After a near-vertical 70 cent up move from early December, Jan Beans are finally correcting their overbought condition with a 10-12 cent correction today! The mkt sniffed out the phase one trade agreement a few weeks before it became reality – and has surged higher off the positive trade news despite benign Brazilian weather & a record crop forecast.
FACTORS IMPACTING THE MKT
- EXPORTS – Fri Sales – 747,000 (700-1,500) & Mon Inspections – 1,083,866
- US/CHINA PHASE ONE TRADE DEAL – many thought it would never happen but Trump obviously needed it politically & China needed it economically So it made sense! Finally, the mkt is holding early gains & actually increasing them – in a “melt-up” type of mkt action!
- JAN CROP REPORT – final #’s will be issued on Friday Jan 10 – & will update the November #’s – at 3.550 BB & 46.9 BU/AC
- SOUTH AMERICAN WEATHER – Brazil is on pace for a record crop – particularly in light of the very benign rainfalls that country has had
- PRODUCER SELLING – no producers are selling at these price levels and the mkt will have to rally if it wants grain
- BIG SHORT OPEN INTEREST – even though a lot of shorts have already covered there are still many that haven’t
- THE US DOLLAR – is down 50 points today & is sitting on 2-week lows – whereas the Brazilian Real is on a 7-week high – very favorable for exports
- HISTORICALLY CHEAP – many traders eschew supply/demand fundamentals & only look at where the mkt is on historical charts buying or selling only the bottom or top 10%
Just over 10 year lows, the “down potential” is very small – leaving sideways-to-up! As a trader/analyst, that scenario is seems very receptive to a call strategy!
They say “a rising tide floats all boats” and indeed that has been the case for Mar Corn – up 20 cents while Mar Beans were up 70 cents Mar Wht – 45 cents since the phase one trade deal was agreed to! Rain in Argentina has put the cap on rallies lately – as the mkt anxiously awaits the WADSE REPORT on Jan 10 & the formal signing of the US/China trade – expected in Mid-Jan! It’s hard to imagine further down from here – as we’re already sitting on 10 year lows!!
Mar Wht has rocketed up 20 cents in the past two trading sessions (540-560) as rumors of Chinese Wht Purchases being part of the US/China Trade Deal – bubbled to the surface! Also underpinning the mkt is Russia’s poor wht crop! Finally the US Dollar’s 200 point plummet in the past week implies a big up-tick foreign exports!!
The charts look great & Feb Cat are at an unseasonable $7-8 premium to cash – But the recent Cattle-On-Feed reports portend a cautionary tale as placements have continuously been over the previous year – and those #’s will eventually come home to roost! Meanwhile, the current mkt is feeding off stellar demand – as the DJI scores new all-time highs almost every day!
Feb Hogs appear to have bottomed but they sure are taking their sweet time rallying – given all the positive news – first the trade deal has been agreed on – which should translate into big pork exports to China & second – the production seems to have peaked – meaning less supplies down the road! We’ve been waiting a long time for the US/China Pork connection & it finally seems to be coming to fruition! Finally,the Dec pig crop reflected 3% more all hogs – but exactly within trade expectations – so the mkt took it well!
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