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
There are many moving parts in the current “bean equation” but when all the smoke clears, the mkt finds itself just $1.50 off the all-time record high – even with the March 3-31 planting report indicated 2022 acreage at a record 91 MA – roughly 4 MA more than last year! On the plus side, the Russian-Ukraine War has diverted some export business to the US & current dryness in the Mid-Plains threatens to spread into corn/bean belt – possibly reducing the total production – much like El Nina did in South America! Inflation is at a 40 year high – prompting many fund managers to buy into grains as a safe haven! So the ledger is still tipping to the upside despite the high price level!
The March 31 Acreage Report was a bullish shocker – estimates had total acres down 1.5 MA but they came out nearly 4 MA under last years 93.5! This was more in line with the early perceptions of a major corn-to-bean switch due to the sky-high fertilizer costs! On the export front, China bought over 1 MMT of US Corn on the last two consecutive Mondays! In addition, the Central Plains dryness jeopardizing the Winter Wheat crop may spread to the Corn/Bean planting areas! This could lead to smaller production on smaller acres – which on top of reduced yields in South America – could mean near record corn prices still aren’t high enough! Another demand pump-up was the Biden OK to use E15 in the summer monthsfurther enhancing ethanol demand. Finally the Russ/Ukr War will ultimately augment exports! The mkt seems to be “hitting on all cylinders”!
Wheats meteoric rally since last summer is legendary – with May Futures doubling in price in just 9 months -but it was certainly accelerated by the “BLACK SWAN EVENT” that is the Brutal Russian/Ukraine War! But a more pervasive threat to the Winter Wheat Crop emerged in recent weeks as the early WW crop ratings came in at 30% – the lowest ever good-to-excellent ratings for this time of the year! This week, the ratings improved marginally to 32%! It appears the La Nina-induced dryness that sabotaged the S/A crops has moved to the Northern Hemisphere! That something BOT prices can’t really handle – two below-average crops from both hemispheres – when coming in with carry-over already at 5-6 yr lows! And the Russ/Ukr War shows no sign of abating – every time, peace talks are suggested, hopes are dashed due to new Russian atrocities!
The cattle mkt has been victimized by two major negative fundamentals – the sky-high cost of feed & questionable demand! With feed grains at or near record levels, producers are very gun-shy about increasing their herds – and with inflation at 40 year highs & gas at record levels, the consumer dollar is being stretched – with beef mkt share on the wane! Both of these have kept cattle futures languishing in a tight range well-off their Feb highs! However, in the last week, the sheer cheapness of price has created a $5 rally as “cheap prices often cure cheap prices”!
The same factors afflicting the cattle mkt indeed are impacting the hog mkt – keeping it under wraps as well! In addition, the June Hog contract is a whopping $20 premium to cash further inhibiting any inclination it has to rally from the current depressed level! The economy is plenty concerned about the Russian/Ukraine War, 40 year high inflation & rising interest rates & that concern is trickling down to the consumer in terms of reduced demand for certain food stuffs!Questions? Ask Bill Moore today at 312-264-4337