FUTURES MARKET OVERVIEW
Read the November 2022 Edition HERE
The USDA’s November report was neutral for corn, soybeans and wheat. The USDA’s new estimates of the U.S. 2022 soybean and corn crop yield were slightly above both trade estimates and the USDA October guess. This suggested slightly higher carryouts. The U.S. dollar traded lower. Initially, crude oil traded higher and tested 92.50 but then dropped to 81.50.
Live CattleCattle and beef prices fell through September that set up beef buyers to become active buyers in October with cattle prices gaining with the strength in beef prices. Choice composite boxed beef prices in September fell from $262.39/cwt to $243.75 at the beginning of October. However, in October choice boxed beef did a complete turn around and moved back to $264.19/cwt. The primal beef sections that moved the most were choice rib and loin sections, breaking down to make rib roasts, loin roasts and steaks, as wholesalers and retailers secured inventory for the upcoming November and December holidays.
Lean hog futures fell hard from September 20, 2022 to October 4 2022. October 2022 lean hogs declined from a high of $97.45/cwt on September 20 to a low at $86.20/cwt on October 4. But on October 4, in a spot month, there was a large difference between futures and cash hogs. The CME lean hog index was $92.93/cwt, a $6.73 difference between cash and futures. With October 2022 lean hogs expiring on October 14, futures and cash needed to converge.
Stock Index Futures
The technicals for stock index futures are improving. The bottom for S&P 500 futures took place on October 13 when there was a one-day reversal pattern and prices have been higher ever since. Also, major downtrend lines have been penetrated on the upside.
US Dollar Index
The U.S. dollar index advanced to a 20-year high in late September as interest rate differential expectations drove the greenback higher. Most of the strength was linked to Federal Reserve officials indicating a readiness to take more aggressive steps to bring inflation under control as most inflation measures were coming in hotter than expected.
The euro currency declined to the lowest level in 20 years in early September, falling to below parity against the U.S. dollar. Pressure on the euro at that time was linked to a growing disparity between the European Central Bank and Federal Reserve policies.
Crude oil prices peaked on November 7 and then fell to just above 81.00. Much of the pressure was linked to fears of a potential global recession-driven demand downturn, which continued to hang over the market. Investors remain worried about a deteriorating outlook for growth and demand due to intensifying macro headwinds, including high inflation and tighter financial conditions.
After making a triple bottom on the daily chart on November 3, futures were able to advance more than $160 in only 9 trading days. Much of the strength can be explained by a sharply declining U.S. dollar and increased speculation that the Federal Open Market Committee will be less hawkish going forward. Investors are thinking the Federal Reserve will moderate the size of its rate hikes to 50 basis points from December after delivering four straight 75 basis point increases.
Futures and options trading involve significant risk of loss and may not be suitable for everyone. Therefore, carefully consider whether such trading is suitable for you in light of your financial condition. The information and comments contained herein is provided by ADMIS and in no way should be construed to be information provided by ADM. The author of this report did not have a financial interest in any of the contracts discussed in this report at the time the report was prepared. The information provided is designed to assist in your analysis and evaluation of the futures and options markets. However, any decisions you may make to buy, sell or hold a futures or options position on such research are entirely your own and not in any way deemed to be endorsed by or attributed to ADMIS. Copyright ADM Investor Services, Inc.