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10 Feb 2023
Agriculture, CME, Corn, Dow Jones, Grain, Market Commentary, Market Updates, Research, Risk Management, Soybeans, USDA Report, Weekly Prices rcmagserv 0 comment

AG MARKET UPDATE: JANUARY 26 – FEBRUARY 10

Corn has been relatively flat over the last two weeks as it has continued to trade in a tight range the last 3 weeks. This week’s USDA Report did not provide any fireworks as there were no big surprises. The USDA lowered Argentina’s production while leaving Brazil’s unchanged from the January report. While the lowering of Argentina’s yield was expected, analysts still believe it will be lower. The main change to the US balance sheet was a 25-million-bushel reduction in ethanol consumption of corn, leading to a slight rise in ending stocks. World stocks received a boost from smaller world feed usage while stocks remain historically tight. Exports got off to a good start in February, with the week ended 2/02, coming in at the top end of estimates.

Via Barchart

Soybeans had not moved much over the last two weeks until  Friday’s trade saw the march futures get a 24 cent boost while new crop gained 13 cents. Like corn the USDA report was a non-event for beans with no major news. The only notable changes were lowering Argentina’s total yield and lower crush numbers in the US. The lower crush in the US was more newsworthy as the markets had priced in lower Argentinian yield. World ending stocks were right on estimates.

Via Barchart

Equity Markets

Equity Markets were down this week after having a good run following the Fed raising rates another 25 points. Earnings and AI were the storylines the last 2 weeks, causing big swings in many markets. Crude Oil also rallied this week after dipping down into the $72 range and Russia announced they were cutting production by 500,000 barrels a day in March in retaliation for international sanctions. Earnings moving forward will help give an idea if this rally can continue or if we hit a near term high.

Via Barchart

Drought Monitor

Eastern corn belt has gotten plenty of moisture so far this winter with the western corn belt needs more heading into the spring.

Podcast

With every new year, there are new opportunities, and there’s no better time to dive deeply into the stock market and tax-saving strategies for 2023 than now. In our latest episode of the Hedged Edge, we’re joined by Tim Webb, Chief Investment Officer and Managing Partner from our sister company, RCM Wealth Advisors. Tim is no stranger to advising institutions and agribusinesses where he has been implementing no-nonsense financial planning strategies and market investment disciplines to help Clients build and maintain wealth and reach financial goals since

Inside this jam-packed session, we’re taking a break from commodities, and talking about the world of equities, interest rates, tax savings, and business planning strategies. Plus, Jeff and Tim delve into a variety of topics like:

  • The current state of the markets within the wealth management industry
  • Is there a beacon of hope, or is it all doom and gloom for the markets?
  • Other strategies to think about outside of the stock market and so much more!

 

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 Feb 2023
Agriculture, Lumber, Market Commentary, Market Updates, Research, Risk Management, Weekly Prices rcmagserv 0 comment

LEONARD LUMBER REPORT: The futures market lost momentum last week but still remained near its 3-month highs

Commentary: 

The futures market lost momentum last week but still remained near its 3-month highs. The indifference trade was caused by a flat cash market. It is hard to tell if the resilience shown in futures was from a better outlook or from funds covering shorts. We have been flying blind the last few sessions as an outage in statement reporting at many firms has stopped the CME from being able to report open interest accurately. It has also prevented the CFTC from issuing the commitment of trader’s report for last week. What we do know is that the housing market, like equities, has support. Mortgage rates are back down to 6.09% which equates to another 3 million buyers who now qualify. Traffic is reported to be better than expected. While it is down sharply from the Dec 2021 highs, it still shows potential. After Friday’s jobs data we can be confident that there are buyers out there and they have jobs. All past housing downturns remained negative because of job losses. This isn’t the case this time. The key takeaway from last week was that once the froth is off the market and when homes become affordable again there is a market waiting. Let’s take a broader look at the economics.

