RCM Ag Services

Tag: ag futures

29 Oct 2024
Agriculture, Corn, Dow Jones, Futures, Grain, Hedging, Market Commentary, Market Updates, Research, Risk Management, Soybeans, Weather, Weekly Prices rcmagserv 0 comment

AG MARKET UPDATE: OCTOBER 4 – 29

Corn has been range-bound the last 2 months between $4 and $4.40. With no weather issues during harvest following a very dry end of the growing season, the market did not get any unexpected help to push it higher. Mexico continues to buy US corn at a fast pace, appearing again in the export reports. With no major problems starting the year in South America and smooth sailing to the finish of US harvest there does not appear to be anything to give this market a boost. Expect technicals to play a major role in the direction of the trade for the near term as the fundamental trade will be reliant on harvest news.

Via Barchart

Soybeans weakness over the month has lowered it with corn. Beans do not have any bullish news on the horizon as they failed to rally through technical resistance. With the election next week, a tariff war with China would hurt beans in an already depressed market as we have seen in the past. Funds are very short and will need a catalyst to get them to change course, which currently is lacking. Bean harvest is 89% complete which means there won’t be much opportunity for unexpected bullish news moving forward.

Via Barchart

Equity Markets

The equity markets continue higher as the biggest week of earnings kicks off. The Fed is expected to cut rates again by the end of the year, but inflation and jobs data are sending a mixed picture. The 10-year US treasuries have moved higher since the rate cut as the market is questioning whether or not the Fed will get it right.

Via Barchart

Other News

  • China announced that total grain production this year would be a record 700 million metric tons. As China continues to increase domestic production of edible commodities while continuing to invest in South America the US needs to find a new partner to replace their demand as they continue to try and be less reliant on American agriculture.
  • Crude Oil has been volatile but has moved lower this week as possible easing tensions in the Middle East as cease fire negotiations restart.
  • With the election results potentially being unknown for a few days following November 5 there could be some volatility in all markets.

Drought Monitor

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].

28 Oct 2024
Agriculture, CME, Education, Futures, Hedging, Lumber, Market Commentary, Market Updates, Research, Risk Management, Weekly Prices rcmagserv 0 comment

LEONARD LUMBER REPORT: Lumber is a very complicated commodity

Recap:

Lumber is a very complicated commodity with the most moving parts of any I have dealt with. That said, it is a commodity and commodities trade value. Lumber is only $20 either side of a trade and can’t get there. If you look at a weekly chart you’ll need a microscope to see the trading ranges for the last 5 weeks. Someone said last week that this market is coiling ready itself for a blowup. I said the same thing 12 months ago. I’m hoping he is closer to right than I was. My point is that the market is draining all the excesses caused by Covid a few ounces at a time. The shutdowns just aren’t showing up in a way that can cause a panic. It looks like more of the same.

A few recap points.

A mill reported a 3rd quarter loss last week. Let’s take a step back. Futures contracts are designed to protect the producer in a falling market. Mills presences will actually put a floor in prices. We have little mill participation today. I’m hoping they take a deeper look into the financial design of futures.

All week I heard complaints about certain items not being available. It is not a free-flowing cash market out there. Now, yes, there are some cheap and available items, but for a flat market things are getting tight. Unless it’s a basis trade, this is a tough place to sell futures. The funds are rolling and exiting. The report this week is up to Tuesday, so it missed the 3 strongest days for the week. It all comes down to momentum. Outside money creates momentum in the lumber futures market. Shutdowns, fires, and strikes all have a very limited effect. The algo and the funds are today’s day-to-day drivers. The lack of that push keeps us flat. Now, it may be defined as flat, but I wouldn’t be short.

Technically, we are married to trying to push to a new high in futures. Cash hasn’t recently allowed it but that too is moving up. In November the last high was 538.00. Today, its 200-day moving average sits at 554.07.

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

14 Oct 2024
Agriculture, CME, Futures, Lumber, Market Commentary, Market Updates, Research, Risk Management, Weekly Prices rcmagserv 0 comment

LEONARD LUMBER REPORT: There is malaise over almost every market out there

Recap:

There is malaise over almost every market out there, whether it is corn or equities. Lumber is no different. The futures market has traded between 538 and 515 for 14 straight sessions. There is no energy and no real direction. The lumber market is flat, as is housing. The upcoming election may be a factor, but even that has gone flat. Economic uncertainty has put us all back into the weeds. That is friendly. Lumber gets bought in the fall. The longer one waits, the higher it will go. Today, the lumber futures are not showing signs of going higher. It shows signs of fatigue at the higher levels. The premium gets no help from the cash market each time it is up. That creates fatigue and the continued cycle of tight highs and lows.

Patience is key as we navigate these market conditions. The upcoming start reports on Friday could be the trigger we’re waiting for. Remember, hibernating till spring only works for bears.

