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Early Call 8:45am EST: Corn down $.02, soybeans down $.02, wheat down $.02.
Soybeans traded both sides of unchanged overnight before settling lower as the dollar
rallied after private U.S. jobs data was released. The dollar continues to consolidate
ahead of Friday's November jobs data, which is expected to set the table for a move on
interest rates by the Federal Reserve.
Grains: Corn and soybean futures advanced Tuesday thanks to hopes for increased
demand and short covering by investors. Wheat fell. Soybean prices rose to a five-week
high, gaining as investors closed out of bets on lower prices by buying futures, which
lifted the market. Investors were exiting their bearish wagers because of growing
sentiment that prices have fallen far enough, recently hitting a fresh 6 1/2-year low in
November. Buying in the soybean oil market also propped up oilseeds. Soybean oil
prices rose 2.3% on Tuesday, supported in part by the release Monday of the U.S.
Environmental Protection Agency's annual targets for how much biofuel must be mixed
into the nation's fuel supply. The federal agency raised its volume requirements,
suggesting more soyoil will be needed to meet biodiesel goals. The final EPA mandates
indicate that a lot of soybean oil will be used to make biodiesel next year, so people are
all bulled up on that. Soybean futures for January delivery rose $.08 1/4 to $8.89 1/4,
the highest closing price since Oct. 27. Corn prices rose to a one-week high, boosted by
investor short covering, which comes after prices tumbled in November. Corn prices
also were supported by EPA's ruling, which increased blending requirements for ethanol
and prompted hopes for increased corn demand, the main feedstock in the biofuel. Corn
traders figured the EPA announcement was friendly. The dollar, which fell 0.5% against
a basket of international currencies on Tuesday, further supported corn and soybean
prices. December corn added $.02 to $3.67, the highest closing price since Nov. 23.
Wheat prices fell to a three-month low, weighed down partly by improving conditions
of the nation's winter wheat crop. CBOT December wheat shed $.03 1/2 to $4.56 1/2,
the lowest settlement price since Sept. 3.
Daily Grain / Hogs Marketing Outlook Written by: Jim Gerlach
12/2/2015
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Our lead forecaster says that
ongoing dryness and wetness in
Brazil have the potential to
become more pronounced over
the next 10 days, though
scattered t-storms affect driest
areas Sun.-Wed. (Dec. 6-9), and
drying occurs over the same
period in wettest areas.
Sustained drying aids planting
and harvesting in Argentina, but
rain may eventually be needed
by mid-month and seasonable to
cool weather limits drying rates.
Quiet and mild weather
dominate U.S. livestock areas.
Over the last 30 days, soybeans
in northern Brazil were the
second driest since 2000, with
only 2002 drier. Over the same
period, southern Brazil
soybeans were the second
wettest since 2002, with only
2009 wetter. Southern Brazil
and Paraguay stay wet from t-storms through Sat. and again later next week. Dry-hot
weather will dominate northern Brazil into Sat., followed by scattered t-storms Sun.-
Wed. At least several days of drier and hotter weather potentially return to northern
Brazil after next Wed. (Dec. 9). CWG (www.commoditywx.com) noted in the attache
graphic that relying on the U.S. model in the 11-15 day period hasn’t been a good idea
as model performace has had a dry/hot bias. Mild and dry weather dominate U.S.
livestock for 7 to 10 days, followed by seasonable cooling.
Ukraine’s 2016 wheat crop is now sailing into uncharted waters given both the
significantly missed planting target and a record percentage of crops in poor condition.
Ukraine, the world's sixth-largest wheat exporter, has faced one of the most challenging
winter planting campaigns this year than ever before in the wake of a historic drought
that set in during late summer. As a result, planting progress and plant emergence has
been considerably behind normal pace all along, and crop health has suffered
immensely. The outlook was rather gloomy as of early November, but hope still
remained that Ukrainian farmers could boost winter wheat area throughout the month
3
with help from favorable weather, which would also presumably help improve overall
plant conditions. Analytical firm SovEcon is predicting that Russian total grain
production will reach 100mmt, down from 103.7mmt last year, and 105.4mmt the year
before. Currently the crops are overall in better condition than they were last year and
this winter is expected to be mild with plenty of precipitation. The Russian agricultural
ministry has not released any official estimates for the 2015/16 crop year yet.
