Ag Markets January 6, 2020

As we enter the first full trading week of the calendar year and ahead of Friday's big USDA numbers, the non-fundamental message for agriculture markets this week: bullish January price seasonals and a positive macroeconomic environment (crude up, inflation expectations up) vs increasingly bearish market structure (hedge funds are extended long, especially momentum CTA traders).

Watch the macro environment closely this week, especially crude oil, S&P 500, and the US dollar. Ag markets are being buoyed by stronger energy markets (and positive Jan seasonals) but if the macro mood sours and hedge funds bail on macro/inflation hedges, that would make overbought markets like bean oil and coffee look vulnerable to profit taking. Watch Iran headlines (crude oil driver) and US job numbers Friday at 14:30 GVA, 7:30am Chicago (next USD driver).

Chart of the week: Markets like bean oil, sugar and coffee are especially sensitive to volatility in energy markets and perform well when crude jumps.

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