Economic:

The Economic downturns have a timeline from when it reaches recession, pushes capital into the system and then recovers. This process tends to take time. Milton Friedman called it “the long and variable lag.” Today, unlike ever before, there is enough capital in the system to move the economy out of a recession. Since we have never been here before no one can tell us what it will look like. That said, the consensus seems to be leaning to a longer timeline for things to turn. The typical move would be to cut rates and boost confidence. Without that type of stimulus, money will only trickle into the economy. The markets are acting less nervous and more confident. If this economy has its way the market will move from point A to point B instead of heading to Z from A.

Technical: 

Things are as not bad as we thought they would be at this point, and the rally in the lumber market just confirmed it.  The upside focus is on the 200-day moving average. It is sitting at 564.75. That’s a $200 futures run in a short period of time. The market got caught short. The slight sell off last week allowed a few of the momentum indicators to correct. That’s mildly friendly and consistent with reports from the field. Builders were projecting cutting production by 40%. It turns out that they only cut 20% so far. A 20% reduction from lofty highs isn’t a reason for $335 cash but it also isn’t a reason for $600 cash. The technical read is right.

Notes:

There is a lot of confusion about the commodity funds in general and especially those in lumber. The funds that participate in the lumber futures market are generally ones with either a focus on a basket of products or purely momentum. The long fund that is getting all the press recently is a fund that carries a basket of commodities on the long side. This Rogers fund has been around since the early 2000’s. We haven’t seen it for a while during the big run up but seems to be back. The last commitment of traders report two weeks ago had the long fund count at 393. We have no way of knowing if that is all Rogers or if it is made up of a few funds. I have heard that smaller funds were looking at lumber futures when it was in the $300’s so it could be spread out some. On the other side are the short funds. Those looked to be mostly momentum funds that add to a winning position. They hit a high of 1955 open interest a few weeks ago. The last report had them down to 954. These types of funds carry defined positions based on equity. They are designed to add as the market goes lower and exit when it rallies a certain distance. There is no opinion of market direction. When the futures market was breaking $400, they were adding. When the market failed to continue lower and turned, they began to exit. The question today is of how much they will liquidate instead of rolling because of the switch of the contract. These funds are designed with strict liquidity rules. They will not accumulate open interest in an illiquid market. That said, if this is one fund or a big fund with tags attached, it has been making a windfall in this market. Their design has worked extremely well so I would expect them to stay around but the downside momentum model could be less profitable from here on out.

 

NEW CONTRACT:

Lumber Futures Volume & Open Interest

https://www.cmegroup.com/markets/agriculture/lumber-and-softs/lumber.volume.html?itm_source=cmegroup&itm_medium=friendly&itm_campaign=lbr&redirect=/lbr

CFTC Commitments of Traders Long Report

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

Lumber & Wood Pulp Options

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

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

01 Feb 2023
Agriculture, Lumber, Market Commentary, Market Updates, Research, Risk Management, Weekly Prices rcmagserv 0 comment

THE LEONARD LUMBER REPORT: The futures market ran $95 higher last week and is now up $165 from its lows

Recap:

The futures market ran $95 higher last week and is now up $165 from its lows. The cash market also had a good week, rallying $55. It is up almost $90 from its lows. While the previous week’s rally was mostly fund buying this week was very well rounded. My thoughts of a tight ranged slog are out the window. The industry is settling into the thick of the economic issue and finding that it isn’t that bad. Many had to enter the cash market sooner than expected to lock in jobs. The market would typically digest after a sharp move, but what we saw in futures on Friday may prevent that. There were two 100 lots bid within a dollar bid. That raises numerous issues and red flags.

