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
Despite the lack of USDA data due to the gov’t shutdown, Mar Beans flourished this week – gaining 27 cents while closing on 3-week highs! The mkt rode the back of US/China trade optimism & extreme Brazil dryness –along with strong “macro mkt” performances from the DJI (up 750 points) & Crude Oil (up 1.22)!!
FACTORS IMPACTING THE MKT
- EXPORTS – Mon Inspections were 677,679 (700 -1,000) – once again, no wkly Sales #’s or 8am sales this week due to the gov’t shutdown
- JAN USDA FINAL #’s – which were due out this Friday – have been postponed until the gov’t is back at work – so more “flying blind” for traders who also have been without export sales and commitment of traders! PLEASE MR TRUMP & CONGRESS – GET IT TOGETHER!!
- TRADE PROGRESS – a 2nd US delegation has travelled to Bejing to further try to hammer out a trade agreement – the rhetoric surrounding this meeting has been positive – both the US & China’s economies are floundering –partially due to the tariffs – so it’s in both their best interests to resolve!!
- SOUTH AMERICAN WEATHER WOES – simply put, Brazil is too dry & Argentina is too wet – the once record Brazilian Bean forecast has been ratcheted down from 122-124 MMT to 115-118!
- SPEC MONEY IS SHIFTING – out of record high stocks to cheap commodities and why not?
- MACRO MKTS – the all-important “outside mkts” always remind us that the grains don’t trade in a vacuum – Friday, for a change, they were a friend of the grain complex – with a sharply higher crude oil & stock mkt & a lower $$. Granted, we have record global stocks – but that’s why we’re on 10 year lows ! Newer, untraded-on news would be a resumption of some kind of export normalcy with China – which would go a long way in whittling down these stocks!!
The Mar Corn turned in a respectable performance this week – gaining 8 cents & closing on a 2 wk high!! The rally was due to several factors – coat-tailing Mar Beans, feeding off the potential that a trade deal will mean 3-5 MMT of China corn exports & hoping that crude oil’s freefall has given way to “cratering” & a solid low!! Positive unemployment #’s & dovish remarks from the Fed Reserve Chief helped the DJI to a 700 point gain while the crude oil was the beneficiary of friendly OPEC rhetoric! S/A weather issues could be a major mkt mover for corn – especially given that its US/Global stocks aren’t nearly as plentiful as beans!
Various factors impacted the Mar Wht contract but the positives outweighed the negatives as the contract eked out a weekly 6 cent gain! The major bearish influence –Russia unrelenting export pace – may be finally getting dialed in! The mkt is also concerned that next week’s rebalancing may lead to some index selling. But more than offsetting these were the Argentine wht crop shortfall & the corn & bean rallies to start the year! We feel the single most important factor for wht is the simple fact that US Wheat is the cheapest in the world – which should significantly open up its exports!!
After an impressive $8.00 upside run (117-125) since Mid-Nov, Feb Cat became overbought & quite vulnerable to a correction – & indeed, it began on Mon with a major technical reversal- with new highs followed by a lower close! The slide was exacerbated by a healthy premium to cash & bearish weather (unseasonably warm temps)! So in total, the contract has corrected about 40 % (125-122)! However, with the excellent demand we’ve seen for cattle this past Fall, current levels could offer an excellent buying opportunity!
Feb Hogs had a completely reverse-dynamic to Feb Cat – having broken $9.00 since Mid-Nov (69-60) off burdensome pork & poultry supplies that demand could not offset! So the contract came into 2019 very oversold! And the mkt was rescued by pervasive trade optimism ahead of the coming “Bejing Trade Meeting” and lingering fears of a menacing asian swine flu – with new cases cropping up daily! Both imply much better “export flow” –just what the Dr. ordered! And the mkt responded accordingly this week with a $1.20 gain!
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