Ag Markets November 9, 2020
/Agriculture futures are being supported by a weaker U.S. dollar following Joe Biden's electoral college win and ahead of Tuesday's November WASDE report.
This weekend's COT positioning report showed small hedge fund outflows (the first weekly hedge fund selling since August). Funds still hold massive long positions across the ag complex, especially in soybeans, soybean meal, canola seed, corn, spring wheat, and kansas wheat.
Fund positioning will be a negative price driver if/when some negative catalyst drives funds to reduce positions all at once. Funds don't like holding extended long positions, especially in grains.
Macro data is light this week following last week's elections, non-event Fed meeting, and better-than-expected NFP jobs report (+638k jobs vs +580k exp). Investors see U.S. CPI inflation data Thursday and PPI data Friday. Focus is on the Covid-19 pandemic, government stimulus efforts, and the Trump-Biden transition. Markets are trading with a firm risk-on tone this morning, boosted by a weaker USD.
Agriculture price seasonals are negative during the first weeks of November, before turning more broadly supportive at the end of the month. Price patterns worth noting:
Robusta futures have dropped 11 out of 12 years the 35 trading sessions starting today.
Canola seed futures have dropped in 9 out of 10 years the 16 sessions starting today.
Palm oil and bean oil have bullish multi-week price patterns starting Friday.
Watch this week:
After last week's big macro download, focus shifts back to fundamentals this week, especially updated yields and Chinese export numbers in Tuesday's WASDE report. South American weather has been dry, exports have been strong...both bullish soybeans. Watch pre-report position squaring.
On the macro side, watch the path of the S&P 500 (proxy for broad risk sentiment), and watch if the U.S. dollar can break below the multi-year lows from late August. Gold at $1,950/oz and Bitcoin $15k are underscoring the Biden USD devaluation theme. A weaker U.S. dollar is a powerful positive lever for ag futures - chart of the week below.
Chart of the Week: Joe Biden’s electoral college win has boosted stock markets and weakened the U.S. dollar - both positive tailwinds for agriculture futures.
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