Category: Uncategorized

22 Apr 2022

AG MARKET UPDATE: APRIL 8 – 21

Corn has had a good past couple of weeks despite the pullback on Thursday. Planting has gotten underway across the country; while some areas are not quite ready, the next month will be as important as the last few years for weather. The western corn belt needs some rain, and the plains need warmer temperatures to begin planting. The uncertainty with Ukraine remains, but there have been reports that farmers have already planted 20% of their spring crops despite the ongoing war. While this is bearish for prices, it is important to note that there will almost definitely be a drop in total acres. China’s lockdowns in Shanghai continue as they remain a big question mark in the short run as to how their covid restrictions will play out. For now, keep an eye on US planting weather as a delayed crop will lead to yield loss, the current prices for new crop would move higher, and supplies would get tighter. Ethanol production last week was the lowest since September, with some plants down for maintenance and rail transportation prices higher; this is not surprising but will be something to keep an eye on with gas prices still elevated.

Via Barchart

Soybeans have had a good couple of weeks after a short period of movement lower. Exports this week were on the low end of expectations outside of new crop bean sales, seeing a decent number. Bean oil prices continue higher supporting beans to move higher. After trading sideways for a bit, then lowering this move upward looks to continue and possibly test the highs we saw in late February in a wildly volatile trading day. China’s ag ministry said they intend to produce 20.63 million tonnes of beans this year, up from the 16.4 million last year. Like corn, the weather needs to improve across much of the US to feel better about this crop’s potential.

Via Barchart

Dow Jones

The Dow was up slightly on the week and reached its highest point in over two months before falling lower on Thursday. There has been a lot going on with earnings, but Netflix posted the most headline-worthy while losing a billion in market cap, and Tesla posted a solid quarter to provide some support. Inflation and interest rates continue to be the talking points as everyone looks to point fingers at noncontrollable factors. The next quarter will be important to see if inflation can get under control or if more warning signs come to the market. The “growth trade” will be challenged with rates rising and some valuations coming back down to earth.

Via Barchart

Drought Monitor

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

Podcast

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

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

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

 

 

Via Barchart.com

 

Contact an Ag Specialist Today

Whether you’re a producer, end-user, commercial operator, RCM AG Services helps protect revenues and control costs through its suite of hedging tools and network of buyers/sellers — Contact Ag Specialist Brady Lawrence today at 312-858-4049 or blawrence@rcmam.com.

 

14 Mar 2022

AG MARKET UPDATE: MARCH 3 – 10

Corn made slight gains on the week with very volatile intraday markets. The Ukraine and Russian news continue to stay in the market and will likely dominate headlines until it ends. Other news worldwide is that South America got rains in southern Brazil and Argentina, with dry central and northern Brazil. Russian officials announced that they would suspend fertilizer exports through the end of the year, presenting a supply crunch across the world. This week’s USDA report was nonexistent in the markets as there were no surprises. As mentioned last week, Ukraine’s corn crop may not get in the ground as only 60% of seed is on farm; this will be important moving forward as world balance sheets get tighter.

Via Barchart

Soybeans made small gains this week despite the wild intraday volatility. The USDA trimmed South American production again in this week’s report as they continue to baby step lower to what will be a smaller crop. World edible oil prices were up on the week pulling bean oil and soybeans higher. The Black Sea area’s worry and trade have affected the oils market, not just wheat.

Via Barchart

 Wheat fell hard this week with an expanded limit down the day with a small bounce on Friday heading into the weekend. All the short wheat positions that were getting run over had the opportunity to get out this week with the move down. However, the unknown in eastern Europe and China having its worst winter wheat crop on record means there is still upside with volatility. Friday’s gains were welcome to see after three days of large losses. The cash market will be essential to follow as it will help determine the fair market value.

Via Barchart

Dow Jones

The equity market fell again this week as continuing war, and another record inflation number was challenging for the market to figure out. While the market seems like it is struggling to make up its mind, there are pockets that are performing alright. The world economic outlook appears to be teetering, and trying to digest what to do with Russia will be a major decider.

Via Barchart

Podcast

Tune in as biotech guru Dr. Channa S. Prakash discusses everything from Alabama football, genetics as one of the most extensive agricultural advancements, the most significant risk factors to feeding the world over the next 30-50 years, plus everything in between.