Economics:

The completion chart I showed last week indicates a topping housing market. Most would agree that home building has slowed, but would also agree that the rapid pace of construction was not sustainable. The economy as a whole will spend the rest of the year bouncing from sector to sector with bad news. This type of economic cycle will lower home prices and pressure interest rates. That’s a plus for our industry. With a better outlook, less Euro wood and Canadian production we can see the lumber market finding some type of balance. Add in a China opening, and the US supply and demand curve is closer to equilibrium. I can’t stress enough the fact that any indication of an over bought or oversold market equates to a big move today. This market is no longer conditioned to move $70 on news. It’s conditioned to move $300 or more. The reason being is all the consolidation the industry has gone through over the last 20 years.

Technical:

The focus last week was on the looming gap below the market. Today it is still the focus but this time with a positive spin. The gap was created by an expiration and not better business. (At least I thought) Today that gap is still in place and has created a very supportive trend line. It comes in at $397.70. It’s not often we see a pattern reversed from negative to positive on a long-term chart in just one week. That’s what happened here. The long-term pattern is now showing a possible V bottom. The issue today is the short-term pattern. With an RSI of 88% and the slow stochastics turning down there should be some type of correction coming. A $50 pullback would not influence the cash trade. It will be a technical correction in futures. Basis traders need to be aware of this possibility to liquidate the trade.

Note:

If you created a simple math equation in 2000 for the breakeven price of lumber by 2020 it would come out to be roughly $380. Now add the fact that from 09 to 11 the industry did not build enough to offset teardowns and you get closer to $420. Add covid logistic nightmares and the number is higher.

Summary:

The market broke out a month earlier than the industry wanted. The higher wages are going to allow buyers back into the market. As I said before, inventory is an investment not a liability. Buy it. You can always sell the futures if you don’t like it.

NEW CONTRACT:

Lumber Futures Volume & Open Interest

https://www.cmegroup.com/markets/agriculture/lumber-and-softs/lumber.volume.html?itm_source=cmegroup&itm_medium=friendly&itm_campaign=lbr&redirect=/lbr

CFTC Commitments of Traders Long Report

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

Lumber & Wood Pulp Options

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

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

27 Jan 2023
Agriculture, Corn, Cotton, Grain, Market Commentary, Market Updates, Podcast, Research, Risk Management, Soybeans, Weather, Weekly Prices rcmagserv 0 comment

AG MARKET UPDATE: JANUARY 13 – 26

Corn made small gains over the last 2 weeks as news was quiet outside of South American weather with China being on holiday for Chinese New Year. Exports were better than expected this week, but Mexico continues to look at increasing their corn imports from Brazil. The forecast for rain in Argentina over the weekend will direct the trade to start the week. The news to look for in the coming weeks will be purchases from China and any changes in South American weather. Any developments in Ukraine will have ripple effects across the commodity space, but trying to predict what will happen there is almost impossible.

Via Barchart

Soybeans, like corn, had an up and down 2 week span but ended with modest losses. The uptrend beans have seen since October has been promising but eventually it will run out of steam with Brazil in a good position. If Brazil’s harvest gets off to a fast start we could see a weakening in old crop quickly with new crop following slower. Like corn, bean exports to China as they come out of covid lockdowns and Chinese new year would help provide some support until Brazil starts sending them beans. Keep an eye on any positive trade news from China, don’t expect news out of Brazil to be bullish.

Via Barchart

The cotton chart below shows the trade has stayed between 80 and 90 cents for the last couple of months. Cotton is caught in the middle of the markets thinking there will be a recession, and China coming out of Covid lockdowns with capital to spend on consumable goods. Cotton will need some news to get it out of this range, until then expect this trade to continue. While exports increased last week from the previous it is still half of this time last year, showing the demand situation is very different.

Via Barchart

Equity Markets

The Dow fell over the last 2 weeks as everyone is playing a guessing game with 1. What the Fed will do and 2. Will there be a recession? The economy is still doing well as jobless claims have not begun to go up and inflation is cooling but still has a way to go. With earnings underway guidance will be important to understand how companies are expecting 2023 to go with jobs and what they think the Fed will do.