Technical:

The technical read has been challenging in a flat market. Today, there is a flag pattern channel with $500 as support and $539 as resistance. The rules for flag patterns tell us that a close over $539.00 calls for a run to $578.00. We have had patterns in the past that call for a higher trade. The problem is the market can’t close over those areas. Maybe we are closer on this one. In any case, it is a buy lower 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

07 Oct 2024
Agriculture, CME, Corn, Futures, Grain, Hedging, Market Commentary, Market Updates, Research, Risk Management, Soybeans, USDA Report, Weekly Prices rcmagserv 0 comment

AG MARKET UPDATE: SEPTEMBER 12 – OCTOBER 4

Corn’s rally back to $4.25 has been welcome heading into harvest as South America’s weather started off a little weary but have added rains to the upcoming forecast. The US drought to end growing season does not appear to have impacted the corn crop very much. Export demand has picked up putting us ahead of the USDA annual projections. The recent rally has taken corn above other major exporters which will likely lead to slowing exports unless South American weather becomes more of a concern. Harvest has gotten off to an average start with 21% harvested as dry weather shouldn’t cause any problems in the next week.

Via Barchart

Soybeans faded to end the week as harvest progress and pressure lead to profit taking after the recent rally. The biggest news related to soybeans, non harvest related, is that congress seems to be working on bipartisan legislature to address the importing of used cooking oil while still collecting tax credits. The American farmer wants this loophole closed to force biofuel producers in the US to use domestic production. This will lead to millions of more bushels used at crush facilities in the US throughout the year with a major question of, what happens to the bean meal? The longer congress and the lobbying associations take on this legislature will lead to more frustration among farmers across the country so with it being an election year I would be careful with what gets “leaked” by parties involved. The end of year drought across much of the US likely led to a smaller crop as pods did not get the moisture needed for max fill. Bean harvest is slightly ahead of expectations at 26% to start the week of Sept 30.

Via Barchart

Equity Markets

The equity markets continue to roll hitting new all-time highs as Fed rate cuts and the likelihood of a soft landing becomes higher. The market has broadened out but the biggest names (Nvidia, Meta, etc) are still doing well. With rates lowering over the next year expect money that has been getting 5%+ in fixed income to begin to move back into the market. Chinese stimulus prompted a large rally in Chinese stocks this week as they try to get their economy going again.

Via Barchart

Other News

  • The Fed announced a 50-basis point rate cut this month, cutting rates for the first time since the Pandemic. More rates are expected into the end of the year.
  • Tensions in the Middle East escalated as Iran launched attacks on Israel. Israel is expected to respond but how and when remain unknown, with attacks on oil fields a possibility crude oil rallied over the week.
  • Hurricane Helene caused massive devastation in the United States Southeast over the weekend causing loss of life and destruction of major infrastructure. The total amount of damage is still unknown, but it will take the mountain communities a long time to recover.

Drought Monitor

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 2024
Agriculture, CME, Futures, Hedging rcmagserv 0 comment

LEONARD LUMBER REPORT: Data is starting to confirm a change in market dynamics

Recap:

Data is starting to confirm a change in market dynamics. The funds exited 1000 shorts from Tuesday to Tuesday, leaving them with 3500 pre-roll. The Oct 1st. mark tends to be the start of the funds cleaning their positions by year-end. The futures focus is always on the funds and algos as they drive our market. They will rally it further than warranted and drive it lower than the actual market. It does it in all commodities markets. They tend to create a speculative value outside the bounds of the fundamentals. We have seen a few highs and lows recently that confirm it. Two rolls are coming up with the fund-type side, but the decrease in the position on the short side and the decrease in open interest tells me that the fundamentals should become the focus of value. Maybe lower rates and less production will become the focus?

Technical:

Today, we have the strongest tech read in many months. It shows trends and support. The moving averages are stacked up from 520 down to 515. This is major support. The slow stochastics turned up ten sessions ago, and the MACD turned up six sessions ago. This change in momentum is hard to reverse. Should we correct rallies? Yes, but it is still pointing higher.

The change is finding support as the market goes lower. It doesn’t indicate new highs. It will still be a slug. The SYP factor today looks very similar to the Euro factor last year. The cheapness and overabundance keep the buyers out. You want to rattle the cage, show an increase in demand.

