RCM Ag Services

Category: Market Updates

  • Home
  • Market Updates
24 Oct 2022
Agriculture, CME, Lumber, Market Commentary, Market Updates, Research rcmagserv 0 comment

THE LEONARD LUMBER REPORT: Another Positive Week With Futures Adding Another $45

Weekly Lumber Recap 

10/23/22

It was another positive week with futures adding another $45. That’s a run of $148 from low too high in 16 sessions. The first takeaway is that historically lumber liked 16-day cycles so it could be nearing its end. The other takeaway would be the fact that the futures market has only rallied $148. Yes, after hitting a low not seen since June of 2020, one would think it deserved more. The question is if this is a one-time cash buy or if there can be more? I’ll take two looks at the question.

First is the cycle. This cycle has a much better dynamic than the ones seen for the past 6 months. Two weeks ago, the buyer was able to buy cash and flip it in almost the same day. That is typical. The difference in this cycle is if a next buy round occurs the buyer will have a premium futures market to lean on. There is an out. That is something we haven’t seen in a long time. That might be just enough to generate more cash buying. It did in the past, I’m just worried the headwinds will keep most out.

The other and most difficult part of this industry is the gap in value from today till next month. There has always been a gap of some sorts but today many are worried that what they buy today will have no value down the road. It is a very real problem. We have already experienced it in 2022 and 2021. There was a time when a product didn’t hold anywhere near the value it was bought at. With today’s uncertainties most don’t want to be caught in it. That will probably limit the next buy round once the needs are filled in regardless of the futures premium.

Another issue I would like to touch upon is the economic future. There is a constant barrage of economic data hitting us daily. It is all over the prediction scale. I want to go back to an analysis I sent out a few years ago about money and housing. There is a lot of data using the last few recessions to gauge how this one will look. I have to warn you that this will be the first recession since the late 70’s/early 80’s that won’t have money thrown at it. Since 1987 every slowdown has had money push into the system. This recession could be ugly. The one caveat is that just possibly we have pushed enough into it, pre-recession, to be an offset. That didn’t help the Roman Empire but just maybe it can help us. This industry will be back on its heels for months. It will probably take until the second quarter to get a clear picture of housing. That doesn’t necessarily tell us not to hold inventory……

NEW CONTRACT:

Lumber Futures Volume & Open Interest

https://www.cmegroup.com/markets/agriculture/lumber-and-softs/lumber.volume.html

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

21 Oct 2022
Agriculture, Corn, Dow Jones, Grain, Market Commentary, Market Updates, Podcast, Research, Risk Management, Soybeans, Weather, Weekly Prices rcmagserv 0 comment

AG MARKET UPDATE: OCTOBER 14 – 21

Corn had small losses on the week as harvest continues to roll on. The major ongoing story is the low river levels impacting barge travel along the Mississippi and other major water ways. This is having an impact on basis levels along with exports. Exports for the week were within estimates and ethanol output got back above 1 million barrels for the first time since early August. The exports will be the main factor to keep an eye on in the short term with no immediate relief expected for the Mississippi River with barges backed up and delays on both sides of the supply chain. The drought conditions compared to this time last year can be seen at the bottom, showing how much moisture is needed over the winter.

Via Barchart

Beans made gains this week with China showing back up as buyers but still has a bearish outlook with South America expecting neutral weather. Harvest continues to roll on with 63% done and nothing slowing it down. As always, the US needs to sell their beans before Brazil gets closer to harvest, with a potentially record crop coming from Brazil this year. If China continues to buy and Brazil begins to have weather issues, we could see a rally, but the Mississippi river issues and other bearish problems may have the upper hand currently.

Via Barchart

Equity Markets

The equity markets were positive again this week with mixed earnings and option expiration pushing markets higher. Next week’s earnings will be the most important and set the tone for the rest of the year with Apple, Microsoft, Google, Amazon, Exxon, Visa, Facebook, and many more. The guidance these company’s give will show where the largest companies in the world see the economy in the next 3-12 months. While this month’s trade has been encouraging, many investors think is just a pause before we move lower again, next week may give us a better idea. Mortgage rates topped 7% again this week as the housing market continues to face the fallout.

