RCM Ag Services

Category: Agriculture

03 Jun 2024
Agriculture, CME, Corn, Education, Futures, Grain, Hedging, Market Commentary, Market Updates, Research, Risk Management, Soybeans, USDA Report, Weather, Weekly Prices rcmagserv 0 comment

AG MARKET UPDATE: MAY 10 – 31

Corn had a rough week as planting is nearly wrapped up and the expectation of high initial US crop ratings put pressure on the market. The forecast for June turned slightly wetter but will not have any material impact on planting finishing up. The Black Sea yields continue to be pressured due to their weather with no immediate relief apparent. The USDA Crop Production report on June 12 will be watched closely as we get updates for the US including acreage, area harvested, and yield. The market will be looking for any good news before then to help support a weakening market.

Via Barchart

Beans fell on the week as planting advances despite some slowdowns in some areas due to weather. Currently only 3% of soybean production comes from areas experiencing drought. Rio Grande do Sul is turning warmer and drier after weeks of issues with flooding. Morgan Stanley estimates 5 million tonnes of soybeans were lost to the flooding in the region. Beans, like corn, have no bullish weather to help the market as it looks like normal planting progress should be made and no major weather issues in the forecast.

Via Barchart

Equity Markets

The equity markets have had a rough go lately with all major indexes falling well off recent highs. Several earnings misses and growing belief that “higher for longer” could last through the summer has people raising questions about the market.

Via Barchart

Other News

  • The Black Sea weather forecast has improved for next week as rain has been added to the forecast.
  • Wheat has seen a strong rally since mid-April seeing a $1.50+ rally at one point with possible production issues in the Black Sea even with the small pullback to end the week.

Drought Monitor

Via Barchart.com

Contact an Ag Specialist Today

Whether you’re a producer, end-user, commercial operator, RCM AG Services helps protect revenues and control costs through its suite of hedging tools and network of buyers/sellers — Contact Ag Specialist Brady Lawrence today at 312-858-4049 or [email protected].

 

28 May 2024
Agriculture, CME, Futures, Lumber, Market Commentary, Market Updates, Research, Risk Management, Weekly Prices rcmagserv 0 comment

LEONARD LUMBER REPORT: HEADWINDS, BROWN SHOOTS, INTEREST RATES

Recap:

Headwinds, brown shoots, interest rates—whatever data we look at is not good. The question is whether we have to start worrying about the housing market. We were looking for more but didn’t get it. What we have is the same market we have had for 17 months now. It has pockets of positives followed by a long bleed. That has been the lumber market for over 40 years now. It is tradable and profitable when one adapts to the trade mode. So what does that look like?

Buying into a falling market has always been a challenge for most. For a few years, you could buy into strength and make money. That is no longer the case. There isn’t enough time between cycles. What this indicates is a flat demand curve. What has finally hit the market is the higher rate uncertainty. For a year, the builders worked around the higher rates. That worked for the aggressive buy side. We now have returned to the “average Joe” buyer. This was expected but came early. The builders are reacting by pulling back. This knee-jerk reaction will take time to work itself out, but for now, it adds pressure.

This is an environment where you need to dust off that 10-year-old playbook. How do you take advantage of a flat market that offers a pop every so often? Today, the industry is offside, being long futures when there is a $40 or more basis opportunity available. Lower prices will rebalance that.

The fear of a strike, fires, or another shutdown has kept the marketplace off balance. At the end of the day the wood continues to show up.

Technical:

The trading range is very narrow. The focus today is on the outer bands. On the upside, the 38% retrace sits at 556.90, and the 200-day moving average sits at 564.98. This market can gain momentum with a move over the 200 day. On the downside, 511.00 is the key support point, followed by 497.00 and 486.00. This area has been support for months. There isn’t a technical point that would increase the downside momentum. Breaking back into the 400’s would indicate an economic turn in housing. The funds seem to be leaning towards a slowdown and could help it lower. That conversation is not for today.

For today, 540 is too high and 520 is too low. Enjoy.

Daily Bulletin:

https://www.cmegroup.com/daily_bulletin/current/Section23_Lumber_Options.pdf

The Commitment of Traders:

https://www.cftc.gov/dea/futures/other_lf.htm

About the Leonard Report:

The Leonard Lumber Report is a column that focuses on the lumber futures market’s highs and lows and everything else in between. Our very own, Brian Leonard, risk analyst, will provide weekly commentary on the industry’s wood product sectors.

