Tag: ag futures

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

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

312-761-2636

29 Apr 2024

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

LEONARD LUMBER REPORT: IT WAS A BETTER WEEK FOR TRADING

Recap:

It was a better week for trading. The market seemed to drift into a bottoming formation, followed by a couple of good spike-up days and a new low for the move. We can call it a bottoming action, supportive, new low, or dead cat bounce. I heard all of them. What it did was cause the trade to be bullish one day and bearish the next. While the trade was highly volatile, the net for the week was only a $8 gain. What was different last week was that, for the first time, we had a few green shoots appear. From wholesalers covering shorts to mills holding prices, there was a better tone. We head into next week with a much more positive attitude.

While attitudes are better, most are very cautious. Prices have fallen far more than expected. Taking the cash market back into the $3’s should not have happened with all the shutdowns etc. The trade is now searching for the reason. Is there a more significant issue lurking out there? It’s hard to pin it on the market going too high, so it needed to go lower theory. I saw fear in the faces of some traders. They couldn’t sell a stick. We can’t blame the algo for that.

The industry is exiting shorts and getting long. Seeing them in a good flow instead of a battle is nice. This last trade report had short funds almost doubling their position while the long funds continued to exit. This report cuts off on Tuesday. I bet it shows the long fund numbers reversed and going higher on the next report. The trade at the end of the week had a fund tone to it.

Technical:

It’s harder to pull any green shoots out of the tech read, except it closed higher on Friday. This indicates that the battle down here isn’t over. The problem for the shorts is that the new volatility rallied futures $15 in a few trades. Your position can be upside down in a few minutes, not sessions. To summarize, the tech read calls for an ABC correction up, not a V bottom. The jury is still out.

Daily Bulletin:

The Commitment of Traders:

About the Leonard Report:

Brian Leonard

312-761-2636

22 Apr 2024

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

AG MARKET UPDATE: APRIL 8 – 19

Corn continued its slow bleed lower over the last couple weeks with no major bullish news to turn this market around. US weather may slow planting down to end April a bit but not enough for markets to begin to worry anytime soon. Argentina’s rain will continue to slow harvest as the discrepancy between the USDA and South American reporting services remains a mystery. The bounce to end the week was due to escalation of the Israel and Hamas/Iran fighting in the middle east. According to Reuters the US EPA is expected to announce plans to temporarily waive restrictions on higher-ethanol gasoline blends this summer. This market is at the mercy of funds and weather which currently aren’t helping prices higher.

Beans continued lower as they lost another 20+ cents this week even with the big up day on Friday. Beans need any good news they can get as you can see from the chart below it has been a rough few months. Soybean oil has also had a rough go lately as bullish news is lacking in the soybean complex. The size of the bean harvest with the USDA and CONAB numbers still far apart will be the biggest factor moving forward as we need all the information we can get. We did get close to the technical support which is good to see a bounce there.

Equity Markets

The equity markets continued their recent struggles as tech and AI stocks have given back some recent gains. Pullbacks are healthy for markets, especially after the run we have had to start the last few months being so concentrated, but sticky inflation and war escalation provides some problems to monitor as earnings are set to ramp up next week.

Other News

Israel retaliated against Iran overnight continuing the escalation of tensions and war in the middle east.
The USD keeps moving higher as the June USD Index went over 106 earlier this week.
Cotton has struggled of late as a lack of demand on the global scale and no weather issues yet in the US pulled it back from recent highs.

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

Drought Monitor

Here is the current drought monitor as we head toward planting with subsoil moisture a focus.

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].

01 Apr 2024

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

Leonard Lumber Report: The hardest part of a lumber cycle is the drift

Recap:

The hardest part of a lumber cycle is the drift. The value of the commodity becomes a moving target, causing futures to erode to its last trading area. The futures market has been in a range from $560 to $595 since the end of November. Without the support of the funds, the market will return to that area and wait for the next buy.

The economy isn’t good. It is great. There is so much capital flowing out there that we can never discount the home market potential. This will be a $20 down $50 up market unless something breaks.