Via Barchart

Drought Monitor

The drought monitor below shows where we stand compared to this time last year.

October 18, 2022 Valid 8 a.m. EDT (Released Thursday, Oct. 20, 2022)

October 19, 2021 Valid 8 a.m. EDT (Released Thursday, Oct. 21, 2021)

Podcast

Are the Fed’s hikes starting to dampen inflation? Oil, grains, and metals have all fallen from their highs. But the rarely spoken of Cotton market was one of the first to crack…falling from 1.58/lb to 0.95/lb in just a few short days. We’re digging into this sharp drop and just why and how Cotton is involved in seemingly everything with RCM’s very own cotton king, LOGIC advisors Ron Lawson.

In this episode, Ron is giving us the low down on how and why he believes it’s not Dr. Copper which acts as the global economic barometer, but how Cotton is the real Canary and leading indicator on global demand. In between those talks, we’re covering all things Cotton including crop insurance, irrigated vs dry land, the scam that was Pima and Egyptian Cotton, the process of cotton – which countries have it, which want it, ginning it, spinning it, dyeing it, global commodity merchant co’s pushing it around, and even micro-plastics, climate change, and how Cotton always flows to the cheapest labor source. Finally, we’re walking in some high Cotton putting Ron in the hot seat. Will we ever get the growth back? Tune in to get these critical hot takes — SEND IT!

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].

 

14 Oct 2022
Agriculture, Corn, Cotton, Dow Jones, Grain, Market Commentary, Market Updates, Other News, Podcast, Research, Risk Management, Soybeans, USDA Report, Weekly Prices rcmagserv 0 comment

AG MARKET UPDATE: OCTOBER 7 – 14

The USDA report this week did not make any major changes to the US corn crop estimating a yield of 171.9 bushels per acres, down .6 bu/ac from September. The lack of surprises in the report kept corn trading along its path of late with no major losses or gains. The ending stocks were raised on lower demand with a high USD and world recession fears looming. While the balance sheets remain tight for corn but the recession fears lowering demand eases the balance sheet worries, for now. Harvest is still rolling along with much of the US experiencing drought conditions and no major rains in the forecast for many areas to slow it down much.

Via Barchart

Beans were the surprise of the report with estimated yields falling to 49.8 bu/ac, down 0.7 bu/ac from the September report. US ending stocks were also cut with the yield lowering getting an appropriate reaction higher aster the report. The main concern for beans right now is low demand and the potential of a record Brazil bean crop. The strong USD weighs on bean exports with China being slow buyers, as we have said before to start feeling better about the direction of beans’ price, we need China to show up more often in larger quantities.

Via Barchart

Cotton continued lower this week following the USDA report that saw a bearish reaction despite lower production estimates. Cotton is still fighting the supply vs demand issue to figure out where to go. Right now, the demand, or lack thereof, is winning as prices have been moving lower over the last 2 months. World recession fears impact the demand for cotton with lower demand balancing the lower production. The lack of demand makes it difficult to see a sizeable move higher in the near term but for cotton to be planted in areas that could grow corn and soybeans these price levels will not be attractive. We could potentially see a sideways trade until there is more certainty economically (demand) going forward.

Via Barchart

Equity Markets

The equity markets were positive this week due to a massive rally on Thursday to gain back the week’s losses and some. Inflation came in hot, again, this week giving the Fed the go ahead to raise rates another 75 basis points in November if they want to with a 15% chance of a 100 point raise. The market rallied on the CPI number, despite it being high, showing that there is still room for bounces in a bear market. It is hard to find much good news in the market with the proposed deal between the Biden administration and Rail workers unions falling apart this week as well, bringing the possibility of shutdowns back.