RJO’s director of research Rich Feltes echoed what I was saying yesterday about why
the market is more apt to rally than decline into the end of the year. In the absence of
fresh fundamentals, ag markets are more susceptible to structural factors and on that
score, managed fund ag shorts are modest and growing, an open invitation to bottom
picking despite the over-riding negative factors including favorable South American
weather, slack demand, a strong dollar, more free flowing Argentine exports, and a
doggy CRB index. The only commodities up on the year are white
(sugar/cotton/rice/cotton/cocoa), while only gains in Nov were rice/OJ/lumber/$/soy
oil/sugar/cocoa), hardly a ringing endorsement for commodities. More crushers eased
U.S. soy basis yesterday than those that advanced basis, a sign of thinning margins and
expectations for an acceleration in farmer selling next month. U.S. corn is getting
competitive in the world export market, although this is no sign of trouble as yet for
2016 Argentine or Brazilian corn crops. Soybean oil share, correcting today after
posting new high yesterday, will likely see strong support on breaks. Row crop prices
are entering a zone where further gains will ignite stepped up farm selling. We think
upside follow-through is limited.
Adding to what Rich is saying, taking a closer look at Monday afternoon’s CFTC report
revealed another boost in speculators’ net short position in ag commodities. As of last
Tuesday, a record short position worth 51,000 contracts was established in KC wheat.
Funds were outright short 83,000 contracts of soybeans, which is near the early summer
low, and just over 150,000 contracts of corn. Altogether, funds were short 400,000
contracts in corn, wheat, beans, hogs and cattle, which is the highest of such since
the supplemental report began in 2006. Those short futures positions soften
somewhat when netted against outstanding options positions, but in either case, what we
really have is an opportunistic trade community trying to lean on the biggest player in
the house (fund managers) and force them into cover shorts in low volume/thin holiday
trade. Whether or not that will work/happen remains an open question, but any such
action would prove a gift to under marketed producers holding large stocks of grain and
soy. Producers need to be in position to take advantage of any rally into year end,
specifically Mar corn above $3.95 and Jan beans above $9.00. With final South
American and all of the U.S. 2016 growing season lies ahead of us, use options to limit
your downside exposure as we move into the new year.
4
Looking WAAAY ahead, with U.S. corn producers looking for any edge to prop up
projected 2016 balance sheets that are projecting losses, crop specialists point out that
early planting can be one of the best ways to increase corn yield without incurring
additional costs. Planting corn earlier guarantees the best yield potential. However,
environmental factors and management also enter the picture, but these also tend to take
a bigger toll the later you plant. Generally, early corn planting is defined as pushing the
date up by at least 10 days from the traditional planting window. A report by economists
from the University of Illinois says early planting works, but there's more to the story.
Research conducted by University of Illinois agronomist Emerson Nafziger shows
planting before April 25 produced the highest overall yield, but it's not necessarily a
yield bump. Planting between April 25 and May 15 resulted in modest yield penalties as
time progressed. Planting after May 15 resulted in the most severe yield penalties. This
is not news to growers, and that's why they make every effort to get planters rolling as
early as possible. In other words, the economists found that the yield penalty is larger
for planting later than are the gains for planting early. The point is that early planting
guarantees you the best yield potential in a field. As planting is delayed, penalties
worsen and often significantly.
The authors agree that timely planting clearly influences corn yield prospects, but they
emphasize that other factors probably play a bigger role in final yield. Purdue
University agronomist Bob Nielsen is noted for stating: "The statewide (Indiana)
statistical data suggest that planting date accounts for less than 25% of the variability in
statewide yields from year to year." Nielsen noted that yield potential declines not just
because of the delay in planting, but the introduction of additional stress factors such as
a shorter growing season, pollination when it is hotter and drier and possible increases
in pest pressure. He points out that growers have to remember that yield loss associated
with late planting should be attributed to two things; yield loss due relative to the
maximum possible yield at the ideal planting date and yield loss due to additional
stresses that are incurred. In 2015, some corn was planted in April on the early side and
easily weathered the heavy spring rainfall events. We also had corn planted far outside
the April 20 to May 10 window that suffered more from too much rain in June and early
July rather than just an unfortunate delay in planting. Nielsen said growers also need to
understand the consequences of rushing the season. "Adequate moisture and soil
temperature and good seed-to-soil contact sound easy, but growers find it hard to wait,
especially when they have a lot of acres to cover, especially if the previous season didn't
cooperate," Nielsen said. "I don't care when you plant, just recognize the risk and
consequences of cold soil temperatures."
