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18 Dec 2023
Agriculture, CME, Corn, Futures, Grain, Hedging, Market Commentary, Market Updates, Research, Risk Management, Soybeans, Weekly Prices rcmagserv 0 comment

AG MARKET UPDATE: DECEMBER 1 – 15

Corn has been rage bound for the last two weeks with no catalysts in the market to move it much either direction. The weather in South America has improved slightly in areas that got off to a tough start but doesn’t seem to have made much a difference on the market. It is still a wait and see approach for the South American crop, nobody wants to jump to conclusions. Th Biden administration is supporting tax credits for ethanol-based sustainable aviation fuel, which would result in a major new demand source down the road. The markets will likely be muted in both volume and price movement as we head into the end of the year.

Via Barchart

Soybeans have bounced around the last couple of weeks with a steady stream of exports and the Argentinian peso devaluation. The latest crush report from NOPA recorded a record for the month and about 3 million bushels more than pre-report estimates. The demand for beans has been there and seems to be significant but with so much time still to go before South America’s crop is known. Estimates keep shrinking the Bazil crop, which the market shrugs off, making it a hard market to be overly bullish in when good news is not met with good market reactions.

Via Barchart

Equity Markets

The equity markets continued their run higher this week as the Fed kept rates steady and seem likely to begin cuts in 2024. The rest of the market has begun participating as the Magnificent 7 stocks had done most of the heavy lifting to this point. Analysts are still warry of a soft landing recession but for now the markets are moving higher in the short term.

Via Barchart

Other News

  • The Fed held rates steady this week with markets expecting them to start cutting in the first half of 2024.
  • Argentina devalued the peso by more than 50% to try and help the nation’s struggling economy.

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].

 

11 Dec 2023
Agriculture, CME, Hedging, Lumber, Market Commentary, Market Updates, Research, Risk Management, Weekly Prices rcmagserv 0 comment

LEONARD LUMBER REPORT: “THE SEASON OF CONTENTMENT”

Recap:

“The season of contentment.” Most have closed up shop for the rest of the year. There is minimal volume in either the futures or cash. The futures trade is a liquidation of all sides. The outlook is also fuzzy. As the daily traders look for a crack at the mills the long-term traders wonder if that was enough of a buy. In 2023, there have been three good buy rounds, each at a lower cash price and futures bounce. Does the trend continue? I will say this: most of the industry does not want lower cash prices. That tells me it could be more of the same, dragging the market lower until the next round.

It’s been over a year of complacency, confusion, and a content market. The data shows a loss of 20% from the retail sector side versus a drop in supply of roughly 20%. You can be more balanced. Historically, this industry doesn’t come out of that phase quietly. With less production, less Euro, and a construction needle that doesn’t move, the volatility will be on the upside. The futures market is quietly indicating that with the support we are seeing. It’s going to take more time.

Technical:

The lower objectives of 518.50 and 510.50 are still in play. These are corrective objectives. If you look at the wedge pattern that formed in 2023, the bands are 568.80 and 495.30. Today, lower mill prices will not stimulate buying. With an RSI of 49.40%, those bands look a mile away.

Daily Bulletin:

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

The Commitment of Traders:

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

About the Leonard Report:

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

 

Brian Leonard

[email protected]

312-761-2636

04 Dec 2023
Agriculture, CME, Lumber, Market Commentary, Market Updates, Research, Risk Management, Weekly Prices rcmagserv 0 comment

LEONARD LUMBER REPORT: The lumber market today has three defined pillars

Recap:

The lumber market today has three defined pillars. The first is supply and demand. The other is rates, and then there is inventory management attitudes. All are currently indicating more of the same for 2024. What could be different is inventory management.

This past month we saw a much more robust buy round. There was a genuine attitude that buying cash at $370 or $375 held a low risk. We saw that again with the lack of hedging after a $50 run in futures. Most believed that inventory management was sufficient. Distribution and wholesalers want to hold more product. Contracts and VMI limit the availability of wood at any given time. The fact that the industry was able to have a good buy round indicates a shift at the mills to hold more wood. That is good for prices in a flat market. A Weyerhaeuser guy (Jay) always said that it is bullish when the mills control the wood. When they ship it to others it is bearish. Let’s see if that is the case next year.