Via Barchart

Drought Monitor

The drought monitor below shows where we stand week to week. As you can see much of the country is in drought conditions and will need moisture over the winter.

Podcast

Are the Fed’s hikes starting to dampen inflation? Oil, grains, and metals have all fallen from their highs. But the rarely spoken of Cotton market was one of the first to crack…falling from 1.58/lb to 0.95/lb in just a few short days. We’re digging into this sharp drop and just why and how Cotton is involved in seemingly everything with RCM’s very own cotton king, LOGIC advisors Ron Lawson.

In this episode, Ron is giving us the low down on how and why he believes it’s not Dr. Copper which acts as the global economic barometer, but how Cotton is the real Canary and leading indicator on global demand. In between those talks, we’re covering all things Cotton including crop insurance, irrigated vs dry land, the scam that was Pima and Egyptian Cotton, the process of cotton – which countries have it, which want it, ginning it, spinning it, dyeing it, global commodity merchant co’s pushing it around, and even micro-plastics, climate change, and how Cotton always flows to the cheapest labor source. Finally, we’re walking in some high Cotton putting Ron in the hot seat. Will we ever get the growth back? Tune in to get these critical hot takes — SEND IT!

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].

07 Oct 2022
Agriculture, Corn, Dow Jones, Grain, Market Commentary, Market Updates, Risk Management, Soybeans, U.S. Dollar, USDA Report, Weekly Prices rcmagserv 0 comment

AG MARKET UPDATE: SEPTEMBER 30 – OCTOBER 7

As you can see in the chart below the relatively sideways trade continued this week. Harvest is rolling along, about 20% done at the start of the week, with no issues across much of the country as most areas are experiencing drought conditions. The upcoming USDA report on Wednesday will update US and South American estimated yields. The low river levels from lack of rain are starting to cause bottlenecks and problems for exports. Elevators may ask farmers to delay delivery until they know they will be able to ship it out of their facility. A continued strong US Dollar will continue to weigh on export demand.

Via Barchart

Beans were relatively flat this week but are still much lower than the highs from last month. Beans have struggled on lack of exports and relatively strong yields. The strong USD and barge situation is hurting bean export demand same as corn. China will be coming out of their week long market shut down on Sunday and hopefully we will see them as buyers more regularly in larger quantities. Harvest was 22% complete this week, off to a great start. The bean market is more vulnerable than corn at this point with less supportive news and poor technical.

Via Barchart

Equity Markets

The markets had a nice two-day rally before losing a solid chunk of those gains heading into the weekend. The hard sell off on Friday was fueled by the strong jobs report. While a strong job report sounds like a good thing, it is one of the indicators the Fed has been using when deciding to raise rates and this would incline them to raise again instead of slowing down. There is not a lot of good news in the market right now with many analysts seeing more downside, while a few thinks this most recent bounce may have put in a good floor.

Via Barchart

Drought Monitor

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

Podcast

Are the Fed’s hikes starting to dampen inflation? Oil, grains, and metals have all fallen from their highs. But the rarely spoken of Cotton market was one of the first to crack…falling from 1.58/lb to 0.95/lb in just a few short days. We’re digging into this sharp drop and just why and how Cotton is involved in seemingly everything with RCM’s very own cotton king, LOGIC advisors Ron Lawson.

In this episode, Ron is giving us the low down on how and why he believes it’s not Dr. Copper which acts as the global economic barometer, but how Cotton is the real Canary and leading indicator on global demand. In between those talks, we’re covering all things Cotton including crop insurance, irrigated vs dry land, the scam that was Pima and Egyptian Cotton, the process of cotton – which countries have it, which want it, ginning it, spinning it, dyeing it, global commodity merchant co’s pushing it around, and even micro-plastics, climate change, and how Cotton always flows to the cheapest labor source. Finally, we’re walking in some high Cotton putting Ron in the hot seat. Will we ever get the growth back? Tune in to get these critical hot takes — SEND IT!

