The Brexit vote in the UK Parliament is on Saturday (tomorrow). It is expected to pass. All weak the GBP has been increasing in value, which in turn has been pressuring the USD lower. At Daniels Trading the intraday margins (day trading margins) for the GBP currency pairs and the European Indices will be set to 100% for the Sunday/Monday trading session. A lot can happy politically over the weekend so keep an eye on this story and we’ll see how the macro markets respond Sunday night. I think Brexit happens and the GBP/USD pair heads to 1.33 by the end of the year. It is currently trading at 1.2975. A rejection of the Brexit vote could see the GBP drop back to the 1.22 to 1.25 range very quickly.
Great British Pound
Grains & Oilseeds
Midwest harvest is progressing due to favorable weather. Some farmers I work with are finished with soybeans or will be by the weekend. Then they move to corn. Exports sales this morning was disappointing for corn. Between the poor exports sales and decelerated harvest I think corn might be pressured lower next week.
Soybean sales were strong this morning with net sales at 1.7mm metric tons. A majority went to China but we also saw big buyers from Egypt, Mexico, and Thailand. Soybeans should be supported at the $9.20 to $9.30 level as uncertainty remains about the crop size and no one can be for sure how many soybeans China will buy.
Wheat lead the day higher with SRW up 7. Australian wheat production was cut again due to drought. Dec Chicago is almost $1.00 higher than Dec KC wheat. I’m not in this trade but at some point you would think KC would finally turn around and starting gaining on Chicago again.
Dec KC Wheat vs Dec Chicago Wheat
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.
Net sales of 292,200 MT for 2019 were a marketing year high. 132K went to Mexico, 94K went to China, and the rest was spread across Japan, South Korea, and China. That is a massive number for pork. In my opinion, the biggest challenge the US export pork market faces is logistical. We have so much pork that the rest of the world needs, but can we actually get it to them? Pork in cold storage is not as easy to transport in large quantities as corn and soybeans. I think the industry finds a way because there is a lot of money on the table to get this pork out of the country and clear supplies. US suppliers want to sell their large inventory. China and most of Asia have been hit by ASF. The trade war Phase One agreement is likely to happen. Stay tuned!
Feb 2020 Lean Hogs
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