Category: Market Commentary

27 May 2022

Corn, Crude Oil, Grain, Market Commentary, Market Updates, Research, Risk Management, Soybeans, Weather, Weekly Prices rcmagserv 0 comment

AG MARKET UPDATE: MAY 12 – 26

Corn has traded lower over the past couple of weeks as planting progress has sped up following a slow start to the planting season. While we knew the corn would get planted, the early delay was worrisome and continues to have the potential to lead to harvest yield loss. Despite the gains in many states, ND and MN are still wet and cool with no warmer weather in the forecast to help pull these areas into any form of normal pattern.

With the country wide and regional delays to planting, the latest USDA yield estimate of 177 bpa seems realistic vs the initial 181 bpa. That said, more progress will be made over the 3-day weekend as catch up is played leaving traders only guessing how the lates progress data will be reported come Tuesday. 3-day weekends tend to be unpredictable as the markets do not open until Monday night, so any weather event over the weekend followed by a shortened trading week will likely lead to continued volatility.

Soybeans have bounced back the past couple of weeks as they have traded up and down since making contract highs in February. Diesel’s rally has helped beans as it increases the need for more vegetable oil in renewable diesels. Chinese demand has been quiet and their new deal with Brazil for corn could lead to friendlier trade elsewhere as well. Planting is slow but we are not late enough into the year yet to worry about yield loss, like we are with corn. More progress will be made over the long weekend and could see a volatile open Monday night as well.

Crude Oil

Crude is back trading near its post invasion highs of the mid $110s while natural gas continues higher. The world energy market continues to trade higher while countries try to explore ways to ease the burden on their citizens. This problem will not be fixed anytime soon so we should expect higher prices in to the summer.

Equity Markets

The equity markets saw a welcome rally this week amidst the continued bear market of the last few months. While this may just be a temporary bounce before the Fed reduces its balance sheet, it is nice to see some positive days in a row. Mixed earnings, interest rates, and the war in the Ukraine continue to dominate the story lines. Keep an eye on the big names as they will continue to decide which way the market goes.

Drought Monitor

The drought monitor below shows where we stand week to week.

Podcast

There is an agriculture tug of war happening across the nation, impacting America’s farmland. Fertilizer prices are continuously fluctuating, and it has us taking a page the “The Clash” should we stay, or should we go?! And we aren’t the only ones. Many farmers are asking their agronomist and chemical salespeople, “what will fertilizer cost me the rest of the season, and what are my options if I don’t want to go all-in on my typical fertilizer treatment plan?”

In this episode of the Hedged Edge, we are joined by a special guest who needs no introduction in his local circle, Dick Stiltz. Dick is a 50-year veteran of the fertilizer and chemical industry and is the current Agronomy Marketing Manager of Procurement fertilizer and crop protection at Prairieland FS, Inc in Jacksonville, IL. He is at the pulse of the current struggle and here to discuss the topic at hand.

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].

13 May 2022

Agriculture, Corn, Dow Jones, Fertilizer, Grain, Market Commentary, Market Updates, Other News, Podcast, Research, Risk Management, Soybeans, USDA Report, Weather, Weekly Prices, Wheat rcmagserv 0 comment

AG MARKET UPDATE: APRIL 28 – MAY 12

The May USDA report was mixed but the most bullish news out of it was lowering expected yield to 177 bu/acre from 181. This adjustment trumped the other numbers as US and world stocks were higher than expected. The USDA appears to think demand rationing is in the future but is also aware the late panted US crop will not achieve record yield. The USDA did not change their estimates for Brazil’s safrinha crop, their estimates remain a few hundred million bushels over private estimates. Corn planting was seen as being 22% complete to start the week with more progress being made. The US is well behind its normal pace and there are still places that have yet to start, the longer planting drags out the lower that yield is expected to go.

Soybeans have struggled the last few weeks as it has fallen to the low $16s. The USDA report was relatively neutral with a mixed bag of numbers that offset each other. They kept the US yield estimates at 51.5 bu/acre as the slow planting pace has not gotten to the end of the soybean window yet. One important thing to note is the USDA’s acreage already had a large shift to beans from corn. If the wet areas do not dry in time for corn to get in so beans get planted instead, we could see an even larger bean vs corn gap in acreage. The slower corn gets planted the more eyes will turn to soybeans and could make for an interesting year.

