Doane Weekly Review & Outlook
Major market movers last week:
- Corn demand remained weak last week, which, despite persistently strong basis levels across the Midwest, weighed on futures. December prices fell significantly after violating 40-day moving average support, although the Friday USDA reports provided belated support before the weekend.
- After posting a fresh high close for 2019 on Wednesday, nearby oat futures set back into the weekend. They held above 10-day moving average support, with fundamental support possibly coming from the USDA’s slight reduction in its 2019 harvest estimate.
- The U.S. and China apparently built momentum toward a partial trade agreement in late October and early November, which provided considerable support for soybean futures. But the market stalled when the USDA didn’t cut its crop estimate Friday.
- After having been relatively dry in recent weeks, South America’s main field crop areas have been blessed with improved rains lately. The prospect of increased production from that region weighed somewhat upon soymeal quotes last week, whereas soyoil seemingly continued drawing support from the strong palm oil market.
- The rice market fluctuated rather widely within its recent range last week. Traders still seem to think a U.S.-China trade deal will cause a buyer shift from rice and toward soybeans, so the white grain continued its recent pattern of moving in opposition.
- Cotton futures continued deriving support from hopes for a partial U.S.-China trade deal in the near future. The market then got a major Friday boost from the USDA reports, which slashed the 2019 harvest forecast by 890,000 bales.
- Wholesale beef prices continued climbing last week, with the choice-select spread remaining extremely wide. Given those gains, as well as the profits being earned by packers, another rise in cash prices was also to be expected. Futures stalled in the wake of their big autumn advance, but the upward trend is still very much intact.
- Rising fed cattle prices provided persistent support for the feeder market last week, especially with the 2020 live cattle contracts trading at sizable premiums to spot quotes. This is very likely encouraging feedlot buying of replacement yearlings.
- The wholesale pork market also proved quite strong last week, despite weekly slaughter totals remaining extremely large. However, cash hog prices were seemingly suffering from seasonal downward pressure, thereby weighing on futures as well.
- Extraordinarily strong domestic demand for cheese continued powering gains in the dairy markets early last week, with Class III prices posting their best close in five years Tuesday. However, worries about an end to seasonal buying before the holidays seemed to trigger a drastic late-week setback.
- Persistent U.S. economic strength, as epitomized by the November 1 U.S. Employment report, seemed to translate into renewed U.S. dollar gains last week. Having the Fed signal in late October that its interest rate cuts are likely ending also spurred buying.
- The momentum developed toward a partial U.S.-China trade deal in recent weeks probably supported the dollar as well. That shift, along with the implied reduction in geopolitical tensions sent gold futures tumbling. The drop to fresh fall lows seemingly presages a follow-through decline.
- Crude oil futures remained within the relatively tight range between $50 and $65 per barrel occupied since late spring. The market did rise somewhat, seemingly anticipating a fresh round of OPEC cutbacks aimed at supporting prices.
- Ideas that the Democrats’ push to impeach President Trump will fail seemed to encourage bullish equity traders in early November. Consistently robust economic data also appeared quite favorable.
Likely market movers this week:
- Veterans Day—Government offices closed (11/11)
- USDA Crop progress (11/12).
- EIA petroleum status (11/13).
- USDA Export sales, NOPA Crush (11/15).
- Economic reports this week: NFIB Small business index (11/12), Consumer price index, Core CPI (11/13), Jobless claims, Producer price index (11/14), Retail sales, Empire state index, Industrial production, Capacity utilization, Business inventories (11/15).
Dan Vaught is a senior economist with Doane Advisory Services. He has been engaged in commodity market analysis for 27 years. Since earning his master’s degree in agricultural economics from the University of Arkansas, Dan has been involved in commodity market research and analysis, specializing in fundamental analysis and studying supply/demand factors and price charts to find market opportunities for clients. Dan specializes in livestock markets, including cattle, hogs and dairy.
Doane Advisory Services is a market leader for agricultural economic information and outlook. Doane’s economists combine Farm Journal’s deep farm-data content with its proven models and analysis – which distinguish Doane as the only advisory services with direct contact with America’s farmers and ranchers. Started in 1919 by Mr. D. Howard Doane, Doane Advisory Services was built with the vision of creating a more efficient, productive agriculture industry. Our promise is to provide research, analysis and insight with a personal component to each and every client as we celebrate our 100th anniversary and many more to come.
