William Moore's market views are centered around his many relationships with Agricultural producers. His weekly newsletter, AGMASTER, provides a blend of fundamental & technical information used to make prudent hedging decisions. Contact Mr. Moore at (312) 264-4337
Since the USDA Jan 12 Crop Report, Mar Beans have gone vertical – amassing 75 cents worth of gains in just 4 trading days! They have been the beneficiary of a plethora of factors – excessive rains in Argentina, a sharply lower dollar & a friendly Jan USDA Report. Even more impressive technically has been the Mar Meal Contract – which today extended to 6 mn highs!
FACTORS IMPACTING THE MKT
- EXPORTS – Tues Inspections were 1,409,466 MMT (1.1-1.4) Thur sales Were 348,000 MT (450-800)
- USDA JAN 12 REPORT – was interpreted as a little friendly with #’s generally less than expected – albeit, still a record crop! The mkt’s 30 cent rally off The report tells us the record crop is dialed in!
PRODUCTION 4.307bb (4.374)
YIELD 52.1 b/a (52.7)
ENDING STOCKS 0.420 BB (0.468)
QTLY STOCKS 2.895 bb (2.935)
ARG SOY 57.0 mt (57.07)
BRAZIL SOY 104.00 MT (102)
GLOBAL STOCKS 82.32 MT (82.58)
- WEATHER MKT IN SOUTH AMERICA – after talk of record crops in S/A Had been bandied about, excessive rains in Argentina have caused Analysts to dial back their estimates by as much as 3-4 MMT – and this Has definitely got the mkt’s attention!
- IS THE US DOLLAR TOO HIGH – coming off 14 year highs at the first Of the year, the Mar US $ has broken 300 points – amidst talk the US Currency has finally peaked out – ideas of up to three IR increases In 2017 have softened – giving hope to the grain trade that the Dollar has finally topped out
- THE TRUMP WILDCARD – Trump was elected because Middle America Wanted a business man not a politician – to run the country – the stock mkt So far has validated with a big “thumbs up”! We feel commodities Could well follow!
- TRUMPS TOUGH TALK ON TRADE – during his campaign will not translate Into any damage to our trade with China, Mexico, etc – he wants all business To succeed & is not interested in undermining any trade deals
In very quick fashion, Mar Beans have jumped up to the top end of its two-month trading range (985-1075) – mostly on weather concerns from S/A! This action demonstrates how sensitive the Bean complex will be to ANY weather issues in either hemisphere in the next six months! And meal has been the upside leader – always a good thing for Bean rallies!
Mar Corn has clearly ridden the coattails of its sister market – Mar Beans – gaining a meager 7 cents while Mar Beans scored a 65 cent gain – since last Thur’s USDA report! Also supporting corn was a Mar Wht contract – which added to its 35 cent pre-report rally – off the USDA’s news that the WW acreage is the lowest in over 100 years!
FACTORS IMPACTING THE MKT
- EXPORTS – Tues Inspections were 888,804 MT (800-1,500) & Thur sales were 603,000 MT (450 -950)
Mon (1-9) 112,500 MT to Unk
Tues 130,000 MT to Taiwan
150,000 MT to Unk
Thur 253,000 MT to Unk
110,000 MT to Japan
Tues 102,944 MT to Unk
- JAN CROP REPORT – corn had one troublesome # – Qtly Stocks – which was Over estimates – & kept corn’s advances minimal!
PRODUCTION – 15,148 BB (15,196)
YIELD 174.6 B/A (175.1)
ENDING STOCS 2355 BB (2.389)
QTLY STOCKS 12,384 BB (12,389)
ARG CORN 36.50 MT (36.500
BRAZIL CORN 86.50 MT (86.50)
GLOBAL STOCKS 220.0 MT (221.9)
- ARGENTINA – the excessive rains have obviously impacted Beans Much more than corn – but EVENTUALLY corn will catch up- so to Maintain a reasonable Bean/Corn ratio
- US DOLLAR – a change in the dollar trend from UP to DOWN could Ultimately impact corn more than any South American weather mkt
- HISTORICALLY CHEAP – being on a 7-8 year low makes corn much more Sensitive to any bullish developments – be it weather, exports and/or The US $!
