Futures Archives - Page 3 of 4

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

18 Mar 2024

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

LEONARD LUMBER REPORT: Last week, the futures market saw a healthy correction

Recap:

Last week, the futures market saw a healthy correction, dropping $22 in 4 sessions. March expired at 560, which was right in line with expectations. What was different was that most expected it to carry a premium, not a discount. My point is that this cash run has been far more significant than most expected. That leads to the question of how much was bought and whether it is enough. The cash side has hit the pause button to get a read of where they are. This is typical in any run but also leads to a quieter cash market and a futures correction. That sums up the week. Now what?

The industry focus is always on the micro. Today, wood continues to go out the door at a good pace. It has been a fluid trade for 18 months so that that feature will remain. The mills do have a tighter grip on certain items. This is related to logs and production. Most items are still under and over-produced within the typical timeframe. Timing that imbalance has always been a challenge. What remains in place is that a cash market run will not continue with some items tight and others abundant. The focus for this upcoming week will be on items liquidity. A sharply lower trade in May futures on Monday will give an immediate answer.

The macro picture has to be looked at. We can see the data on fewer shipments, log issues, fires, and the “worm.” What we can’t measure today is the potential headwinds of a slowing economy, rates that are higher for longer and affordability. All that is slowly creeping into the multifamily side of the business. That we can measure. The question is if a slowing multifamily sector takes the energy out of the starts number going into the fall. If it happens, we can expect a flat trading range that mirrors 2023.

The industry has to look to futures to lock in a profit or to mitigate risk. Playing supply spikes isn’t the best strategy.

Technically, this market has strong support all the way down from here. The key points are the 38% at 598.80, the 50% at 590.70, and the 61% at 582.60. A close over $620 indicates the funds are back in charge.

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:

Brian Leonard

[email protected]

312-761-2636

04 Mar 2024

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

LEONARD LUMBER REPORT: The futures market sprang to life on Friday

Recap:

The futures market sprang to life on Friday, with May spiking to 620.50. It looks as if long-term buy stops were hit without any selling above. This market needed a little rattling. It wound itself tight into a small range while the cash market was busy daily. The premium did add to the buy side reluctance but a spike higher was brewing. Now what?

Weeks ago, we discussed the cash market needing to be the leader. Futures were already at a premium, and only the sell algo was trading. The cash side has been strong for a few weeks. The spring rally started early after the cash market suffered through January. That lag in business is showing up today. So, a combination of pent-up business and spring has helped keep the mills active.

This is not a supply-and-demand rally. The reduced supply has yet to be a factor in the trade. This is an accelerated fill-in. The buy side should see this as a warning to what a supply disruption could look like.

Technical:

The technical picture is limited to short-term data. The focus today is on the RSI in May, which is sitting at 75.10%—other than that, the switch from the old contract to new has nullified a lot of data points. If we add in the older data, the market tells us there is a $80 downside and $200 upside.

Note: A commodity producer will only lose money for so long before retooling the strategy.

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:

Brian Leonard

[email protected]

312-761-2636

26 Feb 2024

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

LEONARD LUMBER REPORT: IT IS STILL FEBRUARY

Note:

It is still February. I have to remind most traders of that. Most are trying to accelerate the cycle up a few months, looking for all the issues to hit. In reality, the market is trading at an average February pace. What is unusual is the added buying in the last few weeks. Most are trying to hold a consistent inventory level into the spring buy. The previous two weeks’ business was not an inventory build but a fill-in. That is mildly friendly.

It is a challenging environment to navigate. For every negative data point, there is a positive one. You can’t get pessimistic about the housing industry. 2024 will be steady. The difference between 2023 and 2024 was that the lumber market was demand-driven. There could be a pivot coming to a supply-driven market. That is when the volatility starts. Last year, the cheapest, most abundant wood in the world was sitting at Port Canaveral. That is different this year.

Technical:

I am switching to the May futures contract for the tech read. Now is a good time to mention the significant gap from 572.00 to 566.00 under the market. For now, we aren’t going to worry about it. The RSI is 62%, with most momentum indicators pointing up. You can build a case that May has been a more volatile trade. That may indicate more volatility to come. A few extra cars with futures $30 over is a win/win.

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:

Brian Leonard

[email protected]

312-761-2636

12 Feb 2024

Agriculture, CME, Corn, Dow Jones, Futures, Grain, Hedging, Market Commentary, Market Updates, Research, Risk Management, Soybeans, USDA Report, Weather, Weekly Prices rcmagserv 0 comment

AG MARKET UPDATE: JANUARY 26 – FEBRUARY 9

Corn has had a rough 6 months and continued lower with bearish sentiment and funds being short. The USDA report had higher Brazil corn production than the CONAB numbers by 10.25 MMT. The market has been looking for any good news to help put a floor in and that has not materialized. The one bright spot in exports is that we are ahead of pace to both Japan and Mexico for the year while China’s demand has been poor heading into the Lunar New Year. The USDA report pegged 23/24 US corn stocks at 2.172 billion bushels, close to the pre-report estimates.

