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
The above chart illustrates what you often see in commodity trading – a stand-off resulting in a sideways, congestion trade! Where the “good” exactly offsets the “bad”! In this case, the bad is meager exports exacerbated by the China Covid Outbreak & a forecast record South American Crop perfectly balanced by 6-7 year low stocks & stout, domestic demand! But the impressive aspect of this scenario is the relatively elevated price level of Dec Corn – just 30 cents off the $7.00 mark! How many years in the last 10 would we have given our “eye teeth” for this price level! Also, the mkt has withstood harvest pressure & and the renewal of the Ukraine Corridor Pact! What if the S/A crop isn’t a record after all?
Much like Dec Corn, Jan Beans are holding a seasonally very high level -given the current unimpressive supply/demand fundamentals – a record S/A bean crop looming, an adequate US crop about the same as 2021, paltry exports due to the US being too high, severe Covid issues in China – our biggest trading partner & an economy leaning toward a recession in early 2023! But also very similar to corn, how many seasons would we have welcomed near $15.00 beans with open arms! The underlying reason is of course very tight global stocks – currently at multi-year lows! What if the Brazilian bean crop isn’t a record or the Argentine crop continues to wane due to dryness or exports improve due to the recent sharp drop in the US dollar or the US somehow escapes a recession! When many expected stocks to be rejuvenated this year, mediocre to substandard crops in both hemispheres caused just the opposite! Stay tuned!!
Well, I always say a picture is worth 1000 words – so comparing the Dec Corn, Jan Beans & Dec Wht charts, there are glaring disparities – which clearly validate Dec Wht as the “weak sister” at the CBOT! Beans are $1.30 off their 2022 highs, Corn $.90 off its – but Wht $5.00 off its! The reason is a lack of supply issues for wht – with Ukraine back in the picture & Russia yielding a record crop! And, much like corn & beans, US wht is non-competitive on the global mkt so exports are hamstrung! There are certain issues with the Winter Wht Crop (central plains drought) but not enough to impact the price – yet! So, wht will continue to coat-tail corn & beans on any upside movement!
Whereas you must respect the technical reversal of last Wed – which saw the mkt post new contract highs – followed by a lower close – plus a lower close Friday & a lower mkt yet today, you must heed the supply fundamentals into 2023 which project a 4.5% production decrease in the 1st qtr of 2023 & a 7.3% drop in the 2nd Qtr! Plus, demand should be solid with Christmas only 4 weeks away! So, the jury is still out as to whether the mkt has topped out or is only correcting a severe overbought condition!
An ominous looking chart with a clear downside break-out, a down-trending pork cut-out & a production decrease from the 4th to 1st Qtr much less than 2021 – have all contributed to a developing down trend in Dec Hogs – now $10.00 off its Aug Highs! However, upcoming holiday demand may mitigate the down!Questions? Ask Bill Moore today at 312-264-4337