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
The Jan Crop Report ignited Mar Beans near vertical 80 cent move (1000-1080) & it was extended by too much rain in Argentina! Some recent dryness there has forced a 25% correction – but this is considered reasonably tame! Also, underpinning the rally have been solid exports & a weakening dollar!
FACTORS IMPACTING THE MKT
- EXPORTS – Mon Inspections were 1,290,777 MMT (LW – 1,420, 068) – Fri Sales were 979,000 MT (400-600)
- JAN 12 USDA REPORT – final 2016 production was 4.307 BB & 52.1 B/A – These are both records but have been well-chronicled since harvest Was over
- SOUTH AMERICAN WOES – it’s been way too wet in Argentina & some Analysts are reducing their crop estimates by 3-5 MMT
- US DOLLAR AT A TOP? – This mkt hasn’t made new highs since Mid-Dec & the chart formations look toppy! It wouldn’t be surprising if the Mkt – after reaching 14 year highs – has topped out! Recent exports Have been impressive – imagine what they’d be with a much lower Dollar
- THE TRUMP WILDCARD – the first “businessman President” in recent Memory promises to right the ship economically & we believe It will happen – & the spillover will be beneficial to all mkts – including The AGs!
Despite the recent 80 cent run-up, the Bean mkt is still simply too cheap to withstand any weather issues from either hemisphere!
After dawdling in a 3-month range (344-368), Mar Corn has finally come alive – punching out new 6-month highs last Friday. With the Bean/Corn ratio already at a 20 year high, Mar Corn decided to start “keeping up” with Mar Beans!
FACTORS IMPACTING THE MKT
- EXPORTS – Mon Inspections were 963,897 MT (LW-902,528) – Fri Sales were 1,367,000 (900-1.2)
Tues – 102,944 MT to Unk
Thur – 110,400 MT to Unk
- JAN 12 USDA REPORT – final 2016 production was 15,148 BB & 174.6 B/A However, these #’s weren’t exactly a revelation to the mkt place – Which has traded a 15 BB plus crop for 2-3 months now
- SOUTH AMERICA – it’s either too dry or too wet & Mar Corn is “feeling it”! Again, much like Mar Beans, the contract is way too Cheap to absorb ANY weather issues in either S/A or the US!
- THE ALMIGHTY DOLLAR – it’s very significant how robust exports Have been recently – given that the US $ is at a 14 year high – Imagine what they could be with even a 35% correction in its value?
- LESS ACRES – whether its 2 or 4 million less acres, the reduction Will be very supportive to corn in 2017
- 8 YEAR LOWS – a mkt at the same level as it was in 2009 – is very sensitive to any bullish news
Any one of several factors – lower acreage, good exports, a lower US Dollar & weather issues – either South or North – can rally this mkt! If it’s more than one, then look out!
Mar Wht consolidated its gains from a late Dec 40 cent rally (392 -437) as it fed off the lowest winter acreage since 1909 & a declining dollar while still confronting record high carry-out!
FACTORS IMPACTING THE MKT
- EXPORTS- Mon Inspections were 226,205 MT (LW – 385,495) – Fri Sales Were 245,000 MT (250-750) –
- WINTER WHEAT ACREAGE – the USDA reported 32,383 MA- the lowest In over 100 years but this # has been well factored in
- HUGE NET SHORT POSITION – at 92,733 contracts- which is the largest Short position for any AG mkt – that’s a massive “buying pool” Should any bullish news come along
- HUGE RUSSIAN CROP – is coming & will weigh on the world mkt
- EGYPT – bought 235,000 MT of wht over the W/E – three cargoes From Russia & one from Romania – a good sign for the world mkt
- US DOLLAR – a big drop in the US Dollar from14 year highs – Could do more for the price of wht – than anything else!
- 10 YEAR LOW – historically low wht prices will eventually turn the mkt!
The old commodity axiom “LOW PRICES CURE LOW PRICES” will come home to roost for the 2017 wht contracts!
The impressive $21 run-up (98-118) in Feb Cat since Mid-Oct has become overbought but this condition has been alleviated by consolidation & not reversal type action!
- Post Holiday Demand has been much stronger than anticipated
- The surge in open interest has accompanied the rally – a very positive sign
- Despite the steep run-up, April Cat is still discount to cash
DEMAND trumps all right now!
After an $18 rally (48-66) from Mid-Oct to Mid-Dec, Feb Hogs have fallen into a sideways pattern – where normal season strength has been offset by an expected big supply ahead!
- The production decline from the 1st to 2nd Qtr – at 90 MP – is said to be The smallest in 15 years
- A sweeping technical reversal a few days back did not follow thru down
- Being winter, storms could spring up at any time – underpinning the mkt
A rallying cattle mkt may keep Feb Hogs in a consolidation mode!
Questions? Ask Bill Moore today at 312-264-4337
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