Via Barchart

As bad as the news, or lack of news, for corn has been, the news for beans has been worse. In this week’s USDA report the US bean stocks came in at 30 million bushels higher as exports struggle. Brazil bean production came in above expectations as well with a 156 mmt production (trade estimate of 153.15mmt). With a quiet period occurring during Chinese Lunar New Year it is unlikely to see strong exports and weather is neutral to bearish in South America.

Via Barchart

Equity Markets

The equity markets continue to climb as the S&P 500 closed over 5,000 for the first time on Friday. The market has been pulled higher by the same stocks that have gotten it to this point in the magnificent 7 and AI stocks rallying. Analysts are debating whether the rally should broaden in 2024 or remain top heavy as it has started. The Fed will likely keep rates where they are until at least the summer.

Via Barchart

Other News

The bearish USDA report continued to weigh on the markets as South American production came in above expectations, still higher than many private estimates.
Thanks to Chip Flory and Davis Michaelson for having Jody Lawrence on their internationally known and critically acclaimed AgriTalk radio program last Friday. Here is the link.

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].

29 Jan 2024

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

LEONARD LUMBER REPORT: CAN IT BE ANY MORE OBVIOUS?

Recap:

Can it be any more obvious? For many months, which are now turning into years, the marketplace has been perpetually short. Some by design and some by necessity. The market is always short. That had been a winning strategy. With a shift to tighter supply, pressure on the buy-side is coming into play today. Last week was a good example where an announcement of another mill closure set futures, not cash off. The industry adjusted by exiting futures positions, not buying cash. Where is the panic? The answer lies with the other obvious factor. As long as construction remains steady and mills produce, the industry can stay in this guarded mode. That is why the action last week was in the futures and not cash. The buy side will not go unless it is needed. Announcements won’t be a factor right after a buy round. They are a few weeks in.

The futures market has changed directions. Instead of bleeding the market to the downside, it will bleed the market to the upside. This is not fund-related or algo-driven. This is a simple cycle change. The potential for sharp upside moves is real. The ability to hold those gains is not so much.

Technical:

The elephant in the room is the gap below the market. I looked for it to get filled, only to see higher highs. The volume is too low to show a direction here. It is easy to hold the market up. A pullback into the gap is not a reversal. The technicals are positive. Basis trades are still in play.

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:

Brian Leonard

[email protected]

312-761-2636

16 Jan 2024

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

LEONARD LUMBER REPORT: THE MARKET TOPPED RIGHT BEFORE CHRISTMAS

Recap:

The market topped right before Christmas and now has given back $43 of the $56 rally in March. What we saw last week was the selling gaining momentum. The short-term focus has to be on the range. Is it the low of 537.00 at the start of the December rally, or is it back at $500, March’s bottom in November? Here are a few points.

There are zero reports of the market struggling. The market is fluid, but it is work. Are there deals showing up? Yes, but on a limited basis and at a higher level. So, the industry is now accepting a trade at a higher level. We all expected it. It tells us that in the short term, prices will not go back to the original lows but base out higher.

Technical:

The elephant in the room is Friday’s January close of 528.00. Next Friday, there will be a large weekly gap. Those gaps get closed. Would I get short on Tuesday because of the gap? No, but we will see 528. The weather and the algo selling tells me that it should come sooner rather than later.

Note: this has been a short-term read. We are looking at 550, 537,528, or even 500. In 2023, watching the downside grew the dollars. In 2024, not watching the upside will be painful. Treat 2024 like 2019. Stay balanced so you can reap the benefits of any upside move.

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:

Brian Leonard

[email protected]

312-761-2636

16 Jan 2024

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

USDA Final 2023 Yield and Stocks Overview

USDA Final 2023 Yield and Stocks

Overview

January 12, 2024

First Glance:

Corn

USDA Yield: 177.3 BPA (174.9 Estimate – 174.9 Nov)

Total Crop: 15.342 BBU (15.226 Estimate – 15.234 Nov)

Harvested Area: 86.513 MA (87.036 Estimate – 87.096 Nov)

23/24 US Ending Stocks: 2.162 BBU (2.111 Estimate – 2.131 Nov)

23/24 World Stocks: 325.2 MMT (312.9 Estimate – 315.2 Nov)

Brazil/ARG Crop: 182 MMT (180 Estimate – 184 Nov)

Beans

USDA Yield: 50.6 BPA (49.9 Estimate – 49.9 Nov)

Total Crop: 4.165 BBU (4.134 Estimate – 4.129 Nov)

Harvested Area: 82.356 (82.757 Estimate – 82.791 Nov)

23/24 US Ending Stocks: 280 MBU (245 Estimate – 245 Nov)

23/24 World Stocks: 114.6 MMT (111.9 Estimate – 114.2 Nov)