 

Brian Leonard

[email protected]

312-761-2636

20 May 2024
Agriculture, CME, Futures, Hedging, Lumber, Market Commentary, Market Updates, Research, Risk Management, Weekly Prices rcmagserv 0 comment

LEONARD LUMBER REPORT: IT WAS A TOUGH WEEK FOR CASH AND FUTURES

Recap:

It was a tough week for cash and futures as the quiet market pushed prices lower. Before we sound the alarm, the market is $22 off its high and $18 off the low. After 20 sessions, the market sits in the middle. At this time of year, the market tends to put in a seasonal low. This battle with a $35 range is mildly friendly. This marketplace is not heading for the exits. The industry and speculators are firmly committed to the long side, while the funds are firmly committed to the short side. If you are long waiting for the funds to react, it will be a long 30 days. Last year, we saw the same dynamics of less traffic, falling builders’ sentiment, and less construction than projected. What happened was a grind higher market. I want to make a call for the same, but this year, we are just now confirming more negatives and fewer positives. More brown shoots don’t necessarily equal sharply lower prices. It will just be a continued drag on this market. I would be mildly friendly to the market if it weren’t for the fact that the industry is long-future and cash-playing Texas Holdem with a Texas hedge. Those long cash should be selling the pops in futures.

Technical:

The tech read hasn’t been effective this year due to the tight range between swings. Today, there is a mildly friendly candlestick. The market is building a new value area about $20 higher than last year at this time. I’m looking for a lower RSI up here to confirm.

Daily Bulletin:

https://www.cmegroup.com/daily_bulletin/current/Section23_Lumber_Options.pdf

The Commitment of Traders:

https://www.cftc.gov/dea/futures/other_lf.htm

About the Leonard Report:

The Leonard Lumber Report is a column that focuses on the lumber futures market’s highs and lows and everything else in between. Our very own, Brian Leonard, risk analyst, will provide weekly commentary on the industry’s wood product sectors.

 

Brian Leonard

[email protected]

312-761-2636

13 May 2024
Agriculture, CME, Corn, Cotton, Dow Jones, Futures, Grain, Hedging, Market Commentary, Market Updates, Research, Risk Management, Soybeans, USDA Report, Weekly Prices, Wheat rcmagserv 0 comment

AG MARKET UPDATE: APRIL 19 – MAY 10

Corn has seen a strong rally over the last couple of weeks as planting is slightly delayed in parts of the US and funds seem to have changed their tone a bit. Last week’s USDA Report did not have any earth-shattering news but did provide some good news for the markets. US corn stocks were lower than estimates heading into the report along with world stocks for both 23/24 and 24/25. The production outlook for this year, 181 bu/ac, continues to show how the advances in agronomic practices and seed genetics continue to grow. All of these carryout and stocks numbers are based on those production estimates so if we begin to see weather issues or problems at the end of planting, we could continue to see revisions to the downside, and vice versa with great weather and conditions.

Via Barchart

Beans had a rough week after a strong start to May. The USDA Report leaned bearish as the South American production continues to expand for the upcoming year. The USDA is slowly trimming Brazil’s bean crop but is still above CONAB’s estimates by a bout 300 million bushels. The recent flooding in southern Brazil will force their hand to lower their expectations but the CONAB estimates on losses will be closely watched. Another promising development in the report was the expectation of record imports and usage in China. While much of this is expected to be met by Brazil and issues with their production will still need to be met.

Via Barchart

Equity Markets

The equity markets have rebounded over the last couple weeks with earnings season going on. The feeling on Fed rate cuts keeps pushing them back with one not expected until the fall and at least one fed chair thinking we may not get one this year as inflation remains sticky. Rates will remain data dependent but the feeling of higher for longer continues to seem more likely.

Via Barchart

Cotton

  • Cotton has fallen well off the February and March highs as the lack of demand in the global market mixed with funds exiting their long positions has beaten down the market.

Via Barchart

Wheat

  • Wheat’s recent rallies are welcome after struggling to find much positive movement in the market to start the year. Frost damage to Russia’s wheat crop and a dry pattern in the Black Sea has been the recent mover as the USDA Report had some mixed numbers. Smaller than expected US stocks, 24/25 world stocks and total production with higher than expected world wheat stocks for 23/24.

Other News

  • Conflict continues between Israel and Palestine as a ceasefire has been negotiated on many sides, but nothing has been agreed to yet.
  • Major flooding across southern Brazil has killed thousands of livestock and will have an impact on their crop but the extent of which is not known yet

Drought Monitor

Here is the current drought monitor as we head toward planting with subsoil moisture a focus.

Via Barchart.com

Contact an Ag Specialist Today

Whether you’re a producer, end-user, commercial operator, RCM AG Services helps protect revenues and control costs through its suite of hedging tools and network of buyers/sellers — Contact Ag Specialist Brady Lawrence today at 312-858-4049 or [email protected].