Wheat has seen a good rally over the past 2 weeks, lead by a big day after the USDA report. World wheat supplies are at record low stocks to use ratios and moving deeper into 2022. Replacing lost Ukrainian and Russian bushels is a challenge for the USDA balance sheets. World wheat stocks are at 991 million bushels below expectations from the May report in 2021. With the continued war in Ukraine and troubles with wheat crops all over the world, including here in the US, wheat has several bullish factors behind it heading into the summer.

Equity Markets

There really is not much to say as the markets continue lower with inflation posting 8.3% this week. The Fed raised rates last week another 50 points, this was expected, and the markets actually immediately responded favorably before continuing the loses of the last few months. Several rounds of earnings happened this week with few winners and Apple continues its fall as it falls below $150. Apple is always one to keep an eye on as it is no longer the most valuable company in the world. The S&P and NASDAQ are getting hit just as hard (NASDAQ the worst down over 30% from its record highs in November).

Drought Monitor

The drought monitor below shows where we stand week to week.

Podcast

There is an agriculture tug of war happening across the nation, impacting America’s farmland. Fertilizer prices are continuously fluctuating, and it has us taking a page the “The Clash” should we stay or should we go?! And we aren’t the only ones. Many farmers are asking their agronomist and chemical salespeople, “what will fertilizer cost me the rest of the season, and what are my options if I don’t want to go all-in on my typical fertilizer treatment plan?”

In this episode of the Hedged Edge we are joined by a special guest who needs no introduction in his local circle, Dick Stiltz. Dick is a 50 year veteran of the fertilizer and chemical industry and is the current Agronomy Marketing Manager of Procurement fertilizer and crop protection at Prairieland FS, Inc in Jacksonville, IL. He is at the pulse of the current struggle and here to discuss the topic at hand.

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].

09 May 2022

Agriculture, Lumber, Market Commentary, Market Updates rcmagserv 0 comment

The Leonard Lumber Report: The Fundamentals of our Market are Sound

Change for the Week:

May Futures: 1000.10 -39.60

Open Interest: 2503 -184

Commitment of Traders: -105 industry longs -104 spec longs

The fundamentals of our market are sound. Repeat; the fundamentals are sound, and there is a strong backlog of business. More business appears every day, and the marketplace is accepting these price levels. That makes today’s market fundamentally sound. The issue is that a lot of that new business has already been bought, and there is prompt wood all over. That leads to the trade having to define its value areas.

It is complicated to define value today. The manufacturing of this widget has too many components to peg a price to, and it wasn’t long ago we saw a survey that had 83% of respondents calling for a run back to $1,700. Today you have an industry frozen because of last Mays trade, and we end up with a sideways trade.

The best way to judge price with so many outside issues is to look at the technical read and the trend. A picture is worth a thousand words — the futures market is in a firm channel down, and the high channel sits at $915 while the low end is at $640. This is a 3-month channel that is slow moving, and it could take a month to get to the $640 area. On the flip side, the market would need a change in dynamic to run through $914 and stay.

Take a look at the chart below. A correction should close the gap above, which was left on Friday. If we don’t correct this by Wednesday, July may be back in the $600 quicker than most want.

Open Interest and Commitment of Traders

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

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

About The Leonard Report

The Leonard Lumber Report is a new 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.

29 Apr 2022

Agriculture, Corn, Cotton, Dow Jones, Grain, Market Commentary, Market Updates, Other News, Podcast, Research, Risk Management, Soybeans, Weather, Weekly Prices rcmagserv 0 comment

AG MARKET UPDATE: APRIL 21 – 28

Corn continues to move higher as planting has gotten off to a slow start in the US and Brazil’s safrinha crop is facing drought conditions, shrinking their crop. The wet and cool forecasts remain into May for the north and eastern corn belt which will make it unlikely to see much planting progress in those areas. The rain will be welcome in the western corn belt that has been dry and making slow progress in planting, but the rain will be welcome for the soil even if it slows planting for a day or two. The ongoing conflict in Ukraine continues to decimate their infrastructure as Russia destroys ports and has seized stored corn to sell as their own. China was a buyer of corn this week and will hopefully continue to show up on exports as demand from other buyers has slowed. Limits have been increased at the CBOT for some commodities and corn will now have a 50 cent limit starting May 1 from the current 35 cent limit.

