Global macro risk indices turned lower on Friday and markets are in free-fall this Monday morning with crude down -25% (biggest drop since 1991), S&P 500 futures limit down -5%, and 10yr US bond yields at record lows below 50bps. 

The US dollar is cratering to 13-month lows this morning on further Fed rate cut expectations; this USD weakness is the only lifeline for our agriculture futures markets in a sea of red. 

Big drops in energy prices (and the knock-on effects for inflation expectations and ag input prices) are broadly negative for agriculture markets, especially bean oil, sugar no. 11, arabica coffee, and cotton - see our chart of the week below. This Opec-driven crude drop adds a new and significant headwind for agriculture futures markets.

Like last week, investor focus will be on coronavirus contagion (reported cases now >110k), central bank support, market price action, and economic data:

• The ECB meets this Thursday. The ECB's deposit rate is already negative at -0.50bps; they could push further negative (10-20 bps?) or open additional financing lines. 

• The U.K. government releases its new budget this Wednesday, which could include emergency fiscal or liquidity measures ahead of the BoE meeting March 26th.

• Next U.S. Fed policy decision is next Wednesday, March 18th (2+ more 25bp cuts priced in as of this morning).

Last week's stale Feb Nonfarm payroll numbers were great, with +273k jobs created. We'll get into more recent corona-impacted data starting with March US consumer sentiment data this Friday.

Price seasonals remain broadly negative in March, esp for the sugar markets, beans and meal. Our seasonal heat maps have more red than green until mid-April.

This weekend's COT report showed larger-than-expected short covering inflows into soybeans and soybean meal, but otherwise we've seen funds selling (long liquidation, new shorts) over the past month, driven by the negative macro.

Market structure is a ~neutral input overall, with today's aggregate fund position matching the average position of the past 24 months. Momentum traders ("first movers") have been selling ag futures and today these traders are the shortest they've been in six months according to our internal models.

What Matters This Week:

The macro environment will be the #1 price input for ags again this week, likely overwhelming the impact from Tuesday’s March USDA WASDE report. Investors will focus on corona contagion and central banks' ability to backstop growth expectations and capital markets. 

The ECB is on deck Thursday at 13:45 GVA, 7:45am Chicago following the Fed's emergency -50bp rate cut last week. Investors want to see real action and additional market stimulus.

Negative March price seasonals are a headwind and will continue to weigh on agriculture markets over the near term.

Market structure is a more neutral input overall but there are still a few markets where funds are relatively long vs data the past 24 months: matif rapeseed, white sugar, cocoa, matif wheat, sugar no.11, chicago wheat, and arabica coffee. 

It's another week to be careful with long futures positions: strongly negative macro + negative March seasonals = headwinds for ag futures prices.

Chart of the Week: Today’s Opec-driven crude oil price rout is dragging agriculture futures markets lower in the overnight session. Big drops in energy prices are broadly negative for agriculture futures, especially bean oil, sugar no. 11, arabica coffee, and cotton.

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