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 USDA surprised traders on Friday at 11am with a bearish report – higher across the board – yield, production & carry-out! But the good news is the mkt took it very well rallying a quick dime – from a spike-lower opening – to close 2 ½ cents higher! The mkt has already dialed in “much bad” & was looking ahead to the trade signing on Wed!
FACTORS IMPACTING THE MKT
- EXPORTS – Mon Inspections – 460,307 (450-600) – Fri Sales – 161,000 (350-700)
- JAN CROP REPORT- definitely was a bearish surprise with all but one # coming in over expectations
Production – 13.692 (est – 13.513 Nov – 13.661)
Yield 168 (est – 166.2 Nov – 167.0)
12-1 Qtly 11389 (est – 11511 Dec 11.937)
US Stocks 1.892 (est – 1.757 Dec 1.910)
Global Stk 297.8 (est – 296.6 Dec – 300.5)
- SIGNING OF US/CHINA PHASE ONE – The Chinese VP arrived Sunday –
- The actual signing is scheduled for Wednesday
- SOUTH AMERICAN WEATHER – has been bearish with frequent rains & no oppressive heat – this fundamental will take center stage after Wed’s signing
- PRODUCER SELLING – still very little farmer movement of grain
- US DRONE ATTACK ON IRAN – things have calmed down considerably – one mitigating factor is Iran’s admission that they accidentally shot down an Iraqi commercial airliner
- STILL HISTORICALLY CHEAP – we don’t necessarily recommend “buying price” just because it’s low – but it’s hard to ignore a mkt on a 10-year low! Trade deals with Japan, Mexico, Canada & China are precisely what the Dr. ordered – those coupled with a competitive world price should “Grease the export skids” in 2020!!
A near-vertical 80 cent rally (880-960) since 12/1 has been tested multiple times in the past few weeks – and impressively has help 75% of the rally! First, consistently bearish weather in South America promises a record Bean crop – Second, The Iran airstrike rattled geo-political nerves & Third, the Jan USDA Report last Friday reflected higher production – 3,558 (est – 3519) – yield 47.4 (est – 46.6) – US Stocks 475.0 (est – 432). So that mkt action tells us a lot of bearishness is already built in – and that any “good news” should be met with substantially positive mkt action!!
Since Sept 1, Mar Wht has clearly been the upside leader in the grain complex rallying over $1.00 (457 – 567) – coming close to testing the June highs! And the USDA Jan Report issued Friday at 11am – may be providing a good reason why!! While the report was widely regarded as a bearish disappointment for corn & Beans, this was not the case for the wht #’s! First the total acreage is predicted to be the lowest in 100 years – second, the stock number were all in line or less than estimates – 12/1 Qtly – 1.834 (est – 1.917) US Stocks – .9658 & Global Stks – 288.1 (est – 287.3). In addition, the “cool-down” of the Iran incident would imply a resumption of the Iraqi Wht business – a welcome boon to exports!!
Unlike what many are saying, the Feb Cat contract looks more like a mkt which is temporarily stalling out – after a sustained run – readying itself for the next leg up – versus a mkt getting ready to capitulate! A strong cash mkt on Friday led to the futures 2nd highest close of the year! So despite big placements in the past 3 months & the likelihood of a big production increase from the 2nd to 3rd Qtr, the “OLD BULL” still has a lot of life in her yet!!
Feb Hogs directional narrative falls conveniently under the category of “WHAT HAVE YOU DONE FOR ME LATELY”? Whereas the longer term export potential of US Pork to China seems to be a foregone conclusion, nothing has been “signed on the dotted line” – so the mkt has been left to focus on the short-term bearishness of record daily slaughters & record average weights – leading to lower highs & lower lows in the past two weeks!!
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