 

06 May 2024
Agriculture, CME, Futures, Hedging, Lumber, Market Commentary, Market Updates, Research, Risk Management, Weekly Prices rcmagserv 0 comment

LEONARD LUMBER REPORT: MIXED REVIEWS

Recap:

Mixed reviews. That is the industry’s opinion of this market. What we saw in futures last week was slightly more positive than mixed. Futures are showing signs of a turn. The market closed slightly higher for the second week as print continued down. It also works higher on low volume. That indicates a muted computer trade down here. The fundamentals are the focus. The funds are short but didn’t add much for the week. This lack of momentum puts them on the sidelines. So, with all the blah in the market, I would expect more of the same this week, but that’s not lumber. One side will try to push the market. Today, it is more likely that the longs will do the pushing, but never count the funds out. The cash market is getting better, albeit from some very low levels. That creep should support futures. There are still eight long sessions until May expires, so volatility could be an influence.

Technical:

The tech picture is still no help. We see better momentum signs and a slightly higher trend but no confirmation of direction.

There are two key focal points. The first is the upside objective of 556.60, which is the 38% retracement of the move. A close over it may cause the short funds to start exiting. That push sends it to the 200-day moving average at 566.80, setting off another round of short-covering. All of a sudden, the futures market is at $600.

The other point is the low at 511.00. Here, the opposite happens, and the computers kick into sell mode. Futures fall to $480, and the cash market shuts off.

Your risk model should lean towards higher prices and hope it happens. For two years now, the market has never signaled an end to the basis opportunity. It still hasn’t.

 

Daily Bulletin:

https://www.cmegroup.com/daily_bulletin/current/Section23_Lumber_Options.pdf

The Commitment of Traders:

https://www.cftc.gov/dea/futures/other_lf.htm

About the Leonard Report:

The Leonard Lumber Report is a column that focuses on the lumber futures market’s highs and lows and everything else in between. Our very own, Brian Leonard, risk analyst, will provide weekly commentary on the industry’s wood product sectors.

 

Brian Leonard

[email protected]

312-761-2636

29 Apr 2024
Agriculture, CME, Futures, Hedging, Housing, Lumber, Market Commentary, Market Updates, Research, Risk Management, Weekly Prices rcmagserv 0 comment

LEONARD LUMBER REPORT: IT WAS A BETTER WEEK FOR TRADING

Recap:

It was a better week for trading. The market seemed to drift into a bottoming formation, followed by a couple of good spike-up days and a new low for the move. We can call it a bottoming action, supportive, new low, or dead cat bounce. I heard all of them. What it did was cause the trade to be bullish one day and bearish the next. While the trade was highly volatile, the net for the week was only a $8 gain. What was different last week was that, for the first time, we had a few green shoots appear. From wholesalers covering shorts to mills holding prices, there was a better tone. We head into next week with a much more positive attitude.

While attitudes are better, most are very cautious. Prices have fallen far more than expected. Taking the cash market back into the $3’s should not have happened with all the shutdowns etc. The trade is now searching for the reason. Is there a more significant issue lurking out there? It’s hard to pin it on the market going too high, so it needed to go lower theory. I saw fear in the faces of some traders. They couldn’t sell a stick. We can’t blame the algo for that.

The industry is exiting shorts and getting long. Seeing them in a good flow instead of a battle is nice. This last trade report had short funds almost doubling their position while the long funds continued to exit. This report cuts off on Tuesday. I bet it shows the long fund numbers reversed and going higher on the next report. The trade at the end of the week had a fund tone to it.

Technical:

It’s harder to pull any green shoots out of the tech read, except it closed higher on Friday. This indicates that the battle down here isn’t over. The problem for the shorts is that the new volatility rallied futures $15 in a few trades. Your position can be upside down in a few minutes, not sessions. To summarize, the tech read calls for an ABC correction up, not a V bottom. The jury is still out.

 

Daily Bulletin:

https://www.cmegroup.com/daily_bulletin/current/Section23_Lumber_Options.pdf

The Commitment of Traders:

https://www.cftc.gov/dea/futures/other_lf.htm

About the Leonard Report:

The Leonard Lumber Report is a column that focuses on the lumber futures market’s highs and lows and everything else in between. Our very own, Brian Leonard, risk analyst, will provide weekly commentary on the industry’s wood product sectors.