Via Barchart

Drought Monitor

Podcast

With every new year, there are new opportunities, and there’s no better time to dive deeply into the stock market and tax-saving strategies for 2023 than now. In our latest episode of the Hedged Edge, we’re joined by Tim Webb, Chief Investment Officer and Managing Partner from our sister company, RCM Wealth Advisors. Tim is no stranger to advising institutions and agribusinesses where he has been implementing no-nonsense financial planning strategies and market investment disciplines to help Clients build and maintain wealth and reach financial goals since

Inside this jam-packed session, we’re taking a break from commodities, and talking about the world of equities, interest rates, tax savings, and business planning strategies. Plus, Jeff and Tim delve into a variety of topics like:

  • The current state of the markets within the wealth management industry
  • Is there a beacon of hope, or is it all doom and gloom for the markets?
  • Other strategies to think about outside of the stock market and so much more!

 

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].

 

23 Jan 2023
Agriculture, Lumber, Market Commentary, Market Updates, Risk Management, Weekly Prices rcmagserv 0 comment

THE LEONARD LUMBER REPORT: The open interest in fund shorts dropped almost 30% for the week

Commentary: 

The open interest in fund shorts dropped almost 30% for the week. That answers where the robust buying in March came from. It also shows that the funds are outright liquidating. They did abruptly stop buying as of Wednesday dulling the futures trade. Without the fund buying the futures premium to cash comes into focus. I’ll talk about the chart formation when I write the technical piece, but I would suspect a sloppy week is coming.

Economic:

The positives of the housing industry need to be mentioned often to reenforce the potentials. The chart below is of housing completions since 1968. It shows a modest uptrend for the last 8 years. A mild pullback in construction will smooth out the covid spike but also keep the trend in place. Housing isn’t dead. It just got ahead of itself. The chatter out there is that if rates were 6% 8 years ago and wages were rising at today’s pace demand would have stayed the same. That’s interesting. Today it is all about affordability. The market priced the buyer out of the game. We now have to wait for convergence. Existing homes are down $50K since June. Rates are down to 6.15%. There is still a way to go, but it is going in the right direction.

Technical: 

That’s one hell of a gap below the market. This upcycle has extended most of the momentum indicators enough to warrant a correction. Those two factors indicate a pullback is coming. The question is how much? As far as futures go any selloff is met with good support. The futures quickly become oversold whereas the overbought side takes time. I’m sticking with the current range projection of $392 to $456 with $411 now representing a pivot area.

NEW CONTRACT:

Lumber Futures Volume & Open Interest

https://www.cmegroup.com/markets/agriculture/lumber-and-softs/lumber.volume.html?itm_source=cmegroup&itm_medium=friendly&itm_campaign=lbr&redirect=/lbr

CFTC Commitments of Traders Long Report

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

Lumber & Wood Pulp Options

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

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

 

15 Jan 2023
Agriculture, Corn, Grain, Market Commentary, Market Updates, Other News, Research, Risk Management, Soybeans, USDA Report rcmagserv 0 comment

AG MARKET UPDATE: DECEMBER 30 – JANUARY 13

Corn finished the week strong following the January USDA report. The report had a mix of bullish and bearish news with the USDA raising the yield estimate to 173.3 bu/acre from 172.3 in November. At the same time they cut total production due to lowered harvested acreage while lowering US and world ending stocks. The USDA also lowered production estimates for South America by lowering Argentina yield 3 bu/acre and Brazil 1 bu/acre. Exports were also lowered as a bearish factor with lower usage. The news in the report was slightly bullish for corn and it needed it but there are still many factors around the world that can change. Argentina’s weather remains hot and dry for the next week and many private estimates believe the crop will continue to get lower.

Via Barchart

Soybeans participated in the post rally on bullish numbers from the USDA. The USDA lowered bean yield to 49.5 bu/acre, .7 bu/acre lower than November report. The lower yields and lower harvested acres lead to a lower US ending stocks of 210 million bushels. They also lowered Argentina’s bean yield by 4 bushels per acre and raised Brazil’s 1 bu/acre. Beans have been trading higher over the last couple of months and the report did not throw water on it. While any further rallies will be met with farmer selling, South American weather will be the main factor going forward.