Last week’s negative trade reflected the lack of hedging by the industry. The end-of-the-year timeframe is rough for those holding inventories. Another sloppy week is expected. The massive liquidation in the futures market takes it out of the game to help at this point.

Technical:

The futures market retraced 38% of the move last week. The 50% mark is 518.00 and the 61% is 509.70. All are in reach. What is a little more bullish is the fact that the lower Bollinger band sits at 520.50. It would take time and work to get that band to turn down. I am looking for a lower trade in January, but the timing may be closer to expiration.

Note: fund managers point to a possible shift in the fund makeup in lumber from short to long. Rates will control that conversation.

Note: the sleeper in this market is the monthly inventory of new homes available. This last number of 7.8 months is the highest we have seen in three years.

Daily Bulletin:

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

The Commitment of Traders:

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

About the Leonard Report:

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

 

Brian Leonard

[email protected]

312-761-2636

01 Dec 2023
Agriculture, CME, Corn, Futures, Grain, Hedging, Market Commentary, Market Updates, Research, Risk Management, Soybeans, Weather, Weekly Prices rcmagserv 0 comment

AG MARKET UPDATE: NOVEMBER 9 – DECEMBER 1

Corn has had a rough month as it continues its sideways to lower grind after briefly touching $5.20 in October for the March contract. While there has not been any major market news to direct the market a strong weekly export report this week was welcome to the market that had been bleeding lower. The last few days saw a nice reversal, seeing a 14-cent rally off this week’s lows. Basis has taken a nosedive in many areas of the country hinting that there may be more corn out there than initially expected. With harvest all but wrapped up for most of the country it will be worth keeping an eye on whether farmers store the corn and hope for better basis or get it off their books to pay back operating loans at the highest rates we have seen in years. Brazil’s weather remains about the same with beneficial rains expected over the next couple of weeks in the drier areas north and the south remains wet.

Via Barchart

Soybeans have fallen over the last couple of weeks but is in a sideways trade in the big picture. Exports were not as strong as corn but better than expected. Brazil’s weather is the main focus for beans right now as the north is drier than normal and the south is still wet. The bean demand from China is welcome, as always, but sustained demand and not just demand while Brazil is having logistic issues will be important. The amount of rain in Brazil next week will be the main market mover until the report on Friday if we get some surprises.

Via Barchart

Equity Markets

The equity markets had a great November seeing strong gains across the board as the Fed speak has turned dovish and inflation continues to cool. The markets are pricing in the Fed beginning to cut rates in the first half of 2024 while the general consensus by large companies and funds is that a mild recession is still in the cards next year. The big names had a good month and the 10-year note fell, but it was encouraging to see some laggards join the party. The end of the year always involves some shuffling, but economic data will continue to move the markets now that earnings are past.

Via Barchart

 

Other News

  • Charlie Munger passed away this week at the age of 99. A longtime investor and one of the brightest minds for financial markets the Berkshire Hathaway investor left his mark and knowledge on the financial markets.
  • The next WASDE Report is Friday, December 8 at 12 ET
  • Brazil is set to join OPEC+. Brazil produces about 3.7 million barrels a day which makes it a top 10 oil producing country.
  • The ceasefire between Israel and Hamas ended as hostage swap negotiations stalled. The unrest in the Middle East will continue to dominate headlines.

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].

 

27 Nov 2023
Agriculture, CME, Housing, Lumber, Market Commentary, Market Updates, Research, Risk Management, Weekly Prices rcmagserv 0 comment

Leonard Lumber Update: I Will Continue to focus on the technical side of this market

Recap:

I will continue to focus on the technical side of this market. There are two takeaways from the weekly chart below.

