Macro Environment Impacts Ag Commodities
Feb 06, 2018
Good Morning! From Allendale, Inc. with the early morning commentary for February 6, 2018.
Grain markets are consolidating as the macro market environment is taking the spotlight. Questions being asked are: Will money flow come back into stocks as quickly as it has come out? When will traders see grains as a bargain and cover large short positions?
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World Weather Inc. says, “In Argentina, a general band of showers and thunderstorms will slowly shift from south to north Wednesday through this weekend along a frontal boundary. Some meaningful rain is expected, especially in central and northern production areas Friday into Sunday; though, the significant rain will be localized with some locations that miss out. Follow-up rain will be needed for improvements of subsoil moisture and for areas that miss out in the next seven days from the meaningful rain.” They expect Brazil’s conditions to remain favorable for crop development.
Trade estimates for South American production on Thursday’s report has Argentina at 40.68 mmt (USDA 42.00) for corn. They are looking for a 54.06 mmt (USDA’s 56.00) for soybeans. Trade estimates for Brazil has corn production at 93.73 mmt (USDA’s 95.00) and soybeans 111.20 mmt (USDA’s 110.00).
Trade estimates for US Ending stocks has corn and wheat with minimal change from USDA’s last report, however they are expecting a 3.5% increase in soybean stocks.
Brazil’s soybean harvest is 6% complete, slightly behind the average of 8%. Their 1st crop corn harvest is in line with the progress of the last 2 years at 10%. Second crop corn planting is well behind recent years progress with only 10% completed verses 20% last year.
Funds were net sellers across the grain complex on Monday. They were estimated sellers of 8,000 corn contracts, 9,000 soybeans, 4,500 wheat, soymeal 4,000 and soyoil 3,500 contracts.
Legislation to help young "Dreamer" immigrants struggled to gain footing in the U.S. Congress, as lawmakers prepared to hold a Tuesday vote on a short-term government funding measure to avoid a rerun of January's three-day partial shutdown. (Reuters)
Cattle Showlists for this week are estimated to be 4,700 head more than last week.
Selloff in stock indices are concerning bulls in the livestock complex as futures market slips on Monday. However, bull spreading remains a positive factor for the market. Cash cattle are expected to be steady to better this week if it were not for the outside markets. Heavy snow across IA is hampering movement of meat supplies and is providing a bit of support to cutout values.
April live cattle futures posted a new high for the move on Monday and closed lower with an outside day down on the charts. This would suggest the possibility of more selling pressure today. Support crosses at 122.50 with resistance at 127.20 in April futures.
The pork market is depending on a weak US Dollar to support export volume. Packers have been aggressively trying to stay up with demand. Bull spreading remains a key factor in maintaining the uptrend in lean hog futures.
April lean hogs have bounced off the 5-day consolidation support around 72.00. First level of resistance comes in at 74.12 and then at 76.50.
Dressed beef values were higher with choice up .33 and select up .71. The CME Feeder Index is 148.12. Pork cutout value is down 1.51.
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