Mar Corn has factored in the 15.1 BB crop – as the recent USDA Report clearly shows! Going forward, the mkt will assess each new fundamental – but again, from the perspective at a 7-8 year low!
Much like Mar Corn, Mar Wht had a much more muted reaction since the USDA Report – only netting a gain of about 5 cents! Part of the reason is that the mkt had already rallied 30 cents into the report – the very bullish WW acreage # was already factored in & world stocks are expected at record levels! Still, a “rising tide floats all boats” so any S/A weather issues lifting corn & beans will do the same for wheat!
FACTORS IMPACTING THE MKT
- EXPORTS – Tues Inspections were 344,436 MT (300-500) – Thur Sales Were 391,000 MT (150-400)
- USDA JAN REPORT – the WW acreage at over a 100 year low – has been Well documented as such & is thought to be factored in
WW ACREAGE- 32.38 MA (341.3)
ENDING STOCKS- 1.186 BB (1.148)
QTLY STOCKS – 2,073 BB (2.056)
GLOBAL STOCKS 253.29 MT (252.01)
RUSSIA WHT 61.04 MT (61.04)
- HEFTY NET SHORT POSITION – could easily give way to short-covering On any perceived good news
- WINTER KILL DAMAGE – with little snow cover in this so-far mild winter, The WW crop is especially vulnerable
- HIGHER PRODUCTION FOR ARG & RUSSIA – than expected will only add To the already record global stocks
- $4.00 WHT IS A 10 YEAR LOW – which was caused by record carryover & resulted in the lowest WW acreage in 106 years
Mar Wht acts like its bottomed but will, as usual, need help from Corn & beans for a sustained rally!
The $64 question is what do Feb Cat do for an encore after their $20 rally since Mid-Oct (98-118)? Reversal action early last week suggested a ”top” but there was no “downside follow thru” as the reversal morphed into a consolidation – followed by new highs! A strong cash mkt & fewer 1st Qtr supplies helped to underpin the mkt!
FACTORS IMPACTING THE MKT
- AN OVERBOUGHT MKT – and a weaker tone for pork have suggested a steep Corrective break – which has not materialized
- A DISCOUNT TO CASH –has been supportive
- 1ST QTR PRODUCTION –is expected to come in at 385 MP – below the 4th Qtr output
- ADVERSE JANUARY WEATHER – will always be a positive for Feb Cat – as The production normally drops in harsh conditions
- AN OPEN INTEREST SURGE – on the recent rally is a positive for the Mkt place
- A TOPPING US DOLLAR – would be good for exports
Impressively, even after a $20 rally, DEMAND has been stout!
Feb Hogs last new highs were in Mid-Dec following its $18 run-up (48-66) ytet Feb Cat made new highs just this morning! Certainly, a cautionary tale for the Hog Bulls!
- US PORK EXPORTS –may slow due to the weak peso & our conflicts With Mexico
- SUPPLY FUNDAMENTALS – for the 1st Qtr looks burdensome
- MODERATE MIDWEST TEMPS – could well bring out a bigger supply
- SEASONAL STRENGTH – into the Spring may be muted by big supply
- A SWEEPING TECH REVERSAL – yesterday could mean a top or At least a consolidation
Questions? Ask Bill Moore today at 312-264-4337
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Past results are not necessarily indicative of future results. Investing in futures can involve substantial risk of loss & is not suitable for everyone. Trading foreign exchange also involves a high degree of risk. The leverage created by trading on margin can work against you as well as for you, and losses can exceed your entire investment. Before opening an account and trading, you should seek advice from your advisors as appropriate to ensure that you understand the risks and can withstand the losses.
The information and data in this report were obtained from sources considered reliable. Their accuracy or completeness is not guaranteed and the giving of the same is not to be deemed as an offer or solicitation on our part with respect to the sale or purchase of any securities or futures. The Price Futures Group, its officers, directors, employees, and brokers may in the normal course of business have positions, which may or may not agree with the opinions expressed in this report. Any decision to purchase or sell as a result of the opinions expressed in this report will be the full responsibility of the person authorizing such transaction. Reproduction and/or distribution of any portion of this report are strictly prohibited without the written permission of the author. Trading in futures contracts, options on futures contracts, and forward contracts is not suitable for all investors and involves substantial risks. ©2016
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