Friday, May 24, 2019

Ag Commodities: There is a LOT Going On

From AgWeb:

The Allendale Wake-Up Call
Good Morning from Allendale, Inc. with the early morning commentary for May 24, 2019.
Grain markets continue to juggle a forecast that won't allow for planting with new trade aid that seems to demand it. Remember, markets will not trade Sunday night or during Monday's day session in observance of Memorial Day. They will, however, reopen Monday night at their normal time. Join us in remembering those who gave all.

Acreage questions continue to swirl
the market with weather-delayed plantings, prevent plant talks, and now the latest in trade mitigation aid. Rich Nelson shares his latest thoughts on these topics in a free ten minute webinar here.

Corn export sales from 5/10 – 5/16 totaled 625,959 metric tonnes (442,080 for 2018/19). That was within the wide 250,000 – 1,050,000 trade expectation. Soybean export sales from 5/10 – 5/16 totaled 540,948 metric tonnes (535,848 for 2018/19). That was within the wide 100,000 – 800,000 trade expectation. This is the best sale for this specific week in three years.

Wheat sales were noted at 393,247 metric tonnes (48,395 for 2018/19 and 344,852 for 2019/20), also within the wide trade expectation of 0 – 700,000 tonnes. Late in the marketing year, we monitor weekly shipments, not sales. To hit their 925 million export goal, we only need shipments of 861 million. We have 846 million bushels shipped out. We only need an extra 15 million bushels in shipments over the next two weeks. That would be a bit under the 38 million from last year in that time.

The government aid package likely put a million or two acres back into corn.
The package requires that ground be planted with a crop. That eliminates some of the preventive plant talk. It also does not discriminate between corn or soybean ground. Corn acres will still fall from the March report, perhaps by 2 to 4 million acres. But we are no longer talking about a 3 to 8 million drop.

The U.S. Coast Guard said it has closed the Mississippi River near St. Louis to boat and barge traffic on Thursday for the second time this month due to high water and strong currents on the major shipping waterway. (Reuters)

Managed money funds ended their eight day corn buying streak in yesterday's trade selling 20,500 corn contracts, 6,000 soybeans, 3,000 wheat, 2,000 soymeal, and 4,500 soyoil. It will be interesting to see this afternoon's Commitments of Traders report....

This is where having an internalized mental matrix to hang all this stuff on comes in very, very handy.
From the introduction to an April 2016 post:

Global Macro: There Are Many Ways To Approach It, Here's A Good One
A couple weeks ago I emailed a friend:
Re: posts on money
Years ago one of the mentors said you can approach macro from a lot of starting points, for him it was bonds, he had internalized the price/interest rate teeter-totter to the point that if the other parts of the matrix, currencies or metals or equities, whatever, didn't fit the paradigm he'd know he was looking at either danger or opportunity.
I can't go so far as to say they are all fungible but along with empirically derived lead/lag times, grit in the gears/slippage inefficiencies and leverage it's a close enough first approximation to use as a mental model.
The key is to have enough exposure to your subject that your understanding is innate, that you don't have to consciously think "Now when interest rates go down, bonds go up". When you've achieved this level of mastery you immediately sense when the presented facts aren't conforming to the mental model and may be worth further scrutiny.

Another way in to global macro is commodities and if this is your choice it helps to internalize curves to the point the dangers/opportunities pop when you look at them.

Permit me to present Izabella Kaminska, writing at FT Alphaville:...MORE