January 23, 2020
I continue to strongly recommend buying Corn, Cotton, Soybeans and Wheat.
I may be dead wrong but I firmly believe all 4 of these markets have put in major bottoms during the past 12 months…and that in an atmosphere where I can basically find zero analysts, farmers, or speculators who see any real upside potential for any of these markets (I know there must be some bulls out there but I haven’t seen or heard them), my old hack experience suggests that we are finally there…that after 5-6 years of going nowhere at borderline (at best) cost-of-production prices…with, in my opinion, virtually NOBODY bullish, and record world demand in any number of commodities…I believe we are about to see true EXTENDED bull moves in all four of these markets…and in reality, several of those moves are ALREADY underway.
No…they won’t all make identically sized moves, or necessarily at the same time…but I believe they are ALL going to go…this year…from here. In fact, since September, Cotton is up 12 cents a pound and Wheat $1.00 a bushel, and I think they both just getting started…with Corn and Soybeans ready to go right behind, with, or ahead of them.
As I’ve written for some time now, I considered last year’s highly popular forecasts of an oncoming recession as being totally absurd…and that virtually all of the various capital and commodity markets had long since accounted for the detrimental effects of Trump’s trade war…with the end result being that I looked for 2020 to be nothing but an UP economic year…for the World and USA…And I still believe, more than ever, that this will be the case…And with these four crops still at rock bottom (in my view) levels, plain and simple, I think they have nowhere to go but up. Talk all you want about how much China will buy, or won’t…or what the crops look like in South America…or what and how much farmers here will decide to plant…or what Trump might do…or whatever bearish/non-bullish arguments you want to present…But I am buying. As always, I might be dead wrong, which can mean losing every dollar you put on the table…but I am personally buying all four…and therefore would offer the recommendation that you do the same.
Here are the charts and some option prices.
My recommendation is to buy in units of 1 call for each of the 4 markets…Using the 4 options here, the total spent would be about $5650.
The profits and/or losses can work out in any number of ways but the essential math is that if one of the four does make what I would classify as a moderate/normal move…and the remaining three are total losers…you still could come close to breaking even…If 2 or 3 go, the result would obviously be better…And, obviously, if none of them work, then you will lose the entire $5650….The truth is, to me, the end result is all about the math…I absolutely know I can lose 100% of what I have on the table…but I also know that if we get moves in my favor that are, let’s say, beyond “moderate, ” the possibility certainly exists of get something above an “moderate” gain. Again, however, if I’m wrong…I can lose 100% of my investment.
My personal perspective here is to own these markets simply because I think they are LONG overdue bull markets…and, the whole world, as I perceive it, is fully beared up…and because of the time of the year. These crops all have YET to be made for 2020…or even planted (except Wheat)…and who ever knows what might happen with the weather…or even just weather scares?
I’d also add that, right or wrong, in my technical opinion, all four of these markets have delivered substantial evidence of having bottomed during 2019…and after having been down here for so long, I think there is no telling what we could see on the upside…No question, I could be dead wrong and 5-6 months from now they could still be here…or lower…and we’d be losing, but that is a bet I’m willing to take…with both my money…and my reputation.
Call me if you want to talk about any of this…or anything. I always love to talk to you guys out in the real world.
All option prices in this newsletter include all fees and commissions.
FUTURES TRADING IS NOT FOR EVERYONE. THE RISK OF LOSS IN TRADING CAN BE SUBSTANTIAL. THEREFORE, CAREFULLY CONSIDER WHETHER SUCH TRADING IS SUITABLE FOR YOU IN LIGHT OF YOUR FINANCIAL CONDITION. PAST PERFORMANCE IS NOT INDICATIVE OF FUTURE RESULTS. THERE IS NO GUARANTEE YOUR TRADING EXPERIENCE WILL BE SIMILAR TO PAST PERFORMANCE.
The author of this piece currently trades for his own account and has a financial interest in the following derivative products mentioned within: Corn, Cotton, Soybeans, Wheat