Brazil/ARG Crop: 212.0 MMT (204.9 Estimate – 209 Nov)

Wheat

23/24 US Ending Stocks: 648 MBU (659 Estimate – 659 Nov)

Winter Wheat Seedings: 34.425 MA (35.786 Estimate – 36.699 LY)

23/24 World Stocks: 260.0 MMT (258.3 Estimate – 258.2 Nov)

The USDA found larger than expected totals in almost every category, increasing corn yield 2.4 bpa over the November estimate to 177.3 bpa. This is both a record yield and record total crop of 15.342 billion bushels. Bean yield was also raised .7 bpa to 50.6 and a total crop of 4.165 bbu. Both corn and bean harvested acres were slightly trimmed, the only bullish news in the report.

Higher yields were pushed through to higher ending stocks with US corn carryover raised to 2.162 bbu (+31 mbu from Nov) and 803 mbu above last year’s stocks. Beans had a similar fate with stocks set at 280 mbu, up 35 mbu from November but only 16 mbu above last year. Wheat stocks were slightly smaller than expected at 648 mbu but still up 78 mbu from 22/23.

Despite the rough start to Brazil’s growing season in their northern regions, Brazil’s bean and corn crops were not cut as much as expected. The weather has improved hurting the bullish narrative of a bad year for Brazil but the expanded acreage will also help offset any damage done earlier in the year.

There has not been any good news lately and prices reflect that. In June there was concern over the US crop with corn a $6.25 and beans at $14, now today has made new contract and multi-year lows in corn, soybeans and wheat.

08 Jan 2024

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

Leonard Lumber Report: The futures trade last week looked flat

Recap:

On the surface, the futures trade last week looked flat. The net change for the week was up $2. In fact, the last seven sessions have seen closes within a $4 range. A digestion phase after the run-up? Underneath the surface, things are changing. We have shifted the fund shorts over to the industry. Wood is now hedged. We have also shifted some of the industry longs over to new fund longs. The makeup of the futures market today is friendly. It is not a signal to buy, but it could generate higher prices on its own.

The futures market is closed on Monday the 15th, so January expires on Friday. The current open interest is normal for five sessions to go. With the growing industry’s short number, we may see some upward pressure again. We could see a shift to expirations now having an upward bias.

As far as the cash market goes, it remains fluid. That has been the case for months now. It has the feel of the covid slowdown that never occurred. This time, we spent a year expecting a recession and higher unemployment. What we found was steady business.

With mills coming back online and wholesalers owning wood, it could be sloppy for a while. The funds are the key.

This recent sideways trade is nearing an end…….

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:

Brian Leonard

[email protected]

312-761-2636

18 Dec 2023

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

LEONARD LUMBER REPORT: THE VOLKER RALLY

Happy Holidays to all and your families.

Recap:

The Volker rally. The markets reacted very positively to Powell’s comments on lower rates sooner. The comments were in stark contrast to the previous comments about higher for longer. The lumber market was no different, squeezing out gains for the week. So, while there are positives on the horizon, the facts are the futures market has been flat for over 75 weeks. (see chart below) That is a long time without a trend. The housing market has a like dynamic. if you look at today’s active listings, new listings, and closed sales; they are very close to 2019 levels. We are not coming out of COVID weaker or stronger, just flat. So, what has changed? The answer is two main drivers. The first has been the significant loss of production in Canada. That will continue with little chance of growing that back. The other is rates. The homes today are not affordable to many buyers. Higher rates also contribute to the pause in move-ups. The buying dynamic is flat.

Those two factors, supply and affordability keep the market flat. Either one would cause the market to trend but remain in conflict. One thing is sure: the tighter you control inventories next year, the more you’ll pay up.

Technical:

The Bollinger bands on a weekly chart are as tight as I have seen them. A spike through one of the bands is imminent. I expect a higher spike since the futures market sits near the top band. That said, if the market continues its drag sideways, look for an uneventful winter season. The market tends to hint towards a direction as we go into the Christmas holidays.

Note:

The open interest increase is industry-based this time.

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:

Brian Leonard

[email protected]

312-761-2636

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Category: Futures

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

LEONARD LUMBER REPORT: Last week, the futures market saw a healthy correction

LEONARD LUMBER REPORT: The futures market sprang to life on Friday

LEONARD LUMBER REPORT: IT IS STILL FEBRUARY

AG MARKET UPDATE: JANUARY 26 – FEBRUARY 9

LEONARD LUMBER REPORT: CAN IT BE ANY MORE OBVIOUS?

LEONARD LUMBER REPORT: THE MARKET TOPPED RIGHT BEFORE CHRISTMAS

USDA Final 2023 Yield and Stocks Overview

USDA Final 2023 Yield and Stocks

Overview

January 12, 2024

Corn

Beans

Wheat

Leonard Lumber Report: The futures trade last week looked flat

LEONARD LUMBER REPORT: THE VOLKER RALLY

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