The volatility continues and why not – with robust exports, 6-year low stocks, dicey weather & massive fund participation, the mkt has already round-tripped the 525-625 range 3 times since mid April! Most recently, the mkt rallied hard after a bullish acreage report on 6/30 – then gave it all back the following week after a wet 4th of July W/E! But it appeared to extract too much weather premium – so this week the mkt has recovered after a neutral WASDE Report Monday & a forecast for “hot & dry” returning to the M/W later this month! While the crop benefitted from the rains so far, it’s far from made & will need more to finish!
Despite recent rains & a neutral report Mon, the Sept Bean Contract has managed to maintain a 45 degree uptrend line – as it awaiting the critical pod-setting month of August! The July WASDE issued yesterday at 11am raised prod 4.405 (4.374), yield 50.8 (50.6), US stocks 155 (140) & Global Stocks 94.5 (92.3) above pre-report estimates! Regardless of the weather up until now, next month is key for completing the Bean’s maturation! And while China’s exports have slacked off, they are expected to resume in August!
The wheat numbers on Monday’s USDA Report were easily the bullish highlight of the report – prod 1.75 BB (1.898), yield 45.8 (50.7), US Stocks 655 (711) & Global Stocks 291.7 (295.8)! The result was a 25 cent rally on Monday – although disappointingly lower today as the good-to-excellent rating stayed at 16%! A smaller overall Wht Crop coupled with any imminent weather issues for corn & beans should underpin the mkt into late July!
The cattle mkt took over the upside leadership of the meats from the hogs but recently corrected due to renewed fears that the Delta variant would cause Covid to rear its ugly head once again & thereby derail our economic recovery! But we feel those fears were overblown an that the US economic growth will only stall for a while! With everything opening up, restrictions being lifted & the grilling season going full bore, demand for beef will continue to be robust & will translate into new highs for Aug Cat!!
They say FEAR & GREED drive commodity prices more than anything else and what happened to Aug Hogs in the first half of June is a prime example! Namely, fears that Chinese demand for our pork would entirely go away – has gripped the mkt sending it into a tailspin! But like many commodity price moves, this correction was way overdone – as China indeed continues to import our pork – but just not at the pace it did a year ago! The China Hog Herd after losing 40% in 2018 due to ASF, has been nicely rebuilt – diminishing but not eliminating their US imports! Meanwhile, the very healthy US Economic Recovery is feeding meat demand athletic events are 100% attendance & Music Fests are resuming – all contributing to increased pork demand! -