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Whats next after yesterdays report


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Commentary

It was Groundhog Day for the grains again today because of a USDA crop report due, and you could obviously expect some bearish data. Thats what occurred, as not only was the acreage data bearish for corn, so was yield. On the other side of the spectrum, acreage data was bullish for beans with the yield slightly negative.

The big question on everybodys mind is, how could the FSA release an 11.2 million preventive plant and total corn acreage still come in at 90 million acres? This is 2 million acres above the average guess. When you look at total preventive acreage losses between beans and corn and wheat, you do get a combined loss of acreage from last year of 14 million acres.

What this means is, at the end of May/early June when corn was trading at 4.50, farmers everywhere were scrapping the thoughts of planting beans because of the ongoing trade dispute, and pushed to get corn in on areas where they could plant. We probably had intentions of 100 million acres of corn to be planted, while farmers were abandoning the thought of beans. This is how the USDA can justify a 90 million planted acreage for corn. Farmers were going to go whole hog on corn, as everybody was already thinking producers were going to do for 2020/21. Dont forget, the early intentions for beans in the spring were for acreage of 84.5 million acres. Soybean acreage has dropped 8 million acres just from that time window.

The USDA will make adjustments to the acreage in the September and October reports, but nothing monumental at this time would be expected. What will be watched now is the yields on corn and soybeans, since August whether it has not been conducive for a good crop and yields on todays report were based off a farmer surveys and satellite imagery. Next month will reflect test plots. So, corn yields could be scaled back to the 165-166 range with bean yields dropping to 46-47 Bu/acre. Then, of course, there will still be the conversation of the growing season being long enough to produce these yield potentials.

We re-established our option portion of new crop hedges on Friday by purchasing the September short dated new crop $430 corn put for 18.4 cents and the September soybean new crop $9.00 bean put for $0.21. This gives us a short December corn from a net $4.30 on the board and short in November beans from a net $9.00 on the board with only our profits from the summer strategy invested. Our total hedge on new crop corn is at 65% and 50% on soybeans, as listed in the hedge section at the bottom of the newsletter.

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Corn

Corn barely attained the standard 38% retracement, that bear markets typically do before breaking to a new low, and on cue, it started breaking lower Friday right into the report before the negative data was released. The fact that corn was drifting during the day session into the11 o'clock report, you can almost smell a rat that somebody new this thing was not good.

Now for the bad news as far as what the chart says. Since we are in five waves down from the high made on June 17, this move measures down to 373-375, which is just below the weekly continuation chart support in the 380 range. This is where you would look for stability to come in to the market, as it looks into the future to re-assess if yield data is coming off or if there is a fear of an early end of the growing season.

Support is at 380 and then major support 373-375 resistance at 405-408

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Beans

Soybeans had a friendly report yesterdayand the corn-bean ratio is back to 2.24, a more normal ratio when we don't have such fears of corn supplies versus soybean supplies. Now there is an awakening that soybeans have a carry out at 755 million, still bountiful, but a bad finish of the crop in August, could drop that number considerably by another 200 million bushels.

It's possible that as corn works its way down to major support, soybeans could get drug back down to the 860-870 range, where support should be solid if weather does not become conducive to better yields. Now soybeans have become the friendly play, and corn the negative play.

Support 870-875, resistance 900.

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Wheat

In the grand scheme of things, the wheat number was irrelevant from the USDA. with corn limit down, traders ran to the wheat market to sell to cover losses on the market they could not get out of. This helped shove wheat to a new low for August, which is the same thing corn did on the bearish crop report news.

Wheat broke to new lows and will be the victim of the corn albatross dragging it lower. The 60-day cycle is due September 3, so at this time we can think it's a low setting up and probably near the .786 Fibonacci retracement value of 448-450. World wheat values also moved lower today on the USDA crop report,as world corn stocks were elevated substantially, as referenced in the commentary section in the various tables.

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Cattle

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2019 Hedge Recommendations

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Corn

Sold 25% Bought the Sept 4.30 short-dated corn puts for 18.4 cents.

Sold 25% of 2018 corn stocks at 429.2, with 50% having been sold at a 409 average. Total sales are now 75%.

Sold 25% new crop 2019 on December corn at 4.47. Total sales are at 40%.

Sold 15% of 2019 corn crop at 3.96 Dec corn.

New crop 2019 corn sales to 65% by purchasing the September 460 short-dated corn put on 25% production for 30 cents.Covered at 50 for a $0.20 gain.

Wheat

New crop sales on Minneapolis wheat were started at 571 September or 581 December for 20%.

Beans

Sold 25% bought the Sept short-dated 880 bean puts for 21 cents.

Sold 25% of 2019 production at 910 on the November contract. Total sales at 25%

New crop 2019 bean sales to 50% with the purchase of the 940 September short-dated bean puts on 25% production for $0.45.Covered at 65 for a $0.20 gain.

Old crop 2018 bean sales were completed at 920 average this spring, and we added 1.14 gains from our put options in the summer of 2018 along with the 2018 market facilitation payment of $0.83 a bushel. That put our total sales value at above 11.00 on 2018production.


NOTE: All trades will be entered in the electronic markets unless otherwise noted. Hedge recommendations and Trade recommendations are totally separate, and may sometimes conflict with one another. It is strongly suggested that Spec trades and Hedge trades be done in separate accounts.

A word to the Wise

This material has been prepared by a sales or trading employee or agent o Heartland Investor Capital and is, or is in the nature of, a solicitation. This material is not a research report prepared by Heartland Investor Capital Research Department. By accepting this communication, you agree that you are an experienced user of the futures markets, capable of making independent trading decisions, and agree that you are not, and will not, rely solely on this communication in making trading decisions.

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The risk of loss in trading futures and/or options is substantial and each investor and/or trader

must consider whether this is a suitable investment. Past performance, whether actual or

indicated by simulated historical tests of strategies, is not indicative of future results. Trading

advice is based on information taken from trades and statistical services and other sources that Heartland Investor Capital believes are reliable. We do not guarantee that such information is accurate or complete and it should not be relied upon as such. Trading advice reflects our good faith judgment at a specific time and is subject to change without notice. There is no guarantee that the advice we give will result in profitable trades.

Newsletter provided by Heartland Investor Capital Management, Inc. a registered CTA with the NFA, of which Eugene Graner is principal. This entity is a separate legal entity from the Introducing Broker Heartland Investor Services.

Copyright 2018 Heartland Investor Capital Management All rights reserved



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About the author


Eugene Graner is the founder and President of Heartland Investor Capital Management Inc. As a veteran commodity analyst, broker, and CTA that eats, sleeps, and breathes commodity futures, his priority is to bring clients the latest and most useful information of the markets along with uncannily accurate futures predictions. By balancing risk and reward, Eugene uses his proprietary trading strategies to develop the best possible trading approaches for his clients. He has 28 years of experience in the industry and his voice has been heard around the United States. He is heard on multiple radio stations throughout the day, also has been featured on CNN, Bloomberg, Wall Street Journal, and The New York Times, and is the go-to guy to for multiple TV network stations for interviews about market news weekly.
 
Contributing author since 1/3/2019 

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