5
U.S. farmers are getting one piece of good news regarding the 2016 corn crop. Fertilizer
prices continued to drift lower the fourth week of November 2015, with some fertilizer
retail prices at or are closing in on historic lows (going back to 2008 anyway). All of the
eight major fertilizers slipped lower compared to a month earlier, according to a DTN
weekly survey, but none were down significantly. DAP has an average price of $543 per
ton, MAP $556/ton, potash $422/ton, urea $397/ton, 10-34-0 $580/ton, anhydrous
$624/ton, UAN28 $286/ton and UAN32 $325/ton. On a price per pound of nitrogen
basis, the average urea price was at $0.43/lb.N, anhydrous $0.38/lb.N, UAN28
$0.51/lb.N and UAN32 $0.51/lb.N. While fertilizers and other inputs have been slow to
adjust to the crash in commodity prices since 2012, some are breaking new ground:
Surveys of national average retail fertilizer prices since November 2008 show lows for
most fertilizers were seen in either 2009 or 2010, with three lows set in November 2009
alone. However, there were a couple exceptions. One would be potash, which is at the
lowest price in more than seven years. Last week's price of $422 per ton is now an all-
time low for potash (since data began to be collected in 2008). Before this recent move,
the lowest price in our dataset occurred in August 2010, with an average of $467 per
ton. Another fertilizer nearing a an all-time low would be urea. The nitrogen fertilizer,
with an average last week of $397 per ton, dropped below $400 per ton for the first time
since June 2009 when the average price was at $390 per ton. The all-time low for urea is
$375 per ton in October 2009. The remaining six fertilizers all have current retail prices
which will have to move considerably to reach record lows.
DAP, with an average price of $543/ton now, has a seven-year low of $362/ton reached
during the second week of November 2009. MAP, with an average price of $556/ton
now, reached its low of $386/ton the first week of November 2009. 10-34-0, with an
average price of $580/ton currently, is nowhere near its low of $381/ton seen the fourth
week of December 2009. Anhydrous, with a current price of $624/ton, has a low of
$410/ton seen on the first week of November 2009. UAN28, with the current price of
$286/ton, has a low price of $199/ton from third week of August 2009. UAN32,
currently at $325/ton, has a low of $231/ton seen the first week of September 2009.
With retail fertilizer moving lower in recent months, only one fertilizer is now higher
compared to a year earlier. 10-34-0 is 3% higher than last year. The remaining seven
nutrients are now lower compared to retail prices from a year ago. DAP is now 6%
lower, MAP is 7% less expensive and UAN28 is 11% lower. Anhydrous, potash and
UAN32 are all 12% less expensive while urea is 19% less expensive from a year earlier.
DTN collects roughly 1,700 retail fertilizer bids from 310 retailer locations weekly.
On the demand front, the cost of U.S. transportation remains relatively cheap. Spot
barge freight was 280% of tariff and December freight was down to 285%. Corn barges
were unchanged to a bit higher. Dec corn barges were bid $.50 over with offers at $.53,
6
last half Dec barges were $.50 on $.54, Jan was bid $.48 over and Feb had a buyer at
$.52 over. The eastern corn basis remains a bit defensive as ethanol producers have
started to back away from the market. Farmers sold more corn on the rally, especially
reseller interest. Premiums in the barge market for soybeans were unchanged. Last half
Nov barges were bid $.62 over, Dec barges were bid $.64 over and Jan was $.65 on
$.67. Dec CIF beans traded to $.65 over Jan, with Jan also trading at $.65 over. China
reportedly picked up a few cargoes for January shipment as crush margins showed
better there. Farmer selling picked up on the futures rally especially to the west. The
rally has allowed crushers to extend ownership for much of the month of December.
