading at 8 week highs too.  We have been waiting for global stocks to get tight, especially for high quality wheat. It looks like we are finally here and the US should continue to be competitive on the global export market.

REUTERS | Paris Wheat Hits 8-Week High, Spurred By Rising Russian Prices

MARCH 19 SRW WHEAT

Corn Testing A Major Resistance Level

Corn is testing a major resistance level at $3.88.  Ending stocks are projected to be around 1.8 billion.  There are some rumors going around China may buy 5mm mt of corn from the US as a result of the new trade deal. That is just under 200mm bushels.  If that happens in old crop it brings ending stocks to 1.6 billion. That will take March corn over $3.88 and into the $4s.  If not then I think this resistance level holds for the time being.  I still like short straddles in corn and playing the ranges.  Farmers should start looking to price new crop above $4.05 and have some orders to sell at $4.15 and $4.25 incase we get a spike due to the Chinese trade deal.

CONTINUOS CORN

Crude Oil Range Bound

We feel crude oil will be range bound and spend a majority of it’s time between $50 and $60.  The bears will point to a slowing US and global economy, but we are not in recession, just slower growth.  The bulls will point to OPEC cutting production, but it will only be enough to stabilize prices until global growth picks up.  We are going to trade crude as a range bound market.  Buy support, sell resistance, sell option spreads at the edge of the ranges, and if we are around the middle of the range we might right straddles.

CONTINUOS CRUDE OIL

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