The key points are the 38% at 598.80, the 50% at 590.70, and the 61% at 582.60. It could be the range areas.

Note: I see that open interest hit 10,000. Once the funds gear up, it will double. As I said before, even with 2000 open interest, I was able to trade large quantities with no price movement. This is a good trading market.

Daily Bulletin:

The Commitment of Traders:

About the Leonard Report:

Brian Leonard

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

312-761-2636

18 Mar 2024

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

LEONARD LUMBER REPORT: Last week, the futures market saw a healthy correction

Recap:

Last week, the futures market saw a healthy correction, dropping $22 in 4 sessions. March expired at 560, which was right in line with expectations. What was different was that most expected it to carry a premium, not a discount. My point is that this cash run has been far more significant than most expected. That leads to the question of how much was bought and whether it is enough. The cash side has hit the pause button to get a read of where they are. This is typical in any run but also leads to a quieter cash market and a futures correction. That sums up the week. Now what?

The industry focus is always on the micro. Today, wood continues to go out the door at a good pace. It has been a fluid trade for 18 months so that that feature will remain. The mills do have a tighter grip on certain items. This is related to logs and production. Most items are still under and over-produced within the typical timeframe. Timing that imbalance has always been a challenge. What remains in place is that a cash market run will not continue with some items tight and others abundant. The focus for this upcoming week will be on items liquidity. A sharply lower trade in May futures on Monday will give an immediate answer.

The macro picture has to be looked at. We can see the data on fewer shipments, log issues, fires, and the “worm.” What we can’t measure today is the potential headwinds of a slowing economy, rates that are higher for longer and affordability. All that is slowly creeping into the multifamily side of the business. That we can measure. The question is if a slowing multifamily sector takes the energy out of the starts number going into the fall. If it happens, we can expect a flat trading range that mirrors 2023.

The industry has to look to futures to lock in a profit or to mitigate risk. Playing supply spikes isn’t the best strategy.

Technically, this market has strong support all the way down from here. The key points are the 38% at 598.80, the 50% at 590.70, and the 61% at 582.60. A close over $620 indicates the funds are back in charge.

Daily Bulletin:

The Commitment of Traders:

About the Leonard Report:

Brian Leonard

312-761-2636

12 Feb 2024

Agriculture, CME, Corn, Dow Jones, Futures, Grain, Hedging, Market Commentary, Market Updates, Research, Risk Management, Soybeans, USDA Report, Weather, Weekly Prices rcmagserv 0 comment

AG MARKET UPDATE: JANUARY 26 – FEBRUARY 9

Corn has had a rough 6 months and continued lower with bearish sentiment and funds being short. The USDA report had higher Brazil corn production than the CONAB numbers by 10.25 MMT. The market has been looking for any good news to help put a floor in and that has not materialized. The one bright spot in exports is that we are ahead of pace to both Japan and Mexico for the year while China’s demand has been poor heading into the Lunar New Year. The USDA report pegged 23/24 US corn stocks at 2.172 billion bushels, close to the pre-report estimates.

As bad as the news, or lack of news, for corn has been, the news for beans has been worse. In this week’s USDA report the US bean stocks came in at 30 million bushels higher as exports struggle. Brazil bean production came in above expectations as well with a 156 mmt production (trade estimate of 153.15mmt). With a quiet period occurring during Chinese Lunar New Year it is unlikely to see strong exports and weather is neutral to bearish in South America.

Equity Markets

The equity markets continue to climb as the S&P 500 closed over 5,000 for the first time on Friday. The market has been pulled higher by the same stocks that have gotten it to this point in the magnificent 7 and AI stocks rallying. Analysts are debating whether the rally should broaden in 2024 or remain top heavy as it has started. The Fed will likely keep rates where they are until at least the summer.

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

Other News

The bearish USDA report continued to weigh on the markets as South American production came in above expectations, still higher than many private estimates.
Thanks to Chip Flory and Davis Michaelson for having Jody Lawrence on their internationally known and critically acclaimed AgriTalk radio program last Friday. Here is the link.