 

Brian Leonard

[email protected]

312-761-2636

22 Apr 2024
Agriculture, CME, Corn, Cotton, Dow Jones, Futures, Grain, Hedging, Market Commentary, Market Updates, Research, Risk Management, Soybeans, Weather, Weekly Prices rcmagserv 0 comment

AG MARKET UPDATE: APRIL 8 – 19

Corn continued its slow bleed lower over the last couple weeks with no major bullish news to turn this market around. US weather may slow planting down to end April a bit but not enough for markets to begin to worry anytime soon. Argentina’s rain will continue to slow harvest as the discrepancy between the USDA and South American reporting services remains a mystery. The bounce to end the week was due to escalation of the Israel and Hamas/Iran fighting in the middle east.  According to Reuters the US EPA is expected to announce plans to temporarily waive restrictions on higher-ethanol gasoline blends this summer. This market is at the mercy of funds and weather which currently aren’t helping prices higher.

Via Barchart

Beans continued lower as they lost another 20+ cents this week even with the big up day on Friday. Beans need any good news they can get as you can see from the chart below it has been a rough few months. Soybean oil has also had a rough go lately as bullish news is lacking in the soybean complex. The size of the bean harvest with the USDA and CONAB numbers still far apart will be the biggest factor moving forward as we need all the information we can get. We did get close to the technical support which is good to see a bounce there.

Via Barchart

Equity Markets

The equity markets continued their recent struggles as tech and AI stocks have given back some recent gains. Pullbacks are healthy for markets, especially after the run we have had to start the last few months being so concentrated, but sticky inflation and war escalation provides some problems to monitor as earnings are set to ramp up next week.

Via Barchart

Other News

  • Israel retaliated against Iran overnight continuing the escalation of tensions and war in the middle east.
  • The USD keeps moving higher as the June USD Index went over 106 earlier this week.
  • Cotton has struggled of late as a lack of demand on the global scale and no weather issues yet in the US pulled it back from recent highs.

Via Barchart

Drought Monitor

Here is the current drought monitor as we head toward planting with subsoil moisture a focus.

Via Barchart.com

Contact an Ag Specialist Today

Whether you’re a producer, end-user, commercial operator, RCM AG Services helps protect revenues and control costs through its suite of hedging tools and network of buyers/sellers — Contact Ag Specialist Brady Lawrence today at 312-858-4049 or [email protected].

15 Apr 2024
Agriculture, CME, Housing, Lumber, Market Commentary, Market Updates, Research, Risk Management, Weekly Prices rcmagserv 0 comment

LEONARD LUMBER REPORT: The futures market got crushed last week

Recap:

The futures market got crushed last week. The lack of a cash market increased the negative momentum. It was, as one trader put it, a “strange change in dynamics.” On almost every break in the last 16 months, the mantra was to buy it lower. We did that dance under $520 and again under $500 numerous times. Last week, the majority were preaching to sell a bounce. That is a definite change. That said, let’s wait to sell the farm.

The starts and permits report come out on Tuesday. They are looking for a number around 1.5. I struggle to see how, with the current reduced production, there can be an abundance of wood. We do generate abundance with every buy, but that is drained over time. This last buy round was more aggressive than usual. Traders became more confident and added purchases showed this. Today, we are living in the glow of that abundance. It will get cleaned up.

Economic:

We talked for months, going on years, about the probability of something breaking in the system. I’m worried the Fed can upset the marketplace with continued bad decisions. They want to cut interest rates while still carrying a large balance sheet. Continuing to push money into the system and cutting rates in an inflationary environment will choke off the market. And just to be clear, we are the first to feel the choke. I am worried we are seeing it in the multifamily sector already. Disrupt the apple cart, causing unemployment to rise, and we get the single-family sector to start to feel that choke.

Our last rally was a needed fill-in that was better than expected. This current downturn is the clearing out of those extras. Once done, another fill-in will be needed.

Technical:

The downside move last week was violent, to say the least. This pushed the RSI down to 11.80%. The selling is computer-related, driving markets well beyond the norm. Lumber futures went from $1250 to $1700 purely on computer buying. My point is that computers can move markets. Now that said, here it comes: the futures market has been following the cash market lower. The move in futures has been as much fundamentally driven as it has been computer driven.

This RSI extreme will correct itself.

 

Daily Bulletin:

https://www.cmegroup.com/daily_bulletin/current/Section23_Lumber_Options.pdf

The Commitment of Traders:

https://www.cftc.gov/dea/futures/other_lf.htm

About the Leonard Report:

The Leonard Lumber Report is a column that focuses on the lumber futures market’s highs and lows and everything else in between. Our very own, Brian Leonard, risk analyst, will provide weekly commentary on the industry’s wood product sectors.

