Macro Markets
The stock market opened lower last night and traded lower through mid-morning. Once the Fed announced they will be buying individual corporate bonds the markets all seemed to get stronger. This is a new form of stimulus that will provide liquidity to corporations. The bonds will have to meet minimum financial requirements (no junk bonds) and this will help corporations find liquidity and financial when they need it. This action should be supportive overall for the markets except the US dollar.
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Ag Markets
It was a quiet day for grain and oilseeds. The markets were weak in the overnight and traded lower after the morning open, but started to rally back after the Fed announcement. The USDA announced another soybean export buy from China, and this is the time of year when they start to switch from Brazilian soybeans to American soybeans. We should continue to hear about China buying soybeans from the US. Bean Oil rallied today as did Rice, two markets we are long. The determining factor for the corn and soybeans going forward will be central US weather. It will be hot this week but there is more precipitation forecast for the last half of June. As of the latest models the weather should be friendly to US crop production.
Livestock continues to chop and we see the live cattle winter months with the best value. I like Dec LC when it is below 100. We think it can trade between 110 and 120 later this year. The next time it trades below 100 I like getting a double position. The first we will hold of the long term and the second we will use to trade around the core positions.
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Dec Live Cattle
Weather
Below are the 6-10 day and 8-14 day precipitation probability maps from the NOAA. While it may be hot for the next two weeks, we do expect rain in most of the Midwest. This should be positive for corn and soybean crop development. I’m starting to think corn yields could be 180 and soybean yields at least 50 bpa. We still have a ways to go but based on the current forecast I am more optimistic about trend line yields or higher as opposed to lower crop produciton.
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6-10 Day Precipitation NOAA
8-14 Day Precipitation NOAA
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Energy Markets
Crude oil was down overnight just like the rest of the macro markets but rebounded after the Fed announcement. Crude was also spurred on by optimism around continued OPEC+ production cuts. Below is a chart of December 2020 WTI Crude Oil. We think it is a matter of time before the gap is filled and crude trades to $44 again. So far the 20 day moving average (red line) has proved to be a good daily support line. There will be a lot of resistance at $40 and then $44. We like buying the dips and then looking for a rally. $36 is the first support level and then again at $34.
Dec 2020 Crude Oil
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Craig Turner – Commodity Futures Broker
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