It seems that the most noteworthy story circulating this morning emanates from Washington, surprise, surprise, as Congress has aligned with President Trump by approving a bill that would increase the size of stimulus checks from $600 to $2,000, which has now been sent over to the Senate. Interestingly enough, much of the commentary I have read implies that passage in the Senate is “uncertain,” which comes as a bit of a surprise as I assumed this would be akin to that proverbial snowball in hell, but what do I know of the inner workings of Washington. Regardless, all of this government largess, not to mention the abundance of capital available from the Fed at little to no cost, has kept the equity markets excited as we have pressed into new record highs yet again this morning, but all of this has taken its toll on the dollar. We are now on track to record the lowest monthly close since March of 2018, and interestingly enough, what would be the lowest yearly close since 2013. Of course, we have talked about this and the correlation to commodity markets, it seems, ad nauseam, but the inverse relationship appears to have held true again this year. While there is certainly no assurance that it always will in the future nevertheless, it is worth pointing out that we are rapidly approaching the reaction lows recorded back in early 2018 and we have long-term indicators just now slipping into an oversold position. We do not know yet if this combination will set us up for another bottom in the dollar, but as we transition into early 2021, it will almost certainly be worth keeping an eye on. A stable or rising dollar will not change the fundamental picture we currently confront in the grain and soy markets but could shift money flow and create more significant headwinds for commodities in general. Always remember the old adage that it is never the alligators that you are watching that will get you.
Last week large spec did a little reshuffling but remained the bulls in the commodity sector. During the week ending December 21st, they were sellers of 3,400 Chicago wheat, 735 KC wheat but turned up to purchase 19,173 corn, 12,675 beans, 4,916 bean oil, and just over 10,000 meal. While we have a few more days to go, this could leave them exiting 2020 long over 300,000 contracts in corn and close to 180,000 beans. These bulls are going to require some fresh feed soon after the New Year.
Rains have been a bit more plentiful in Brazil over the past week, enough at least to hold most crop projections in check. Dr. Cordonnier kept his bean number at 130 and corn at 102. Conditions have not improved as much in Argentina, though, and he lowered estimates for both corn and bean by 1 MMT each, taking the corn to 46 MMT and beans to 47 million. By the way, the strike continues at Argentine ports with over 140 ships now backed up. Negotiations are taking place today.
