Stocks are higher today as optimism increases around a US-China trade deal. China has granted waivers for at least 2mm tons of US soybeans to several private importers. CNBC also reported this morning trade talks will resume in two weeks. The housing market is also starting to pickup again and that is seen as a positive sign for the US economy.
I like buying the dips on the stock market. We’ve been using the Micro and/or the Emini S&P to have a core position in the S&P 500 and then “trade around” the position by picking up an extra contract on the dips and then liquidating into resistance. We are now waiting for the next pullback.
Dec 2019 Emini S&P 500
GRAINS & OILSEEDS
Corn conditions unexpectedly rose 2% in the GD/EX category last night but the market has seemed to shrug that off. Frost risk is showing up in the GFS models for the N Plains and NW Midwest for Oct 4th and 5th. Confidence was low in this forecast yesterday as it only showed up in one model. It showed up in multiple models this morning. The rest of the September will be warmer than normal and good for crop development. It looks like October will be colder and temperatures closer to the seasonal averages.
USDA reports 200K of corn to Mexico this morning but no sales announcements for soybeans to China. As stated above China is waiving tariffs for private importers that need soybeans. It feels like to me the tariffs will exist to drive all sales to Brazil until the they have to come back to the US.
For now our bias is higher but it is hard to see corn trade through $3.90 and soybeans over $9.20 without a serious wide spread frost risk OR the yields being reported out of the fields are much lower than expected. In the short term we like Dec 19 corn and Nov 19 soybeans but in the long term we think farmers need to start pricing and/or hedging 2020 and 2021 for corn and soybeans.
Dec 2019 Corn
Nov 2019 Soybeans
South Korea reported their fourth case of ASF last night. It is rumored that North Korea has been hit hard by ASF but officially they have not said much about it. Lean hogs are up about 0.750 today as Dec LH tests 70.000. A close above 73.00 would be a reversal in trend to the upside.
Live Cattle in a head and shoulders bottom. Cutouts have been grinding lower but we are looking for them to stabilize soon. Packers are seeing very good margins and have an incentive to aggressively process animals. Cash prices are stabilizing and we think they start to go higher. We are looking for Dec LC to fill the gap and the next upside target is 111.000. Nov Feeder have filled the gap. A close above 144.000 would be decidedly bullish. We are bullish cattle as a result to the low prices, the expected rebound from the Tyson fire, the bullish seasonality for cattle, and the coming protein deficit ASF is creating around the world.
Dec 2019 Lean Hogs
Dec 2019 Live Cattle
Nov 2019 Feeder Cattle
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