 

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

16 Sep 2024
Agriculture, CME, Futures, Lumber, Market Commentary, Market Updates, Research, Risk Management, Weekly Prices rcmagserv 0 comment

LEONARD LUMBER REPORT: September futures settled at $20 under print, the first recorded discounted expiration in almost 12 months

Recap:

September futures settled at $20 under print, the first recorded discounted expiration in almost 12 months. Was it a one-off trade or a change in market dynamics? It’s too early to tell, but we must remember that it doesn’t necessarily indicate a bull or bear market, only a change. If it holds, it is a shift from basis trading strategies to forward pricing. I don’t expect to see much forward selling from the industry. They didn’t touch the basis, so why do forwards? I expect the industry to continue to trade extremely guarded through the end of the year. We saw an almost 30% reduction in the commercial short position after the Canfor announcement. That massive bail is a result of the guardedness of the trade. Most took hedges off above $520 and are naked under $500. Is this a dynamic shift or a fluke?

Production is getting cut. When will the supply cut be a factor? Someday, but not tomorrow? The struggle now is to continue to navigate a balanced marketplace. Can value be brought back into play in housing after a few rate cuts and increasing existing home supplies? We are starting that process based on the futures trade, but it could take another year. If you look back, in 2012, there was a fear of a fiber shortage that shot prices higher. It took five years to get our next spike to new highs in 2017. And finally, our covid 2021 debacle. My point is it takes years to create the undersupplied pocket. If we are there, our lows will be higher and highs sharply higher. Today, all the pressure is from the funds or the algo selling. That’s where the work needs to be done. The mills should start with the funds if they want to curtail something.

Technical:

The November contract low is 473.00. September’s low was 455, and July’s was 418. The market is already stair-stepping higher, making these lows significant points. As we head into October and the traditional lows, 473 is key. A trade under 473 indicates a more aggressive fund-selling program, knocking all fundamentals out of the equation.

The technical picture is negative for the short term. To change the trend, we need to reach an oversold condition. The problem with the RSI today is that it holds long-term bearish divergence. It remains high every time the market breaks. Walk that down into the low 20s, and the momentum can change. I could bring in almost every other oscillator and show the same results. The selloffs are not hurting the market.

The key upside point is 518. This area has been key for months and could be the top for now. The computers will target the low of 473. It could be a $10 market until the next announcement comes out.

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

12 Sep 2024
Agriculture, CME, Corn, Futures, Grain, Hedging, Market Commentary, Market Updates, Other News, Research, Risk Management, Soybeans, USDA Report, Weekly Prices, Wheat rcmagserv 0 comment

AG MARKET UPDATE: AUGUST 26 – SEPTEMBER 12

Corn has gotten back above $4.00 in a struggling market that needs good news to propel it back to the mid $4s. The USDA raised US corn yield to 183.6 bu/ac up from 183.1 bu/ac in last month’s report. In the USDA’s eyes the crop is getting bigger as struggling areas will be more than made up for by the best areas across the corn belt. Despite the higher US yield numbers, the corn trade following the report was welcome to see as it did not move much lower on larger numbers. If corn can bounce off or hold this $4 level then we can probably expect it to hang around here as planting gets rolling until we know what is actually in the field and if the numbers are closer to 180 or 183.6.

Via Barchart

Soybeans have seen a nice 50+ cent rally off recent lows with dryness in areas causing a little concern with pod fill and some pickup in demand. The USDA kept yield the same at 53.2 bu/ac as they agree with Pro Farmer tour that a massive crop is out there. Like corn, this recent bounce off lows is encouraging but may setup a range bound trade until harvest gets rolling and we have a better idea on the true yield. The USDA did slightly lower US ending stocks in both 23/24 and 24/25. Continued exports and any issues to South American planting are needed to drive beans higher in the current market.

Via Barchart

Equity Markets

The equity markets have been on a bit of a roller coaster lately with the tech/semiconductor trade having quite a bit of volatility while some rotation occurs with the Fed rate cuts expected to begin this month.

Via Barchart

Other News

  • The market is expecting a 25 basis point cut to the Fed Funds rate this month

Wheat

  • Wheat has been the one positive market lately, hitting new 2-month highs. The war in Ukraine and Russia continues to escalate and the market has responded accordingly. The USDA did not make any major changes in the report.

Drought Monitor

Via Barchart.com

Contact an Ag Specialist Today

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

 

09 Sep 2024
Agriculture, CME, Lumber, Market Commentary, Market Updates, Research, Risk Management rcmagserv 0 comment

LEONARD LUMBER REPORT: Last week’s trade showed just how much the headwinds are weighing on the market

Recap:

Last week’s trade showed just how much the headwinds are weighing on the market. Rates coming off are a given, but employment direction and costs aren’t. That leaves two reasons for the futures to rally. The first is the fill-in buy, which occurs every few months. The other is the “spook.” That is when another announcement comes out and spooks good shorts out. Lumber, unlike most other industries, has a quick reaction to news. We saw that early in the week with a mill announcement set off the short covering. Once that was finished, the algo/fund stepped back in to sell it off. There was an abundance of emotion in the market last week. It seems like the anxiety level is starting to rise.

