Play Turner’s Take Podcast Episode 204

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In the first part of the podcast we talk about the US and macro markets.  S&P 500 corporate earnings have been better than expected but the recent slow down in retail has the market concerned about growth over the next six to twelve months. The Fed has confirmed the US economy is expanding but the recent weak manufacturing data means we could have a slowdown right around the corner.  One the bright side the US and China are reportedly working on Phase One of the trade deal.

We then switch over the corn, soybeans, hogs, cattle and sugar.  We think corn can go higher but will most likely be range bound until the Nov 8 WASDE report.  We see spot corn trading between $3.80 and $4.05.  We are bullish soybeans and we think they can trade another leg higher when Phase One is finalized AND we think yields are coming down another 1 or 2 bpa.  Make sure you listen to Turner’s Take podcast for more details.

Grains & Oilseeds

We think the market is trading a 166 corn yield with the added potential China might buy US corn if a trade deal is reached.   Basis has been very strong for corn.  The national average basis was up 4 cents from last week and is now just 1 to 2 cents under Dec.  That is at least 20 cents better than the average during harvest for the past few years.  Soybean basis is also very strong.  The national average soybean basis was also up about 4 cents last week to 28 under.  That is 11 cents better than the historical average for this time of year.  As long as the market thinks we are 165 yield or higher, Dec corn will struggle to trade over $4.00 for any length of time.

We think there is value in the soybean market.  Yields are likely to come down 1 to 2 bpa.  The US and China are more likely to get Phase One of a trade deal done as opposed to one giant comprehensive agreement.  A trade deal could add 50mm bushel of soybeans to our export demand for new crop.  When you combine the potential yield loss with added export business and soybeans could have a sub 300 carryout by the Jan WASDE.  From my perspective that means there is the possibility soybeans could be over $10 across the board.

Livestock

I think Feb Hogs have the potential to trade in the high 80s or low 90s if we get a trade deal with China.  China consumes 50mm tons of pork a year.  They lost 40% of their production due to ASF.  That is 20 million tons. The US only produces 25mm tons a year.  If China were to just try to buy a small portion of their losses from the US, say 1 million tons, it would clear out our cold storage and excess production capacity.  Lean Hog futures can get very volatile and the options are expensive. I like buying call spread in Feb and selling put spreads to finance.

 

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Craig Turner – Commodity Futures Broker

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