Doane Weekly Review & Outlook
Major market movers last week:
- The corn market remained weak through much of last week, with demand concerns remaining elevated. The lack of futures strength, despite the hugely delayed harvest and the tight basis, suggests the market has limited upside potential.
- Concurrent corn and soybean weakness after midweek seemed to weigh upon the oat market as well. Nevertheless, the recent oat market advance remains very much intact, as indicated by strong support at the December contract’s 10-day moving average.
- S. soybean sales to China have accelerated lately. That fact, as well as persistent talk that the two countries are closing in on an agreement their respective leaders can sign, seem very supportive, but futures barely rebounded in the wake of Monday’s drop.
- The soybean meal market has tended to lag soybean futures in recent weeks, but meal values outdid beans last week. Friday’s bullish NOPA Crush report gave meal a big boost. In contrast, soyoil prices sank despite major gains in palm oil prices. However, the upward trend is still intact.
- The rice market had recently been sliding and proved unable to rally in response to the November 8 USDA reduction to its U.S. rice harvest forecast. Prices sagged through much of the week, although they bounced from three-month lows on Friday.
- Cotton futures remained within a tight range last week, but ended near the upper limit of that area after Friday’s belatedly released USDA Export Sales report indicated a marketing-year high sold during the week ended Nov. 7. Bulls likely need to see much more of the same before they step up their buying.
- The stunning November rise in beef prices continued last week despite the grocery industry’s growing focus upon hams and turkeys for Thanksgiving, which in turn spurred another rise in cash cattle prices. The futures rally stalled, but major support held.
- Live cattle futures climbed to substantial premiums over spot values in early autumn. The move also reduced feeder premiums to fed cattle quotes. These shifts are very likely spurring feedlot purchases of replacement yearlings, boosting feeder prices.
- Export buying of U.S. pork has remained highly sporadic, which in turn has apparently made the market vulnerable to traditional seasonal weakness. However, a shortage of openly available fresh hams provided considerable price support in early November.
- Nearby futures for both Class III milk and cheese remained at five-year highs last week, although the deferred contracts continued slipping from their early-November peak. Traders are rather clearly anticipating a sizable setback when holiday cheese demand passes its usual seasonal climax.
- S. Fed Chairman Jerome Powell confirmed recent indications that the central bank will stand pat after cutting U.S. interest rates three times in recent months. The lack of a positive U.S. dollar response to that news indicates it was already in the market.
- Optimism about U.S. and global economic strength, especially if/when the U.S. and China reach a ‘Phase 1” trade deal, seemed to support the crude oil market last week. Bears’ recent inability to force nearby futures to close below 10-day moving average support implies significant underlying strength.
- Although the energy markets worked higher last week, the commodity sector continues sending few signals of incipient price inflation. That factor, along with the apparent closeness of a U.S.-China trade deal, maintained pressure upon gold futures.
- Hopes for a trade deal also seemed to keep investors buying in the equity markets. Having the DJIA gap to fresh record highs on Friday seemed to confirm the strength of current optimism about the economic outlook.
Likely market movers this week:
- USDA Crop progress (11/18).
- USDA Milk production (11/19).
- EIA petroleum status (11/20).
- USDA Export sales (11/21).
- USDA Cattle on feed, Cold storage (11/22).
- Economic reports this week: Home builders index (11/18), Housing starts, Building permits, Advance services (11/19), FOMC minutes (11/20), Jobless claims, Philadelphia Fed index, Existing home sales, Leading economic indicators (11/21), Markit manufacturing PMI (flash), Markie services PMI (flash), Consumer sentiment index (11/22).