January 13, 2020

US$ 97.06 up .51 for the week Just won’t go down



March corn futures were unchanged for the week, although it did take a turn higher after the USDA report to get the market back there.  There were several small changes made by USDA but in the end traders digested the changes and became buyers.  Even though funds bought 12,000 contracts Friday they are still holding a short position with 86,000 contracts sold.  So, certainly there is room for more short covering and it appears that today is such the case.  The March futures have traded above all resent highs and is trying to make believers out of the bears.  Time will tell and as of now taking advantage of strong cash basis is of the utmost importance.


Soybean futures gained 5 cents for the week no thanks to the USDA numbers.  There was really nothing positive for numbers but some how fund traders decided to buy and brought the March contract 10 cents off the lows of the day.  That was nice however the damage was done by trading below the 945 number and not being able to go above there so far today.  It is getting to the point where I just want to say, “go fishing” and come back the middle of March.  I guess we better see what materializes on Wednesday at the infamous signing of a trade deal with China.  All I can say is that it better be positive.  The 900 level available for new crop pricing is still hanging around.  In my opinion there is more risk with bushels of soybeans in your bin at home than selling those bushels and replacing those bushels with some sort of call option position.  Fund traders are now on the plus side of the market with just 2000 long positions according to information forwarded to me from the EFG Group.  It is my opinion that is not a position they will defend if Wednesday’s signing is a farce.


February live cattle futures gained 270 last week but at this point it appears to be somewhat overdone.  Today the market has failed to get near any resistance like 12790 or 12810 so it will continue to struggle.  Cash was barely higher last week with the best numbers turned in in Iowa at 126 and 200 dressed.  Just not enough to keep the futures market ticking higher.  Now I did not say that this run higher is over just slowing down in my estimation.  Along that line of thought is that carcass weights have crept higher at the same time cutout values have declined.  Both of these trends play into the packer’s hand and must be dealt with in the marketplace.  In other words, with either higher futures values or higher cutout values to keep the greedy packers happy.  Keeping in mind that our beef will continue to have plenty of competition from poultry and pork and another unproven protein that I can’t get myself to put in print here.  Longer term it is sad to say that Australia’s forced liquidation of beef herds will probably help demand here.


February milk futures lost again for the week ending at 1698.  So, we have seen it again that bouncing higher is near impossible to hold on to.  My idea is that a way to defense that is when the futures market does touch between 18 and 19 get a put option position in place.  Then hope the market rocket over twenty and never comes back.  Needless to say there was nothing positive about the butter or cheese trade, both being lower.  It looks to me like either milk production needs to come down or milk demand needs to improve.  I for one will take the improved demand.

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