Following an explosive $4.00 rally ($9 – $13) since August, Mar Beans tacked on an additional 40 cents last night – only to give back 50 cents inter-day in a massive correction – responding to an extremely overbought mkt – yet still eking out a small gain at 1:20pm! In addition to the well-chronicled bullish factors – a very dry S/A, stellar exports, tightening stocks & a weakening US Dollar, Argentina announced they would be banning exports until Mar 1! This coupled with a vaccine-driven economic recovery in 2021 gave the mkt an extra boost! However, traders wary of the Jan 12 Crop Report, quickly jumped in to take profits! The mkt should continue to climb until demand rationing begins to happen!
Mar Corn is clearly following Mar Bean on the upside – as the Bean complex has stronger fundamentals – but corn is no slouch – as it tickled the $5.00 level early this morning before correcting nearly 20 cents with the rest of the CBOT! It may be the most impressive upside mover in the grain complex – as its rallied despite large ethanol demand destruction due to Covid! But that should be rectified in 2021 as vaccine-inspired global economic rebound leads to ramped up driving & a big spike in ethanol usage! And China will continue to buy our feed-grains for its ever-expanding hog population! And not only is US Corn the cheapest anywhere but it’s the “only game in town” until S/A supplies come on board in late Spring! And a steadily falling US $$ “greases the export slide”! With corn stocks tightening, there is “no margin for error” for any shortfall in the Northern Hemisphere! Such as what might happen if the S/A DRY moves north!! 10 year range! ($3 – $8)!
They say “a rising tide floats all boats” & that perfectly fits the Wht mkt – the perennial weak sister to beans & corn! While some of its fundamentals occasionally flip to the bullish camp – such as dryness in the Central Plains or the upcoming Russian Wht tax, mostly Mar Wht coattails beans & corn & derives strength from the “outside mkts” – especially the weak US Dollar! After posting 6 year highs last week, the contract extended to $6.50 last night before correcting with the other grains!
It looks like the accumulative strength of the corn mkt finally caught up with the Feeder Mkt driving it down sharply – taking the fat mkt with it! Feb Cat lost almost $3.00 closing at a 3-wk low! Covid-weakened demand resulting in less company & family holiday outings also weighed on the mkt. The 2021 economic rebound should boost the cattle complex into the 2nd quarter!
In an impressive display of stand-alone strength, Feb Hogs shrugged off the $3.00 drop in Feb Cat to gain over $1.00 – matching 9 month highs! The primary impetus was the continued Chinese Pork Demand that has remained strong despite frequent rumors it would be waning sharply in 2021! But that hasn’t happened & this steady export demand flow along with an expected pick-up in domestic consumption (as the vaccines become more widespread) should bolster the pork complex thru the 1st half of 2021!