Soybeans had a small dip this week after its nice run higher from the previous dip at the end of March. Soyoil prices continue their move higher pulling beans with it while meal struggles. Indonesia placed a palm oil ban on both refined and unrefined product. The slow start to planting will ultimately roll into affecting soybeans like corn but we aren’t at panic mode yet. The start to the year has been less than ideal when the world stocks need a great year. Beans daily trading limit will move up to $1.15 effective May 1^st.

Cotton

July cotton traded limit up (7 cents) on Thursday to set a new contract high at $1.4768. Export data from last week was better than the last few weeks. Cotton’s problem appears to be a lack of world supply mixed with (so far) not ideal growing conditions in Texas. Forecasts for rain in Texas are very welcome but will need to be widespread and a large amount to help the drought. (See drought map below)

Dow Jones

The Dow was down this week as volatility continues to be in the markets as earnings continue to come across with some large companies getting crushed and others posting solid numbers. Tech companies have had a good week after getting run over the past couple months. This may not be the bottom for tech but it is nice to see some good numbers and some support.

Drought Monitor

The drought monitor below shows where we stand week to week.

Podcast

RCM Ag Services put a unique spin on National Agriculture Day by going international. That’s right, we jumped right into international waters with Maria Dorsett from USDA’s Foreign Agriculture Services for an interesting discussion about linking U.S. agriculture to the rest of the world.

Each year, March 22 represents a special day to increase public awareness of the U.S.’s agricultural role in society, so why not take it one step further by bringing in a global component? As the world population soars, there’s an even greater demand for producing food, fiber, and renewable resources. That’s why we’re taking a deeper dive into the USDA’s trade finance programs, like the GSM-102, which supports sales of U.S. agricultural products in overseas markets and supports export growth in areas of the world that are seeing some of the fastest population growth.

So, jump aboard (no passport needed), as Maria discusses how U.S. companies use GSM-102, what the program features, and the benefits that it offers!

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].

26 Apr 2022

Lumber, Market Commentary, Market Updates rcmagserv 0 comment

The Leonard Lumber Report: It Was A Grind Higher Week in Futures

Change for the Week:

May Futures: 1002.60 +113.60
Open Interest: 2848 +66
CoT: + 108 Industry

It was a grind higher week in futures as the cash trade found traction. The timing of this cash buy has come about earlier than many would have liked. Logistics and timing continue to be the issue, and these issues have pushed the trade to the futures for some upside risk management. In today’s volatile environment, most find risk management to be a must. The futures did see light selling by Friday, but it mainly was Dow-related.

It’s time to reintroduce the elephant. The great debate is whether there will be a soft or hard landing. In either case, the ship is going down, and the question is how hard it will hit. While that is an interesting debate, we know the housing sector will be the first to show the negative signs regardless.

Today the buy-side of the industry is trying to navigate the great unknown. There isn’t a big push to own wood, which keeps the marketplace slightly underbought. Contracts and programs are just enough to keep the pipeline flowing. Logistic issues are now having a negative effect on buyers. Instead of a rush to own enough, the buyer is stepping back and just filling in. Another panic buy is looming out there, but the quantity may be less this time. That is troubling long-term.

Let’s Get Technical:

A while back, the support and resistance channel in May showed an intersection at the $1000 mark, and here we are. Today we have the 100-day moving average meeting the top of the Bollinger band at 1049.60. The 200-day is meeting the bottom of the bands at 861.80. That typically would lead to a breakout. Today it could be signaling a sideways trade. The chart pattern calls a sideways trade from $1200 to $800. The bands are calling it $1050 to $860.00.

Outlook:

There is a change in this cycle’s features going on. Those who limited exposure for the last few years also limited their profits. The cycle is now moving towards those who limit their exposure will be limiting their losses. While that isn’t the case today, the momentum is swinging back. This new feature of limiting exposure is creeping into the industry at a time when demand is good. That leads to tightness. Every dollar higher also leads to less buying. This creates a positive cycle staying in place for a long period. That is what the market indicators are telling us. The short-term investment could be long lumber futures and shorting ARC…..

Open Interest and Commitment of Traders

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

About The Leonard Report

The Leonard Lumber Report is a new 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.

Before You Go…

RCM Ag Services put a unique spin on National Agriculture Day by going international. That’s right, we jumped right into international waters with Maria Dorsett from USDA’s Foreign Agriculture Services for an interesting discussion about linking U.S. agriculture to the rest of the world.

