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 post-Thanksgiving collapse that has afflicted corn & wheat has not spilled over into the beans – as they have rallied to more than 20 cents higher on the week – feeding off a shrinking Brazilian Bean Crop & a steady flow of export inspections (Mon), sales (Thur) & flash sales last Fri & today! Due to hot/dry in Northern Brazil & too-wet in Southern Brazil, local Brazil estimators have Brazil’s crop down to 156 MMT (163- USDA)! And since last Fri, we’ve had flash sales of 123,000, 323,000 & 129,000 MT to China & unknown! Also, due to a sharp acreage reduction, the final 2023 crop is pegged at 4.1 BB – roughly the same as 2022! So the beans started with a leg-up – & today the outsides are helping – higher crude, a lower $!
A very disappointing-looking corn chart – to say the least – as new contract lows were scored Mon & again today! The culprits are a substantial US Crop at 15.22 BB & slack exports – even though US corn is the cheapest on the world mkt! And that price is being ratcheted down even further with a plummeting US Dollar! The weather issues in Brazil are only beneficial to beans – not corn or wht! Although a sharply higher bean mkt over continued weather woes in Brazil would offer spill-over support! The mkt will probably continue to muddle along until we’re past First Notice Day on Thursday! What the Bulls have going for them is a huge short open interest in corn, positive seasonal trends & the likelihood that these lower prices will ignite export demand! Already, domestic demand for corn has been quite strong! And the end of harvest isn’t exactly the time to be selling corn! The old commodity axiom LOW PRICES CURE LOW PRICES will soon kick in!
Much like Mar Corn, Mar Wht needs a bullish narrative & it’s just not there right now! Russia has continued to keep this mkt “under wraps” with its cheap export program! In addition, First Notice Day looms ahead with Dec Wht holding a sizeable open interest – compared to last year! As well, poor export inspections, beneficial snow in the Plains last W/E & end-of-the-month selling have pressured prices! Further, the WW good-to-excellent rose 2% to 50% – the 10 year average! However, hopeful Bulls say the mkt is plenty cheap enough already! Watch for “bullish divergence” where Mar Wht is unable to go down on bearish news to signify seasonal lows have been achieved!
What began as consumers starting to balk at record high price – especially with so many cheap alternatives available (pork, chicken), has morphed into a full-blown capitulation as Cattle prices have plummeted $27 in the past two months! Greasing the slide were the last 2 Cattle-On-Feed Reports – reporting a 6% & a 3% increase in placements – both implying a herd expansion! As well, exports have been soft! But the pendulum has swung too far as the mkt became severely oversold & as a result rallied back $5.00 in just 2 days! We feel the expected herd expansion is dialed in & the mkt will fall into a new trading range between 170 & 180!
The main culprit pulling Feb Hog Futures down in the past 10 days is China! A few weeks ago, they said they have “too many hogs” & this prompted a mass liquidation by their farmers – pulling down their futures & cash & doing the same to the US Hog Futures! As well, their hog excess took them out of our export program – further pressuring Feb Hogs! Basically a double jeopardy! But much like the cattle, they overdid it as futures dropped $10 in no time – even creating a cash mkt discount at a time when its normally premium! So the mkt key reversed to the upside yesterday! Probably meaning the China news is dialed in & the mkt will consolidate between now & year end – as seasonal demand for pork kicks in!Questions? Ask Bill Moore today at 312-264-4337