The first read is that when a market goes through an extreme volatility event, there tends to be a corrective phase. You can see just how flat the market has become. In 2021 and 2022, the market experienced record prices and volatility. In 2023, the market has been flat. I wonder if the excess volatility has been sufficiently drained yet. The chart shows that futures can run another $50 higher and still be in the flat range. That brings me to read number two. This is a flat market working along its bottom. Rarely does a market break out down from this type of trade. The breakout is usually a retracement of the last move. So, this market has some room to run higher. I made a case in March, more than once, that the potential distance up is far greater than down. That math has stayed the same, but the timeline is in doubt.

The fundamentals are getting better as time goes on. The market is getting used to higher rates and higher home prices. A slight downtick in either stimulates more activity. I expect a continued start and lag with the buyers for another year, but the good news is the actual decline was marginal at best. My other soapbox rant continues to be the excess capital in the system. Massive capital injections are still coming into the market. There is also enormous capital sitting on the sidelines. And finally, 2024 is an election year. Enough said there.

Last week’s futures trade was a good read of the market. The recent Sept-Oct trend to new lows was more a sign of frustration than weakness. The bounce off those lows is a rebalancing, but last week’s positive trade showed underlying strength. The breakthrough of the 100-day average and the 200-day average indicated new strength. Two other keys are that Elliot Wave is calling the excess volatility gone. This is not a bottom call. It is a warning not to discount the possibility of some large spikes higher. If true, the other key factor could be a market exiting the focus of the 2020 to 2022 data and reverting to pre-2020 data and fundamentals. As we remember, that was an underbuilt sector with lessening production.

This week’s focus remains on the algo buying versus the premium. This is a very disciplined premium/discount trading market. It will have to meet somewhere in the middle. A good indicator of potential January weakness will be if the spread goes further. The upcoming roll might be enough to bring January closer to the cash market.

Daily Bulletin:

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

The Commitment of Traders:

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

About the Leonard Report:

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

 

Brian Leonard

[email protected]

312-761-2636

21 Nov 2023
Agriculture, CME, Dairy, Futures, Hedging, Market Commentary, Market Updates, Research, Risk Management rcmagserv 0 comment

Merucci- Milk, Feed, Cattle market update

As we head into end of year, take time to make sure you have minimized your risk and kept yourself open for better prices if they may occur.  It has been a difficult stretch for milk prices which is evident by clients that have had consistent coverage in place are shaping up to get DRP indemnities for their 6th quarter in a row!  Don’t get caught thinking that you know where prices are heading next year.  Here are good ways to protect negative outcomes and still be positioned for better prices in milk, feed and cattle.

 

Milk-  This part is simple, DRP has worked as advertised over the last few years.  There have been both good and bad prices.  DRP has paid out nicely in the low price times and still allowed for availability to participate in some of the highest milk checks on record.  I strongly recommend having at minimum 25% of milk protected in both Q2 and Q3.  Utilizing the 1.5 factor, this will protect 33% and still leave plenty of room to add coverage if prices improve.  Looking at the historical comparisons, milk prices are pretty good and with the subsidy provided for DRP purchase, the cost is well worth the investment in price security.

 

Corn and Meal-  Now the attention is south of the equator.  Don’t put yourself in a position of guessing weather outcomes and China demand, which we will be hearing a lot about in the next few months.  There are plenty of technical and fundamental cases being made for higher or lower prices for corn and meal.  It is unnecessary to take this risk.  Buy May calls in meal; buy calls or risk reversals in corn.  Calls in May meal will give protection against a disastrous crop in Argentina and Brazil.  For corn, whichever timeframe you are concerned about March through December, add an option strategy that best fits your needs.

 

Cattle-  Cattle prices, not to mention DRP,  have been a savior to many dairies.  Now that the straight climb up has seemingly ended, we now will be experiencing some volatility and up and down markets.  With the emergence of beef/dairy, I’m an advocate of LRP for all dairies.  Beef prices affect dairy revenue, why not have subsidized coverage to protect that revenue stream?  Look to add LRP on upticks in feeders or live cattle and be open to trading futures and options vs. LRP policies.

 

Looking back to the beginning of this year and the newsletters that charge subscription fees and “predict” market direction, not very many, if any, predicted this market.  Don’t get caught thinking you know what is ahead.  Your business won’t have a bad year because your invested in downside protection, but it could have a bad year if you don’t.