Via Barchart.com

Contact an Ag Specialist Today

16 Jan 2024

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

USDA Final 2023 Yield and Stocks Overview

USDA Final 2023 Yield and Stocks

Overview

January 12, 2024

First Glance:

Corn

USDA Yield: 177.3 BPA (174.9 Estimate – 174.9 Nov)

Total Crop: 15.342 BBU (15.226 Estimate – 15.234 Nov)

Harvested Area: 86.513 MA (87.036 Estimate – 87.096 Nov)

23/24 US Ending Stocks: 2.162 BBU (2.111 Estimate – 2.131 Nov)

23/24 World Stocks: 325.2 MMT (312.9 Estimate – 315.2 Nov)

Brazil/ARG Crop: 182 MMT (180 Estimate – 184 Nov)

Beans

USDA Yield: 50.6 BPA (49.9 Estimate – 49.9 Nov)

Total Crop: 4.165 BBU (4.134 Estimate – 4.129 Nov)

Harvested Area: 82.356 (82.757 Estimate – 82.791 Nov)

23/24 US Ending Stocks: 280 MBU (245 Estimate – 245 Nov)

23/24 World Stocks: 114.6 MMT (111.9 Estimate – 114.2 Nov)

Brazil/ARG Crop: 212.0 MMT (204.9 Estimate – 209 Nov)

Wheat

23/24 US Ending Stocks: 648 MBU (659 Estimate – 659 Nov)

Winter Wheat Seedings: 34.425 MA (35.786 Estimate – 36.699 LY)

23/24 World Stocks: 260.0 MMT (258.3 Estimate – 258.2 Nov)

The USDA found larger than expected totals in almost every category, increasing corn yield 2.4 bpa over the November estimate to 177.3 bpa. This is both a record yield and record total crop of 15.342 billion bushels. Bean yield was also raised .7 bpa to 50.6 and a total crop of 4.165 bbu. Both corn and bean harvested acres were slightly trimmed, the only bullish news in the report.

Higher yields were pushed through to higher ending stocks with US corn carryover raised to 2.162 bbu (+31 mbu from Nov) and 803 mbu above last year’s stocks. Beans had a similar fate with stocks set at 280 mbu, up 35 mbu from November but only 16 mbu above last year. Wheat stocks were slightly smaller than expected at 648 mbu but still up 78 mbu from 22/23.

Despite the rough start to Brazil’s growing season in their northern regions, Brazil’s bean and corn crops were not cut as much as expected. The weather has improved hurting the bullish narrative of a bad year for Brazil but the expanded acreage will also help offset any damage done earlier in the year.

There has not been any good news lately and prices reflect that. In June there was concern over the US crop with corn a $6.25 and beans at $14, now today has made new contract and multi-year lows in corn, soybeans and wheat.

08 Jan 2024

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

Leonard Lumber Report: The futures trade last week looked flat

Recap:

On the surface, the futures trade last week looked flat. The net change for the week was up $2. In fact, the last seven sessions have seen closes within a $4 range. A digestion phase after the run-up? Underneath the surface, things are changing. We have shifted the fund shorts over to the industry. Wood is now hedged. We have also shifted some of the industry longs over to new fund longs. The makeup of the futures market today is friendly. It is not a signal to buy, but it could generate higher prices on its own.

The futures market is closed on Monday the 15th, so January expires on Friday. The current open interest is normal for five sessions to go. With the growing industry’s short number, we may see some upward pressure again. We could see a shift to expirations now having an upward bias.

As far as the cash market goes, it remains fluid. That has been the case for months now. It has the feel of the covid slowdown that never occurred. This time, we spent a year expecting a recession and higher unemployment. What we found was steady business.

With mills coming back online and wholesalers owning wood, it could be sloppy for a while. The funds are the key.

This recent sideways trade is nearing an end…….

Daily Bulletin:

The Commitment of Traders:

About the Leonard Report:

Brian Leonard

312-761-2636

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.

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.

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.

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

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

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:

The Commitment of Traders:

About the Leonard Report:

Brian Leonard