MN/IA oymeal nearby was offered at $28 under Dec and many crushers are now rolling
from the Dec to the Jan. Barge meal values were steady at $13 over Dec bid on $15 over
Dec on the nearby. The IL market was called $3 under Dec. Crush margins were
showing $.50-$.75 a bushel.
In export-related news, the USDA announced a 124,000mt sale of 2015/16 soybeans to
an unknown this morning. Traders continue to debate just how much hoarded grains
Argentine farmers possess. According to Ricardo Echegaray, the head of the AFIP tax
agency, farmers have about $6 billion worth of soybeans available for export, or
16.8mmt, $3.4 billion worth of corn, or 20.1mmt, and $2 billion worth of wheat, or
about 9.5mmt. Echegaray said, “This is not an estimate, these are hard figures that we
have from the declarations of each farmer.” It is being reported that Asian countries
have all but halted corn imports in anticipation that Argentina’s new export policy will
lead to cheaper corn. Rain-induced shipping delays continue to plague Brazilian corn
exports as port facilities are uncovered and do not operate while raining. El Nino-related
rains have been a consistent feature in southern Brazil, leaving the port of Paranagua to
not load any corn for 14 days in November. Shipping delays continue to run around 40
days and corn exports are expected to remain heavy into February in order to work off
the backlog of delays currently in place. Russian wheat exports in November are likely
to be 1.9-2.0mmt based on preliminary phytosanitary certificates issued for the Nov 1-
27 period, and would be down from October exports of 2.6mmt. Wheat exports since
the start of the 2015/16 marketing year on July 1 have been 12.0mmt, down 11% from
last year. India continues as a bullish background factor for vegetable oil as rapeseed
crop worries remain and ample port stocks appear to be getting absorbed. The soyoil
import margin recovered some this week to $5 negative in the spot market, $16 negative
for December and again $4 positive for January. With Russian sanctions placed on
Turkey, analytical firm UkrAgroConsult is anticipating a boast in Ukrainian exports to
the country. Over that last 5 years, Turkey has cut its Ukrainian exports by 50% and last
year only 2.7% of all Turkish wheat imports came from the Ukraine.
7
Hogs: Cash hogs are called steady to narrowly higher as buyers are signalling a low has
been posted in cash markets. Although negotiated receipts appear to be tightening, chain
speed remains fairly aggressive. We're likely to fall below the biggest weekly total
posted before Thanksgiving (i.e., 2.4 million), but probably not by much. Peoria is
called steady-firm after closing steady at $30.00 on Tuesday. The national bid rose $.32
to close at $51.65 while the IA/MN bid gained $.42 to close at $52.70. Bids for
livestock have remained in a narrow range in the past week, following a weeks-long
slide, indicating to some market watchers that demand could be turning a corner. Prices
for hogs have fallen dramatically from this time last year due to a swell in supplies,
spurring hopes that retailers will stock up on loins and other pork cuts for the end-of-
year holidays. Weekly kill is up 2.1% vs. a year ago and early projections for Saturday's
load of hogs to be processed total 235,000 head, down 140,000 hogs from the slaughter
last weekend, when plants were adding extra shifts to make up for the shortened holiday
week of production. Last week, U.S. pork output was estimated to have climbed to
454.0 million pounds, up 6.3% from this time last year, and total year-to-date
production has surpassed 2014 levels by 7.1%. The total number of hogs processed last
week exceeded the same period last year by 7.1%. Cutout values did slip $.89 to $73.01
on excellent movement of 477 loads. Estimated packer margins were $36.12/head for
non-integrators and $4.76/head for integrators vs. $39.93 and $7.70 the previous day.
February lean hog futures blasted to a sharply higher close on Tuesday. The action is a
bullish short-term signal as the contract closed above its 20-day moving average. The
lean hog contract closed just above $59.65, the Nov. 23 daily high and sustained gains
above that ceiling are needed to keep the bulls in control. The 40-day moving average
line is a bullish target and resistance at $62.42. Initial support lies at Tuesday's low at
$57.00, with a stronger floor at $55.77. The long-term trend is bearish, but a short-term
bottom has formed on the daily chart at the Nov. 17 low at $53.97.
