Written Commentary
SOYBEANS
Following the poor finish last week, beans are seeing a bounce this morning as a risk-on tone permeates the commodity space, with stocks, metals, crude oil, and grains/soy all higher. We have not heard rumors of any China buying yet, but we wouldn’t be surprised if prices got low enough last week to encourage some export interest.
SOYBEAN MEAL
The soymeal market is starting this week on a higher note after a poor technical performance last week. Friday’s close in March meal was the lowest since October 23rd, but a turn higher in beans overnight is encouraging a short covering bounce.
CORN
There were lower daily closes in corn each day last week, but prices are seeing a minor bounce this morning after testing support. The bulls are hanging by a thread as prices test the 9-week low. The January supply and demand report is a week away, and although pre-report estimates are not out yet, early indications suggest USDA will cut corn yields slightly.
WHEAT
March Chicago wheat made new contract lows on Friday, ending near the lows of last year. However, prices closed near the upper end of the daily range, which may encourage some short covering today. The southern Plains will remain warmer than average this week, and the 6-10 day forecast continues the trend of below-normal precipitation, although there is a chance of rain late this week. However, the most important weather factor is that there is no sign yet of any major polar air incursions into the US Plains over the next 2 weeks, which will keep winterkill risks low
CATTLE
The cattle complex turned sharply higher on Friday, breaking out to the upside on tight cattle supplies, stronger cash prices, and expectations of smaller fed beef production ahead. Another new screwworm case in Mexico also supported the feeder market. The bull camp remains in clear control.
HOGS
February hogs made new lows for the week on Friday in disappointing fashion. However, prices held key support at the 200-day moving average at 83.90, keeping the bulls’ hopes alive that the uptrend can continue. The New Year’s week slaughter was slightly below the holiday week kill the year prior, but nearly 250,000 head above the Christmas week slaughter.
MILK CLASS III
February Class III milk finished last week with a sizable loss after reaching a 2 1/2-week high on Wednesday and a 1 1/2-week low on Friday.
ENERGIES
February Crude Oil was lower early Monday but managed to reverse that and move to higher on the day as the session progressed. The market initially viewed the capture of Venezuelan President Maduro by US troops and remarks by US President Trump that the US intends to restore Venezuela oil production as negative for prices on ideas it would eventually lead to higher supply, but it will take some time to restore Venezuela’s capacity to where it was. The fact that Maduro loyalists remain in charge of Venezuela also suggests that it may be difficult for US oil companies to effect a change, but after first denouncing Maduro’s capture the acting president Delcy Rodriguez appeared less defiant on Sunday, saying it was a priority to have respectful relations with Washington.
DOLLAR INDEX
The dollar held overnight strength, gaining strongly against the euro and Mexican peso, as traders largely shrugged off the Venezuela impact ahead of key economic data out of the US this week, suggesting that the economic calendar will be more decisive in determining dollar direction than geopolitical headlines.
COCOA
March Cocoa traded inside Friday’s range early Monday, mostly above Friday’s weak close. The market has managed to hold just above the 50-day moving average after falling below it briefly on Friday. Ivory Coast port arrivals were estimated at 43,000 metric tons for the week ending January 4, down from 60,000 the previous week and 55,000 for the same week a year ago.
COFFEE
March Coffee made an attempt at last week’s highs early Monday but backed off as the session progressed. Official export data from Vietnam and Indonesia showed both nations are running ahead of year ago levels. Vietnam reported exports of 180,000 metric tons in December (3 million bags), which was up 40.8% from the same period last year.
COTTON
March Cotton traded up to (and just above) the 50-day moving average early Monday, drawing support from a better trend in US export sales but still guarded in its expectations.
SUGAR
March Sugar was higher early Monday but was confined to the lower end of Friday’s range-down action. We expect the UNICA update for Center-South Brazil cane crush and sugar production during the first half of December to be released this week.
PRECIOUS METALS
Gold and silver gapped higher at the open, likely safe-haven buying following that news out of Venezuela, although equity and currency markets have largely shrugged off the US military action that saw the removal of longtime president Maduro.
Copper prices surged higher following news of a strike at a Chilean mine, sparking up supply concerns once again. Benchmark three-month copper on the rose as much as 4.4% to $13,020, beating a previous record of $12,960 last week.
EQUITIES
The indexes are higher, shrugging off the events in Venezuela over the weekend suggesting that economic data out of the US this week will be playing a larger role in price direction than geopolitics. A lack of further escalation, alongside the decisiveness of the operation present minimal opportunities for a spillover in conflict and seem to present minimal downside risks in regard to geopolitics.
INTEREST RATES
Yields are lower at the front end and higher at the long end as traders largely shrug off any impact from the developments in Venezuela over the weekend. A lack of spillover and further escalation alongside the decisiveness of the US operation seem to present minimal downside risks in regard to geopolitics.
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