Global Commodities Newsletter For November

Market Outlook for US and South America Regions

Grains

The USDA estimated the U.S. 2020 soybean crop to be near 4,170 million bushels and lowered the U.S. 2020/21 soybean carryout to 190 million bushels. This was bullish and prices rallied on concerns over dry South American weather and talk of continued China buying of U.S. soybeans. Managed funds increased their net long soybean, soyoil and soymeal positions. U.S. farmers increased cash sales. Some analysts believe soybean prices could trend higher if China continues to buy U.S. soybeans. The USDA left its estimate of China’s 2020/21 soybean imports at 100.0 mmt versus 98.5 last year. Soybean futures rallied from 10.60 to 11.80.

Live Cattle

Live cattle futures have been in a rolling wave-like trading pattern since a high price for live cattle futures was made on August 18. After making a high in August, live cattle futures dropped approximately $7.00/cwt to September 2, then reversed and moved up in September around $6.50/cwt to September 30. On October 1 and throughout October, live cattle dropped around $10.00/cwt to October 26 and since the end of October started moving higher into November. October is often a month where boxed beef moves lower. The grilling season is over and grills in the northern states are put away. October had far too many overfed cattle that moved to slaughter along with more than usual heavy select cattle sold.

Lean Hogs

On April 4, October 2020 lean hogs reversed the downward move that happened because of the slowdown and plant stoppages due to COVID 19 and traded mostly sideways until July 31. On July 31 a rally began and until October 14 when October lean hogs settled, except for a few small setbacks and profit taking, rallied to from $49.40/cwt to settle on October 14t at $78.42/cwt. Pork export demand during 2020 from China and Mexico was exceptionally strong and the weak U.S. dollar gave exporters an advantage to buy U.S. pork.

Stock Index Futures

S&P 500, Dow and Russell 2000 futures advanced to new record highs due to vaccine optimism, a flurry of merger and acquisition activity in the tech sector, along with better than expected quarterly earnings results. In addition, recent gains are linked to ideas that the Federal Reserve will remain accommodative for an extended period. Overall, stock index futures have been able to “climb the wall of worry.”

US Dollar Index

The U.S dollar has been weakening since May amid rising debt levels coupled with expectations for an extended period of low interest rates. In addition, the greenback has trended lower in November, as flight to quality longs were liquidated.

Euro Currency

The currency of the euro zone began its climb in June when the European Central Bank at its regularly scheduled policy meeting almost doubled its asset-buying program. The ECB is adding EUR600 billion ($675 billion) to the EUR750 billion that it announced in March.

Crude Oil

January crude oil futures advanced over $9 in November after a weak finish in October. Much of the strength can be attributed to hopes of a global economic recovery due to vaccine optimism. However, gains were tempered when Federal Reserve Chairman Powell cautioned that “even in the best case, widespread vaccination is months into the future.”

Gold

In recent weeks gold futures have trended sideways to lower as vaccine optimism prompted flight to quality vehicles to be liquidated. There is still talk of stimulus from Washington, but it may be a smaller package. Any additional stimulus will increase expected inflation, which should boost the appeal of gold.

Market Outlook for China and Asia Regions

The key Chinese and Asian event over the last 30 days has been the Reserve Bank of Australia’s cut in its key interest rate to a record low of 0.1% but ruled out the possibility of negative interest rates. Chinese data continues to improve, with the PMI extending the rebound and trade data also recording strong growth.

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