Welcome to 2018 and for those of you in the United States east of around 96° west and north of 38°north, welcome to the winter wonderland. Of course, in this case with air temperatures here in northern Illinois hovering around -13° Fahrenheit, (with wind chill -35) my compatriots in the office here are interpreting the word “wonderland” as in, I wonder why I am living in this land? I have to admit that even with Norwegian blood coursing through my veins, I did need to zip up my jacket this morning, but reminded them of the old Scandinavian saying, there is no such things bad weather, only bad gear.
You have probably already gathered that seeing that I am talking about the weather and Scandinavian folklore there must not be a tremendous amount of news around this morning and you would be correct. Yes, thoughts of winterkill in wheat should help support that market, but the trade still appears relatively unconcerned about this in light of the global supplies. We do have the final crop number and supply/demand estimate just 10-days away, and estimates should be flowing in by the end of the week, but that is hardly a market driver at this point.
South American appear to be progressing well. Brazil, in particular, appears to be in good shape and this week, Dr. Cordonnier bumped his bean estimate higher by 1 MMT to 109 MMT. Do keep in mind that the overall soy crop was planted late and this combined with poor prices levels should lead to a lower safrinha corn crop, and last year this second crop accounted for 70% of the production. Argentina has now reached 82% planted for beans and 70% for corn, and as a whole, the crop is stable with the recent rainfall. That said, we have plenty of season ahead.
As we kick off the trade for the New Year, we might as well look around at the macros and see how that has begun. Equities are higher but seeing that we fell backward at the end of last week, that means we have yet to set a new record high. The bulls must be discouraged. Metals are generally higher, as are energies, but in the case of the latter, the gains are rather insignificant. The one market whose action does look a bit intriguing this morning is the U.S. Dollar which is under decent pressure. Do note that the dollar index is currently 11% below were we began trade one year ago and is looking quite defensive. We have not pressed through any key levels of support as of yet (90.99), but with weekly indicators now crossed lower, it would appear that level could be tested relatively soon. If we are looking for something that could breathe a little positive life back into the commodity sector, it could be right here. Certainly, a market we need to pay attention to as the week's progress.
Last but not least this morning, we have begun the grain/soy trade on a positive note, which if nothing else provides a little psychological lift. I wish I had some type of statistical data that tells us that 90% of the time if the grain market opens higher in the first day of the year that then portends an up year, but I have nothing of the sort. That said, as I commented in my weekend letter, I do believe that 2018 and 2019 will see the Ag sectors begin to take a positive leadership role in the commodity sector but we may have to spend another 3 to 4 months wandering in the frozen tundra first.