The much-anticipated Jan Crop Report issued yesterday turned out to be a bullish shocker – with total Corn Production down to 14,182 (14,434) – yield 172 (175) – stocks 1552 (1597) – Qtly Stocks 11,322 (11,642)! This resulted in a limit-up in Mar Corn to the highest levels in 7 years! So on top of already stout supply/demand fundamentals which include a very dry S/A, stellar exports, shrinking stocks, a weakening dollar & a very strong economic recovery into 2021 – is added help from the USDA! Keep in mind that US Corn is not only the cheapest feed grain in the world but the only game in town until S/A supplies come on line later this Spring! Finally Mar Corn soared to $5.00 WITHOUT any help from ethanol demand!
The upside leader of this powerful CBOT 6-month rally has been Beans – but not so in Tuesday’s USDA Report – as its numbers were a touch friendly but nowhere near as bullish as corn’s #’s! So for a change, Mar Beans coat-tailed Mar Corn! That was even more in evidence today as Corn is holding 5-6 higher while beans are 10 lower! But the overriding fundamentals going forward are the widespread dryness in S Brazil & Argentina – coupled with China’s voracious appetite for our beans as they attempt to feed a rebuilt hog herd! Of course, Beans are now over $14.00 – not at $8.40 where they were last August! But if a dry S/A persists & if that weather pattern shifts north to impact US Spring Planting, one has to wonder if $14 is enough! An expected robust economic recovery & a touch of inflation can only help!!
Mar wht rode the bullish euphoria of the USDA Jan Crop Report -where most estimates were under expectations – but more so for corn than beans & wheat! The 31 cent gain scored new contract highs for the Mar Wht contract! US stocks were 836 (856) – world stocks were 313 (315) – Qtly 12/1 stocks were 1.674 (1.695)! Mar Corn’s limit up & Mar Beans 42 cent up provided adequate coat-tails for Mar Wht – as they normally do. Plus the Macros also provided support! As well, Russia Wht rises rose with new export taxes coming soon & China’s recent interest is US Wht has elevated!
Feb Cat closed lower for a 5th consecutive day – influenced by a host of factors skyrocketing feed costs have pressured feeders – restaurant & food services promise to reopen In the Spring but not now – heavier weight cattle are entering the mkt place – Feb Cat still holds a premium to cash which blunts rallies! But hope is on the horizon as more widespread dissemination of Covid vaccines should ameliorate the economic recovery – leading to increased beef demand!
The Hog Complex is a short-term down / long-term up scenario because of the Covid/Vaccine dichotomy – and nothing demonstrates it more clearly than the comparison of the Feb & June charts!