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
Surprise!! Surprise!! With everyone leaning toward bearish #’s from the September WASDE in the wake of the Pro Farmer 51.7 BPA yield estimate, the USDA threw the trade a curveball coming at 50.5 – almost 1 ½ bushels under their August guess! It appears the hot & dry summer weather exacted more of a toll on the row crops than previously thought! Nov Beans exploded with a 76 cent gain! Maybe even more impressive is todays holding action in the face of bearish macro news! First the Aug CPI came out at 8.3% (exp – 8.00) sending the DJI down almost 900 points – plus a rail strike is imminent- and despite that, only a small loss! The total Bean production is now estimated at 4.378 BB, under last year’s 4.531 BB!
The WASDE corn #’s were in line with estimates – production – 13,994 BB (ly – 15.115) & yield 172.5 (ly- 177). So, the corn was effectively dragged up by the beans – as the upside leader! Still, the corn #’s give reason to pause – in a year where we came in with quite tight stocks, the total production is over 1 billion bushels under 2021 – so they stand to get tighter after harvest! But the macro headwinds might offer stern resistance to explosive rallies! For instance today, the DJI is down over 800 points after a bearish CPI at 7:30am – which implies the Fed will continue to be aggressive in fighting inflation by ratcheting up IR’s! Plus, the US Dollar is on a 20 year high -a strong disincentive for US exports! And finally, the Ukraine Grain Corridor Deal is hanging in the balance & may not be renewed after its expiration in Nov! But based on sheer supply/demand fundamentals, Dec Corn stands to move higher this Fall!
Dec Wht was unable to follow Dec Corn & especially Nov Beans higher yesterday despite lower-than-expected stocks – due to improved production for both Russia & Ukraine! Russia went up 3mmt to 91mmt & Ukraine went up 1mmt to 20.5mmt! However, in wheat’s favor is the lingering controversy about the Corridor Deal – where Russia feels the grain is wrongly going to the rich West instead of the impoverished African & SE countries! The resolution will probably involve less grain shipped & is thereby friendly to wht futures!
Dec Hogs were sharply higher due to an extreme upward bounce in pork cutout & the extreme discount the contract holds to cash – now at $15 (avg-4)! But the Macro headwinds are blowing strongly – as evidenced by the bearish CPI – 8.3% (exp – 8.0) forcing a 1200 point collapse in the DJI – the biggest loss in 2 years! A weak economy bodes ill for consumer demand – and that on top of waning Chinese demand for US pork!
The chart action since Mid-July has been stellar with an $8 rally (144-152) – pushing the mkt to its April highs! But the afore-mentioned macro issues loom large for this Fall! The bearish CPI has the pundits fearing the pattern of jacking up IR’s to combat inflation may last longer than initially thought! Already, a .75% increase is expected next week with more like increases to follow! The drop in gas prices may well be offset by muted beef demand should we slip into a recession!Questions? Ask Bill Moore today at 312-264-4337