 

Brian Leonard

[email protected]

312-761-2636

08 Apr 2024
Agriculture, CME, Corn, Futures, Grain, Market Commentary, Market Updates, Research, Risk Management, Soybeans, USDA Report, Weekly Prices, Wheat rcmagserv 0 comment

AG MARKET UPDATE: MARCH 8 – APRIL 8

Corn has traded in about a 20 cent range the last month spending much of its time in July corn between $4.40 and $4.60. The USDA acreage intention report gave the markets an initial bullish reaction but struggled to follow through past the report as prices have fallen back from the post report highs. Corn acreage for 2024 came in at 90.036 million acres (91.776 estimate) which was a surprise to the market. The trade appears to believe that the acreage number is likely higher as it has given some of the gains back quickly. While lower prices and high input costs are likely to affect farmer’s decisions, if the weather this April and May is friendly to planting it will be hard for farmers to leave acreage on the table. South America harvest in Brazil and Argentina is in line or slightly behind average.

Via Barchart

Soybeans have fallen from their recent highs as the USDA Report did not provide the market with any actionable news. The USDA came in at 86.510 million acres (86.530 estimate), because the acres were so close to the estimate the report was not a big mover for the bean market. The market has slowly traded lower since the report as the next market mover will be the April USDA and April CONAB Reports this week. The more information we can get on South America’s harvest the clearer the picture will become as the discrepancies between the USDA and CONAB still have the markets confused.

Via Barchart

Equity Markets

The equity markets have pulled back from recent highs with the pullback in some tech names but the market and economy are still strong as inflation remains sticky and the Fed trying to decide when, or if, to cut rates this year.

Via Barchart

 

Other News

  • US wheat acres will be lower than last year. Winter wheat plantings shrunk from the estimate in January, but spring wheat will be slightly higher than last year.
  • The transmission of bird flu in cattle in several states this week drove cattle prices lower and is a development to keep an eye on.

Drought Monitor

Here is the current drought monitor as we head toward planting with subsoil moisture a focus.

Via Barchart.com

Contact an Ag Specialist Today

Whether you’re a producer, end-user, commercial operator, RCM AG Services helps protect revenues and control costs through its suite of hedging tools and network of buyers/sellers — Contact Ag Specialist Brady Lawrence today at 312-858-4049 or [email protected].

01 Apr 2024
Agriculture, CME, Futures, Hedging, Housing, Lumber, Market Commentary, Market Updates, Research, Risk Management, Weekly Prices rcmagserv 0 comment

Leonard Lumber Report: The hardest part of a lumber cycle is the drift

Recap:

The hardest part of a lumber cycle is the drift. The value of the commodity becomes a moving target, causing futures to erode to its last trading area. The futures market has been in a range from $560 to $595 since the end of November. Without the support of the funds, the market will return to that area and wait for the next buy.

The economy isn’t good. It is great. There is so much capital flowing out there that we can never discount the home market potential. This will be a $20 down $50 up market unless something breaks.

 The key points are the 38% at 598.80, the 50% at 590.70, and the 61% at 582.60. It could be the range areas.

Note: I see that open interest hit 10,000. Once the funds gear up, it will double. As I said before, even with 2000 open interest, I was able to trade large quantities with no price movement. This is a good trading market.

 

Daily Bulletin:

https://www.cmegroup.com/daily_bulletin/current/Section23_Lumber_Options.pdf

The Commitment of Traders:

https://www.cftc.gov/dea/futures/other_lf.htm

About the Leonard Report:

The Leonard Lumber Report is a column that focuses on the lumber futures market’s highs and lows and everything else in between. Our very own, Brian Leonard, risk analyst, will provide weekly commentary on the industry’s wood product sectors.

 

Brian Leonard

[email protected]

312-761-2636

Disclaimer

RCM Ag Services is a registered DBA of Reliance Capital Markets II LLC. Trading futures, options on futures, and retail off-exchange foreign currency transactions are complex and involve substantial risk of loss and are not suitable for all investors. Loss-limiting strategies such as stop loss orders may not be effective because market conditions or technological issues may make it impossible to execute such orders. Likewise, strategies using combinations of options and/or futures positions such as “spread” or “straddle” trades may be just as risky as simple long and short positions. There are no guarantees of profit. You should carefully consider whether trading is suitable for you in light of your circumstances, knowledge and financial resources. You may lose all or more than your initial investment. You should not rely on any of the information herein as a substitute for the exercise of your own skill and judgment in making such a decision on the appropriateness of such investments. Opinions, market data and recommendations are subject to change without notice. Reliance Capital Markets II LLC shall not be held responsible for any actions taken based on this website or attached links. Parties acting on this electronic communication are responsible for their own actions. Past performance is not necessarily indicative of future results.