Hog futures rallied on demand optimism after selling across the livestock markets
pushed prices down on Monday. December lean hogs picked up 1.525 cents to 59.95
cents a pound. Most active hog futures for February advanced 2.975 cents to 59.775
cents a pound. The late-year rally in lean hog futures continued yesterday with most
contracts nailing another round of triple-digit gains. Spot Dec stretched as high as $60
and notched its best close since October 29. Hog futures rallied by the exchange
imposed daily limit before trimming gains amid strength in the cash markets. Tuesday's
cash market reflected another positive combination of higher live bids and sales on one
hand and relatively light receipts on the other. This suggests the country firming will be
sustained, at least in the short run. Cattle futures reversed early session losses to end
higher on Tuesday as profit-taking subsided and traders focused on signs of
strengthening demand. December live cattle futures picked up 2.05 cents to $1.3210 a
pound. Cattle futures for February advanced 2.275 cents to $1.34625 a pound. Feeder
8
cattle futures for January rose 1.65 cents to $1.6440 a pound. Beef prices have tumbled
since the start of the year, leading some to suspect that after the Thanksgiving holiday
season, retailers will stock up on steaks and roasts. Demand optimism was bolstered
after cattle prices in the cash markets last week traded steady with the prior week's
trend, following a weekslong slide in cash prices. As profit-taking eased midday
Tuesday, investors searched for fresh indicators of buying interest in the beef market.
Analysts cautioned that despite the steep drop in beef costs facing grocery store and
restaurant buyers, prices for most beef cuts remain significantly higher than those for
pork or poultry, which could curb gains ahead.
Weather: The U.S. and European models are in fair to good agreement today.
However, the European model is somewhat deeper and a little faster with a trough that
moves over the northeast U.S. and into the Atlantic during the early and middle part of
this period and the U.S. model is somewhat deeper and further east with an upper level
trough and surface storm that moves over the western U.S. and into the central U.S. at
the end of the period. Today's U.S. model is favored as it concerns the trough/low over
the northeast U.S. and in the Atlantic during the early and middle part of the outlook
period, and the European model is favored as it concerns the trough moving over the
west and central U.S. at the end of the period. The mean maps at 8-10 days continue to
feature above normal heights over central and east Canada and northeast U.S. and also a
strong trough covering the Gulf of Alaska and pushing into western North America.
This is mostly an above normal temperature pattern, however late in the period it may
turn somewhat cooler through the west and central U.S. The precipitation chances may
increase with time due to the Gulf of Alaska trough moving into western North
America, but this is probably just beyond the 10 day forecast for the most part.
Dry weather dominated most of the Argentine growing regions yesterday. Rains in
Brazil were limited mainly to Parana, MGDS, Sao Paulo and Mato Grosso, with totals
generally less than .30” most common. Temps were in the 80’s for highs in Argentina,
with 80’s and a few 90’s in Brazil. Close to average rains will fall across most of the
Brazilian growing regions in the next 5 days, with some above average totals across the
south. The 6-10 day period sees average to above average rainfall for most of the
Brazilian growing regions as well. Dry weather will dominate much of the Argentine
growing regions through the rest of this week, the weekend and into the first half of next
week, with most of the meaningful activity confined to the far south, west and north.
Ideas for the end of next week are still mixed. Temps will run near average in most of
the Argentine and Brazilian growing regions in the next week to ten days.
Rains and snows fell across the eastern sections of the Dakotas, NE into MN, WI and
IL. Most snow totals were around 1-3” or less, with rains generally under .25”. Things
9
were fairly quiet across the rest of the Plains and Midwest yesterday. Temps ran near
average in the Plains, with highs in the 40’s and 50’s in the southern Plains and lows in
the 20’s and 30’s. Highs in the Midwest were in the 30’s and 40’s in most cases. The
current system will finish up across the Great Lakes region today, with some light rains
and snows there. The rest of the Midwest and all of the Plains will be fairly quiet today
and then things will be fairly quiet in the Plains and Midwest for the rest of this period.
Things also look to be mainly dry in the Plains and Midwest in most of the 6-10 day
time period, with the potential for a system to develop some precip across the Plains late
in the period. Temps will be warming to average to above average across the Plains and
Midwest for the end of this week, the weekend and much of next week.
