Coronavirus was the only topic of discussion that really matters once again this week. Depending on which way the headlines read, the stock market was either sharply higher or sharply lower. We even had the largest one-day point day ever on the Dow Jones. The volatility and the uncertainty, and the surprise half point rate cut by the fed, sent the bond and note futures to uncharted levels and yields down to levels not seen before. It will be interesting to see if somebody can get a 30-year mortgage for 2.5 percent next week.
Cattle futures and the stock market were closely correlated this week, so when stocks were down, the cattle probably were, too. Cash trade was down to $113, which could have been worse, and the feeder index has had a long string of sideways numbers. The lack of overt cash market pressure did not seem to help the cattle much, however, and the April live cattle fell to a new contract low Friday. April feeders didn’t make a new contract low but did get close and made a new multi-month low.
Friday’s poor closes suggest more weakness is ahead, especially if the stock market is lower. The next down side target in the April live cattle is just above $100, and the $128 area has been acting as support for years in the feeders, so we will probably test that again.
At times, the grains and particularly the corn did a better job of trading independently of the stock market than the cattle did. The corn actually had some impressive gains at times, but gave up a lot of those gains on Friday. $3.76 should act as solid support in the July corn, and if that fails, the next target is the contract low. The wheat and soybeans appear set to at least test recent lows and probably slide farther than that. $4.40 is a good downside target for the July KW, and a move to $8.70 is still a possibility for the July soybeans.
We do have a supply and demand report on March 10, but there is a great chance that it doesn’t give us much market moving information. There have been a few Chinese purchases here and there, but not enough to change the supply and demand tables. The possible exception is the grains sorghum, where there has been a great deal of export business. The U.S. Department of Agriculture, however, will probably want to see more big sales before making adjustments.
Our next potential for excitement from USDA numbers will be March 31 when we get the Prospective Plantings Report and the Quarterly Stocks Report. The bull spreading in the corn still suggests that we don’t have as much corn on hand as the supply and demand report would suggest, so maybe there will be something to work with in the stocks report. As far as the acreage goes, we know we will have more corn and beans, but the size of the increases and the mix between the two can cause volatility.
The U.S. Dollar Index has gone from multi-year highs, to nearly one-year lows in the course of just a couple of weeks. The volatility in the stock market and the fed rate cut have put heavy pressure on the dollar. Normally, there is an inverse relationship between the dollar and corn, so perhaps the dollar weakness will begin to help the agricultural markets in the near future. Plan on a lot of volatility in the currency markets until we get some stability in the stock market.
Schwieterman, Inc. is a full service commodity brokerage firm. If you would like more information on commodity markets or our brokerage services, contact Eric Relph at 800-272-9131 or www.upthelimit.com.