Each year, March 22 represents a special day to increase public awareness of the U.S.’s agricultural role in society, so why not take it one step further by bringing in a global component? As the world population soars, there’s an even greater demand for producing food, fiber, and renewable resources. That’s why we’re taking a deeper dive into the USDA’s trade finance programs, like the GSM-102, which supports sales of U.S. agricultural products in overseas markets and supports export growth in areas of the world that are seeing some of the fastest population growth.

So, jump aboard (no passport needed), as Maria discusses how U.S. companies use GSM-102, what the program features, and the benefits that it offers!

20 Apr 2022

Agriculture, Market Commentary, Research rcmagserv 0 comment

A Closer Look into the Evolution of Farming Equipment

Advancements in heavy equipment play a critical role in ensuring that agriculture and food production is sustainable for the world. From horses pulling wagons to modern-day combines, the evolution of farm equipment has played a vital role in the agriculture industry.

The development in technology has not only helped speed up the overall farming processes, but farming equipment is essential for decreasing the amount of manpower needed for each harvest season and increasing production overall.

First, let’s recognize a few of the pioneers and inventors of farming machinery:

In 1794, Eli Whitney created the cotton gin, which separated seeds, hulls, and other unwanted materials from cotton after it had been picked.
In 1831, Cyrus H. McCormick developed the first commercially successful reaper, a horse-drawn machine that harvested wheat.
In 1837, John Deere invented the self-polishing cast steel plow, improving the iron plow.
In 1842, the first grain elevator was built by Joseph Dart.
In 1878, a New Jersey woman named Anna Baldwin invented the first suction milking machine, which revolutionized the industry.

It’s incredible to see how far the evolution of these essential pieces of equipment has come, and be sure to read more in-depth descriptions of these early inventions here. We also had the opportunity to sit down with the late Bob Miller, who also discussed the various items used on his family farm in Wisconsin from 1927-present day in this recently released whitepaper, Then vs. Now: Memoirs from the Miller Family Farm; check that out here.

And thanks to these early inventions, today’s modern agriculture has adopted tools and digital technologies that have significantly improved the way farmers can manage their crops and fields. Here are five technologies that have been added to machinery that has made farming more efficient and safer:

GPS software and GPS agriculture
Satellite imagery
Drone and other aerial imagery (Check out our podcast with Dr. Scott Irwin where we discuss the biggest evolution in crop agriculture here)
Farming software and online data
Merging datasets

The introduction of satellites into the world of agriculture has helped make farming decisions easier and has helped make farming more efficient. Satellites allow tractors to be more efficient with GPS technology to help plant and spray crops more precisely. Satellite imagery is also now used in the USDA’s research when putting out yield estimate reports by using satellite imagery to try and estimate the health of the crop.

Technological updates in drones and other intelligent software have allowed farmers to use artificial intelligence to help make decisions for the crop as the year goes on. Agriculture companies have developed apps that can gather hundreds of data points for every field someone farms to help farmers make time-critical decisions much easier. Artificial intelligence can make decisions in seconds that used to take hours of looking over data from the soil composition, seed variety, to when to spray the chemicals.

Not only does this information help each field for that year, but it helps farms become more sustainable and produce more consistent crops year after year. Reducing carbon emissions by being more efficient with tractors, combines and planters will help farming be “greener” moving forward. AI also helps benefit both farmers and the farming process by reducing runoff of chemicals and fertilizers as well as staying in the soil.

The continued development of technology and equipment is crucial now, more than ever, to help farmers produce the needed quantities to feed the world. With a global population projection of 10 billion people by 2050, agricultural production will need to increase by at least 60%, according to the Food and Agriculture Organization (FAO) from current levels. Will it be equipment, seed / chemicals, or simply mother nature that helps us reach a 200 bu per acre corn crop in the years ahead??

Be sure to download how equipment works to feed the world in our infographic here.

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 us today to speak with an ag specialist at 888-875-2110!

