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
Well we’re rubbing our eyes – and in total disbelief! A Phase One Trade Deal has indeed been agreed to! Many felt it would never happen – and rightfully so – after all the fits & starts! But this changes the landscape – going forward – having our #1 trading partner back in the fold!! To me, It had to happen as I’ve said – China economically -Trump -politically!
FACTORS IMPACTING THE MKT
- EXPORTS – Mon Inspections -1,259,374mt & Thur sales – 1.460,000mt
- US/CHINA PHASE ONE TRADE DEAL – finally – this is a “game-changer” with out largest trading partner back in play
- JAN CROP REPORT – 1/10 – will reveal the final #’s currently at 3,550 & 46.9
- SOUTH AMERICAN WEATHER – Brazil is ok -but Argentina is too dry
- TECHNICAL OPTIMISM – 60 cents up since Dec 1 -braking thru the down-channel
- HISTORICALLY CHEAP – prices coming off a 10 year low – hard to believe the same price today as in 2008/2009
- NO PRODUCER SELLING – the farmer has his bins closed – will need a substantial rally for him to open them
- BIG SHORT OPEN INTEREST- they’ll becoming out!
With China back, there is no margin for error in production – either in S/A or the US in 2020 – especially at current price levels – we feel the recent trade agreements with China, Mexico & China have taken the “down” out of the mkt!!
As you can see, Corns reaction to the trade deal wasn’t nearly as impressive technically but the Mar Contract did manage to break out of the down trading channel & there still is a large short open interest & corn is also coming off 10 year lows! Finally the Jan Crop Report should lower production & yield as the last part of harvest is almost always the worst!!
Whereas Mar Wht has some positive supply/demand fundamentals of its own, the 40 cent rally (516-556) since Dec 12 was mostly a “coattail ride” off Mar Corn & Jan Beans hard rally since the trade deal got done!!
Pundits have been calling for a top in this mkt for some time but the uptrend has refused to capitulate despite increased cattle placements, a very mild weather & the huge premium Feb Cat holds to cash! In fact, just last week, the mkt staged new highs for the move! All eyes will be on today’s Cattle-On-Feed – to see if it will shed any light on the mkts direction in January!!
Much like the cattle – but the other extreme – traders have been closely watching Feb Hogs – looking for an imminent bottom! But the best we’ve done is a steep downtrend which has morphed into a sideways, congestion area! Many thought the recent trade deal would accelerate this mkt out of its recent range but its tepid reaction to the deal really disappointed traders- yet it seems only a matter of time before China’s severe need for pork & our over-abundance of same will have a coupling!! Meanwhile, all eyes will be on Monday’s Pig Crop Report – for directional clues!
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