North American Crop Impact: A drier period for at least the next 7 days will improve
conditions for transport and will favor winter wheat in the Midwest/Delta, especially
fields that may have been flooded by recent rains. There is no significant threat of
damaging cold weather in the wheat areas. A drier period with warmer temperatures
will favor livestock in the feed lots of the southwest Plains. Warm temperatures and
recent moisture favor the HRW wheat crop.
Global Weather Highlights: Episodes of rain and showers will favor development of
corn and soybeans from RGDS northward to MGDS, Brazil. Some delay to planting is
possible. Episodes of scattered to widely showers and thundershowers help improve
conditions for soybeans in Mato Grosso as well during this period. However, in this area
it may be hot at times, which could stress early developing soybeans. A drier, warmer to
hotter trend is expected in Argentina during the next 7 days. Soil moisture and
temperatures will favor developing crops during this period and provide mostly
favorable weather for planting. Another significant snow and rain event moved over
Ukraine, South Russia and the Black Soils region during the past 24 hours. Precipitation
may help ease drought conditions somewhat, but is unlikely to improve the conditions
of winter grains. However, it has been reported that grains in South Russia have
improved due to the increase in fall rains in that location. A variable temperature pattern
continues with some warm and some cold periods. The coldest weather does not look to
be damaging even to unprotected winter grains. However, a cycle of freeze-thaw has
been know to cause some problems for winter grains. Hot temperatures increase stress
to early planted corn and developing sugarcane in South Africa. However, we did see a
few thundershowers yesterday, with the chance for scattered showers and
thundershowers today or during Thursday into Friday as well.
Macros: The macro markets were mostly weak as of 9:00am EST, with Dow futures
down 0.1%, the U.S. dollar index is up 0.4%, crude oil is down 1.9% and gold is down
0.6%. The S&P 500 on Tuesday rallied to a 3-week high and settled 1.07% higher, the
10
DJIA gained 0.95%, and the Nasdaq gained 1.11%. In the bizzaro world that weaker
economies are bullish stocks, bullish factors included speculation that any Fed interest
rate hikes will be slow and shallow after the Nov ISM manufacturing index
unexpectedly fell 1.5 to a 6-1/3 year low of 48.6, weaker than expectations of +0.4 to
50.5, and speculation that the PBOC will expand stimulus after the China Nov
manufacturing PMI unexpected fell 0.2 to a 3-1/4 year low of 49.6 .The Fed today will
release the Beige Book survey of the economy ahead of the Dec 15-16 FOMC meeting
in two weeks. Any indication of an improvement in the economy since the Fed's last
Beige Book report would encourage the Fed at its Dec 15-16 meeting to raise interest
rates. The Fed's last Beige Book report, released on Oct 14, said that reports from the
twelve Fed districts pointed to "continued modest expansion in economic activity during
the reporting period from mid-August through early October." The report went on to
say, "A number of Districts cite the strong dollar as restraining manufacturing activity
as well as tourism spending. Business contacts across the nation were generally
optimistic about the near-term outlook." The market is expecting today's Q3 non-farm
productivity report to be revised higher to +2.2% from the last estimate of +1.6%. The
upward revision is expected to stem from the recent upward revision in Q3 GDP to
+2.1% from +1.5%, which boosted the output numerator in the productivity ratio. U.S.
productivity continues to be weak, which is negative for corporate profits and employee
real wages. U.S. productivity has averaged only +1.0% over the last eight quarters, far
below the post-war average of +2.2%. The market consensus for today's weekly EIA
report is for a 900,000 barrel decline in crude oil inventories, a 1.5 million rise in
gasoline inventories, a 500,000 rise in distillate inventories, and a 0.5 point rise in the
refinery utilization rate to 92.5%. If crude oil inventories in today's EIA report show the
expected report of -900,000 barrels, that would snap the string of 9 consecutive weeks
of gains. U.S. crude oil inventories should have already flattened out due to rising
refinery activity, but have instead continued rising, thus worsening the U.S. oil glut.
U.S. crude oil inventories are currently 32.5% (120 million barrels) above the 5-year
seasonal average. Product inventories are
already ample with gasoline inventories
4.1% above the 5-year seasonal average
and distillate inventories are a hefty
12.7% above average.
