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
Several bullish factors are “coming home to roost” all at once -resulting in a solid up-week for May beans of 13 cents (896-909). First, the on-again/off-again trade talks are indeed ON-AGAIN! Second, a weather phenomenon known as the “bomb cyclone” assaulted the Mid-West this week leaving too much moisture & finally a bulky short open int!
FACTORS IMPACTING THE MKT
- EXPORTS – Mon Inspections were 874,363 MT (700-1050) & Thur Sales Were a whopping 1.91 MMT (1.2-1.9) Mon – 926,000 MT to China
- US/CHINA DEAL – well, nobody thought it would be a “quick fix” and It certainly hasn’t been! One day things are going well – the next- not! But the overriding facts are that BOTH US & China need the deal economically & Trump needs it politically -with the 2020 elections right around the corner So we see it happening sooner rather than later
- THE BOMB CYCLONE – dropped tremendous amounts of snow & rain in the midwest – which brought flooding issues/late planting concerns to the mkt
- RECORD SHORT OPEN INTEREST IN GRAINS -is highly unusual right in front of planting but people are “beared up”! At the same, these “shorts” would exit quickly on any crop issues
- PROSPECTIVE PLANTING & QTLY STOCKS FRIDAY MAR 29 – this is a biggie and will set the tone of trading after its release
- CONAB – estimated Brazil’s beans at 113.5MMT (last month – 115.3)
- OUTSIDES HELPFUL- the US Dollar lost 70 points, the crude gained 2.52 & the DJI was up 450 points – all positives for the grain complex
- APL HOGS NEAR VERTICAL $15 RALLY – since Mid-Feb bodes well for corn & Meal implying solid China imports of hogs (since ASF) & their subsequent need for feeding them
The mkt feels like it has turned the corner – despite plentiful stocks, there is “no margin for error” this year for any production glitches anywhere around the world with the expected jump in demand off the trade deal!
May Corn was the beneficiary of very positive technical & fundamental action & responded in kind with a 9 cent rise for the week! The very volatile trade talks seem to be “back on the rails”, pre-planting weather has given reason for concern & short corn open interest inexplicably has risen 200,000 contracts! And all this occurring with corn hovering Just over 10 year lows! Early trade talk has China buying 7 MMT of corn & 3 MMT of ethanol! Sounds good BUT SEEING IS BELIEVING!!
FACTORS IMPACTING THE MKT
- EXPORTS – Mon Inspections were 756, 618 (800-1,000) & Thur Sales were 846,000 (800-1,200)
- PLANTING DELAYS – just a day past THE IDES OF MARCH, it’s certainly too early to get overly concerned about delays getting the crop – however, corn stocks are not abundant so any weather glitch taking the “top end” off this year’s production is significant
- ASIAN SWINE FEVER – has moved from the back burner to the front – as massive increases in US pork exports has hog futures exploding on the upside – with implication that corn & meal will soon follow
- SHORT OPEN INTEREST – is massive as many are convinced that corn is headed South
We’ve been dealing with “ uncharted waters “ in the past few months – trying to determine mkt direction amidst trade tariffs & gov’t shutdowns! However, we feel pretty certain now that corn has stopped going down – which leaves sideways or higher! And that creates a favorable trading environment!
We’re going to invoke an old commodity axiom to explains wheat’s resurgence this week – IT LOOKED SO BAD THAT IT WAS GOOD! On Tuesday, for no reason, May wht had it’s biggest one day gain since 7/25/18 – rising over 20 cents! There were no huge export sales or Russian rumors claiming once again that they were curtailing their unrelenting export pace! Just a pure rally with really no justification – and that’s often the best kind! We feel it reflects the general tenor of all the grains – sitting on historical lows with dicey planting & growing ahead & a trade deal that looks to be soon consummated!
April Cat feels like it wants to put in a top after its $10 run-up since last fall (120-130) – considering the available supply of cattle for mkt is expected to increase Into the 2nd Qtr & the fact that seasonals are soon pointing down! But strong beef prices, periodic winter storms & a raging hog mkt are propping the mkt up! So be careful in here as the mkt had nice come-back Friday – closing almost steady on the week – even after Tuesday’s sharp reversal down – but got a “big assist” from Apl hog’s limit up today!!
Well we certainly did see this coming – Apl hogs -after an almost vertical upmove of $13 (53-66), tacked on a $3.00 limit-up today off news that China had made its largest purchase of US pork in 2 years! So this seems to speak to two developments – one that, indeed, the Asian Swine Fever wreaked considerable havoc to the Chinese hog herds & second – that the US/China trade deal is imminent! Also, a ratcheting up of domestic demand can’t be discounted – as the huge gap between beef & pork – just a few weeks ago – wasn’t lost on the consumer at the retail level!
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