The housing market is priced too high. Case/Shiller last week showed another gain in values—that’s 17 straight months. We are seeing inventories grow out there. The existing home inventories have been held low because of the rate spike. There is a growing pent-up sell lurking out there in the existing space. The inventory number could see a sharp bounce once the Fed cuts. That will push prices lower and cause a pickup in demand. This is important because a fluid housing market starts and ends in the existing home market.

The futures are behind the proverbial eight ball. The November contract is generally near value. The issue is the front-month expiring month. The spread trading is a good indication of the liquidation mode. The spread goes from -20 to -10 and then out to wherever. It is already at -29. The lack of industry participation in the big discount hurts the search for value. Commodity markets are efficient when value is recognized.

Technical:

The failure to create momentum last week was troublesome. This indicates a “more of the same” trade. We know rates are coming off. That is a major tailwind for us and should bring in support. September expires on Friday. It’s back to wait and see. In general, this market finds support faster than resistance.

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

26 Aug 2024
Agriculture, CME, Corn, Futures, Grain, Hedging, Market Commentary, Market Updates, Other News, Research, Risk Management, Soybeans, U.S. Dollar, Weather, Weekly Prices, Wheat rcmagserv 0 comment

AG MARKET UPDATE: AUGUST 12 – 26

Corn’s continued weakness following the August USDA report. Pro Farmer completed their crop tour last week and see the US yield being 181.1 bu/ac and a total 14.979-billion-bushel production. With another record crop expected this year, the market is continuing lower as plenty of 2023 corn remains in storage needing to be moved before this year’s harvest gets underway. The end of month heat is not expected to do much damage to the corn crop, but this crop is not done yet and still needs some more rain to get to the finish line. While demand is improving in the commodity space with a weaker USD, the large supply is still driving prices lower for the time being. There is not any major news to keep an eye on coming up except export and weather news.

Via Barchart

Pro Farmer found a massive crop in their tour last week estimating the 2024 US bean crop at 54.9 bu/ac(!!) and 4.74-billion-bushel total production. This soybean yield would easily be a record and would justify the collapse in bean prices seen this year. The current heat will likely stress the crop a bit, making that big a yield unlikely, however we should still expect to see a record crop, like corn. Soybeans need some good news in the form of demand whether that be from exports or the sustainable fuel market to get this thing turned around without production concerns in South America.

Via Barchart

Equity Markets

The equity markets have rallied back to recent highs after a small correction with the Yen carry unwind and some market broadening out of tech. With earnings season coming to an end markets will trade on economic data and any election surprises after Nvidia this week.

Via Barchart

Other News

  • Fed chairman Powell spoke in Jackson Hole last week and set up for the Fed to begin cutting rates next month.
  • The Canadian rail strike started and seemingly ended quickly with the government stepping in and saying that arbitration will decide negotiations.
  • Wheat’s summer trend lower from the $7.59 high looks to continue as it is not getting any help from other commodities to pull it up.

Drought Monitor

  

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 2024
Agriculture, CME, Futures, Hedging, Lumber, Market Commentary, Market Updates, Research, Risk Management, Weekly Prices rcmagserv 0 comment

LEONARD LUMBER REPORT: As much as we all want to discuss the rail issue, we should take a step back and look at the market

Recap:
As much as we all want to discuss the rail issue, we should take a step back and look at the market. The cash market is up $75 from reported lows in a few weeks. That strength has pulled futures higher and also narrowed the premium. Two weeks ago, there was an uptick in cash interest. This past week saw digestion. That is very efficient. Last week’s futures trade was anything but efficient. There were wide swings from rail news and algo selling. The roll held it up while the computer sold. The futures are signaling an ending cash buy round. That remains to be seen.

It looks like the Teamsters were blindsided by the Minister’s next-day order to return to work, so they decided to serve 72 hours’ notice and sue the Minister. Welcome to Chicago. This back and forth has drained some of the momentum/panic out of the situation. This could lead to another week of digestion on the cash side and more $20 moves back and forth in futures.

I’m not a fan of shorting a commodity priced below the cost of production. While the cash market has robustly rallied, most mills are still underwater. While waiting for the reduced supply equation to hit the market finally, we may have to suffer the testing of lows a few times. Lumber 101, prepare for the worst, and hope for the best.

Technical:

The momentum couldn’t carry futures to new highs last week. The market hit an artificial wall in the high 530’s. It’s considered artificial because of the aggressive selling shown by the industry over 540. That doesn’t top the market but shows the growing inventory lists. It’s interesting how moving averages on the chart and inventories tend to match up over time. A slow Monday will allow the algo to shove Sept under $500. They’ll take one more shot at forcing the spec longs out before the labor news heats up again. This week, it may be more prudent to play the news cycles than the technical points…

 

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.