18 Apr 2022

Lumber, Market Commentary, Market Updates rcmagserv 0 comment

The Leonard Lumber Report: The feature of the week was easily the $122 swing this past Monday

Change for the Week:
May Futures 889.00 -$60.90
Open Interest 2782 +15
CoT + 245 Industry -143 Long Funds

The feature of the week was easily the $122 swing on Monday. May went from $40 higher to $80 lower in a matter of minutes. The feature may be more about how it was received than the distance, and it was met with a lot of yawns. What is noticeable is the collective sigh of relief from the whole industry on limit-down moves in futures. People need wood again. Looking at the commitment of the trader’s report, there is a continuing gain in the industry longs. These are forward buys in futures at the discount. They keep stacking up, keeping the cash side slow, and that will turn into business at some point. I would look for that to slow now that cash is close to futures. Any push in that market will cause a futures rally as short hedges cover. That is how the futures swing from a discount to a premium and bottoms cash.

While we expect the froth starts to come off the housing market, it won’t happen tomorrow. The market has slowed enough to allow the wood to ship in real-time, and it has not solved the logistics issue. We saw back in February reports of the rail sector staying tied up through the summer. Reports over the weekend of nitrogen producers seeing their car allotment shrink have turned the ag community on its head. Planting and growing seasons could see a shortage of fertilizer. If the rail side limits cars to that sector, we can’t see them freeing up more to the lumber side. That will be a factor in our market if the buyers hold out too long.

Let’s Get Technical:

The focus here is on a bottoming formation. There is a little-known gap in May from 825.00 to 809.00 set on December 1st. May hit $829.30 last week, putting the gap in play. Also, the bottom of the channel comes in at 795.00. If you are getting long, you can use $829 as your stop area. There’s no reason to wait around for $795. On the flip side, we don’t see a value in shorting the market on a rally. A close over $900 and a loss of the algo will send this thing $100 higher overnight.

Outlook:

Repeat… We’ve seen this drill before. One day the mills can’t give wood away, and then they are off the market. We hate to say it, but it is going to happen again. The longer this one takes to catch, the less the worthy the “sell in May and go away” will be. We see that $1000 wood could now be the new $1400. The mills should start to sell rallies in futures.

The trade locked in their second-quarter needs around $1400. Today the fight is at the $1100 mark and getting a lot of pushback. The point is a trading level of $1100. If that is the case, then futures are getting cheap. Cash was quoted at $1030 on Friday with no takers. We recommend staying out of the riptide Mondays in futures and waiting for a better read on Tuesday….

Open Interest and Commitment of Traders:

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

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

About The Leonard Report

The Leonard Lumber Report is a new 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.

Before You Go…

RCM Ag Services put a unique spin on National Agriculture Day by going international. That’s right, we jumped right into international waters with Maria Dorsett from USDA’s Foreign Agriculture Services for an interesting discussion about linking U.S. agriculture to the rest of the world.

Each year, March 22 represents a special day to increase public awareness of the U.S.’s agricultural role in society, so why not take it one step further by bringing in a global component? As the world population soars, there’s an even greater demand for producing food, fiber, and renewable resources. That’s why we’re taking a deeper dive into the USDA’s trade finance programs, like the GSM-102, which supports sales of U.S. agricultural products in overseas markets and supports export growth in areas of the world that are seeing some of the fastest population growth.

So, jump aboard (no passport needed), as Maria discusses how U.S. companies use GSM-102, what the program features, and the benefits that it offers!

08 Apr 2022

Agriculture, Corn, Dow Jones, Grain, Market Commentary, Market Updates, Risk Management, Soybeans, USDA Report, Weekly Prices, Wheat rcmagserv 0 comment

AG MARKET UPDATE: MARCH 31 – APRIL 8

A bullish USDA WASDE report on Friday did nothing to affect the markets; it appears that the report was met with little reaction. The U.S. ending stocks were unchanged while world ending stocks were raised due to larger Brazil corn crop estimates by 2 million tonnes. The weather in South America and the U.S. over the next month will be the main focus as it will be essential for U.S. corn to get off to a good start as far as world supply goes. The war in Ukraine continues, and as the ultimate damage and consequences are unknown, it is doubtful Ukraine will be able to produce/export what it was for a few years.

Soybeans were trading higher into the report and continued that post report solidifying their gains for the week. The USDA had the U.S. ending stocks at 260 million bushels which were right on estimates going into the report, and world ending stocks at 89.58 million metric tonnes. World veg oil prices continue higher, pulling bean oil prices to new 2-week highs. This week’s gains have gotten back the losses from the acreage report last week.

