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
We’ve seen this movie before – progress in US/China trade talks is announced & then the next day more tariffs are announced – and we’re right back to square one! But this time feels different – there seems to be more urgency to “resolve” with mid-terms next Tues and the stock mkt reeling! And the mkt seemed to confirm that – holding gains this week!
FACTORS IMPACTING THE MKTS
- EXPORTS – Mon Inspections were 1,304 (650 – 1150) & Thur Sales were 455,000 (400-700)
- HARVEST PROGRESS – Beans are 72% in( lw -53 avg -81)
Ill – 86 (84) Ind – 80 (77) Iowa – 71 (86)
- NOV CROP REPORT – 11/8 – is widely expected to lower both yield & production due to adverse harvest weather in the past month – both FC Stone & Informa lowered their #’s from Oct
Prod – USDA Oct – 4,690 NOV FC STONE – 4,699 INFORMA – 4,647
Yield- USDA Oct – 53.1 NOV FC STONE – 53.2 INFORMA – 52.6
- TARIFFS – now known as the “tweet heard around the AG WORLD”, Thur am President Trump tweeted that he had very constructive conversations with China regarding the trade war – the mkt immediately rallied 30 cents and amazingly held these gains into the close –the next day various comments – both pro & con came out from Washington – but beans closed the week 30 cents higher –seeming to corroborate that THIS TIME – the promise of a trade deal getting down had some traction – the timing makes sense with Mid-term elections on Tues & the DJI faltering
- HARVEST PRESSURE WILL BE WANING – with harvest probably 75% done now and the final yields not as good as earlier, the bearishness of harvest pressure should be in the rear view
- NOV DELIVERIES – pushed up over 800 this week but were taken by strong hands
- WHAT’S AHEAD IN NOV – actually a lot
- A) MIDTERM ELECTIONS – on Tues 11/5
- B) NOV CROP REPORT – on Thur 11/8
- C) G-20 SUMMIT – on 11/30 with both US & China in attendance & hopes
Growing, after this week, that a trade resolution is at hand the most optimistic week in quite a while happened- and based on the mkts reaction & Friday close, the positive trade talk had some teeth to it! Given Trumps success in NAFTA & the fact that the trade war is jeopardizing the entire economy, it seems very plausible a deal can get done!!
Dec Corn has remained the most stalwart of the grain complex – as the tariffs really applied more to beans than corn – and exports have remained mostly robust – unlike wheat where Russia’s relentless export pace has cut substantially into the US mkt share! Still “a rising tide floats all boats” so Dec Corn did rally 10 cents off the positive trade talk this week! But it did it from a price level relatively much higher off the lows – than beans & Wht! Still upbeat news on exports is more than welcome for all members of the grain complex
FACTORS IMPACTING THE MKT
- EXPORTS – Mon Inspections were 652,000 (800-1.1) & Thur sales were 400,000 (500-800) – collectively, the poorest exports in quite a while – so the up-beat trade news on Thur & Fri is more than welcome
- HARVEST PROGRESS – Corn is 63% in (lw -49 avg – 63)
Ill – 89 (48) Ind – 77 (65) Iowa – 49 (57)
- NOV CROP REPORT – most are calling for a corn yield under 180 – in light of rain & snow issues in recent weeks
Prod USDA – Oct USDA -14,778 Nov FC STONE – 14,830 INFORMA – 14,698
Yield USDA – Oct USDA – 180.7 Nov FC STONE – 181.4 INFORMA – 179.7
- US DOLLAR – had possible reversal action on Thur/Fri & should it be topping out, that would be obvious welcome news
- HARVEST PRESSURE – imagine a world without harvest pressure & tariffs – it could happen very soon!
- 10 YEAR LOWS – tariffs & big yields have pushed corn to 2007/2008 levels – with possibly no tariffs & definitely no harvest pressure –and assuming solid exports continue, it doesn’t seem prudent to push the short side our corn remains the cheapest in the world – that should bode well for higher prices in 2019!
A confluence of many supportive factors teamed up to stop Dec Wht’s downward spiral as the contract managed to eke a small positive weekly close!
- TRUMPS TWEET –could signal the eventual end of the US/China trade war- generally beneficial to all grains
- EGYPT SAYS THERE’S MORE – for the first time in forever, Egypt bought US Wht – and they say we’ll be included in future tenders
- US DOLLAR – had reversal type action late last week – a downtrend in the Dollar would do wonders for our Wht Exports
- THE $5.00 LEVEL – has spawned at least two major rallies in 2019 – in April, $5.00 – 585 & in July, $4.90 – 6.10 – so a major support level traders are mindful of!
Dec Cattle is caught in a classic trading range (116-119) & spent all of its time there in the month of October. The positives were a strong beef & cash mkt, lower weights, optimism over improved relations with China & excellent domestic demand fueled by the highest consumer confidence in 17 years! The negatives were sluggish export demand, a hefty supply of all meat and a solid premium to the cash mkt. The two opposite sets of fundamentals have perfectly offset each other – keeping the mkt range-bound!!
Trading the hog mkt is like “waiting for the other shoe to drop” – due to the 800 pound gorilla that is the AFRICAN SWINE FEVER (ASF) epidemic in China! There are no vaccines, no cure, and infected hogs typically die within 10 days of contracting it! So if they can’t contain it, than due to magnitude of China’s pork industry, a minor drop in their production could result in massive imports on the world mkt! So even though short-term negatives – a slumping cash mkt & a jump in weights – have forced a $3.00 correction, the 2019 outlook is very positive due to the afore-mentioned ASF & positive trade vibes!
Bill MooreQuestions? Ask Bill Moore today at 312-264-4337