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].

30 Sep 2022
Agriculture, Corn, Dow Jones, Grain, Market Commentary, Market Updates, Research, Risk Management, Soybeans, USDA Report, Weekly Prices, Wheat rcmagserv 0 comment

AG MARKET UPDATE: SEPTEMBER 15 – 30

What a day…what a week for grain market volatility!  With the anticipated shrinking US Corn crop, Corn has been moving higher over the last few weeks and today did not disappoint. The Sept 30 USDA report was bullish for corn coming in with quarterly stocks of 1.377 billion bushels. This was below the trade estimate (by roughly 1.6 bu/ac), giving corn prices a boost. The charts remain range bound but are starting to look more bullish. The October USDA report is in 2 weeks and is sure to have some surprises, be prepared for the volatility ahead and take advantage of rallies to catch up on sales.

Via Barchart

Beans have not had any good news over the last 2 weeks as they continue lower into harvest. Friday’s report did nothing to help this, having 274 million bushels in quarterly stocks where the average trade estimate was 242 M/bu. While exports for beans have been slow, this number was much higher than expected and beans had an appropriate reaction lower. With a stronger USD vs international currency, there is limited expectation of any major export news in the near future.  While beans are still about $1 higher than the July lows, there is little hope that additional supportive news around beans is coming to bail out the bulls…higher stocks reported today, Brazil off to a great start to their planting, and limited exports…Bears win (not talking about the @Chicagobears).

Via Barchart

Wheat has had a good run since the August lows and received more bullish news in today’s USDA report. Wheat stocks came in below estimates at 1.650 billion bushels (1.778 billion estimate). The tight world wheat stocks are supportive for prices, along with the continued war in Ukraine. Any developments in the Black Sea trade corridor would add volatility to the grain markets, specifically wheat. Beyond the unknown factors of war sixty four percent of US winter wheat production is in areas that are currently experiencing moderate to exceptional drought. In this case the Bulls are the clear winners (not the @Chicagobulls).

Via Barchart

Equity Markets

The markets were decimated in September with inflation not cooling off, increasing US & global recession fears and continued Fed rate hikes. There is no way around it, the news for the markets has been horrendous, with unemployment numbers remaining the limited good news. The S&P blew through the June lows today and is set to finish the quarter down -4.7% and the YTD down approximately – 24.8%. It’s anyone’s guess from there where the FED will go next; but as of now, they are set to continue to raise rates adding additional pressure to capital markets.

Via Barchart

Drought Monitor

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

Podcast

Are the Fed’s hikes starting to dampen inflation? Oil, grains, and metals have all fallen from their highs. But the rarely spoken of Cotton market was one of the first to crack…falling from 1.58/lb to 0.95/lb in just a few short days. We’re digging into this sharp drop and just why and how Cotton is involved in seemingly everything with RCM’s very own cotton king, LOGIC advisors Ron Lawson.

In this episode, Ron is giving us the low down on how and why he believes it’s not Dr. Copper which acts as the global economic barometer, but how Cotton is the real Canary and leading indicator on global demand. In between those talks, we’re covering all things Cotton including crop insurance, irrigated vs dry land, the scam that was Pima and Egyptian Cotton, the process of cotton – which countries have it, which want it, ginning it, spinning it, dyeing it, global commodity merchant co’s pushing it around, and even micro-plastics, climate change, and how Cotton always flows to the cheapest labor source. Finally, we’re walking in some high Cotton putting Ron in the hot seat. Will we ever get the growth back? Tune in to get these critical hot takes — SEND IT!