Wheat’s report numbers were neutral with no surprises. Wheat will gain on corn and beans strength as there is not much news outside of Ukraine and Russia to move it right now. With no end to the war seemingly coming soon, major questions will remain unanswered as world trade will be messed up for a long time. World trade with wheat will be what markets will keep an eye on as the cash market will give us a better idea of expected availability moving forward.

Dow Jones

The Dow was relatively flat on the week while tech struggled as the market is trying to position itself ahead of more Fed moves. It is unsure how many and by how much the hikes will be this year as inflation continues to be the main problem facing Americans. The market is hoping that the struggles of Q1 will not continue into Q2, but inflation is sticking around.

Drought Monitor

The drought monitor below shows where we stand heading into April compared to last year.

Podcast

RCM Ag Services put a unique spin on National Agriculture Day by going international. That’s right, we jumped right into international waters with Maria Dorsett from USDA’s Foreign Agriculture Services for an interesting discussion about linking U.S. agriculture to the rest of the world.

Each year, March 22 represents a special day to increase public awareness of the U.S.’s agricultural role in society, so why not take it one step further by bringing in a global component? As the world population soars, there’s an even greater demand for producing food, fiber, and renewable resources. That’s why we’re taking a deeper dive into the USDA’s trade finance programs, like the GSM-102, which supports sales of U.S. agricultural products in overseas markets and supports export growth in areas of the world that are seeing some of the fastest population growth.

So, jump aboard (no passport needed), as Maria discusses how U.S. companies use GSM-102, what the program features, and the benefits that it offers!

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].

04 Apr 2022

Lumber, Market Commentary, Market Updates rcmagserv 0 comment

The Leonard Lumber Report: Biggest Takeaways From Last Week’s Trade

The biggest takeaway from last week’s trade is that lumber cycles develop and remain in place. We as an industry try to decipher each outside influence on pricing to help make a call for a reversal or add to the confirmation. That was the case last week as a flood of news, noise, and reactions flipped the bull or bear switch a few times. By Friday, all we had was a lower price for the week. The key to businesses is to judge those cycles to be buying on the way down and selling on the way up. Is that possible today with a different rumor every other day and late ship times?

Cycle:

Cycles in lumber were generally easier to determine as they tended to relate to expirations, holidays, and seasonals. Today, they still relate but are also influenced more by previous trading and potential upcoming issues. This last upcycle, which may still be in place, has lasted longer than most at this time of year. This late Nov to early Mar run was unusual. But if we go back to where the market started in terms of moves, you can see how it became more underbought than usual and thus extended this upcycle. Another factor was that it took longer for the buy-side to reenter the market after the scaring it just took. That is also why you can’t call this upcycle done because the industry has not returned to the normal inventory building. It probably never will, but it’s always underbought in a good demand-driven market. If that catches up to this market, it will rally again.

Economics:

The publicly traded homebuilders, distribution, and producers are not the darlings of Wallstreet anymore. And why is that? Higher rates and inflation kills housing markets. The only way to come back into favor with the street is through increased sales. If the home builders can ramp it up for the rest of 2022, all three of the sectors will do better. My guess is the plan will be to increase construction based on the uptick in business showing up on desks.

Outlook:

The market has two opposing dynamics at work today. The one is good demand that is neither letting up nor getting bought for. The other is rising rates etc. Rates will be an issue, as we can see by Wall Street’s attitude towards the industry, but at the end of the day, this is a micro-focused industry. It looks only at the immediate buy or sells, and today it is looking for that cheap buy.

** There has been an increase of open interest of about 400 contracts. Almost all of that is from the industry, and it is evenly split between buyers and sellers. Many have realized the benefits of using the board to protect themselves from the ever-present swings.

Open Interest and Commitment of Traders:

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

About The Leonard Report

The Leonard Lumber Report is a new 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.

Before You Go…

RCM Ag Services put a unique spin on National Agriculture Day by going international. That’s right, we jumped right into international waters with Maria Dorsett from USDA’s Foreign Agriculture Services for an interesting discussion about linking U.S. agriculture to the rest of the world.

Each year, March 22 represents a special day to increase public awareness of the U.S.’s agricultural role in society, so why not take it one step further by bringing in a global component? As the world population soars, there’s an even greater demand for producing food, fiber, and renewable resources. That’s why we’re taking a deeper dive into the USDA’s trade finance programs, like the GSM-102, which supports sales of U.S. agricultural products in overseas markets and supports export growth in areas of the world that are seeing some of the fastest population growth.