Why producing crop plants with a much gentler footprint on the natural resources will help feed the growing population. How 75% of the world’s patents in agriculture gene editing are coming from China. Understanding that trying to impose restrictions on our ability to grow food can be a considerable risk to agriculture. Listen to hear about these topics and 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 blawrence@rcmam.com.

18 Jan 2022

Then Vs. Now — An Overview of Farm Inflation from 1927 – Present

We have seen inflation take off in the last year posting a 6.2% rise in the CPI year-over-year through October 2021 – when thinking about a one-year raise, this is a large and problematic number. This prompts several questions on whether inflation has impacted farms’ profitability in the past few years — like what does this CPI number look like over the long haul (What do we mean by long haul, say about 100 years), and how does it affect farm profitability?

Luckily, RCM Ag Services recently launched a whitepaper that dives into this topic and more. In this paper, we discuss; energy prices that directly correlate to the input/fertilizer prices, the current cost of labor and machinery, understanding how inflationary pressures have changed the world in the last 100 years, a first-hand, short memoir, commentated by RCM Ag Services, Bob Miller, and more!

Take advantage of this free offer and discover essential farm inflation information today — Download now.

11 Nov 2021

The Hedged Edge Makes Top 25 Agricultural Podcasts on the Web

This week, Feedspot selected the Hedged Edge one of their best Agribusiness Podcasts on the web.

RCM Ag Services launched the Hedged Edge Podcast in late 2020, with the goal to provide market updates and bring an educational value to those interested in agriculture. The Hedged Edge delivers in-depth chats with the best and the brightest in the agribusiness, from industry experts like Elaine Kub and Dr. Scott Irwin to in the field specialists like Jody Lawrence and Ron Lawson.

Our pod provides an avenue for agriculture thought-leaders to give commentary and essential reports/forecasts on everything from cotton,  gran, lumber to planting intentions and quarterly stocks. So, in honor of this gracious recognition from Feedspot, let’s dive into The Hedged Edge’s Top-5 episodes (in no particular order):

Lumber Party: Sky High Prices and Dwindling Supply with Kyle Little of Sherwood Lumber

How can lumber prices shoot up nearly 300% in one year? Does it all come down to the Corona-push to homebuying, supply chain issues, environmental swings, all of the above, or none of it at all? We dig into all these questions and more with a lumber veteran, Kyle Little, to get the nitty-gritty explanations on why everyone is talking about lumber.

Acing Agriculture with Dr. Scott Irwin

Dr. Scott Irwin discusses his research on agricultural markets that is widely-cited by other academic researchers and is in high demand among market participants, policymakers, and the media — he also dives into 2021 and beyond, game changers in the ag market, Chinese demand, the USDA report, FarmDoc, and more.

The Fertilizer Forecast with Billy Dale Strader

For the past year, commodity prices have perpetually soared and continue to trend higher. We’re diving into the fertilizer forecast with a unique guest, Billy Dale Strader, a branch manager for Helena Agri-Enterprises in Russellville, KY., who is truly at the epicenter of the rising fertilizer prices.

Cotton Commodities & Options Trading w/ Ron Lawson

Ron’s experience in the agribusiness space spans over 4 decades giving him unique expertise of both agricultural business, and the business of agriculture. In this pod, Ron shares his knowledge on cotton commodities, options trading, “Lawson’s Laws,” and much more.

Agronomy 101 with (Professor) Greg Willoughby

Agronomy is one of the most important facets of agriculture since farming began. Everyone from the farmer to the producer to the elevator depends on the success of agronomist and their advice to the American Farmer – In this episode, one of the top agronomists in the industry, Greg Willoughby, talks about being a “plant doctor”, weather patterns, GMO & organic produce, crop history, technical advances, level 201 education on agronomy, and more.

If you liked our top-five pods, here are a few more that you didn’t know you needed to listen to until now. Check them out below!
Cracking the Cotton Commodities Code
Mastering the Grains Market
Risk Management, Research Writing, and International Protein
Managing Today’s Market Risks through Short Dated Options

Who will make the list next? Stay tuned to find out —subscribe to The Hedged Edge, and  follow us on Twitter, LinkedIn, and Facebook for the latest updates from RCM Ag Services.

