The grain complex has been inundated with bearish fundamentals since the beginning of the year – including China NOT immediately buying after the Phase One Signing, China observing their Chinese New Year & the malevolent Coronavirus! But maybe it’s all dialed in – as reflected by new monthly highs today – after all, US Corn is the cheapest!
FACTORS IMPACTING THE MKT
- EXPORTS – Mon Inspections were 562,380 (679, 994) &
- Thur sales were a whopping 1.338 (600-1.300)
- CORONA VIRUS – the numbers keep mounting but the mortality rate has stayed constant at 2% – injecting some hope in the trade community that the pandemic won’t go global!!
- SOUTH AMERICAN WEATHER – too much rain in Brazil has severely slowed the harvest of their record bean crop -but it will take another couple weeks of same to impact the mkt
- CHINESE NEW YEAR – is over but China still hasn’t initiated their buying program instead purchasing beans lately from Brazil
- FEB WASDE REPORT – TUES 2/11/20 – the #’s are generally expected to be lower Across the board – US Stocks – 1856 (1892) – Global – 297 (297) Brazil Bns – 123.8
- GEO-POLITICAL ISSUES – please no more! We’ve had enough “black swan events” in the past few months to last a year (Iran, China Virus)
- HISTORICALLY CHEAP – take a look at your historical charts & you’ll be amazed at how cheap is I adhere to the KISS THEORY! KEEP IT SIMPLE STUPID! Corn is on 10 year lows & And on the world mkt is the lowest of any competing exporter! So what’s not to like?
Fear & uncertainty are the enemies of commodity markets and the current Mar Bean contract is a fine example of that! Even with the newly minted Phase One Trade deal, Chinese exports disappointingly haven’t materialized -as extenuating circumstances have prevented them! First, the Chinese observed their New Year & they took a hiatus from the marketplace – then during their break, the Coronavirus crept up – freezing traders & exporters – as they were unsure of it’s impact! And now there is doubt as to whether or not China can fulfill Phase One in light of the virus – we feel they will!!
After a $1.30 rally since Sept 1 (460-590), Mar Wht was over-bought- in need of a correction & it didn’t have to look very far to find one! The Coronavirus popped up – forcing a 30 cent break (590-560) – but this week, the mkt stabilized – with an up-reversal on Monday and a net gain for the week of 5 cents! Prior to the correction. Mar Wht was the upside leader in the grain complex – feeding off the lowest projected acreage in 100 years coupled with various projection issues around the world. After all the smoke clears from the Coronavirus it could well resume that leadership!!
The long-anticipated break in the cattle mkt has occurred – certainly hastened by the onset of the Coronavirus -leading to a $10 break in April Cattle (128.50-118.50)! The virus dampened the possibility of beef exports to China while the well-chronicled increase in placements for the last 4 COF reports – promised more tonnage on the mkt in the Spring! However, the seasonals point up for the 1st Qtr so this break may have run its course for now!!
At long last, the Apl Hog contract has finally put in a low – as indicated by the extreme volatility it has experienced in the past two weeks – such volatility is often very characteristic of tops & bottoms! From 1/23 to 2/3, the contract lost $14 – then it gained $6.00 from 2/3 to 2/7! Part of the catalyst for this turn-around was news from a Tyson Foods conference call yesterday – that its 1st Qtr Exports could jump over 600% from last year! It seems that the potential huge export potential of US Pork to China has finally come home to roost! We’ll need technical confirmation of a low over the next couple of weeks.
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