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
A meteoric rise in May Meal of almost $20 (290-310) to 3-month highs in 6 short trading days presaged Monday’s explosive turn around – basically saying enough is enough – as far as grains knee-jerk reaction down to the Coronavirus! Helping this turn-around was a coordinated World Central Bank effort to lower lending rates & a lower $$!
FACTORS IMPACTING THE MKT
- EXPORTS – Thur Sales were 361 (500 – 1.2) & Mon Inspections were 670,608 (596)
- MACROS – have taken center stage pushing “supply & demand” to the back burner – Monday the DJI rallied nearly 1300 points – the biggest one-day gain ever following last weeks carnage – the worst since the 2008 recession – and today, the Fed lowered interest rates ½ percent in an effort to stave off the negative effects that the Coronavirus might have on the economy – the grains liked both moves!
- CORONAVIRUS – give the media a big assist in drumming up sometimes irrational fears about this malady impacting the World – not to minimize its severity or the need to contain it, but the “regular flu virus” has killed thousands already this year in the US – by comparison!
- SOUTH AMERICA – Brazilian Bean harvest is roughly 50% done & is still forecast to be a record crop although that has become “old news”!
- USDA 2020 CROP PREDICTIONS – A March WADSE Report will be issued on Tuesday 3/10/20 at 11am -the USDA Ag Forum #’s from a week ago were
1) Prod – 4.195 (ly – 3.558)
2) Yield – 49.0 (ly – 47.4)
3) Stocks – 425 (ly- 909)
4) Acres – 85 (ly – 76.1)
- SURPRISE RATE CUTS – yesterday, the Fed unexpectedly cut interest rates by ½ % – and although the DJI eventually closed sharply lower, the move was heralded as a very positive indication of the Central Bank’s interest to lessen the negative economic impact of the Coronavirus
The Meal was oversold already and when it couldn’t be pushed lower by the onset of the Coronavirus a week ago, that was the “acid test” that its seasonal lows were in! A classic example of bullish divergence!
May Corn has rallied 20 cents (366-386) in the past five days – pretty much announcing that its seasonal lows were in! A host of factors energized the up-move – historical cheapness, the expectation that China will soon be buying, the ½ point interest rate cut, the relative stabilization of the DJI this week after a tumultuous last week & indirectly Joe Biden’s resurgence on Super Tuesday! A resumption of Chinese imports and/or weather issues in South America may be needed to further the uptrend!
Quite conspicuously, May wht has not joined the “upside party” that has been enjoyed by the May Corn – up 20 cents & May Beans – up 30 cents – in the past week! The reasons center around some bearish fundamentals – improving US crop conditions, talk of a 40% jump in Australian Wht Production & a noncompetitive US wheat price on the world mkt! However, low prices indeed cure low prices and the 80 cent break in May Wht (590-510) should begin to attract some export business!
More any other Ag Mkt, Apl Cat seems to move in lock-step with the DJI – in fact you could overlay the cattle chart over the stock chart – as an almost identical fit! The reason is the DJI reflects consumer demand & optimism – which the cattle mkt needs for a rally! But when people – fearful of the virus – are not going out to dinner or travelling – beef demand takes a hit! But when the DJI rallies 1200 points in one day & the Fed unexpectedly cuts interest rates, the stock mkt is happy – and so are cattle futures! We strongly feel the spike low scored last Friday is a seasonal low & the mkt will adhere to the normal seasonal up!
Apl Hogs are also “joined at the hip” with the stock mkt & are happy when the DJI is higher – today, for instance, April Hogs are $1.00 higher & the DJI is 800 higher! Additionally, US Pork Production should see a significant drop from the 1st to the 2nd Qtr! Also Apl Hogs are at a significant discount to cash! Finally the long anticipated hog export flow between an abundant US & a needy China may commence soon -not a minute too soon!!
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