Via Barchart

Equity Markets

The Dow rallied this week along with other indexes as the market has started off the year on a positive note. CPI came in at 6.5% continuing its trend lower but still well above where the Fed wants it, expect them to continue to raise rates. Recession fears remain with many analysts still expecting one this year in the US and in Europe. Ultimately the market is still looking for a direction as it tries to figure out what comes next.

Via Barchart

Drought Monitor

Podcast

With every new year, there are new opportunities, and there’s no better time to dive deeply into the stock market and tax-saving strategies for 2023 than now. In our latest episode of the Hedged Edge, we’re joined by Tim Webb, Chief Investment Officer and Managing Partner from our sister company, RCM Wealth Advisors. Tim is no stranger to advising institutions and agribusinesses where he has been implementing no-nonsense financial planning strategies and market investment disciplines to help Clients build and maintain wealth and reach financial goals since

Inside this jam-packed session, we’re taking a break from commodities, and talking about the world of equities, interest rates, tax savings, and business planning strategies. Plus, Jeff and Tim delve into a variety of topics like:

  • The current state of the markets within the wealth management industry
  • Is there a beacon of hope, or is it all doom and gloom for the markets?
  • Other strategies to think about outside of the stock market and so much more!

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 Jan 2023
Agriculture, Lumber, Market Commentary, Market Updates, Research, Risk Management rcmagserv 0 comment

The Leonard Lumber Report: The market continued its drift lower as the cash market was silent

Commentary: 

The market continued its drift lower as the cash market was silent. At this point I think you need to begin the process of determining value. March futures sit at $370. That is the lowest price seen since April of 2020. $370 is not low if you compare it to the last 50 years. It is low if you compare it with the last 5. So, the question today is whether the recession is going to be deep or mild? If you answer the recession question, then you also answered the value question.

A recession is slowed by infusing the system with capital. We have never had so much available capital in the marketplace in history. That money sitting there needs to be used. Is that enough to soften the recession? I don’t know. I’m guessing that the recession doesn’t need to be that deep, but the trickle-down funding process could keep it dragging on. That won’t kill the housing market. If the recession is going to be mild, then this industry needs a buy round. There hasn’t been a good buy since October. One is needed today just to get the players back in the game. It will be short and not cause much of a rebound but is needed. Buying wood at $330 or lower is a low-risk investment. It’s hard to believe the pushback. I’m not looking for a reversal in the trend. With supply and demand going in opposite directions the clean-up will take time.

Technical: 

The fundemental and technical picture is one in the same today. The RSI in March is at 34% at its contract low. That is not bullish. It keeps making new lows and not getting oversold. If you look at cash it also keeps trading lower and not finding any interest. While both are due a bounce, the bottom building process is just that a process. A good visual is if you draw a line from the high in Feb of 2010 at 327.50 straight accross till today. The market has some downside potiential and a hell of a lot of upside. The shortside of the trade is difficult from now on. Tell that to the funds.

NEW CONTRACT:

Lumber Futures Volume & Open Interest

https://www.cmegroup.com/markets/agriculture/lumber-and-softs/lumber.volume.html?itm_source=cmegroup&itm_medium=friendly&itm_campaign=lbr&redirect=/lbr

CFTC Commitments of Traders Long Report

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

Lumber & Wood Pulp Options

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

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

03 Jan 2023
Lumber, Market Commentary, Market Updates, Research, Risk Management rcmagserv 0 comment

LEONARD LUMBER REPORT: 2023 Lumber Market Outlook & Affect on Housing

2023 Lumber Market Outlook & Affect on Housing

The following report summarizes today’s lumber industry and housing. I use past data to project future scenarios. What can’t be measured is the buyer attitude, cultural norms, and trends. The data is going to paint a troubling picture while in fact the housing market has tremendous underlying strength because of the cultural shift to homeownership. There is a whole generation out there of new home buyers. Today they are just waiting for it to be affordable again. Hopefully by the end of this report we have some type of idea whether that will happen in 2023 or not.

