Wheat/Corn
Tomorrow at 11 am the USDA will release its prospective plantings and quarterly stocks estimate for it annual end of quarter report. Pre-report planting average trade guesses come in as follows for wheat. All wheat acres at 46.5 million vs 46 last year. Winter wheat 32.5, durum 2.3, spring wheat 11.5. Average est. for all wheat stocks as of 3/1/18 is 1.493 billion bushels compared to 1.65 billion last year. For corn, the average trade guess has US corn acres at 89.5 million bushels compared to 90.2 last year. Avg guess for on farm stocks comes in at 8.7 billion bushels as of March 1st 2018 compared to 8.62 billion last year. The average trade guess in the last two years had the trade looking for a more aggressive cut in corn acres, only to be disappointed by the USDA as their acreage numbers versus expectations were bearish for prices. I keep hearing on how every one wants to own corn and perhaps the buying will resume following tomorrows report. Yes, there are reasons to be long, increased Chinese demand and lower production on Brazilian and Argentinean corn crops this growing season. The managed money trade though is long over 200 K contracts. In my view the market here needs to work higher soon or suffer setbacks prior to US planting and growing season. It is my belief that the reasons to be bullish corn since the January 12th crop report have become somewhat of a known. At the same time, wheat like corn has suffered pullbacks. Drought like weather in the western belt took the KC and Chicago contracts up , and by mid-March the lack of demand among other reasons yanked KC and Chicago down over 70 cents. With Kc wheat still in the ground and weather in April continued dry according to WX Risk the AG weather site, while Minneapolis (spring wheat) still needs to be planted, there maybe a trade here among uncertainty. Its little more risk here than I would consider and perhaps you should wait until tomorrows report to take a shot. Call or email me with questions. 888 391 7894 or slusk@walshtrading.com
Trade Ideas:
Buy KC wheat and sell Chicago Corn basis July: Buy at 95 cents Kc wheat over corn. Risk 9 cents from entry with an objective to 1.20 over.
Buy July Minneapolis wheat sell July Chicago corn . Bid 2.10 wheat over, with a stop at 1.99, risking 11 cents. Objective at 2.50 over.
Buy Chicago wheat and sell Chicago Corn basis May. This trade is at major point at 72 cents wheat over. It needs to hold here. Buy at 71 with a stop at 65 risking 6 cents.
You can use options here if need be which maybe the safer play. Stops on futures spreads need to be wide on the Kc and Minneapolis.
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