Corn Market Stabilizing with Improved Export Demand

Happy Thanksgiving! Here is your weekly grain and livestock market outlook and review for Nov. 25, 2019, from the economic experts at Doane Advisory Services. The next weekly review and outlook will be published on Dec. 9, 2019.

Major market movers last week:

• The corn market stabilized last week in response to signs of improving export demand. Concerns about the vulnerability of yet-unharvested acres seem minimal, especially with traders focusing upon the potential for a big surge in plantings next spring. Traders apparently sold in response to diminishing optimism about a U.S.-China trade deal. 
• Problems associated with the seemingly never-ending Canadian harvest seemed to boost oat prices again last week, with the expiring December contract making a run at last year’s four-year high before backing off later in the week. 
• Pessimism about the ability of the U.S. and China to reach a Phase 1 trade deal in the near future seemed to drive soybeans lower again last week. News of much needed rainfall over major South American production areas also weighed upon prices.
• The soybean meal market had firmed in early November, likely due to expected reductions in Argentine processing and to talk of a surge in October feedlot placements, but Monday’s sharp reversal spurred follow-through losses. Bean oil probably benefited from spillover palm oil strength, but Thursday’s big setback limited the weekly rise.
• The U.S. and South Korea announced an agreement to improve U.S. access to Korea’s rice market last Tuesday. Anticipation of that event and the release of that news apparently powered the strong rally. Thursday’s surge implied more of the same.
• As with soybeans, cotton futures turned decidedly lower as traders and farmers lost hope for a quick agreement on a partial U.S.-China trade deal. The slowing U.S. harvest and the early-November USDA cut to its domestic crop estimate apparently had little sustained impact upon the market. 
• Cash cattle prices continued their advance last week, with most animals reportedly changing hands around $116/cwt. However, futures stalled, which indicated traders were relatively comfortable with the sizable premiums already built into the market.
• In contrast to the firmness exhibited by fed cattle values, feeder futures turned sharply lower late in the week. The drop seemed technical in nature, especially given the discounts already built into feeder futures and corn futures also sliding.
• Although the latest export sales data looked quite supportive of the hog outlook, futures fell to two-month lows on Wednesday. Pessimism about a U.S.-China trade deal, as well as big ham and pork losses, apparently drove the market lower.
• The expiring November Class III milk contract remained above $20/cwt last week (as dictated by the early-month quote for Class I milk), but the deferred contracts continued their losses from the week prior. Conversely, they bounced strongly from support.
• After tumbling late last week and again on Monday, the U.S. dollar turned higher at midweek, then surged on Friday. Supportive economic data, particularly early November reads on U.S business activity, spurred the Friday advance. The strong week-ending close suggests significant potential for a bullish follow-through.
• The crude oil market began the week poorly, but staged a major advance to its best close since the September attack on Saudi oil facilities. It would have been easy to think Friday’s supportive data would spur further gains, but crude futures stalled.
• Gold futures lost considerable ground in mid-November after having failed at 40-day moving average support on November 5. Prices then rebounded early last week, but bulls couldn’t challenge overhead resistance, which in turn seemed to open the door to a poor weekly close. Reduced geopolitical tensions are undercutting support.
• With the recent surge to record highs having at least partially incorporated fresh optimism about the intermediate-term economic outlook, the major equity indices turned lower last Tuesday. However, Friday’s strong indications on domestic business activity powered a firm weekly close.

Likely market movers this week:

• USDA Crop progress (11/25).
• EIA petroleum status (11/27).
• USDA Farm Income (11/27).
• USDA Export sales (11/29).
• Economic reports this week: Chicago Fed national activity index (11/25), Case-Shiller home price index, Consumer confidence index, New home sales (11/26), Jobless claims, GDP revision, Durable goods orders, Core capex orders, Chicago PMI, Personal income, Consumer spending, Core inflation, Pending home sales, Beige book (11/27).

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.