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 headwinds were too formidable this week for the mkt – as it has slipped 6-8 cents from last week close – pressured by a resumption of harvest, very poor exports on Thur at 7:30am & negative Macro mkts! However, today the mkt is recovering in front of another harvest W/E with solid export news in the media this morning helping to support!
FACTORS IMPACTING THE MKT
- EXPORTS – Mon Inspections were 1,148 MMT (900-1,200) & Thur sales were 213,000 MMT (300-700)
- HARVEST PROGRESS – rainy, snowy weather has finally taken a toll on the bean harvest – at ½ done – as it has fallen behind the 5-yr average Beans are 53% in (lw – 38 avg – 69)
Ill – 74 (70) Ind- 67 (64) Iowa – 37 (71)
- USDA OCT CROP REPORT- has pegged production at 4,690 (Sept – 4,693) & yield is 53.1 (Sept – 52.8) – The Nov Report is due Thur Nov 8 & is generally expected to be lower than Oct
- TRADE ISSUES – talks between the US & China has stagnated but Mid-term elections are Tues Nov 6 & the G-20 Summit is Nov 30 – two events that may help re-start negotiations
- THE RESUMPTION OF HARVEST – has generally weighed on prices -& we should see a big jump forward in “% complete” on Mon
- THE OUTSIDE MKTS – have done the grains no favors this week – as “down volatility” in the DJI, a lower crude & a higher dollar – have all weighed on grain prices tariffs & record yields have driven bean prices down to 10 year lows – a fact not lost on our trading partners! So despite tariffs, exports might come in better than expected – given the “bargain basement” price! And the continuing price pressure caused by HARVEST will soon subside as harvest winds down!
The mkt action the last two days corroborates to me that the harvest lows are in! Bad news in the form of very poor exports yesterday – sent the mkt reeling to the tune of a 7 cent loss. But, alas, the damage was short-lived as the mkt turned around today & recovered all that loss! And the harvest pressure that has exerted so much bearishness on the mkt in recent weeks – is soon to be over!!
FACTORS IMPACTING THE MKT
- EXPORTS – Mon Inspections were 949,168 (900 – 1.2) & Thur Sales were 378,000 (400 – 700) – which lead to a sharp but temporary down in Dec Corn
- HARVEST PROGRESS – is slightly better than average at 49% (lw -39 avg – 47) Ill – 82 (66) Ind – 65 (51) Iowa – 29 (38)
- OCT CROP REPORT – not only was a friendly surprise but reversed the trend of yield expectations – going forward – as now the Nov Crop Report (11/8) is expected to reveal still lower yields than Oct
Oct Prod – 14,778 (exp – 14,851 Sept – 14,827)
Yield – 180.7 (exp – 181.8 Sept – 181.3)
- HELP FROM THE WHEAT – on Friday, rumors that Egypt was at least considering US Wht in its most recent tender –energized Dec Wht to an 18 cent higher day – and that spilled over into Dec Corn
- HIGHER ON THE WEEK – amidst a wk of intense harvest pressure, disappointing exports & volatively lower DJI & Crude Oil, Dec Corn still managed to eke out a marginal gain – the only member of the grain complex to do so!
- HARVEST PRESSURE IN THE REARVIEW MIRROR – Monday’s progress will certainly show a marked progress in harvest completion – & soon it will be over – so one bearish event will be done – while Exports should continue to chug along!
In an unprecedented & undesirable coincidence, corn prices have been battered by trade tariffs & record yields – down to nearly 10 year lows – at a price very attractive to our trade partners – clearly, prices have stopped declining – that leaves sideways or up – given that, we like our chances with at-the-money calls!
The Dec Wht contract has been subject to the whims of Dec Corn & Nov Beans during this harvest time – as well as decisions of the Ruskies – as to when they may cut back their exports! Neither one of those has worked out well as of late – leading to a 25 cent plunge in Dec Wht this past week! But the good news goes back to that old commodity axiom – LOW PRICES CURE LOW PRICES! And indeed, that’s what happened this week – as US Wht got cheap enough to get Egypt’s attention in their latest tender, and in fact, yesterday afternoon, they purchased 60,000 tonnes of US Soft Red Wht – causing Dec Wht to rally 20 cts
Every thing pointed to down week:
- Dec cat’s big premium to cash
- DJI’s almost 800 point weekly decline
- 4 million head on-feed –from the Oct COF –
The highest # since 1996
- Increases in 3rd-4th & 4th-1st Qtr beef production
However, Dec Cat rode a higher beef trend, lower weights & spill-over support from the Asian Swine Flu – to carve out a $1.70 wkly gain! Also, demand has been usually good for this time of the year!
Last week’s technical action in Dec Hogs was very disappointing as the mkt penetrated the lower end of its 7 week trading range (54-59) with a weekly close over $2.00 underneath low end of the range! However, come this past Monday, the downside momentum couldn’t continue – & the mkt reversed back up with an over -$6.00 rally (52-58)
To nearly the top end of Dec Hogs previous range! The reversal was due to several factors
- Slaughter & daily production came in below expectations
- The amazing discount to cash at $12 (avg – 8) continues to support
- Asian Swine Fever continues to linger as China has now reported over 40 outbreaks! The disease is highly contagious with no known cure!