Interest Rates:

“The Fed wants housing dead.” If you want to curb inflation you attack the largest segment of the growth wheel. Powell is laser focused on our sector. The is no reason to enter into the debate of whether it will be a “50 or 25” move. Our focus should be on the ratio of wages, home prices and rates to get a better read of trajectory. The average mortgage rate over the last 50 years is 7.76% according to mortgagerates.com. The current rate of 6.30% seems manageable. Weekly wages jumped 6.20% last year. The is the highest rise in wages since the early 1980’s. The dominant factor is home prices. The explosion of prices post covid has taken many out of the game. Home prices and the CPI tend to track well together. A cooling CPI will not necessarily cause a fall in home prices but will lead to home value erosion. It will be purely a mathematical change. The prices will be forced to relate to the marketplace. Today the math adds up to a marketplace will accept rates close to 5.5%, median home values are under $400K and wages that are consistent with inflation. Those points are closer than most think. The issue, as always, in 2023 is if the Fed overshoots. This is the key factor for housing in 2023. A stagflation model will keep demand and construction underwhelmed.

Cost of Production:

The cost to produce, from logs to transportation and also wages has gone up substantially over the past few years. What we have experienced in other commodities after their spike was a return to a level about 35% over their 30-year average. There is a strong correlation here. Those markets found costs higher after the fact. Doing the math that puts the low end of lumber prices to be near $420. Over time that number will be a feature and should be factored into your business plan. Our all-in and all-out cycles make it hard to buy value.

Starts:

Home construction is slowing with expectations of it continuing. From the forward-looking statement coming out of the builders to the reports from those who feed the home builders, things are going to get slower. If you look at the chart below the analysis shows the starts number to close in on the 1.1 mark. The defined business plans in 2023 from the home builders is fluid. It is going to be developed quarter by quarter. The structural decade plan was for a 1.4 pace. Covid accelerated that number and now it is pulling back but construction can be turned on in a short time period given many plans are already in place. In this scenario the longer the pullback the quicker the rebound.

Import/Export:

Here is a component of pricing that has never had as much an impact as it does today. The sheer number of traders in the Euro space is a factor in overall pricing today. They can drive the market. That has never been the case before. We are currently seeing how much downside pressure it is putting on the market. The question now becomes as we move into 2023 and shipment are curtailed will that boost prices? The other positive is the fact that Asia exports are off substantially. There is a lot of capital available to build in China. The increase in exports overseas will at a minimum tighten up certain markets. There are some possible green shoots for the market in this sector.

Wages/Employment/ Money:

Wage growth is currently sitting at 6%. As we try to compare that growth to years back, we must recognize that most families are dual income today so 6% is a big number. The buyer isn’t too far off affordability. There is that natural drift away from buying after such a spike, but incomes will allow home buying. It will take time to accept the higher level. Employment is the key to all this analysis. If unemployment takes off the housing market will go into a freeze mode that takes months to thaw. My analysis calls for a continued rise in unemployment but leveling off at some point in the 3rd quarter. Most will be comfortable with their employment status. And finally, with have a very large amount of excess capital out there. From infrastructure to chip building the dollar amount is enormous. That capital spending will trickle into housing.

Summary:

A drag across the bottom could be unsettling in 2023 to all who haven’t lived it. Not just in the lumber industry but in most others. There will not be an all-good signal until the cycle plays out and that won’t be for many months. That said, any signs of a turn in the market will bring in a robust buying environment that will fail. What is needed is a guarded deliberate buy program to build a value area. Inventory will become an investment not a liability. There won’t be a perfectly timed buy. It must be ongoing. There also won’t be the volatility we are used to. This will be a grind year with spikes higher. Grind is good.

