Good morning
- Ill be out of the office this week, attending the World Ag Expo in Tulare, California. Given the Pacific time zone, you may not hear from me everyday. I will be checking email frequently, but please call in orders this morning as I will be airborne. If you will be in Tulare, please look for the Stonex booth and swing by to say hi. Oh, and download the APP.
- USDA WASDE and CONAB will be out with official adjustments to corn and bean crops on Wednesday. Expectations are baked in for a cut to S. Am production. I think the wild card is the Brazil corn number and early outlook on Argentina. I think the trade has built in expectations of a cut there to yields but I am not sure we get it tomorrow, if at all given recent rains. There is likely US demand changes as well, down in wheat and up in cotton, corn and beans would be my lean. In regards to wheat, any negative action on demand should be bought given future weather problems not priced in at this time.
- US CPI numbers on Thursday should dictate the attitude of the macro trade into the March FOMC meeting. Inflation is driving the FOMC to want to tighten, CPI will give traders an indication of how aggressive they need to be. If CPI comes in under .5% per month, I think we could see a risk on type of trade. If its .5% or higher I think risk off is the theme as expectations will remain for a higher than expected rate hike pace. All asset prices will likely struggle in the short to medium term in my opinion, should we see a high CPI print on Thursday.
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The yield on the benchmark 10-year Treasury note edged up to 1.92% on Monday, the highest in 2 years, as investors await US inflation data on Thursday and continue to expect the Fed will need to raise rates faster to tackle soaring consumer prices. Money markets are now betting on more than five quarter-point Federal Reserve interest-rate hikes in 2022, after a stronger-than-expected job gain last month. I am somewhat surprised we are seeing strength in commodities (and crypto) as this occurs, although given the US remains at negative real interest rates I should not be.
- Both Russian Ruble and Brazil Real markets have been strengthening vs the USD of late. This is a friendly sight for US growers as one domino yet to fall is the currency competition between the US/Brazil for beans and corn and US/Russia for wheat. Weaker currencies support export demand, something the US grower has not had in their corner for nearly a decade
- Hong Kong Braces for Curbs as Cases Double Every Three Days
- Spec money is at the ag “party” right now but remain well below highs from last spring as well as ’10-12 runups. The “Goldman roll” begins this week. I would bet on some moves in the H vs K spreads given market participation.
CORN (March, Dec)
SOYBEANS (March, Nov)
COTTON (March, Dec)
July WHEAT (Chicago, KC, Minneapolis)
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