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

Leonard Lumber Report: There is still too much wood out there

Commentary: 

There is still too much wood out there. This week the euro traders had to not only deal with a soft market but also with the basis wood getting cheaper daily. Add to the mix that every Friday those with contract wood start off in the negative and you get this extreme malaise. With the amount of construction going on out there the market is either telling us the slowdown will be drastic or we are undervalued. Neither will be answered anytime soon so for today the market is the true indicator. Futures are on day 13 of this sell off. The rally lasted 16 days so the market could be close to bottoming. The resiliency of futures the last few days in light of all the algo selling pressure tells me it is close. What the bounce will look like is anyone’s guess, but the conditions are for a better grind higher market into the spring and not a spike up from the low.  So, prepare for the spike and how for the grind.

Economic:

The housing starts report this week added to the confusion already lingering throughout the industry. Today multifamily units under construction are at the highest level since 1973. Combined single and multifamily there are 1.7 million units under construction. That number bumps up against the record. These are seasonally adjusted numbers. That said, there is near record construction going on with a third of the country dormant because of winter. When digging down into the numbers one must wonder with construction at this pace are we really under built? Rents are sticky, so I would expect that pace to remain in place while single families continue to fall off. The construction dynamics bare some resemblance to the housing market in 2004-2005. That is when the housing bubble burst. The housing sector was in a bear market well before the 2009 economic meltdown. The pace of today’s construction will lead to an overbuilt industry at some point. In a year from now we will not have 1.7 million units under construction. Now let us add to the confusion. The fact is today there are 1.7 million units under construction and that makes $382 way too cheap.

Technical: 

March futures objective is for the January settlement of $344. The gap will be closed at $359.00 but the market is searching for value and that is the last expiration. The fact that the market is headed back to that area is troubling long-term. It indicates that $344 wasn’t a onetime fluke. It was considered a value the first time down and now is the area of rebuilding. The next rally up may just have to correct back again to this area. Momentum is oversold and a correction is coming but the market is not stair stepping higher yet. My only hope is that it isn’t a continuation of the stair stepping lower mode. In any case these are good levels to own wood going into the spring.

Below are the option links to the new contract. Please take a look at the quote page for options.

Quote page: https://www.cmegroup.com/markets/agriculture/lumber-and-softs/lumber.quotes.options.html#optionProductId=10192

Calendar Page: https://www.cmegroup.com/markets/agriculture/lumber-and-softs/lumber.calendar.options.html#optionProductId=10192

 

CFTC Commitment of Traders report still delayed!!

 

NEW CONTRACT:

Lumber Futures Volume & Open Interest

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

CFTC Commitments of Traders Long Report

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

Lumber & Wood Pulp Options

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

About the Leonard Report:

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

 

Brian Leonard

[email protected]

312-761-2636

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

LEONARD LUMBER REPORT: The market just experienced a long needed buy round

Commentary: 

The market just experienced a long needed buy round. It started as a fill in and turned into a fill up. The buy side had the futures to lean on so many stepped up their buying. The problem with that was the fact that futures fell quicker than expected and now there is more wood out there than needed. You throw the Euro wood into the mix, and we have more wood chasing too few dollars again. In traders’ terms “the market lost the bid again.”

Economic:

The key to housing fundamentals is labor. We went all through the teen years without enough skilled labor. Finally, prices were forced up enough to allow wages to rise and get the needed labor. We have not seen any layoffs in the home building sector so far. That is a sign of confidence on the home builder’s side. Today we are all data dependent. The builders are not seeing big downturn in the numbers but its early.

Technical: 

It is hard to believe but the week gap left by the expiration is coming back into play. That gap is 419 to 344. Please remember the last time I talked about the gap the market rallied $100. This time I don’t think the timing is right for a rally. The downside channel comes in at 379.50. The expiration pushed the market over the channel not market conditions. This area has become relevant again today but is also now defined as cheap.

The market of the past few months reminds me of the typical “controlled burn” markets of the past. You have to hold inventory because the spikes are quick and violent. We are back to the first buy is good and then not. The difference on this one is there just may be a premium to sell in futures to stop the bleeding. That’s what just occurred. The other positive is now futures are headed for a deep discount allowing forward pricing again. That is a controlled burn. There is a path to mitigate risk and invest.

 

CFTC Commitment of Traders report still delayed!!

 

NEW CONTRACT:

Lumber Futures Volume & Open Interest

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

CFTC Commitments of Traders Long Report

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

Lumber & Wood Pulp Options

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

About the Leonard Report:

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

 

Brian Leonard

[email protected]

312-761-2636

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

AG MARKET UPDATE: JANUARY 26 – FEBRUARY 10

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

Via Barchart

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

Via Barchart

Equity Markets

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

Via Barchart

Drought Monitor

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

Podcast

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

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

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

 

Via Barchart.com

 

Contact an Ag Specialist Today

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

 

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

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

Commentary: 

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

Economic:

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

Technical: 

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

Notes:

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

 

NEW CONTRACT:

Lumber Futures Volume & Open Interest

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

CFTC Commitments of Traders Long Report

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

Lumber & Wood Pulp Options

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

About the Leonard Report:

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

 

