Written Commentary
The Ghost in the Machine Q1 2024
March 19, 2024
Global Commodities Newsletter Aug 2021
- August 26, 2021
- ADMIS Research Team
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Market Outlook for US and South America Regions
Grains
The USDA’s August report was bullish for corn and wheat, but neutral for soybean prices. After the August USDA report, November soybean futures rallied to a high near 13.79 and are now trading in a range between 13.20 and 13.80. December corn rallied to 5.94, but is now trading in a range between 5.60 and 5.80. Chicago December wheat rallied to 7.86 before traders took profits and pushed prices down to 7.35. December soymeal is near 362 with resistance near 370. December soyoil has fallen from a high near 66 cents to 61.50 on concerns over demand for U.S. biofuel.
Lean Hogs
July 2021 was another month that continued the move higher for hog and pork prices. The lowest price settlement during July was on July 2 at $100.22 with the low day at $98.10 on August lean hogs. But when August lean hogs fell below $100.00, buyers stepped forward and August lean hogs settled at $106.20 and used the up move as a steppingstone higher into August. Comparing July 2021 trading to a year ago, the August 2021 lean hog contract during July 2020 made a low at $73.50 and the high for the month was $75.20. In a year lean hog prices moved up $31.00/cwt. Hogs in July averaged 278 pounds. An increase of $31.00/cwt added an additional $86.20/head to hogs from a year ago.
Live Cattle
Futures trading was moderately active in July. August 2021 live cattle was the most actively traded contract but traded in a fairly tight range. On July 1 it settled at $123.57, which was also the highest close during July. It then drifted down to $119.22 on July 12 and then slowly worked back to settle on Friday, July 30 at $122.07 to be 50 cents lower for July. There was cattle producer hedging during July because of the premiums offered on futures on October 2021 live cattle through April 2022 live cattle. The average weekly close during July using August 2021 live cattle was $121.20. Using December 2021 live cattle for an example, December 2021 futures ranged during July from a low of $129.90 to a high of $134.57. The larger premiums offered hedgers prices above August from $8.00 to over $13.00. When cattle producers used April 2022 live cattle compared to August 2021 live cattle premiums were close to $18.00 to $19.00.
Stock Index Futures
S&P 500, Dow and NASDAQ futures advanced to new record highs in August due to fiscal stimulus optimism, along with better than expected quarterly earnings results. In addition, the bulls were encouraged when Federal Reserve Chairman Jerome Powell said inflation will moderate and that the central bank plans to maintain its current ultra-low interest rate policies. Futures advanced despite ramped up speculation that the Federal Reserve could announce a tapering of its $120 billion a month in asset purchases before the end of the year.
US Dollar Index
Flight to quality buying is coming into the U.S. dollar in light of concerns about the state of the global economic recovery. The greenback has remained firm despite a series of weaker than predicted U.S. economic reports, including the August housing market index, which came in at 75 when 80 was predicted.
Euro Currency
The euro currency traded lower in August on the belief that the European Central Bank will remain dovish for some time, after policymakers promised last month to keep interest rates at record low levels for even longer in an effort to bring inflation back to its 2.0% target.
Crude Oil
Crude oil prices trended lower in August. Much of the selling pressure was linked to ideas that the global economic recovery is slowing leading to further weakening demand, along with rising geopolitical concerns. U.S. benchmark oil prices are now down more than 16% from a mid-July peak above $75.
Gold
Gold prices fell sharply in a flash-crash situation on Sunday August 8. Since then there has been a partial recovery. Some of the selling pressure is linked to ideas that the Federal Open Market Committee will announce a tapering of its asset-purchase program before the end of the year.
Market Outlook for China and Asia Regions
The key Chinese and Asian events over the last 30 days are softening manufacturing activities and the interest rate decision by New Zealand. China, South Korea and Japan all saw lower expansion in manufacturing and the New Zealand central bank maintained interests rate at 0.25%.
Risk Warning: Investments in Equities, Contracts for Difference (CFDs) in any instrument, Futures, Options, Derivatives and Foreign Exchange can fluctuate in value. Investors should therefore be aware that they may not realise the initial amount invested and may incur additional liabilities. These investments may be subject to above average financial risk of loss. Investors should consider their financial circumstances, investment experience and if it is appropriate to invest. If necessary, seek independent financial advice.
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