Private-sector payrolls increased more
than expected in November, the most in
five months and the latest indication of
steady U.S. job growth. Private payrolls
in the U.S. rose by 217,000, said payroll
processor Automatic Data Processing
11
Inc. and forecasting firm Moody's Analytics. The report is based on data collected from
ADP clients in addition to lagged government data. Economists surveyed by The Wall
Street Journal expected an increase of 192,000. Meanwhile, the October gain was
revised up to 196,000 from 182,000. "Job growth remains strong and steady," said Mark
Zandi, chief economist of Moody's Analytics. The November increase was thanks to the
service sector, where firms added 204,000 positions--the most since June and up from
174,000 in October. A rebound in professional- and business-service hiring powered the
rise. Firms in other industries also added workers. Construction and manufacturing,
weak spots of late, added a combined 22,000 jobs. Small businesses added the most
employees, though medium and big businesses also added solid amounts of workers.
The ADP report comes ahead of the Bureau of Labor Statistics's employment-situation
report, due out Friday morning. ADP lags behind the government's initial private payroll
estimate by a month. In October, the initially-reported ADP figure fell 87,000 short of
the BLS number; in September, ADP came in 81,000 ahead of the government's figure.
Overnight, Bloomberg News reported that the euro fell and European stocks gained as
inflation data that fell short of analyst estimates kicked off three days of economic
events likely to set the course for global markets into 2016. Europe’s 19-nation shared
currency approached its weakest level since April and the region’s equities rose toward
a three- month high as the consumer-price data boosted the argument for extra
monetary stimulus when the European Central Bank meets this week. The yield on 10-
year U.S. notes climbed from a one- month low before speeches by Federal Reserve
Chair Janet Yellen and U.S. jobs data. Crude slipped before the Organization of
Petroleum Exporting Countries sets output targets on Friday. Investors are focused on
the prospect of further divergence in global monetary policy amid speculation the ECB
will expand stimulus just as the Fed moves closer to liftoff. Yellen, who has been at
pains to emphasize the Fed’s gradual approach to normalizing interest rates, will
discuss the economy twice in two days. OPEC nations are also gathering in Vienna this
week and while Saudi Arabia, its biggest producer, has pledged to listen to other
members, the group has shown few signs of trimming output even as prices tumble.
The euro dropped 0.4 percent to $1.0589 at 11:09 a.m. London time. The Stoxx Europe
600 Index rose 0.5 percent after a 0.3 percent loss on Tuesday. West Texas Intermediate
crude declined 1.3 percent to $41.32 a barrel Treasury 10-year note yields increased
two basis points to 2.16 percent. Euro-area consumer price growth was unchanged at
0.1 percent in November, missing analyst forecasts for a 0.2 percent increase. With
ECB President Mario Draghi pledging to do what it takes to reignite inflation in the
region’s economy, analysts are predicting a further reduction in the area’s deposit rate
Thursday, and some also see an expansion of the bank’s asset- purchase program. The
euro has weakened more than 12 percent against the dollar this year as the ECB
12
implemented quantitative easing to stimulate the economy, while the Fed moved closer
to raising interest rates for the first time since 2006. It touched $1.0558 on Nov. 30, the
weakest level since April 14. The Bloomberg Dollar Spot Index, a gauge of the U.S.
currency against 10 major peers, was up 0.2 percent after slipping 0.4 percent on
Tuesday. The yen weakened 0.2 percent to 123.16 per dollar. Australia’s dollar was
little changed after third-quarter gross domestic product expanded more than
economists had projected. The won retreated 0.5 percent. Most industry groups on the
Stoxx 600 rose. The index has rebounded 14 percent from its low in September in
anticipation of further stimulus to be announced by the ECB. Investors have been so
confident that they haven’t seen the need to hedge.
Oil fell for the third time in four days. Saudi Arabia will consider all issues at the
Friday gathering and listen to the concerns of other group members, Oil Minister Ali al-
Naimi said. U.S. crude inventories probably declined for the first time in 10 weeks, a
Bloomberg survey showed before Energy Information Administration data Wednesday.
