Market Outlook for US and South America Regions
Read full October edition here
The USDA’s October report was negative for corn, neutral soybeans and bullish for wheat prices. After the September USDA report, November soybean futures traded lower to near 11.84. A short covering rally has November soybeans now near 12.32. Initially December corn rallied from 4.97 to 5.48 then broke in response to the USDA September stocks report to 5.06 and is now near 5.33. Chicago December wheat traded from a low near 6.77 to a high near 7.63 before some profit taking took December Chicago wheat down to 7.12. December wheat is now near 7.40. December soymeal traded from 347 down to near 309. Managed fund short covering has taken December soybean meal now to near 324. December soyoil traded from 54.18 to a high near 63.08 following higher energy prices and hope for increased use for green fuel.
If live cattle traders were short in September 2021, they had a good month of trading and wholesale beef buyers were able to buy beef cheaper. For the majority of the summer of 2021, live cattle slowly climbed from the spring lows, moving higher in a fairly tight range with a quick surge in the third week of August. But after Labor Day 2021, wholesale beef buying weakened, with Labor Day being the last of the big grilling times of the summer, live cattle and beef prices turned lower. September often is a month when beef prices decline when consumers are paying school tuitions and paying off credit cards from summer vacations. It can be a slow month for beef movement, especially for the high end cuts, steaks in particular, and September 2021 followed the course.
After the high made for December 2021 lean hogs was made at the end of July, lean hogs traded lower into August, popped a few dollars by the end of August and peaked on September 1, settling the first day of the month at $82.47/cwt. By September 15, December lean hogs dropped to $71.70/cwt and settled the day at $72.25/cwt. With half of September to go, traders bought in shorts and December lean hogs rallied, ending on September 30 at $85.40/cwt for a gain of $3.45/cwt.
Stock Index Futures
S&P 500 and NASDAQ futures advanced to new record highs in early September after Federal Reserve Chairman Jerome Powell in late August delivered a dovish speech at the Jackson Hole Federal Reserve symposium. Markets focused on the language of the Fed calling to de-couple asset purchases and interest rate decisions. With a timeline for tapering asset purchases still unknown, this was interpreted as meaning that an increase in the fed funds rate is an even longer way off than previously thought. In addition, futures were supported by the anticipation of strong third quarter corporate earnings reports.
US Dollar Index
The U.S. dollar index advanced in September through mid-October to a one-year high. The greenback was supported by a safe-haven flow of funds in light of increasing evidence of slower growth in the global economy. In addition, the U.S. dollar index firmed when the Federal Reserve signaled it could start reducing asset purchases as soon as November. There was temporary pressure on the greenback on news of the headline weak August nonfarm payrolls portion of the employment report.
The euro currency has underperformed. Most economic reports have come in weaker than estimated. For example, construction output in the euro area dropped by 1.6% year-on-year in August 2021, which is the first month of contraction since a recovery started in March 2020. Building activity fell by 1.3%.
Since the third week in August crude oil futures have steadily marched higher, advancing to near the $84 a barrel level, which is a seven-year high. Much of the strength can be linked to supply tightness, as soaring natural gas and coal prices drove a switch to fuel for power generation and heating.
Gold futures prices have advanced since late September due to increasing inflation concerns. Some investors are using precious metals directly to hedge against rising inflation, since higher inflation in the future can erode the value of the U.S. dollar. Also, the latest run-up in energy prices added to fears that inflation will not fade soon.
Market Outlook for China and Asia Regions
The key Chinese and Asian events over the last 30 days are robust exports performance of China and higher material prices brought by disrupted supply chains globally. Australia maintained its interest rate at 0.1% and New Zealand is anticipated to further increase interest rates in an effort to curtail a higher-than-expected inflation rate.
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