Market Outlook for US and South America Regions
Corn futures rallied from the recent lows to near 3.41 to 3.79. Drier than normal U.S. Midwest weather and increased China buying offered support. The USDA estimated the U.S. 2020 corn crop will be near 14,900 million bushels. This was near the average trade guess, but down from its August guess. The USDA estimated the U.S. 2020/21 corn carryout to be 2.503 million bushels also near the average trade guess, but also down from August. Managed funds increased their buying and are now net long. U.S. farmers have been reluctant sellers of new crop. The USDA lowered its estimate of the world 2020/21 corn carryout to 306.7 mmt due to the lower U.S. crop.
Since the drop in prices for cattle and beef last spring, August 2020 showed the best demand for beef and for cattle prices. Choice boxed beef prices began the month at $203.26/cwt. By the middle of the month they were at $214.04/cwt and ended the month at $227.95/cwt. A significant change took place in August. Demand for choice rib sections and loin sections was the main reason beef prices moved higher. Grocery stores were moving more steaks and high priced cuts versus previous months of demand mostly for ground and processed beef. Consumers that retained jobs throughout the slowdown due to the pandemic went back to using their summertime grills and what they earlier in the year bought at restaurants. At the same time, demand for ground and processed beef remain strong. From the highest priced beef cuts to the lower priced cuts, beef was meeting demand from many consumers.
Demand for hogs at the same time prices were firming was good news for hog producers. Demand for pork in August was the driver of the hog complex. The CME pork index at the start of August was 69.29/cwt and at the end of the month it moved to 74.43/cwt with more hogs going to slaughter.
Stock Index Futures
There was temporary pressure on prices after the Federal Reserve at its September 16 policy meeting was less dovish than expected and offered no promises of new stimulus measures.
US Dollar Index
The U.S. dollar fell to a two-year low in early September. This took place after Federal Reserve Chairman Jerome Powell at the Kansas City Federal Reserve’s 44th Annual Economic Policy Symposium on August 27 called for a “robust updating” of Federal Reserve policy and signaled looser monetary policy for longer.
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 futures fell earlier in the month in conjunction with a lower stock index futures market and concerns over the global economic recovery. However, there has been a recent recovery with futures advancing more than a $3 off the September 8 low. Much of this strength had been linked to OPEC promises to comply with production cuts and data showing another big drop in U.S. crude oil inventories. OPEC’s joint ministerial committee suggested the group would continue to take measures to reduce supply as global economic uncertainties continue to undermine demand. The technical aspects suggest crude oil prices will trend higher.
Since the lows were made on March 16, December gold futures advanced $630.40 to a record high 2089.20 on August 7, as investors are anticipating ultra-low interest rates globally may become even lower. There has been some profit taking more recently, as the U.S. dollar index was able to bounce off a two-year low.
Market Outlook for China and Asia Regions
The key Chinese and Asian fundamental over the last 30 days has been the recovering economic conditions in the region. China’s PMI has been able to stay in the expansion zone. Central Banks kept the monetary policy unchanged, but repeatedly committed to provide support to the economy. The new prime minister in Japan will likely keep the current economic policy unchanged.
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.
ADM Investor Services International Limited, registered in England No. 2547805, is authorised and regulated by the Financial Conduct Authority [FRN 148474] and is a member of the London Stock Exchange. Registered office: 3rd Floor, The Minster Building, 21 Mincing Lane, London EC3R 7AG.
A subsidiary of Archer Daniels Midland Company.
© 2021 ADM Investor Services International Limited.
Futures and options trading involve significant risk of loss and may not be suitable for everyone. Therefore, carefully consider whether such trading is suitable for you in light of your financial condition. The information and comments contained herein is provided by ADMIS and in no way should be construed to be information provided by ADM. The author of this report did not have a financial interest in any of the contracts discussed in this report at the time the report was prepared. The information provided is designed to assist in your analysis and evaluation of the futures and options markets. However, any decisions you may make to buy, sell or hold a futures or options position on such research are entirely your own and not in any way deemed to be endorsed by or attributed to ADMIS. Copyright ADM Investor Services, Inc.