Copper declined after a report on Tuesday showed U.S. manufacturing unexpectedly
shrank at the fastest pace since 2009. The metal for three-month delivery slid 0.8
percent to $4,596.50 a metric ton in London, retracing most of an advance the previous
day. The MSCI Emerging Markets Index dropped 0.3 percent, after rising the most in
almost two weeks on Tuesday. India, South Africa and South Korea were among
markets that declined. The Shanghai Composite Index climbed 2.3 percent, the most in a
month, after changing direction at least seven times in the morning before rallying in
the last hour of trading. The central bank stepped up cash injections via open-market
operations on Tuesday as the restart of new share sales drove demand for funds. Hong
Kong’s Hang Seng China Enterprises Index increased 1 percent. Turkey’s lira gained
for a third day, advancing 0.4 percent. NATO said on Tuesday it will bolster Turkey’s
air defenses, a week after the country shot down a Russian bomber that strayed over the
border while on a mission over Syria. The currency has gained this week following a
European Union pledge of financial aid to help contain a refugee crisis.
Summary: Soybeans led the grains yesterday, climbing to its highest level since late
October driven in part by technical buying and a positive take on the EPA’s updated
2016 bio-diesel mandate. Jan soybean oil traded to its highest level since mid-August,
with volume in soybean oil late in the day higher than soybeans. However, soybean oil
bulls may be jumping the gun. Reliable trade sources indicate low odds of a producer
bio-diesel credit passing this year, which some analysts believe could trim Oct 1, 2016
U.S. soyoil stocks below 1.0 billion lbs vs. the USDA’s Nov forecast of 2.295 billion
lbs and Oct 1, 2015 stocks of 2.030 billion lbs. Wheat fell and corn was caught in the
middle of the soybean/wheat tug of war. Corn RIN’s surge to as high as $.83-$.85
Tuesday vs. $.60 Monday amid an increase in biofuels mandated by the EPA. Fresh
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fundamentals are lacking amid no change in favorable South American weather, a
slowing pace of year-end U.S. export sales, improving U.S./FSU wheat prospects,
prospects for additional dollar gains and a reluctance to own commodities amid poor
Chinese economic updates. Looking ahead, further gains are likely to be muted by
stepped up selling by farmers, who know that in the absence of adverse South American
weather, the next chance for a substantial board rally will not occur until the 2016 U.S.
growing season gets underway. Long range climatology forecasts from CWG
(www.commoditywx.com) suggest slightly better than 50/50 odds (56%) of a warm/dry
2016 U.S. summer based on the assumption of a transition to La Nina. However,
advanced autumn field prep, low odds of a wet planting season (except for the central
third of the Corn Belt) and better than average sub-soil moisture reserves would mitigate
potential warm/dry stress next summer. Ultimately, the undersold U.S. farmer, record
global corn/soy/wheat supplies and a shift in Chinese corn support prices will
collectively dampen anticipatory 2016 U.S. drought buying until/unless adversity
unfolds.
January soybeans vaulted higher again on Tuesday, as the contract took out the Nov. 2
high at $8.91 intraday. The near-term trend outlook has turned positive in recent days
and a minor floor has been confirmed on the daily chart. In the very short-term,
however, soybeans are showing signs of becoming technically overextended, trading
just above the upper daily Bollinger Band line at $8.87 on Tuesday. The market is
vulnerable to little "backing and filling" following the recent strong gains. Soybeans hit
their first bullish objective at $8.91 on Tuesday. The next bullish target lies at $9.16, the
Oct. 22 swing high. On the downside, support points are seen at $8.83 1/4 and then
$8.70 1/4. March corn pushed higher Tuesday, amid follow-through buying in the wake
of Monday's bullish outside day. The corn contract closed above its 20-day moving
average line on Tuesday, for the first session since early October, which is a bullish
short-term signal. The corn contract needs to sustain gains above the 20-day moving
average to keep the positive near-term trend bias intact. The longer-term trend for corn
is bearish. But, in the short-term, a minor bottom has formed on the daily chart at the
Nov. 16 low at $3.64 1/4. The corn market is moving higher in a minor counter-trend
corrective phase. A bullish target and resistance point is seen at $3.76 1/2, the Nov. 10
daily high, and beyond there the 40-day moving average line is an objective. Tuesday's
low at $3.71 is minor support.
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