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 Aug 2022
Agriculture, Corn, Dow Jones, Grain, Market Commentary, Market Updates, Research, Risk Management, Soybeans, Weekly Prices rcmagserv 0 comment

AG MARKET UPDATE: AUG 12 – AUG 26

Corn has had a good couple weeks with more news coming out of the pro farmer tour. The PFT pegged the US corn yield at 168.1 bu/acre, well below the 175.4 that the USDA has. This would be very bullish for the long run, while this seems low there is still time to help and hurt the crop. A sub 170 number would be a shock to the system and unlikely the USDA would admit they are that far off anytime soon. Crop ratings continue to fall with a national 55 good/excellent rating. The drought out west has taken its toll on the crop and the numbers show that. Balance sheets would get very tight very quickly with at 168 yield, the cash market is already telling us the demand is there so now we begin the home stretch.

Via Barchart

Beans made small gains with some volatility over the last 2 weeks. There were good exports and sales to China that are welcome news. The PFT pegged the US crop at 51.7 bu/acre close to the 51.9 the USDA had. This seems on par for what we are hearing with a strong bean crop and tough looking corn crop. Beans will benefit from the bearish corn numbers but will need their own story to continue their move higher with continued exports. The weather over the next month looks beneficial for beans as well.

Via Barchart

Equity Markets

The equity markets have taken it on the chin in the last week as markets faded further to end the week on hawkish comments by Fed chair Powell. As we still battle inflation the Fed will continue to look at all data to determine the necessary steps come next months meeting. While it is expected they will continue to raise rates the guidance going forward is up in the air.

Via Barchart

Drought Monitor

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

Podcast

Are the Fed’s hikes starting to dampen inflation? Oil, grains, and metals have all fallen from their highs. But the rarely spoken of Cotton market was one of the first to crack…falling from 1.58/lb to 0.95/lb in just a few short days. We’re digging into this sharp drop and just why and how Cotton is involved in seemingly everything with RCM’s very own cotton king, LOGIC advisors Ron Lawson.

In this episode, Ron is giving us the low down on how and why he believes it’s not Dr. Copper which acts as the global economic barometer, but how Cotton is the real Canary and leading indicator on global demand. In between those talks, we’re covering all things Cotton including crop insurance, irrigated vs dry land, the scam that was Pima and Egyptian Cotton, the process of cotton – which countries have it, which want it, ginning it, spinning it, dyeing it, global commodity merchant co’s pushing it around, and even micro-plastics, climate change, and how Cotton always flows to the cheapest labor source. Finally, we’re walking in some high Cotton putting Ron in the hot seat. Will we ever get the growth back? Tune in to get these critical hot takes — SEND IT!

 

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].

 

 

 

12 Aug 2022
Agriculture, Corn, Grain, Market Commentary, Market Updates, Other News, Risk Management, Soybeans, USDA Report, Weekly Prices rcmagserv 0 comment

AG MARKET UPDATE: JULY 28 – AUGUST 12

Corn had had a good couple weeks heading into the August USDA report which gave updated ending stocks and yield numbers. The USDA lowered yield to 175.4 bu/acre from 177 in July (average estimate pre-report has 175.9). They raised old crop ending stocks but lowered 22/23 US and world ending stocks. Corn was rated 58% good/excellent this week, dropping 3% nationally from last week to help add bullish news to the corn market. The next month of weather will be important for kernel fill as the weather remains uncertain with some areas expecting hot and dry with others more seasonal weather in the ECB. Seeing world demand pick up would help corn whether it be China, ethanol demand, whatever it is the markets will gladly accept it.

Via Barchart

Beans have made small gains over the last 2 weeks and rallied after the report following an initial reaction lower. The initial reaction lower was due to the surprise of a higher yield with the USDA estimating the US crop at 51.9 bu/acre, well above the pre report estimates of 50.4. The slow export pace was also factored into the larger ending stocks but could speed up as beans out of the PNW to Asia are very competitive in the world market. The would be record yield still has ways to go with August and September weather still having mixed expectations.

Via Barchart

Cotton

Cotton was limit up after several up days following the report as the US’ crop continues to shrink with abandonment expected to continue to grow. 1.8 million bales ending stocks would be one of the lowest on record since 1960 and potentially problematic with world demand if we avoid a worldwide recession.

