AI THINKS WE ARE GOING HIGHER. DO YOU?
WEEKLY GRAIN NEWSLETTER
Here are some not so fearless comments for www.dailymarketminute.com
The time is now? Is a question many have asked in regards to if we have made our bottom.
A week ago the talk was when is the bleeding going to stop. Now after a few days rallying the talk has turned to have we made our lows. Timing on markets can be even harder than calling the direction. Many times the timing doesn’t happen until the towel gets thrown in.
Did many throw in the towel last week, before we bounced a bit? Did the Chinese news of cancellations cause guys to raise the white flag?
The price action late in the week should remind us of why we don't want to fear sell. It reminds us of why we don’t want to make sales at multi month or yearly lows.
If you are a buyer you have an opportunity to get coverage, don’t be greedy. Remember that farmers don’t have to sell, end users need to either buy, close, or find a replacement product. It makes sense to get coverage at these levels, especially considering farmer wealth, along with the fact that every year more farmers naturally transition from being price takers to price makers.
For those of you that made grain sales. If you did it at the lows you have put yourself in a tough situation. Especially if we start to rally on some sort of weather scare. For some of you to get comfortable you might want to ask to see if wherever you made a sale at will turn the sale into a minimum price contract. For those of you that have hedge accounts consider buying calls, or waiting for a price dip to buy a call.
The bottom line is you should be prepared should that rally come. You want to be prepared ahead of the rally, don’t wait and panic after we rally. If you want to wait for the rally, then try to make some money back after the fact via buying puts trying to make money on the downside.
My preference is for those that made good sales earlier to now buy calls ahead of the May USDA report and ahead of the KC wheat tour. For those that sold lately and are under water already it becomes a personal choice that is difficult. You can spend a little money owning calls now, which gives you the risk that you fall below breakeven. Or you wait for a rally and then you try to pick a top or stair step into buying puts which will help you eventually get the top.
If you have questions on which strategy might work best for you please feel free to give me a call at (605) 295-3100
We mentioned above about the timing of markets. Vince Irlbeck from the Facebook group commodity technical trading room has agreed to do some short audio’s with timing.
Here are the first couple. Here is a cattle audio.
Here one with some dates to watch for July corn.
Make sure you go and join Vince’s Facebook group here. He puts out various charts on various commodities. He has done a good job in calling market direction and timing as well as helping educate farmers in technical trading.
Short Selling
Everyone in the grain market has known that the funds have been short a massive amount of wheat for some time. But in the past couple of days stories have been out where JP Morgan has made a prediction that a ban may take place on “short selling” because of what has happened to the banks. This ban wouldn’t be for commodities nor grains, but for stocks in an attempt to not blow the fear up and to kept shorts from manipulating markets.
First off it seems like they could use this in grains, as the funds shorting wheat is a little manipulative. Just look at the fund shorts versus open interest in CBOT wheat. I mentioned in my audio comments earlier in the week that it didn’t appear that our rally in wheat was from short covering, because otherwise we should have seen CBOT wheat leading KC wheat, but the price action was the opposite.
I think our wheat rally is the market realizing just how bad of a winter wheat crop we have.
The other observation in regards to a possible ban in short selling is what it will do to markets. If you take away shorts, you are left with just buyers and those that already own. So does putting a ban on short selling simply lead to market manipulation by others? And is that market manipulation an upward risk on baias? Does that lead to price support to grains and commodities?
Bottom Line Is We Remain Very Bullish
We have had zero phone calls from any farmers telling us about the perfect conditions that they have. While we get numerous calls/emails/texts daily reporting how dry it is and how much of the land just hasn’t got much of a recharge for the subsoil.
We believe we will get a weather scare and the weather advisors we follow continue to talk about how fast we have switched from La Niña to El Niño with the negative PDO
According to NCEI's Global Annual Temperature Outlook, it's near certain (>99.0% chance) that 2023 will rank among the 10 warmest years on record, with a 96% chance this year will rank among the top-five warmest….
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INCLUDED IN THIS WEEK’S EDITION
AI’s price targets for corn, beans, and wheat. Hint: it’s bullish.
Reasons why AI is bullish grains.
When will we make our highs? Comparing history.
Inputs - Diesel & Hedging
Soil moisture drought situation
Canola seasonals
What is the big picture for the grains?
Why the funds being short is bullish
How similar is this year to 2012?
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A Few Past Updates
5/5/23 - Audio
If This Was Short Covering, Why Didn’t Chicago Lead Us Higher?
5/4/23 - Market Update
Grains Rally Off Lows
5/3/23 - Audio
Wheat Prices Catch Fire
5/2/23 - Market Update
Grains Fade Off Highs
4/30/23 - Audio
Why We Will Be Thanking The Market For Lower Prices
4/27/23 - Audio
Will Markets Reverse Second You Throw In Towel?
Thanks for reading
If you have any questions don’t hesitate to give us a call at (605) 295-3100 anytime