So, jump aboard (no passport needed), as Maria discusses how U.S. companies use GSM-102, what the program features, and the benefits that it offers!

01 Apr 2022

Corn, Cotton, Crude Oil, Dow Jones, Fertilizer, Grain, Market Commentary, Market Updates, Other News, Podcast, Research, Risk Management, Soybeans, USDA Report, Weather, Weekly Prices, Wheat rcmagserv 0 comment

AG MARKET UPDATE: MARCH 24 – 31

A bullish USDA Prospective Plantings report for corn saw both old and new crop corn getting a boost on Thursday. The USDA sees corn-planted acres for all purposes in 2022 at 89.5 million acres, down 3.87 million from last year and well below the average trade estimate of 92 million. Several factors might have played into this number but going from 92 million acres at the USDA Ag Forum to this number a month later is very interesting. Input prices and supply chain woes likely played a major role in the USDA predicting more bean acres than corn as the cost per acre to raise corn will be very high this year with the risk of not receiving all inputs in time. On top of the fallout of the war in Ukraine, this lower number should see tightening on the world balance sheets even with a record yield this year.

Soybeans had a bearish report as the USDA came out with 91 million planted acres in the US for 2022. This would be a record for planted acres and 4 percent higher than last year, with planted acreage being up or unchanged in 24 of the 29 estimating states. Fewer inputs are needed per acre to grow beans than corn played a major role in the shift in acres year to year. How the market trades in the next few days will be interesting to watch as 91 million is a lot of acres, but the world needs it, so will it actually be enough?

Wheat remains vulnerable to Ukraine and Russia news while also figuring out its value in the world market. Wheat acres came in at 47.351 million, lower than the pre-report estimates — 2022 winter wheat planted area at 34.2 million acres and (23.7 million HRW, 6.89 million SRW, 3.62 WW) 11.2 million acres of spring wheat. China’s poor crop and the issues with the U.S. crop seem to be priced into the market possible, but for the time being, Russia’s war in Ukraine will be the market moving news.

Cotton made another jump higher this week before falling following the report. Cotton acres came in at 12.2 million acres, up 9% from last year. Many growing areas have been dry this winter and could use a spring rain to help improve planting conditions. World demand is still present, so the US will have buyers if they can produce a crop. The old and new crops have been over $1 for several weeks now, making it easier to plant than when it was in the 50 cent range a couple of years ago.

Crude continued its move lower this week with a couple of large intraday ranges. The Biden administration announced that it would release 1 million barrels of oil a day from the Strategic Petroleum Reserves to help fight higher gas prices. The big dip came from rumors of progress in peace talks in Ukraine that seemed incorrect as the conflict continued. The Biden administration also wants to make companies with leases on federal land “use em or lose em” but that would take months to years to go from 0 production levels. When Democrats want to shift to EVs and other “green” energy, it is hard to see why companies invest capital when that party wants to get rid of their dependency as fast as possible.

Dow Jones

The equity markets fell slightly during the week due to Thursday’s fall into the close of trading. The 2/10 yr treasury yield inversion has been the main talking point this week as it could be a signal of a recession. While it does not always mean there will be a recession, we have not had a recession without that happening, even though it is usually over a year later. Q1 ended this week after a few months of losses, volatility, confusion, and inflation, and it is hard to see it calming down anytime soon.

Drought Monitor

The drought monitor below shows where we stand heading into April compares to last year.

Podcast

RCM Ag Services put a unique spin on National Agriculture Day by going international. That’s right, we jumped right into international waters with Maria Dorsett from USDA’s Foreign Agriculture Services for an interesting discussion about linking U.S. agriculture to the rest of the world.

Each year, March 22 represents a special day to increase public awareness of the U.S.’s agricultural role in society, so why not take it one step further by bringing in a global component? As the world population soars, there’s an even greater demand for producing food, fiber, and renewable resources. That’s why we’re taking a deeper dive into the USDA’s trade finance programs, like the GSM-102, which supports sales of U.S. agricultural products in overseas markets and supports export growth in areas of the world that are seeing some of the fastest population growth.

So, jump aboard (no passport needed), as Maria discusses how U.S. companies use GSM-102, what the program features, and the benefits that it offers!

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].

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Disclaimers
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.

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.