Via Barchart

Russia and Ukraine

Vessels carrying grain have left Ukraine but the first cargo was not accepted due to quality concerns at its intended location. While the grain was sitting for a long time this is not surprising as the quality was always going to be a concern. The newest problem is the Zaporzhye nuclear power plant, with the UN Security Council meeting to discuss what needs to be done to make sure there is a not a “catastrophe on a scale much greater than the consequences of the accident at the Chernobyl nuclear power plant”.

Equity Markets

The equity markets have seen a strong and steady rally higher with consumer sentiment rising. CPI came in at 8.5% again this month so the positive is it did not go up from last month, the negative is it is still at 8.5% YOY so this number will need to start going down before there is too much confidence we have peaked with the Fed still raising rates. Production at several offshore drilling sights were paused for a short period this week while a problem was fixed causing some volatility in the energy sector.

Via Barchart

Drought Monitor

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

Podcast

Are the Fed’s hikes starting to dampen inflation? Oil, grains, and metals have all fallen from their highs. But the rarely spoken of Cotton market was one of the first to crack…falling from 1.58/lb to 0.95/lb in just a few short days. We’re digging into this sharp drop and just why and how Cotton is involved in seemingly everything with RCM’s very own cotton king, LOGIC advisors Ron Lawson.

In this episode, Ron is giving us the low down on how and why he believes it’s not Dr. Copper which acts as the global economic barometer, but how Cotton is the real Canary and leading indicator on global demand. In between those talks, we’re covering all things Cotton including crop insurance, irrigated vs dry land, the scam that was Pima and Egyptian Cotton, the process of cotton – which countries have it, which want it, ginning it, spinning it, dyeing it, global commodity merchant co’s pushing it around, and even micro-plastics, climate change, and how Cotton always flows to the cheapest labor source. Finally, we’re walking in some high Cotton putting Ron in the hot seat. Will we ever get the growth back? Tune in to get these critical hot takes — SEND IT!

 

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 Jul 2022
Agriculture, Corn, Dow Jones, Grain, Market Commentary, Market Updates, Other News, Podcast, Research, Risk Management, Soybeans, Weather, Weekly Prices rcmagserv 0 comment

AG MARKET UPDATE: JULY 21 – 28

Corn bounced back this week as hot and dry August forecasts returned across the western corn belt, and eventually are forecasted to move east right in the middle of pollination.  To be clear – hot and dry while pollinating is less than ideal.  In addition, the weekly crop ratings came in lower with the national good/excellent ratings estimates at 61%. Ratings have lowered 6% in the last month, and with the current forecast this trend is likely to continue. All these factors together, along with a weaker US dollar, helped the rebound for the week. While this turnaround has been nice on prices, the yields are a concern, and it will continue to be important to monitor pricing into the weekend and start of trade on Sunday.

Via Barchart

The forecast change has also been supportive of bean prices as August is an important month for yield development. Soybean supply and demand has been tighter over the years and if we lose 1 or 2 bushels in national yield it will result in a big hit to world supply. September beans traded over the $15 mark for the first time in a month with this week’s gains. The November contract has the potential to reach back over $15 with the current momentum, assuming no new bearish forecast changes over the weekend. Soybeans good/excellent ratings came in at 59% nationally, following the worsening trend that corn has had, losing 4% g/e in July.

Via Barchart

Russia and Ukraine

Reports were that Russia and Ukraine had agreed to a safe export corridor, and then…. Russia bombed another port (imagine that)… so that did not last long. Russia wants any obstacles to Russian agriculture exports to be eliminated, which seems unlikely. White House spokesman John Kirby either majorly misspoke or lied this week claiming that there were 80 ships ready to leave the ports with 20 million tons of Ukrainian grain. The largest grain shipping vessels can only hold about 60,000 tons so if there are 80 ships.  Quick math here = they will only be able to ship 4-5 million tons. Luckily this did not spook the markets as traders knew this to be the case with SovEcon saying there are no more than 10 such ships ready to ship grain. The mines remain in the shipping corridors and this conflict will continue to drag out through the summer.

