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The mkt appears to have fallen into broad trading range (378-402) since the Sept 30 Qtly Stocks Report – with positive trade rhetoric underpinning the mkt & harvest pressure capping any rallies! The good news is that early harvest lows were posted in mid Sept – taking the “down” out of the mkt- leaving sideways (now) to up (later) as the 2 options!
FACTORS IMPACTING THE MKT
Nobody wins a trade war & this has been finally understood by the “powers that be” – so we expect a trade resolution before year’s end – plus it would enhance Trump politically with the election just a year away!
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Nov Beans have rallied nearly $1.00 (850- 945) since early Sept – feeding off production concerns due to a harvest still well behind average & building optimism over a possible trade pact! Clearly, Nov Beans are the upside leader of the grain complex as they tested the June highs yesterday – whereas Dec Corn & Wht are well off their June highs! But even after this rally, they remain in the lower 20% of their 10 year range! And finally, many feel the final #’s announced in the January report will be well under earlier expectation.
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Much like its sister mkts Dec Corn & Nov Beans, Dec Wht has corrected this week from an overbought condition. WW planting is proceeding well -77% (lw-65 avg-75) & Spring Wht harvest is nearly complete – 96% (lw-94 avg – 100)! More than its own supply/demand fundamentals, Wht’s direction will be determined by that of corn & beans – plus the impending US/China trade settlement! There has been mention that China may be in the mkt for wht as well as corn & beans!
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Dec Cat continues to be one of the strongest mkts in the ag sector rallying in a near vertical fashion $17 (98.5 – 115.5) since early Sept! The mkt has been fed by a strong cash & beef & a robust economy led by consumer optimism! 4th Qtr production is slated to be under 3rd Qtr by 120 million pounds. The infrequent corrections have been shallow – even when its “sister mkt” Dec Hogs has had substantial drops! The only negative would be that it’s overbought – the mkt anxiously awaits fresh supply/demand info from the Oct COF report issued Friday at 2pm – estimates- mkt 101% – plcmt 102% & on-feed -99%!
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Dec Hogs are caught between “what could be” and “what is”! Down the road, our pork exports to China could be huge – given the ASF epidemic that has decimated their Hog herd – resulting in a 200% increase in Chinese pig prices! But that hinges on a US/China trade deal getting done – which although close, has not happened yet! What is a current reality is the record US pork production – reflected by average hog weights 1.8 over last week and 2.5 over last year! And that has pushed Dec Hogs down $7 (72-65) in the past 2 weeks!
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