Doane Weekly Review & Outlook
Major market movers last week:
- The corn market couldn’t build upon the previous week’s strong finish despite the announcement of a partial U.S-China trade deal and the weekend storm over the upper Midwest. But last week’s U.S. dollar breakdown probably limited losses.
- In contrast to corn futures, oat prices seemed to post a belated reaction to the previous week’s news, with the nearby December contract spiking to four-month highs before setting back. The late-week slide still left it near its June top.
- As with corn, concerns about demand seemed to weigh on soybean futures last week, with the trade being particularly disappointed in the monthly NOPA crush report. Still, the market staged a Friday comeback that left it near the previous week’s Friday close.
- Dryness in Argentina may have provided background support for the soymeal market, as did ideas that the looming Argentine election will bring policies that boost taxes on farmer soybean sales and exports. Meanwhile, flat-to-weak soybean and crude oil quotes seemingly limited bean oil gains later in the week.
- Rice futures proved relatively weak, although technical support at the nearby November contract’s 40-day moving average held. We still suspect traders are viewing the rice outlook as a mirror of soybeans, with strong bean activity hurting rice prospects.
- After having struggled consistently in recent weeks, the cotton market exhibited surprising strength last week. That likely reflected a positive industry response to Chinese inclusion of the fiber in its discussions of good will buying of U.S. commodities.
- The cattle market remained strong early last week, with firm beef quotes being backed by the stunningly wide spread between choice and select-grade beef quotes. The implication of tight market-ready cattle supplies and robust demand sustained support.
- Although there was virtually no talk of the weekend winter storm stressing cattle in the northern Plains, that factor likely spurred buying in the feeder cattle market. The corn market’s inability to sustain its rally probably encouraged buying as well.
- News that the Chinese pork shortage is worsening and that China is stepping up its purchases of U.S. pork seemed to trigger panic buying by other major importers as well. Hog futures traded strongly early in the week, but nearby futures’ premiums to cash and questions about the latest export data sank the market later in the week.
- A couple of less than stellar economic reports and talk of further Fed interest rate cuts seemed to trigger a big U.S. dollar decline last week. The friendlier tone of negotiations between the U.S. and China may also have caused many to abandon safe-have purchases of the greenback made in recent weeks.
- The U.S. dollar drop seemed like a perfect opportunity for gold bulls to push the nearby yellow metal contract back above the pivotal $1,500/ounce level last week. But the same perceived reduction in the need for safe-haven assets that undermined the dollar may also have spurred gold selling. Crude oil weakness was also discouraging.
- Crude oil futures may also have seen selling accelerate in response to the less than supportive economic reports published last week. Traders clearly worry that a U.S. and/or global recession will depress energy demand.
- In contrast to most commodity markets, the financial sector seemed less concerned about recession prospects, as indicated by the DJIA’s mid-week push toward recent highs. However, it proved unable to top resistance marked by a downtrend line drawn across its July and September highs.
Likely market movers this week:
- USDA Milk production, USDA Crop progress (10/21).
- USDA Cold storage (10/22).
- EIA petroleum status (10/23).
- USDA Export sales (10/24).
- USDA Rice stocks, USDA Cattle on feed (10/25).
- Economic reports this week: Existing home sales (10/22), Jobless claims, Durable goods orders, Core capex orders, Markit manufacturing PMI (flash), Markit services PMI (flash), New home sales (10/24), Consumer sentiment index (10/25).