Equity Markets

The equity markets had a good week following a few down days with some strong earnings and some misses. The Fed unsurprisingly raised rates 75 points this week leaving what comes in the next rate hike up in the air. The 2nd quarter GDP posted another negative number after posting a negative first quarter. Historically 2 consecutive quarters of negative growth signals a recession. There are lots of challenges right now with inflation still a major problem but with companies lowering guidance for the rest of the year the current economic slowdown may continue.

Via Barchart

Drought Monitor

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

Podcast

Are the Fed’s hikes starting to dampen inflation? Oil, grains, and metals have all fallen from their highs. But the rarely spoken of Cotton market was one of the first to crack…falling from 1.58/lb to 0.95/lb in just a few short days. We’re digging into this sharp drop and just why and how Cotton is involved in seemingly everything with RCM’s very own cotton king, LOGIC advisors Ron Lawson.

In this episode, Ron is giving us the low down on how and why he believes it’s not Dr. Copper which acts as the global economic barometer, but how Cotton is the real Canary and leading indicator on global demand. In between those talks, we’re covering all things Cotton including crop insurance, irrigated vs dry land, the scam that was Pima and Egyptian Cotton, the process of cotton – which countries have it, which want it, ginning it, spinning it, dyeing it, global commodity merchant co’s pushing it around, and even micro-plastics, climate change, and how Cotton always flows to the cheapest labor source. Finally, we’re walking in some high Cotton putting Ron in the hot seat. Will we ever get the growth back? Tune in to get these critical hot takes — SEND IT!

 

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].

 

 

22 Jul 2022
Agriculture, Corn, Dow Jones, Grain, Market Commentary, Market Updates, Other News, Podcast, Research, Risk Management, Soybeans, Weather, Weekly Prices rcmagserv 0 comment

AG MARKET UPDATE: JULY 14 – 21

Despite a brutal stretch of hot and dry conditions, Corn prices have continued to struggle, tied in with ever changing forecasts looking at favorable conditions ahead. In total, the trend is clearly down with the cooler forecast for the corn belt and a potential for trade in the Black Sea to resume. Energy prices have also fallen pulling other commodities with it as Russia re-opened the Nord Stream pipeline into Europe (at less than 50% capacity). While prices have retreated to pre-Russia invasion of Ukraine, the potential for a sub trend line corn crop in the US remains. Basis is still strong in many areas showing that there is a disconnect and some areas are very worried about potential yield loss.  Weather during the first half of August will be huge for this crop – as forecasts change so will prices.  Expect more volatility ahead!

Via Barchart

Patterns in Soybeans have been almost identical to Corn – ever changing weather conditions along with uncertainty in global demand are driving prices lower.  26% of soybean production is in areas currently experiencing moderate to severe drought. The weather coming up is important for beans as well; if the cooler forecasts do not come to pass and hot and dry conditions continue beans should see a bump in price. Old crop exports were strong this week while new crop fell in the expected range.

Via Barchart

Equity Markets

The equity markets rallied this week stringing together several positive days despite all the concerns of recession and inflation remaining in the market. This appears to be an area that is tradable as many equities are off their lows on the year but still well below the highs. Q2 Earnings have also given some guidance as companies have taken inflation and other rising costs into account for what to expect ahead. Tech stocks have also gotten a big boost this week along with crypto.

Via Barchart

Drought Monitor

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

Podcast

Are the Fed’s hikes starting to dampen inflation? Oil, grains, and metals have all fallen from their highs. But the rarely spoken of Cotton market was one of the first to crack…falling from 1.58/lb to 0.95/lb in just a few short days. We’re digging into this sharp drop and just why and how Cotton is involved in seemingly everything with RCM’s very own cotton king, LOGIC advisors Ron Lawson.