 

I look forward to hearing from you and discussing individualized risk management plans that best fit your business.  Have a wonderful Thanksgiving weekend.

 

 

Mike Merucci

312.893.5546

[email protected]

20 Nov 2023
Agriculture, CME, Lumber, Market Commentary, Market Updates, Research, Risk Management, Weekly Prices rcmagserv 0 comment

LEONARD LUMBER REPORT: THIS MARKET IS STILL A GRIND, BUT THIS TIME A GRIND HIGHER

Recap:

This market is still a grind, but this time a grind higher. The January futures contracts were up $3.50, while the cash print was up $3. It did feel better than that all week. There may be better confidence building up with the recent cash trade. Also, the projections set in January are coming into play. The expectation was a reduced supply coming out of Canada and a slowing of Euro wood coupled with less demand.

The last estimate I saw was an 11.7 shipment number expected for 2023 out of Canada. We were looking for a 12+ number but could get less than expected. The Euro issue is under control. Coming into 2023, the docks were flooded with Euro. It was pretty easy of a call for that problem to subside. The surprise has been the steady demand. It is off YoY, but not at the pace expected. Most were prepping for the next shoe to drop in the economy, only to be forced back into the market. That is where we are at today.

Technical:

The best read for the next eight weeks will be entirely technical. The algo’s, funds, and support/resistance points will be the feature. Why is that? As futures neared the 200-day moving average, the funds started to liquidate. With less fund selling, the algo/long fund has started to buy. There are no fundamental drivers. It is all futures related. If you keep pushing futures higher, the industry can buy cash with a place to go for protection. Every rally for the last 5 years started with the ability for the trade to sell the board for protection. It is a tough time of year to get that firmly in place, but it is trying to form.

This rally is going on 18 sessions, and with an RSI of almost 70%, I believe it needs to be corrected. Hedging or basis trading a percentage of buys is the risk management play. The 200-day is sitting at 555.50.

The pulse of this market is the computer trading in futures. If has not yet switched from the short fund leading to a long fund taking over but it is different.

 

Daily Bulletin:

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

The Commitment of Traders:

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

About the Leonard Report:

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

 

Brian Leonard

[email protected]

312-761-2636

13 Nov 2023
Agriculture, CME, Lumber, Market Commentary, Market Updates, Research, Risk Management, Weekly Prices rcmagserv 0 comment

LEONARD LUMBER REPORT: January gained $10 for the week, but it felt much better than that

Happy Veterans Day!

One of our own, a World War II veteran, is celebrating this weekend. I believe he was in the Army-Aircorp and served with the French underground. Jack Hall from Hall Lumber Sales in Middleton, Wis, is 99 years old. If you are wondering what he likes, he is a big proponent of owning more precious metals and less cash.  

Happy Veterans Day to all who served!

Recap:

January gained $10 for the week, but it felt much better than that. Momentum is getting created just by the fact that sentiment is less bad. While the upside is limited to fund liquidating, there is still that positive note. If you look at open interest, it is apparent that the market is up because of liquidation. Cash, on the other hand, is testing the market’s ability to accept higher prices. The mills still don’t have pricing power back. It gets the win here solely because of how underbought the market has become. If the starts number comes in around 1.4 on Friday, this market will be undersupplied after all the Christmas shutdowns. If it comes in closer to 1.3, then the shutdowns won’t have an effect. That is a general assumption because of the report’s vagueness, but sticking with the dot plots is meaningful.

In 2024, there is less chance of a debacle in employment. The prospective buyers have gone into the weeds with rising rates and primary home prices. They have not gone away, and numbers are growing. That is the main support for holding prices up. There will be spikes up and down in the futures market, but the general economics is that these levels work. Turn demand up some and we are off. Keep demand at its current levels, and it is then more of the same. 

Technical:

The technical picture has been very informational for this last run. It is now pushing its limit on a market that is only filling in. This week, November is expiring. The chart pattern in Jan could begin to top and slowly roll over by the end of the week. 

If the funds show up, I’m wrong. 