The recession is the key to the 2023 housing market. Gold and silver, yes those old men investments, are showing a inclination to a heavier recession than what is projected out there. The other side is talking about copper and its positive tone indicating no recession. None of this will help our current issue of liquidity but could project the distance of the problem.

 

Happy New Year!

 

Brian Leonard

[email protected]

312-761-2636

02 Jan 2023
Agriculture, Corn, Grain, Market Commentary, Market Updates, Research, Risk Management, Soybeans, Weekly Prices rcmagserv 0 comment

AG MARKET UPDATE: DECEMBER 16 – 30

Corn made gains over the last two weeks with the continued escalation of bombing in Ukraine and more dry weather in Argentina. Exports remain uninspiring as the year comes to a close. China announced they will reduce some travel restrictions while covid infections continue to cause problems and continued lockdowns. Brazil’s expected record crops could offset some of Argentina’s losses but what extent will be determined in the next 2 months. The news has been slower as we get to the end of the year but the continuation and escalation of the war along with the other factors can continue.

Via Barchart

Soybeans participated in the market rally over the last couple weeks making solid gains back over $15. The Argentinian crop is rated as just 10% good to excellent, down from 12% the previous week. Brazil’s weather has been quite favorable to their bean crop which is much larger than Argentina’s. While exports remain lackluster, once Brazil begins to harvest they will become worse. The rally into the end of the year was very welcome and the start of 2023 will set the tone into the spring.

Via Barchart

Equity Markets

The Dow has been flat the last couple weeks while the NAQDAQ and S&P 500 stocks saw losses. The continued rate hikes into 2023 along with recession fears continue to weigh on the market as investors look for answers along with some tax loss harvesting to end the year. 2022 was not a great year for the markets as a whole and 2023 will sure to hold its own surprises.

Via Barchart

Drought Monitor

Podcast

The Hedged Edge is back online with a guest who could be this podcast’s most important guest of all time. At a time when inflation is running rampant through the world economy, drought conditions are drying up our rivers, and the global supply of grain is scarce. We are tasked with the question, “what the hell is going on in logistics, and is there any relief in sight?”

To help address these questions and more, I am joined today by a man that needs no introduction to most in the physical commodity sector – Woodson Dunavant with the Dunavant Logistics company based in Memphis, TN.

 

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].

19 Dec 2022
Agriculture, Lumber, Market Commentary, Market Updates, Research, Risk Management rcmagserv 0 comment

THE LEONARD LUMBER REPORT: The liquidity issue in the marketplace seems to be getting worse not better

Weekly Lumber Recap 

12/18/22

Happy Holidays!!

The liquidity issue in the marketplace seems to be getting worse not better. At this point in the cycle, we should start to see a few green shoots. None were to be found last week as futures hit a new low on Friday. The outside markets are having a bigger than normal effect on our trade. Mostly due to the lack of news here. I’m confident that overall production on January 1st. will be less than the amount produced December 1st. The market seems to agree but throws in the fact that there will also be less homes starting on January 1 than started on December 1. The question becomes of how long the drifting lower will remain in place.

Look at the chart below. It has a Fibonacci measurement from the contract low during covid to the highs in 2021. Look to the left and 2019. The sideways price channel for the year was developed with an average of 1.29 starts. If that is the number, we are looking for 2023 then a sideways trade for a year could be expected. I’m not sure if that will develop but it does look like the current futures market wants to test that theory.  I’m in the camp that next year will be somewhat subdued, but at a higher level. Next week will be more of the same unless the short funds start to cover. It hasn’t shown up yet so that is even a limited wish.

NEW CONTRACT:

Lumber Futures Volume & Open Interest

https://www.cmegroup.com/markets/agriculture/lumber-and-softs/lumber.volume.html?itm_source=cmegroup&itm_medium=friendly&itm_campaign=lbr&redirect=/lbr

CFTC Commitments of Traders Long Report

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

Lumber & Wood Pulp Options

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

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

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