In this episode, Ron is giving us the low down on how and why he believes it’s not Dr. Copper which acts as the global economic barometer, but how Cotton is the real Canary and leading indicator on global demand. In between those talks, we’re covering all things Cotton including crop insurance, irrigated vs dry land, the scam that was Pima and Egyptian Cotton, the process of cotton – which countries have it, which want it, ginning it, spinning it, dyeing it, global commodity merchant co’s pushing it around, and even micro-plastics, climate change, and how Cotton always flows to the cheapest labor source. Finally, we’re walking in some high Cotton putting Ron in the hot seat. Will we ever get the growth back? Tune in to get these critical hot takes — SEND IT!

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].

 

20 Jul 2022
Agriculture, CME, Lumber, Market Commentary, Market Updates, Research, Risk Management rcmagserv 0 comment

IS BETTER LUMBER LIQUIDITY HERE?

Lumber has long been known as a quite illiquid futures market. We talked about it on the RCM blog here, on the Hedged Edge podcast here, and Derivative podcast here.

But changes are afoot which may solve the main issues that lead to the illiquid nature of lumber futures, with the CME Group getting ready to launch a new lumber futures and options contract that will be smaller and have more delivery options, which we believe will allow for more effective risk management. The CME said it plans to launch the new contract early in August. The current contract that expires in May 2023 will be the last month under current specifications. This has caused some buzz in the industry, so let’s take some time to check it out.

The two big new key features as far as we’re concerns are:

• Small contract size for precise hedging
• Participation from throughout the lumber supply chain

The smaller contract size is very welcome in the industry as the current lumber contract is for 110,000 board feet (1 rail carload), whereas the new contract will trade in lengths of 27,500 feet (1 truckload). This will allow for more precise and accurate hedging while allowing for more participation in the market from smaller traders. Smaller traders had been pushed out in the past with the requirements and contracts not fitting their needs. This will allow for greater liquidity in the market that currently only sees a couple hundred contracts traded a day.

The new contract also allows eastern mills to deliver, where the current contract only allowed western mill delivery. This expands the accessibility to producers to accommodate the changing landscape and needs of the market. Delivery will now be in Chicago and allow for eastern species of spruce, pine and fir, instead of just species grown in the west (southern yellow pine is still not a deliverable species). This will make the market more accessible and will increase participation and provide more risk management options.

Now, the CME is a publicly traded company and they’re doing this to generate more volumes and interest in this market. But that doesn’t mean it’s not a good thing. We think it will definitely create better liquidity for the lumber market, by both increasing volumes from current market participants and bringing new participants to the market.

By making deliverable contracts for both east and west mills while lowering the contract size, you attract new participants from all along the supply chain from producers of wood, to mills, on through to home builders. And as those commercial groups increase their footprint, the hope is that speculative trade flow (i.e hedge funds, ETF’s, and retail traders) also begin to increase interest in the market; creating a flywheel effect adding to the liquidity for the physical market participants.

The contract is ¼ the size of the old one meaning if you want to hedge or trade the same amount of board feet it will require 4 contracts instead of 1, creating more contracts to trade across the market (more liquid). The length also allows for more accurate hedging needs by making it easier to accurately manage your risk (think now you can protect 165,000 board feet vs either 110,000 or 220,000 feet). Traders will also be able to spread across the two markets for a short time creating new trade/arbitrage opportunities as they are not the same contract and specs, so they will not trade perfectly in tandem.

Ultimately homebuilders and speculators will be welcomed back into the market with these contracts being much more friendly. Builders will be able to hedge the price of lumber on a couple houses (or one large one) instead of having to hedge several at once that may not be under contract.

Our team as well as many others in the lumber industry are fired up after years of wanting a better lumber contract…LETS DO THIS!


As the contract progresses and ultimately receives approval, we will update this article to reflect new information provided from the CME and CFTC.

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 RCM Ag Services today for more information on how this new contract could fit your business.
[email protected]

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.