08 Nov 2021

The Leonard Lumber Report: The Futures Market Recovers Late in the Week

The Futures Market Recovers Late in the Week as Confusion Over the Supply Picture Grew

There is already tension in the market from the slowdown in logging caused by the higher price levels. Any additional supply constraints will add to the nervousness. The futures market bottomed by midweek as the confusion in logging grew. We saw that last week as supply worries stopped the selling and caused short covering. 

Another reason for the less selling came when futures neared par with cash. That brought in scaled-down buying, which sent the algo and its selling to the sidelines.

Market Focus on Price, Premiums and Discounts

We are starting to see a market return focusing on price and whether it carries a premium or discount. Once futures neared par, there was an uptick in forwarding pricing, and there was a $100 basis, selling showed up. This is how the market is designed to trade but has been missing for a few years. 

The difference now is what once took a whole cycle to change; it can now do it in a few sessions. No one is prepared for that. The fact is, about the time you prep your forward pricing sheets, the opportunity goes away, and a basis opportunity appears. Once the industry gets in sync with the quick cycles, the more they will participate. 

Is the Market at Equilibrium?

There are many factors, with the timing of the year being the greatest. The elephant in the room is the question of whether we are at equilibrium. If we are, the sell cycles could be greater than the buy cycles. The cash market hasn’t seen a push of sales in a while. 

Today with the market being fluid, a mill dropping prices creates a giant sucking sound. The $550 reports this week hurt. If cash is flat early next week, the $550 might be $540. It’s not a lot of cars but it will keep the buyers in the weeds. 

Let’s Get Technical

January is building a trading range of $600 to $700. Given the history of carrying a premium to cash, it is correlating well with the cash market. The oscillators are slightly positive, and the market is in the neutral area for momentum. All in the market is going to stay in the grind higher mode with intermitted swings. Those are opportunities.

Weekly Round-Up

We go into the week with a flat market that has an upward bias. There are more plans in place for both basis trades and forward pricing if it fits. The way futures have been trading; both may get a shot again this week. What we are looking for is more fundamental reasons to keep in place the upward bias. Two more months of fewer shipments from Canada and Europe should be enough to clean up the issues still out there. 

The closer the market gets to ridding itself of those issues, the harder it will become to buy the market. It will be typical. We keep mentioning a flat market because we lost open interest again as November liquidated, most being the spec long side of the market. That added push has brought the market back to neutral and allowed the algo back in the game. The market will not create much open interest in a bear cycle. Open interest will grow when the market is positive and rallying. 

Open Interest

Section23_Lumber_Options.pdf (cmegroup.com)

About The Leonard Report

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

Before You Go…

We’re getting out of the field and onto the mic to bring you weekly market updates, commentary from commodity experts, and monthly interviews with the biggest names in agribusiness. Check out the latest episode of The Hedged Edge here:

05 Feb 2020

The ‘right twice a day clock’ that is gold.

We have long been in the Warren Buffet camp in relation to Gold:

“Gold gets dug out of the ground in Africa, or someplace. Then we melt it down, dig another hole, bury it again and pay people to stand around guarding it. It has no utility. Anyone watching from Mars would be scratching their head.”

Gold sort of acts like the proverbial clock that is right twice a day, and (which is rarely said) wrong the other 1,438 minutes. Gold Bugs were finally proven right for 10 years between 2001 and 2011, after waiting for a dozen or more years for Gold to break out of its doldrums. But then the clock went right back to not working so well with the yikes moment starting in 2012 where it fell more than 40% off its highs, and then another five years of basically no movement, as it was stuck in a range between $1,150/oz and $1,350/oz.

If the chart above doesn’t make it abundantly clear – Gold is not a US savings bond or money market replacement churning out a nice annual yield. Gold is a commodity, with all of the commodity volatility the disclaimers warn you about. A 13% drop in 2 days back in 2013 isn’t exactly the kind of safe, smooth return many selling you Gold would have you believe, and in fact Gold’s kurtosis reading is about 4 times that of a normally distributed curve (meaning 1 in 100 year storms will be much more frequent than you would expect – and way more than a savings account).

And, of course, you can do way worse than investing in volatile gold. You can buy gold coins or gold miner stocks. One, you’ll pay an insane markup, and the other, be at risk of CEO mistakes, debt loads, mining accidents, and so forth.

Which all leads us to Gold’s recent price action, where some are starting to say “hmmmm” again following its breakout to new 5+ year highs.

