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
AgMaster Report 01/31/2023
With the recent decision by NATO to ship tanks to Ukraine to fortify their “war effort”, the mkt is adding a “war premium” back into the wht price – another positive fundamental in addition to the mkt coat-tailing the Corn & Beans recent rally! This to offset the bearish influence of Russia flooding the World Mkt with its cheap wheat! A look at the chart indicates a 40% plummet (12.50-7.50) in wht futures since the Spring! That’s probably enough – especially if exports pick up dramatically in the 1st Quarter due to the sharply declining US $ & the re-opening of China!
Remarkably, as we approach month-end, Mar Beans are only 40 cents off their contract highs scored back in early June – and also holding just 50-60 cents off the $16.00 level – historically really high levels for Soys for anytime of the year! And this in the face of a record Brazilian Bean Crop in harvest, recent rains in Argentina, the re-opening of the Ukraine Grain corridor & paltry exports! The mkt seems to be bolstered by the very tight carryover stocks, the promise of a resurgence of exports off the re-opening of China and the plummeting US Dollar – making our grains more competitive on the World Mkt! The chart action demonstrates some impressive “bullish divergence” on the bean’s part! And what if the Brazilian Bean crop comes out something less than a record – after all, it’s only 6% harvested so far!
When Mar Corn failed to fall apart after the Argentine rains last week-end, the mkt made a statement that it expects improved exports in the 1st Qtr of 2023! And now with China back to work after their Lunar New Year, The US Dollar continuing to fall & US Gulf vcorn competitive with Arg & Brazil, the outlook for US Exports in the 1st Qtr of 2023 is quite sanguine! The mere fact that the mkt is able to hover just under the $7.00 mark despite horrendous exports, a potential record Brazilian crop, the re-opening of the Ukraine grain corridor & a US Recession looming – indicates the underlying strength in the mkt! The foundation, of course, comes from 6-7 year low global carry-out – which was NOT augmented by average-to-below average crops from both hemispheres in 2022! A little bit ofgood news for the corn mkt might go a long way!
Despite Feb Cat & Feb Hogs being “sister markets”, they have been heading in opposite ways for a long time now. In fact, the dichotomy is so extreme, that the last few days Feb Cat has made new contract highs while Feb Hogs are punching out contract lows! The explanation boils down to simple supply/demand fundamentals – cattle supplies took a sharp drop from the 4th to the 1st Qtr while hog supplies – for only the 2nd time ever -increased into the 1st Qtr – versus dropping sharply like they normally do!
And another feather in the Bull’s Hat for cattle is the semi-annual Cattle Inventory Report – due out today at 2pm – which is widely expected to show significant drops in the total & Fed cattle #’s!
Remarkably, in just a month’s time, Feb Hogs have plummeted over $16 – off of burdensome supplies & lackluster demand! And in the same time frame, Feb Cat have rallied $3-5! Somewhere along the line, the consumer is going to opt for a cheap pork chop over an expensive steak – bit it hasn’t happened yet! Both export & domestic demand have been down – and not near enough to offset the afore-mentioned increased production! Eventually, bottom-pickers & sheer cheapness will crater this mkt – but not yet!Questions? Ask Bill Moore today at 312-264-4337