We're entering another week where the negative macro environment will be the #1 non-fundamental driver for agriculture prices. March negative price seasonals are a headwind. Market structure is becoming a more neutral input (hedge funds less long) after a month of macro-driven hedge fund selling. 

The macro environment was sharply negative last week on Covid-19 contagion headlines, with many stock and interest rate indices seeing the biggest weekly declines since 2008. Investors saw true risk-off trading. 

This week investors will focus on 1.) coronavirus contagion, 2.) central bank financial market backstops, 3.) economic and political data.

The next scheduled Fed policy decision is March 18th, the ECB is March 12th. Markets are pricing in a 50bp March Fed rate cut this morning (vs 33bps on Friday). Central banks could agree to the first coordinated effort since post-Lehman in Oct '08. 

Data this week: U.S. manufacturing surveys today, NFP job #s on Friday. Super Tuesday primaries tomorrow could also move markets; Biden is seen as the more investor friendly candidate vs Sanders. Data is likely a very distant third concern for investors this week.

Price seasonals are broadly negative in March; ag futures prices will continue to remove a risk premium around South American production.

Market structure is becoming a more neutral input after a month of macro-driven hedge fund selling. Hedge funds are ~252k contracts net short ag markets in aggregate, effectively matching the 24-month average of -243k contracts. CTA momentum traders are the shortest they've been in six months. 

What Matters This Week:

The macro environment will be the #1 input for ags again this week and corona contagion will be investors' main focus. Central bank policy changes, including any coordinated policy changes, would be a plus for risk assets. Economic data will take a back seat this week. 

Negative price seasonals are a headwind and will continue to weigh on our markets over the coming weeks.

Market structure is a more neutral input overall, but some markets still stand out as expensive and overbought: sugar no. 11, white sugar, matif rapeseed, oats, and cocoa (record long leg).

It's another week to be careful with long futures positions: the firmly negative macro environment and negative March seasonals are headwinds for ag futures prices.

Chart of the Week: Price performance for agriculture futures has been broadly negative in February, largely driven by the strongly-negative macroeconomic environment; only 5 of 26 agriculture futures markets finished the month higher: arabica coffee, soybean meal, dalian beans, lean hogs and soybeans.

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