Ag Markets June 22, 2020
There are two non-fundamental agriculture price drivers worth watching this week:
The macro environment has been a volatile trading input as investors weigh the positives of central bank stimulus and economies reopening versus Covid-19 second wave prospects.
The late-June seasonally bullish window for grain and oilseed prices, sandwiched in an otherwise seasonally bearish June 1st - Oct 1st period.
The macroeconomic environment has sent mixed signals for agriculture traders over the past week:
Positive for ags: higher energy commodity prices, higher inflation expectations, strong China sentiment, and higher EM stock markets.
Negative for ags: Weaker South American currencies, firmer U.S. dollar, and lower global growth expectations (reflected in lower interest rates and bond yields).
This week is a quiet week for data and central bank announcements. U.S. jobless claims and continuing claims data are on Thursday. Markets are trading with a mildly supportive tone this morning.
Price seasonals are broadly positive for ag futures in late June - prices tend to bounce. Peak's seasonal heat maps (chart of the week, below) are a sea of green for the next two weeks before turning dark red again in July.
What Matters This Week:
The macro environment is an important x-factor this week for agriculture markets.
If the macro environment turns more negative this week that would be a red flag for markets with newly added hedge fund length like soybeans, bean oil, and sugar.
If the macro pushes into positive territory, there are plenty of cheap and oversold markets that look like good value picks, especially in the context of a late-June seasonal price rebound: corn, kansas wheat, chicago wheat, soybean meal, cattle, hogs, and robusta coffee.
Watch this week:
Sentiment around Covid-19. This virus has been the #1 macro driver in 2020 and things are turning south again: CA record new cases, stores re-closing, second wave warnings.
Macro price action. There's very little on the data calendar this week. Watch S&P 500, crude oil, and the U.S. dollar (can Brazilian real re-strengthen?).
Will ag markets see a quick seasonal bounce? This is especially relevant for oversold markets with big CTA short positions like chicago wheat, soybean meal, and coffee.
Chart of the Week: Is it time to buy chicago wheat and soybean meal? Price seasonals are briefly positive for grain and oilseed markets in late June…a small break from the seasonally-negative trend that runs from June 1st to October 1st.
For a trial of our industry-leading agriculture research, reach out to us: insight@peaktradingresearch.com.
