Dec. 11, 2018
Yesterday an announcement was made that Mexico is buying 1.645 MMT of corn. Two-thirds of it will be for the 2018/2019 marketing year, and the rest will be 2019/2020. This is a sizable order.
It’s good to see Mexico back in buying mode. It won’t solve all of our tariff problems, but this type of sale never hurts. We need to change the thinking from a negative stalemate type to one where we become a lot more positive. We are still going to have plenty of carryover but it is a positive sign.
One million metric tonnes is a large sale any way you cut it. This, coupled with the Chinese trying to triple their ethanol production in the next two years, tells me the demand for corn is going to increase no matter where the Chinese are buying it — but coming from our ports first is a lot better than being the source of last resort.
We traded cattle last week up to $119 on the hoof and $187 hanging. The cattle market keeps edging higher, which tells us the packer is moving meat. However, we get past this weekend and we’re going to have most of the meat for the Christmas/New Year’s weekends already secured.
The dollar has been trending higher on the thinking that when there are trade tensions, the U.S. economy will be hurt less than other countries. It means countries buying our products will have to pay more and we will pay less for theirs. This works well, but we are also losing on the balance of trade because the grain market is a great equalizer.
The stocks in all positions report came out at 11 a.m. today. There was really no change. All guesses on U.S. ending stocks came in near the average, except for corn which was 37 million bushes higher. The USDA left production figures alone. We will see any corrections they want to make in the January report.
I still believe feed needs to be bought on dips in the market, and marketing needs to be done on rallies. Because of the poor state of agriculture, there is going to be a lot of grain sold to make payments and to insure that the crops are going to be put in next year.
The total economy has been doing well, but all the political unrest generally puts gyrations in the markets. I would not be surprised someday to see a hard break in the grain market followed by buying at lower levels. If the funds decide to unload some of their long positions in the stock market, we could see the commodities benefit.
We will come into next year with a reallocation of funds, and generally when the markets have moved a certain way with the funds on that side, we see them either lowering their long or short positions and maybe coming out of them entirely.
We are going to come into a slower trading time. We still have some corn and beans left in the field. This should not hamper the supply situation but it could cut into the carryover.
The energy market is still following its downward trend, but we may be getting to the point where we have finally hit the bargain basement prices. I still believe the price of this fuel is a bargain. The next major move could come from the fuel market.
Composite box meat movement came in at 22-days-and-up sales at 956; NAFTA exports 127; and overseas, 741. Not great numbers, but still over the 700 needed on overseas and NAFTA.
Cattle in the Midwest that have been stressed by the mud are failing to yield as well as cattle coming out of confinements. It looks as if we may have a little bit better weather coming, which could get these lots in the Midwest shaped up.
The feeder cattle market has continued to drift lower. At one time, feeder cattle were the glamour child. Now since early October we have taken quite a bit of money off the cash and the futures.
Feeder cattle have acted correctly this year, with October going off lower than September feeders and November going off lower than October. From now until about the second week of January we generally get a run in the market, and this is a time when we see a tremendous amount of feeder cattle move into the Midwest feed yards.
With that being said, I would be looking at some type of rally. If we get a decent one, it may be worth hedging March through May feeder cattle, especially if April and May get closer to $148.
We are sending a letter to our clients with our thoughts on the next 90 days. If you would like one, give us a call.
Good luck and good marketing.
This weekly report is for informational purposes only and is not to be construed as an offer to sell or a solicitation to buy the commodities listed herein.