 

Daily Bulletin:

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

The Commitment of Traders:

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

About the Leonard Report:

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

 

Brian Leonard

[email protected]

312-761-2636

09 Nov 2023
Agriculture, CME, Corn, Cotton, Grain, Market Commentary, Market Updates, Other News, Research, Risk Management, Soybeans, USDA Report, Weekly Prices rcmagserv 0 comment

AG MARKET UPDATE: NOVEMBER 9

The November USDA Report raised US yields and ending stocks. From what we have been hearing about yields in the eastern corn belt the rise in yields was not that unexpected while a 1.9 bu/ac jump higher to 174.9 was not quite expected. Rarely does the November report differ so much from the Sep/Oct yields, but the yields in IL, IN, and OH made up for losses seen in the western corn belt and plains. Current support is at $4.67 for Dec corn, but a close below that could lead lower. If that holds, we should expect the sideways trade we have seen for the next month+. US corn yield 174.9 bpa. Us corn production 15.234 billion bushels.

Via Barchart

Soybeans had seen a good run over the last couple of weeks until the USDA report took a hit. While beans are still well off their lows the report’s reaction saw beans lose 20 cents. Like corn, soybeans saw their yield increased to 49.9 bu/ac. The Chinese demand situation and northern Brazil’s dry weather have been bullish for beans and will be a bullish talking point if they last and the main news moving forward. US soybean yield 49.9 bu/ac. US soybean production 4.129 billion bushels.

Via Barchart

Equity Markets

The equity markets had their longest winning streak of the year in the past couple weeks, climbing back from the latest move lower. Inflation is cooling and the Fed appeared to be done (for now) with changing rates which allows the market to take a deep breath as a “soft landing” appears attainable. Fed Chair Powell today said that he is not confident the Fed has achieved sufficiently restrictive rate to bring down inflation, allowing for some concern of further rate hikes. While earnings have not been stellar across the board strength in some important areas has given the markets fuel for this most recent rally.

Via Barchart

Cotton

Cotton is a supply and demand story right now with ample supply and a lack of demand. World geopolitical issues and the risk of a recession have kept buying down as producers do not want to be stuck with inventory nobody wants to buy.

PRICES

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

LEONARD LUMBER REPORT: I would not call it the Great Reset, but there was definitely cash trading last week

Recap:

I would not call it the Great Reset, but there was definitely cash trading last week. What started as traders covering cash turned into a global buy. We also saw a mill go up $18 in less than 24 hours. That was reminiscent of the 21-22 trade when they threw a dart each morning. Let’s face it: the mills need to get prices higher, and their marketing for the last 18 months hasn’t done it. The marketplace was extremely underbought, and they took advantage of it. Is it a tighter market? Most likely not, but like futures two weeks ago, it is a “shot over the bow.” This spike results from the lack of buying and will be how the market trades in 2024.

Futures were up $28 for the week, with most coming on Thursday and Friday. The prominent driver in our market is whether the funds are selling or buying. They are the mover of the market today. Friday’s high volume and drop in January open interest could signal a slight exit by them. Their trip number to exit is closer to the trade going into the end of the year. It is a double-edged sword as the liquidation will then show up as new selling on the next break. More liquidation will show up early in the week.

Technical:

This rally has created a strong upward chart trend. In January, we are sticking to the gap area as the objective. The gap sits from 533.50 to 545.50. A futures run to that area equates to a $410 cash market. The problem is that this type of run can’t stop, pull back, and then go again. A slowdown will bring the market back down and send the trade to the sidelines. The short-term technicals are slightly overbought. The RSI in Jan is 77% so there is room. What is worrisome is the upper Bollinger band is sitting at 522, putting January well over that band. A pullback or sideways trade is needed to correct it. The other item on the radar is the small gap left Friday from 512 to 511.50. Fill it and you’ll shut the market down.

I like the chart trend and the renewed enthusiasm in the cash trade. My issue is how quickly the market finishes an inventory build and then hibernates. The market will give us that answer early this time.

Daily Bulletin:

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

The Commitment of Traders:

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

About the Leonard Report:

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

 

Brian Leonard

[email protected]

312-761-2636

Disclaimer

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