Brian Leonard

[email protected]

312-761-2636

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

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

Recap:

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

Economics:

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

Technical:

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

Note:

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

Summary:

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

NEW CONTRACT:

Lumber Futures Volume & Open Interest

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

CFTC Commitments of Traders Long Report

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

Lumber & Wood Pulp Options

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

About the Leonard Report:

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

 

Brian Leonard

[email protected]

312-761-2636

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

AG MARKET UPDATE: JANUARY 13 – 26

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

Via Barchart

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

Via Barchart

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

Via Barchart

Equity Markets

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

Via Barchart

Drought Monitor

Podcast

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

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

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

 

Via Barchart.com

 

Contact an Ag Specialist Today

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

 

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

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

Commentary: 

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

Economic:

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

Technical: 

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

NEW CONTRACT:

Lumber Futures Volume & Open Interest

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

CFTC Commitments of Traders Long Report

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

Lumber & Wood Pulp Options

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

About the Leonard Report:

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

 

Brian Leonard

[email protected]

312-761-2636

 

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

AG MARKET UPDATE: DECEMBER 16 – 30

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

Via Barchart

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

Via Barchart

Equity Markets

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

Via Barchart

Drought Monitor

Podcast

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

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

 

Via Barchart.com

 

Contact an Ag Specialist Today

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

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

AG MARKET UPDATE: DECEMBER 7 – 16

Corn had a good week making gains on mixed news across the world. The war in Ukraine has picked back up with more bombing and aggression from Russia after a “quiet” few weeks. Exports were better this week as we head into the end of the year well behind the expected pace. Weather in Brazil remains good in most areas while Argentina forecast is becoming wetter. Markets will likely remain cooled through the holidays unless there is any unexpected news (flooding rains, further escalation in Ukraine, etc.) that is not already priced in.

Via Barchart

Soybeans were relatively flat this week with a mix of up and down days. We are back up trading at the top of the range we have seen since July. Whether it fails at this level again or can move higher may require some surprise news to the market as exports were good, but the market seemed to shrug off. With South America expected to produce a record crop and those beans hitting the world market in a little over a month, finding buyers for US beans could become challenging. Like corn, news may be quiet heading into the end of the year and holidays.

Via Barchart

Equity Markets

The markets were down this week following a good amount of volatility following the Fed’s announcement of a 50-point hike in rates with comments indicating there will be more raises in the future and could be held higher for longer. CPI came in better than expected but still hot at 7.1%. While we are 2% lower than the highs, we still have a long way to go to hit the target of 2-3% which the Fed will continue to work towards.

Via Barchart

Drought Monitor

Podcast

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

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

Via Barchart.com

 

Contact an Ag Specialist Today

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

 

08 Dec 2022
Agriculture, Corn, Crude Oil, Grain, Market Commentary, Market Updates, Podcast, Research, Risk Management, Soybeans, Weather, Weekly Prices rcmagserv 0 comment

AG MARKET UPDATE: NOVEMBER 18 – DECEMBER 7

December has not been good to corn as we started the month with a slide lower into the $6.40s. There has not been any major news change with a good start for corn in Brazil, China lockdowns, and the war in Ukraine continuing to hold the headlines. While weekly exports have been good but uninspiring, the weakness in the USD should help US ag exports be competitive in the coming months before the South American harvest. The humanitarian corridor has continued to work as ships leave Ukraine, but as always this is something to keep an eye on for any bad developments. Russia is expected to resume ammonia exports soon, which would help keep input costs for 2023 from getting much higher.

Via Barchart

Soybeans have seen a nice improvement with their slow march higher from the beginning of October. The EPA came out with lower-than-expected biofuel mandates sending soybean and other world veg oil prices lower while meal has taken off higher. Soybeans hit their highest price since mid-September this week with buyers coming back in the market with a weakening USD. South Americas start has been good enough to where the market expects them to produce another record crop but there is still a long way to go. Right now, there does not appear to be much higher of an upside than the low $15 range in the near term, but if South America has weather problems, that could be the catalyst to move higher or if weather remains good the next move lower.

Via Barchart

Crude Oil

Crude has had an interesting second half of the year following its peak in June. While it has traded between $80-90/barrel most of that time, this recent dip below $75 shows there is a lot of uncertainty as we head into winter. The sanctions on Russian oil by capping it at $60 goes into effect this week while many investors do not expect to see it having a major impact immediately. With Russian oil already trading below the $60 and their breakeven closer to $40 it does not appear this will dampen exports for them with India and China continuing to buy. Europe is still struggling with energy as the war in Ukraine continues. Further guidance from the UN or another shock to the market (China loosening Covid restrictions) could send Crude back higher to its recent trading range.

Via Barchart

Equity Markets

The equity markets had a great November rallying over 10% but have gotten off to a sluggish start in December. While data comes in still pointing to a strong economy and job numbers the ball is in the Fed’s court on what to do with rates. It is expected that there will continue to be rate hikes into 2023 with the Fed potentially keeping rates higher for longer than originally anticipated but slowing the rate at which they raise them. Some of the largest companies in the world have either laid off workers or frozen hiring as many questions remain for next year.

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Drought Monitor

Podcast

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

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

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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].

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.