Markets recover overnight from Sunday opening losses.
Equities, energies, metals, and commodities all opened lower/sharply lower Sunday night on China’s announcement of staying with its Covid policies, yet valuations recovered throughout the night. Rumors seem to abound that China is using it as propaganda to acquire raw materials that would otherwise be more expensive if they did soften policies. The US dollar also weakened from overnight strength on the likely Republican sweeping wins on Tuesday that will look to limit the Biden administration’s agenda.
Election results on Tuesday, November crop report data on Wednesday, and then the November inflation CPI number comes out on Thursday, which will keep the markets volatile throughout the week.
Egypt and Algeria are tendering for wheat, and Egypt is doing it on an optional origin basis due to the ongoing Russian/Ukrainian war. Russian wheat is the cheapest in the world and will set the purchase price. It will be up to Egypt to determine what it is willing to pay for non-Russian wheat. It’s anticipated that Algeria will take Russian wheat due to the widespread price difference between the French and Russian FOB.
Data compiled on the Black Sea pact shows that since July, Ukraine has exported 5.4 MMTs of wheat, 7.7 MMTs of court, and 1.2 MMTs of barley. It’s highly anticipated that the Russian proposal to keep the corridor open will be worked out by the UN, granting their central bank the ability to do transactions with fertilizer and grain while a secondary bank is monitoring it. Overall, from last year, Ukraine’s grain exports are down 30.7%.
South American weather will provide more rainfall after another 3-4 cool/dry days in central and southern Brazil. Argentine rainfall will increase next week as a high-pressure Ridge over NW Brazil pushes upper air humidity southward. The overall forecast for South America improves the only patchy areas of dryness noted across Argentina in mid-November. La Niña appears to be reaching its zenith, and its forecast is rapidly weakening. The upcoming setup for weather in South America is favorable and shows that the drought in Argentina is starting to break up.
Last week live cattle were lower on the slowing cash trade while feeder cattle firmed. A steady outlook is anticipated today, with live cattle markets looking to the cash trade for strength. The CME feeder cattle index gained $1.14 last week to a five-week high of $176.99 and was $4.99 over the low marked three weeks ago. Box beef values were mixed with the choice cutout gaining $0.49 and select was down $2.59. An interesting statistic is that the choice/select spread is $31.85, while the spread has never been over $26 in November. Significant support lies in the December live cattle in the $150 range, which was a prior resistance point that is now support.