Crop markets responding well to stock gains
Crop markets are responding well to stock gains. Despite talk that South American growers look likely to get considerable rain over the short term, the crop markets seemed to rally in concert with the equity indexes Monday night. Although the rain may delay and/or diminish the Brazilian soy harvest, it might help Argentine corn (since it's like mid-July in their growing season). But the fact that China's latest GDP release essentially matched expectations for growth of about 6.8% annually, instead of falling more substantially, seemed to boost global stock markets over the long weekend. However, the corn market may be facing technical resistance, since the advance left March futures bumping up against its 40-day moving average. March corn futures climbed 4.75 cents to $3.68/bushel Monday night, while May added 4.75 cents to $3.7225.
Soybeans led the crop markets higher over the long holiday weekend, with wire service sources citing the potential for harvest delays if current forecasts for heavy rains over Center-South Brazilian fields are borne out. Bulls were very likely reacting to the equity market strength as well. Also, unlike corn and wheat trading below major moving average resistance, the nearby soybean contract topped its 40 and 50-day moving averages last week. Indeed, the Monday night advance pushed it above its 100-day MA, which might open the door to larger technical gains. March soybean futures surged 6.75 cents to $8.8575 in predawn Tuesday trading, while Mar soyoil advanced 29 points to 29.94 cents per pound and March meal gained $2.20 to $272.90.
The wheat markets joined the general commodity advance, following the equity indexes and soybeans higher. The rise was particularly impressive since it came in the wake of talk that Argentina is
now shipping wheat to the U.S. News that the new Macri government had removed its grain export tariffs and devalued the Argentine peso has weighed on U.S. markets due to ideas that the moves would increase global competition. Those have largely been borne out, but few could have expected grain to be flowing into the U.S., since the domestic market is very well supplied. On the other
hand, the overnight increase suggests industry insiders were not terribly surprised by the news. March CBOT wheat rallied 3.75 cents to $4.775 per bushel in early Tuesday action, while March KC wheat rose 2.75 cents to $4.7675 and March MWE moved up 3.0 cents to $5.0025.
US Cattle sank Friday. A drop in the US stock market and investor concerns about global commodity demand weighed quite heavily upon the market. But the main driver of the breakdown was the wholesale beef market, where price fulfilled recent bearish expectations by falling sharply. They continued sliding Monday, which seemingly bodes ill for today's opening. However, equity index futures rallied Monday electronic trading and accelerated upward overnight. Thus, bullish spillover could hit the cattle and feeder markets as well. February live cattle lost 3.00 cents to 127.550 cents/pound last Friday, while April futures dropped 3.00 cents to 128.50. March feeder cattle declined 4.50 cents to 150.275 cents/pound and April feeders lost 4.50 cents to 150.850.
Although the cattle markets is often seen as being rather heavily influenced by major stock market moves, hog futures have proven even more responsive to recent equity market shifts than their
livestock counterparts. That seems the most likely explanation for last Friday's setback in the face of the recent upward trend in cash values and strong late-week pork quotes. The cash markets reportedly slipped Monday, but the big surge posted by the equity index contracts suggest a higher opening this morning. February hog futures closed 0.33 cents/pound lower at 62.025 cents/pound Friday, while April hogs dropped 0.33 cents to 67.450 cents/pound.
Given the general belief that demand for apparel and for cotton is rather closely linked to national and international economic conditions, fewcould have been surprised by the fiber market's Friday decline or the strong bullish response to the weekend surge in equity index futures. The good Chinese economic news had to encourage cotton traders, since that country has absorbed so much cotton in recent years. The fact that nearby March futures did not drop below recent lows last Friday, is probably spurring aggressive short-covering as well. March cotton jumped 0.49 cents to 61.90 cents/pound early Tuesday morning, while May cotton surged 0.33 to 612.23 cents/pound.
