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
Russian President Putin has recently been “showed up” by the stunning military advances of Ukraine against Russia – and he retaliated big-time in the last few days – effectively escalating the war – and further weakening the likelihood the Ukraine Grain Corridor will last! And this coupled with dryness in the US Plains & Argentina catapulted Dec wht up 50 cents to 3-month highs on Tues! Today, the mkt corrected a bit but is still trading over $9.00! Further clouding the near-term horizon is todays 1pm announcement from Fed Chairman Jerome Powell of a 3/4% interest rate increase – the 3rd in 3 months! This is a negative for grain demand but the much-anticipated increase is likely already dialed in
Dec Corn topped out at $7.00 – following the 9/12 friendly WASDE Report – then broke 30 cents off bearish macro interest rate jitters – then has rallied back to $7.00 on the back of Dec Wht’s 50 cents surge yesterday! Even though demand has been very lackluster due to South America’s lower price & China’s slowing economy, an argument can be built for a “supply bull” – even as we enter the middle of harvest! The production & yield #’s from the USDA – 13.944 BB (ly-15.115) & 172.5 (ly-177.0) speak volumes! And maybe a small crop gets smaller – based on some early disappointing yields! With the stocks coming into this season on 6 year lows, we needed more production – not less! The only fly in the ointment is macro concerns – should the continued IR increases by the Fed push us into a mild recession in 2023!
The Nov Bean contract was basically “left for dead” after the August WASDE & very tepid export demand! The Pro Farmer Tour’s 51.7 didn’t help matters either – coming just under the Aug USDA! But the bullish surprise delivered by the Sept WASDE with a 50.5 yield – 1 ½ bushels under the Aug #, definitely rejuvenated the bean mkt & since then it has been consolidating those gains! Apparently, the “hot & dry” that ravaged the corn crop also seeped into the bean crop! Faltering demand has been an issue for beans much like corn and the US Dollar on a record 20 year high is exacerbating that weak demand! But all of a sudden, the gov’t has the 2022 production under last year! Much like corn, that’s exactly what we don’t need with depleted carry-over stocks! This supports a “bull supply argument” for Bean as well! And maybe demand picks up in 3-4 weeks when S/A supplies run low!
The Oct Cat contract may have moved up too far too fast as boxed beef was down 61 cents Tues to 251.64 – the lowest its been since 4/1/2021! As well, the timing of the Fed’s announcement today of another 3/4% increase in IR’s reminded the trade of the Feds current policy of relentlessly raising rates until inflation is subdued – which continues to raise the likelihood of a mild recession soon – which would be very detrimental to beef demand! So, the mkt may very well consolidate at current levels – awaiting the Fed’s next move!
Oct Hogs were overbought but supported by a stiff discount to cash which keeps them within shouting distance of the August highs! The Macro headwinds blow bearish after the Fed for the 3rd consecutive month ratcheted up IR’s 3/4 % – extending recession fears for early 2023! The silver lining would be the dramatic decrease in gasoline prices this summer which as put extra cash in the consumer’s pocket! This could well offset the possible demand-dampening of a recession – keeping the mkt range-bound for the interim!
Questions? Ask Bill Moore today at 312-264-4337