We seem to have made some progress on the trade deal with China. As usual, the details are lacking but it seems that we are going to hold off on new tariffs, roll back some old ones, the Chinese are going to buy more ag products, and they are also going to implement rules on intellectual property. Since we don’t have many details, and much of the agreement is classified, it hasn’t been signed yet, and the time and place of the signing hasn’t been set, it may turn into nothing at all. Time will tell but there was, at times, optimism in the market place.
There were new all-time highs in the stock market, and the late-week surge was almost all trade news related, along with some share buy backs by Apple. We also saw new all-time highs in palladium and multi-month highs in copper. Some of that strength was trade related as well. In the ag markets, we had multi-month highs in the Kansas City wheat, as well as multi-week highs in corn and soybeans. There were new contract highs in the live cattle, and the hogs showed some signs of life.
Not all of the strength was related to China but the idea that we are making progress, at the very least, is helping psychology. We also seem to be making progress on the U.S.-Mexico-Canada Agreement, although there doesn’t seem to be any timeline on getting that moved through Congress. Mexico continues to be our main buyer of corn and pork even without the agreement being done so maybe there is no rush. The last international event was Boris Johnson’s re-election in the UK, which sent the British pound higher and the U.S. dollar lower. A weaker dollar wouldn’t hurt commodities a bit.
The December supply and demand report was released Tuesday, but as expected it didn’t amount to anything which is typical of a December report. The next meaningful round of fundamental information will be the January supply and demand report, the quarterly stocks report, and the winter wheat seeding report, all of which will be released Jan. 10. Unharvested corn will be lumped into the quarterly stocks, which will not help the reliability of that number and will not build any confidence in the government, especially since we are dealing with a lot of distrust of the U.S. Department of Agriculture as it is. The January numbers are going to create a great deal of volatility but hopefully not create more uncertainty than we already have.
On the charts, the March corn has moved through trend-line resistance and traded above the double top at $3.84 ¾. A little bit of follow-through buying next week will start to put the bulls on firm footing. Numerous short-term technical buy signals have been triggered already, but we will need more supportive action for the longer-term signals.
The March KW made a quick move from the bottom to the top of the recent trading channel, so maybe that will be enough for the time being. The $4.50 area has proven to be strong resistance for the past couple of months and this week was no different. Perhaps if the corn and beans can build upon recent gains, the wheat will as well. A close above $4.50 would suggest we are in for a move up to $4.97.
Soybeans gapped higher Thursday night and saw some very good strength at times. The market failed to hold onto most of the gains, but the charts still suggest the January contract has a reasonable shot at making a run to $9.24. The beans have the advantage of having seen some very good export sales lately, which is keeping a bid under the market.
Cattle had a good week. The new contract highs in the February and April live cattle have those charts looking bullish after the long stretch of sideways trade. The strength in the live cattle also bodes well for the feeder cattle. January feeder moved through trend-line resistance. March and April and up against multi-month highs, and the contracts from May forward made new contract highs. Hedging profits is a good idea, but keep in mind that the trends are up so be a little patient.
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Note: This material has been prepared by a sales or trading employee or agent of Schwieterman, Inc. and is, or is in the nature of, a solicitation. This material is not a research report prepared by Schwieterman, Inc. Research Department.