First, Suki Cooper, precious metals analyst at Standard Chartered Bank.”via Marketwatch

“This is as dovish as we could have potentially hoped for and the gold market has jumped straight on that. The dollar has come off and gold in tandem has rebounded higher.”

And then David Sneddon, global head of technical analysis at Credit Suisse, said in a note to clients recently via CNBC:

“[…] we suspect we could even see a retest of the $1,921 record high, [with a multiyear base that could provide for a] significant and long-lasting rally”

Will Gold go higher? Maybe. Is the chance it goes higher about the same as Cocoa, or Natural Gas, or Chinese Rebar futures. Yes. It isn’t a panacea for all that’s wrong in the world and bloated Fed balance sheets and all the rest. If it were, it would be at $10,000/oz by now given all the Fed meddling in markets, negative interest rates in Europe, Chinese capital controls, and so forth.

We prefer to think of Gold as a historical relic, from a time gone by when currencies were tied to it, and Bond super-villains killed in the name of it.

Photo Courtesy: James Bond Wikipedia 

PS – there is a great piece on Slate’s Blog MoneyBox delving into the economic and political undertones of the famous James Bond Classic: Goldfinger. Was this a classic Bond film with the ejector seat car, or a movie about the Bretton-Woods system of semi-fixed exchange rates restricting British citizens from buying and storing large quantities of gold.

 “…Goldfinger, you see, really liked gold (as the song says “he loves only gold”) [but] the Bretton-Woods system of semi-fixed exchange rates [meant] ordinary citizens couldn’t just own gold. …Goldfinger, being a gold enthusiast, bears little love for an economic policy regime that restricts his ability to obtain it. Thus he isn’t shy about exploiting the arbitrage opportunities that arise under the system…using his industrial permits to obtain gold in Britain and then spiriting some of it off the island for sale in other countries where the price of gold is higher”

We’ll prefer to remember Gold in this light, and for what it’s worth – Goldfinger for the Aston Martin DB5, henchman OddJob, and perhaps the most deliberate use of the double entendre in Bond Girl names; but it’s nice to know there was more to the back story for the movie than just a man who loved Gold.

05 Feb 2020

The Chinese trade war is affecting American soybeans

Sure is tough to be an American farmer these days, with headlines like this popping up around President Trump’s ongoing trade war with the Chinese:

Nowhere is this pain being felt more than in the Soybean market, which is the second largest financially important crop in the U.S., with $41 Billion with soybeans grown in 2017 behind Corn at $48 billion. China is the world’s biggest importer and America’s largest customer in a trade worth $14 billion in 2017. But while it makes for a good headline, that 42-year-low was only about 10% lower than where the market had been a few weeks prior, and only about 3% lower than where prices headed after the initial skirmishes in the trade war last summer. In more finance geek speak – this is not a black swan event, as we’ve known about this market risk since at least May of 2018.

But that doesn’t leave the farmers in any better of a place, especially with all of the rain and wet conditions that have been seen across the Midwest, and we’re seeing that in terms of acres of Soybeans being planted dropping significantly. Here’s the USDA showing just 19% of the Soybean crop is in the ground so far, compared with 47% usually seen by this time of year on average between ’14 and ’18.

We caught up with Doug Bergman, the head of RCM’s AG Trading desk and publisher of daily Ag research for his thoughts on the choices facing the nation’s Soybean farmers:

In my opinion, the easiest way to see the impact is to look at the cash soybean price in Brazil (purple line) vs. cash bids in the US (orange line). You can see the dramatic drop in U.S. prices vs. Brazil last spring and then a small move that started just recently when news broke that a trade deal was not likely to get done. Beyond that, there is a lot of uncertainty regarding another round of government support and what farmers should decide to plant this spring. Planting is delayed due to wet weather, which is leading many to consider taking preventive planting insurance payments. If there is another round of government support payments, the producers that took an insurance payment rather than raise a crop would be left out of the government payment. So do you take the lower risk approach and collect insurance to maybe breakeven, or do you plant beans into less than ideal conditions expecting another government bailout where if the weather cooperates this summer could end up being profitable.

 

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What-It-Takes-To-Feed-The-W

Did you know that by 2050, the world is expected to feed almost 2 billion more people than we do today? As the global population continuously rises, a significant amount of food will need to be produced over the next 30 years.