July 13, 2024

Short Soybeans and Corn

Yesterday’s much anticipated USDA Supply and Demand report was generally perceived by analysts as being “supportive” to Corn and “neutral” for Soybeans. The “supportive” idea was due to several of the USDA’s supply side numbers having come in lower than analysts’ average pre-report guesses (even though stocks are absolutely growing), and therefore considered…by those same analysts…to be a “bullish” factor for Corn prices…The “neutral” Soybeans number was due to those numbers being “in line” with analysts’ average guesses...

I DON’T THINK THERE WAS ANYTHING “SUPPORTIVE” ABOUT THE CORN NUMBER, NOR WOULD I CALL THE SOYBEAN NUMBER “NEUTRAL,” …AND I CONTINUE TO SEE, MORE SO THAN EVER, BOTH CORN AND SOYBEANS ACCELERATING HARD ON THE DOWNSIDE FROM HERE.

The fact is,  the “bullish” Corn number resulted in an essentially insignificant 2 cent higher close…And the “neutral” Soybean number resulted in NEW LOWS and 12 cent lower close…with this “supportive/neutral” characterization being evidence that ag analysts are still clinging to the same bullish slant they have maintained for over two bearish years now, and that furthermore, with all their talk still being about, “next support at ____,” IT SUGGESTS TO ME THAT WE STILL HAVE A LONG, LONG WAY TO GO ON THE DOWNSIDE.

You can book it; when we DO get down to the lows in both markets? Instead of talk referencing, “next support,” you’ll start hearing, from all those same former bulls, loud predictions like, “They’re going DOWN to $______! Get your bins sold NOW.” And again, that is NOT even close to the being the case yet. I think it’s coming, and maybe not too far in the future…but pricewise? I still see Soybeans maybe hitting $9.00 and Corn at $3.00.

I would offer that no matter how “supportive” yesterday’s numbers supposedly were, both tomorrow, and next week, and really, for the next few months, THE overriding factor in both markets’ prices will continue to be that FARMERS ARE STILL SITTING ON MASSIVE CORN AND SOYBEAN STOCKS…THE MAJORITY OF WHICH, MEANING BILLIONS OF BUSHELS, WILL PRETTY MUCH HAVE TO BE SOLD IN THE COMING MONTHS…

I know I keep repeating this, but I know there are 1000’s of farmers out there, who, with analysts’ unwavering predictions of “bull market rally coming,” stored their crops in record quantities (instead of selling at harvest) and now they are ALL watching money steadily evaporate out of their Corn and Soybean bins…And just telling it like it is: They are all in a trade gone bad…and at some point they have to sell…and with prices heading lower and lower…I can assure you that, every day, and every week…for the next few months…there are going to be more and more of them selling…and selling…and selling...while UNWORRIED buyers just sit back and wait…So, one more time…WHAT YOU HAVE IS TONS OF SELLING…AND A VACUUM OF BUYING…and THAT IS HOW YOU OFTEN GET PRICES GOING STRAIGHT, STRAIGHT DOWN AT THIS TIME OF YEAR…QUITE OFTEN, AS I HAVE REPEATEDLY  DOCUMENTED HERE IN 50 YEAR STUDIES, RESULTING IN 20-30%, ONE TO TWO MONTH NOSEDIVES.

And specifically…I think the charts, analysts’ still leaning bullish, the weather, and all those Soybeans that have to be sold absolutely presents an extremely interesting set up/situation in the August Soybean contract shown here.

I think it is entirely possible…because I have seen it before…that August will make its CONTRACT LOW during the last few days before it goes off the board.

In fact…Here is an recent example of exactly what I’m talking about…and I assure you this not, as noted below, a random occurrence. I could dig up 100’s of commodity contracts that were “surprisingly” TOTALLY obliterated during their last months or weeks of trading.

JULY 2018 SOYBEANS – A PERFECT EXAMPLE OF WHAT I THINK CAN HAPPEN NOW…

These two charts…and the situation…are quite similar to the current set up in August (and September) Soybeans…

Both the current August and September Soybean contracts are going to trade together, but I suspect that the August (which directly represents the cash market today) will be where all that Old Crop selling has the greatest DIRECT impact…meaning that the August contract could get hit a LOT harder than the September. For this reason, I am continuing to maintain positions in August (and September), and because they are so cheap, and have so much leverage I think, I am still owning and buying puts there…even though the options themselves only have 2 weeks left to trade…

This is NOT a primary position trade…It is something that might be used as a small, but highly leveraged, addition to deep in-the-money August and September puts we already own, or as an add on to new positions in the Sept contract…

And just to be clear, this option has a VERY short time to trade…but again, if it does get in-the-money, it can be exercised into a futures contract.

Otherwise, from a more pragmatic standpoint, I CONTINUE TO RECOMMEND BUYING PUTS IN THE SEPTEMBER CONTRACT…WHICH WILL, I STILL BELIEVE, GET DOWN TO THE $9.00 AREA.

I know that there are some of you guys out there, still just watching these two bear market declines happen, who CAN “read a chart.” And if you can see the Sept contract below as anything other than pointed sharply lower (and yeah, that does NOT mean it has to do that), I’d love for you to call and give me a different interpretation. Otherwise, if you DO see it the way I do, I urge you to DO something with it. REALLY. N-O-W.

With Corn and Beans both getting whacked during the past month…and especially with Soybeans down about 60 cents this week…into new lows…my feeling is that farmer selling is literally seriously increasing on a daily basis…For this reason, I have no idea where these markets will open Sunday night and Monday morning, but I can easily imagine it as being somewhat lower…and if this is the reality…both of the options I’ve recommended will probably be more expensive than quoted on the charts.

Call me if you want to talk about any of this…And I am STILL Shorting Corn…and the Cattle Complex.

Thanks,

Bill

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866-578-1001

All option prices in this newsletter include all fees and commissions. All charts, unless otherwise noted, are by Aspen Graphics and CRB.

The author of this piece currently trades for his own account and has a financial interest in the following derivative products mentioned within: Soybeans, Corn, Cattle