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 always dreaded geo-political bombshell blind-sided the mkt last Friday – in the form of China’s Coronavirus – spreading fear & uncertainty thru the marketplace – forcing massive fund selling! The rationale – justified or not – was that China’s newly minted grain “D” off the recently signed trade deal – would take a major hit – yet today mkt prices recovered!
FACTORS IMPACTING THE MKT
- EXPORTS – Mon Inspections were 668,000 (500-900) & Fri Sales were an impressive 1.008 (500-950)
Mon – 111,252 MT – Japan
142,428 MT – Unk
Tues – 124,355 MT Mexico
- CORONA VIRUS – from out of nowhere, this very contagious virus has reared its ugly head in China – already infecting over 4500 & killing 106! The basic mentality is that – if it gets out of hand – worldwide, the general demand for US grains will be compromised – while this is a possibility, we don’t see it happening – in the interim, though, nervous funds liquidated! However, today all of Monday’s losses were recouped!
- SOUTH AMERICAN WEATHER – has generally been benign – especially in Brazil – and a record bean crop has been forecast – but this news is hardly a revelation and it has pretty well discounted into the price
- CHINESE NEW YEAR & THE TRADE DEAL – these two mkt events did not meld well – as traders – impatient for some actual exports – will now have to wait a week until the China holiday is over!
- FINAL 2019 CROP NUMBERS – Production – 13,692 BB Yield – 168 B/A
- GEO-POLITICAL ISSUES – well, you never know what’s coming done the pike – first the US takes out a key Iranian terrorist – then it’s the Corona Virus – the mkt stabilized after the first event & we feel the same will happen after the 2nd!
- THE USMCA – aka the Mexico-Canada-US Trade Agreement will be signed into law tomorrow! The mkt reaction to the signing of the Phase One Trade Deal has been admittedly underwhelming – but going forward – an AG person has to be happy with the landscape – trade deals done with China, Canada & Mexico, 10 year low prices, an election year where Trump will be putting “his best foot forward” & carry-over stocks that don’t allow any production snafus in either hemisphere!!
What’s wrong with this picture? Ever since the trade deal was signed, Mar Beans have plummeted! So maybe signing it wasn’t such a good idea after all? Of course that’s nonsense – extenuating circumstances have led to the decline – including buy-the-rumor-sell-the-fact action, an overbought mkt & Chinese New Year! So while the trade was waiting for New Chinese buying, China went on vacation – and then the Coronavirus hit – and presto the mkt broke 40 cents (930-890)! Meanwhile, the US-Mexico-Canada trade deal was signed today – a very good thing! So we’re off to a rough start but trade deals & low prices will win!
A combination of “an extreme overbought condition” & the Coronavirus have sparked a sudden deep correction (590-560) in Mar Wht & the mkt continues to find its bearing – as the entire trade awaits the repercussions of the resolution of this very harmful malady! Wht’s underlying fundamentals are positive with solid demand & production issues here & there around the world!
Finally a “chink in the armor” – as the above chart indicates that the potential bearishness may well be “coming home to roost” – the last 4 Cattle-on-Feed Reports have shown an increase in placements & the 1st to 2nd Qtr beef production is set to increase 645 MP, a record for that time period! Adding fuel to the bearish fire created by the Coronavirus is the possibility that this virus – longer term – could hurt beef demand!
Well that’s an ugly looking chart – as many pundits expected the signing of Phase One of the Trade Deal would be a much-needed shot in the arm for the hog complex! But instead, the mkt has made new lows since the signing – as Chinese pork imports have been delayed by the Chinese New Year & the Coronavirus! Until the mkt sees signatures on the dotted line, it will focus on the short-term bearishness – fed by daily record slaughters & avg weights!!
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