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 full-fledged weather mkt has broken out in the grains – as the mkt repeatedly adds & subtracts “weather premium” from its price structure! Adding to the volatility is the psychological $12.00 level – which 3 times, the mkt has failed to breach! The driest Nov/Dec in recent memory for Brazil & Argentina has traders fearing a full-fledged drought for the world’s largest bean producer! Add to this further “dry issues” in Russia, the Black Sea & the US Plains – and ending stocks – already at 4-5 year lows – are threatened to be pared even further! Plus, world demand for our grain has been immense! Finally, the Macros are helping as well – a vaccine-supported DJI & a lower trending US Dollar are adding underlying support!!
Dec Corn was greeted this morning with two pieces of “good news” – an 8am flash sale of 334,000mt to an unknown –and the announcement of a 3rd vaccine to fight Covid. Less Covid – means more economic growth – which means more driving & ethanol usage! Already carry-over stocks have diminished to 4-5 year lows – because more is going out the front door – than coming in the back! There is simply no margin for error in either hemisphere for corn production! El Nina is attacking S/A production now – and fast-forward 6 months – what if it also turns up dry in the US? Also, a slumping US Dollar is benefitting our exports! But have we already rallied to far? Not really! Dec Corn is currently at 4.25 – still in the bottom 20% of its 10 year range ($3.00 – $8.00)! Will China keep buying? Most probably! Their corn stocks have been depleted by flooding & an aggressive hog-herd rebuild – and US Corn is not only the cheapest but the only global supply until late Feb! STRAP IN!!
Same old – same old!! Dec Wht doesn’t have the supply/demand fundamentals on its own to rally – but with the help a weak US Dollar & Corn/Bean strength, it can muster some upside! The formidable headwinds of record wht global stocks & a non-competitive US price on world export mkt are keeping it “under wraps”!
Improving fundamentals including a bullish cattle-feed-report Friday, strong cash & dressed beef prices and positive vaccine progress – all contributed to $4.00 jump in Dec Cat (106.50 – 110.50) in the past two trading sessions! However, that simply keeps the contract in the middle of a broad $10 range (113-103) that it’s been confined to since early Oct! The Covid/Vaccine issue turns out to be a double-edged sword – one very negative & the other very positive! Holiday beef demand could take a large hit due to Covid’s resurgence while an effective vaccine portends a recovering economy in the 2021 first quarter!
Dec Hogs were catalyzed by a technical upside reversal Friday & continued strong China demand (up 80% in Oct & up 126% over last year) – leading to a two-day $3.00 rally! But the mkt remains locked in a tight range some $8-10 off its October highs – as the mkt comes to grips with Covid’s dent in holiday pork demand & China’s waning imports into 2021!Questions? Ask Bill Moore today at 312-264-4337