The last full trading week of 2020 has plenty of macroeconomic data to chew through - including a Fed meeting on Wednesday - as agriculture futures are adjusting to upcoming Russian export taxes (bullish wheat) and mixed South American forecasts.

Macro:

The macroeconomic environment is a neutral trading input for agriculture futures coming into this week; crude oil, BRL, and CNY are up (good for ags), other risk indices are more mixed. The dollar is trading sideways ahead of Wednesday's big Fed policy decision.

On the macro calendar this week:

• Monday: U.S. $900B Covid stimulus negotiations, U.S. electoral college certifies Biden

• Tuesday: Chinese industrial production and retail sales data; U.S. empire manufacturing

• Wednesday: U.S. FOMC rate decision (watch USD), U.S. retail sales

• Thursday: BOE rate decision (watch GBP)

• Friday: BOJ rate decision (watch JPY) and Russia rate decision (watch RUB)

Fund Positioning:

Friday's COT positioning report showed surprise selling in bean oil and long liquidation from sugar no. 11. Big picture: Although funds have trimmed length over the past six weeks, aggregate positioning across the ag complex remains at nosebleed levels (chart of the week below). Today funds are extended longest in kansas wheat, canola seed, and corn, based on 2-year net positioning z-scores.

Seasonals:

Price seasonals are mixed over the coming weeks before turning more broadly positive into 2021.

Watch this week:

Fundamentals: Last week's WASDE report was a non-event, more changes will be made in January. Northern Argentina saw rains this weekend but cumulative precipitation totals are still below average across Brazil and forecasts are spotty as we're getting deeper into key growing weeks. Russia's pending export taxes are keeping wheat bid; kansas wheat is now the most overbought market across the ag complex (non-commercial traders +33k long).

Non-fundamentals: The macroeconomic environment matters in December. This is the time of year when correlations are highest between macro indices and ag futures. Today ag correlations are highest with crude oil. This week watch CNY around Chinese data Tuesday and watch USD around the big central bank meetings later in the week. Additional Fed stimulus Wednesday = USD down = Ags up.

Chart of the Week: Hedge fund positioning across the agriculture complex is holding steady at historic levels, with dry South American weather and new Russian export taxes keeping funds confidently long. This is the longest that hedge funds have ever been entering a new calendar year.

For a trial of our industry-leading quantitative agriculture research, reach out to us: insight@peaktradingresearch.com.