AgMaster Report 07/29/2020
If there were ever any confusion as to who is the 800 POUND GORILLA in the room today’s mkt action confirmed it – the bearish weather! Mon’s crop ratings jumped 3% in both corn & beans to 72% – the highest for late July in many years! Fortunately, somehow Phase 1 has stayed alive thru the myriad US/China issues providing “export support” & the US Dollar has plummeted to new yearly lows – further facilitating exports! The “net effect” – as you can see from the above chart is a range-bound mkt (315-355) since late April! We feel – that as bad as this mkt looks currently – that they’ve thrown everything at it but the kitchen sink and that it has already priced in some pretty nasty fundamentals! So rallies can happen!!
Thankfully, China’s prodigious & frequent purchases of US Beans – plus the free fall of the US Dollar- have together offset the bearish weather – resulting in a broad trading range! Not only did the overall good-to-excellent rating rise 3% to 72% but Illinois went up 8% to 76% & Indiana rose 15% to 75%! Today was the first day in 10 mkt days that we haven’t had a 8am sale! The steady flow of China exports have been more than welcome but the trade is “walking on eggs” -fearful that the constant US/China political tension will eventually shut down Phase One of our trade deal! Gold & silver have been on a bullish rampage of late – feeding off a weakening dollar & becoming a “flight to safety” trading vehicle! It’s encouraging that albeit in a range, Sept Beans are consolidating some 60 cents off their lows! This coupled with their historical cheapness have us embracing the old commodity axiom – IT’S ALWAYS DARKEST BEFORE THE DAWN! Or THE MKT LOOKS SO BAD IT’S GOOD! Inexpensive Fall Calls might be prudent from current price levels!
A plethora of negative fundamentals jumped on the Sept Wht contract in the past two days forcing a 25 cent sell-off – they included higher-than-expected Russian wheat production, a 2 percent increase in Spring Wheat’s gd/ex crop rating & increased export competition from the Black Sea! However, today Egypt bought 470,000 MT of wht from Russia & the Ukraine – a much larger purchase than normal! Overall, the contract is congesting – much like its sister mkts – corn & beans – awaiting the results of corns pollination and beans pod-setting!
Much like the grains – Aug Cat is caught in a range dealing with the headwinds of hefty premium to cash & burdensome supplies coming soon – against potential red meat demand as the economy struggles to resume its re-opening! Yesterday was a good example – as unexpected friendly Cattle-On-Feed Report started futures higher but the rally failed – into a sharply lower close – but today the mkt couldn’t follow thru down – rebounding for 90 cent gain! A microcosm of the past two weeks! What cattle sorely needs is at least a taming of Covid-19 & solid resumption of meat demand thru a re-opening of US restaurants!
The technical picture looks brighter than the fundamental one as Aug Hogs keep creeping higher – despite the burden of needing to absorb a big supply – however, strong exports from China have helped significantly! But they desperately need to continue! As well the resumption of the re-opening of the US economy is essential for further “up”!