Agriculture markets have gotten a big boost from the positive macroeconomic environment and investors will remain bullish on reflation trades over the coming weeks - a supportive driver for commodities broadly in early January.

Argentina's suspension of new corn exports, strong cash markets, and continued uncertainty around South American weather/production has provided additional support for grain and oilseed markets. Calendar curve inverses are higher and hedge fund positioning is at record levels coming into this week.

Macro:

The macro environment is a strong positive tailwind for agriculture futures today, driven by higher inflation expectations, a weak U.S. dollar, record equity markets, and bullish China sentiment. Correlations are strongly positive between macro indices and ag futures and should remain that way until Feb. The macro matters today.

January is a month when investors focus on 'big picture' investment themes and the potential for higher inflation from dovish Fed policies (a January trading theme since 2008). There will be plenty of #reflation trade headlines his month - a positive driver for ags, metals, and energy commodity markets.

This is a big macro week - with Georgia elections on Tuesday and an NFP report on Friday:

• Monday: OPEC+ meeting on production increases

• Tuesday: Georgia run-off elections to decide which party controls the U.S. Senate

• Wednesday: FOMC meeting minutes, U.S. ADP, Congress certifies Biden's win

• Thursday: U.S. jobless claims

• Friday: U.S. Nonfarm payrolls (exp. +50k jobs, unemployment rate 6.8%)

Fund Positioning:

The CFTC's holiday-delayed COT report later today will likely show a record net long hedge fund position across the ag complex (measured in contracts). Today funds are extended longest in kansas wheat, soybean meal, and corn.

Seasonals:

Price seasonals are positive during the first weeks of January as investors focus on reflation trades and South American weather markets. Peak's seasonal heat maps are a sea of green (chart of the week below).

Watch this week:

Non-fundamentals: #Reflation trades are the focus in January, which boosts all commodities. Hedge funds are record long but the positive macro environment and bullish January seasonals suggest now is *not* the time to take a contrarian play on fund positioning. Watch the path of the U.S. dollar (esp vs CNY & BRL), crude oil (OPEC+ today), and equities...all are supporting ags today.

Fundamentals: The Argentine port strike is over, which should remove some pressure from oilseed markets...but new corn export restrictions are pressuring grains higher (following Russia's similar move on wheat just three weeks ago). Argentine forecasts are dry and Brazil moisture levels are still playing catch-up. We're still in SA weather markets until harvest ramps up in February. Next Tuesday is the big Jan WASDE report.

Chart of the Week: #Reflation trades are popular in January. Price seasonals across agriculture, energy, and metals commodity markets reflect these money flows - futures prices tend to rise during the first weeks of the calendar year. Peak’s seasonal heat maps are a sea of green in agriculture markets over the coming weeks.

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