Bobby Coats and Bert Greenwalt attend Ag council of Arkansas meeting
Bobby Coats and Bert Greenwalt, agricultural economists with the University of Arkansas and Arkansas State University, catch up at the Agricultural Council of Arkansas annual meeting in Little Rock.

Momentum: Grain prices building; oil prices losing

Fed Open Markets Committee meetings this week could help provide some directions for commodity prices -- or not.

What to expect from the markets this week, June 12, 2017

Market “Near Term” Snap Shot

  • 10-year Treasury Yield: We enter the week ahead of the U.S. Fed FOMC meeting on Tuesday (June 13) and Wednesday (June 14) slightly bearish with a potentially higher yield (trend presently remains bullish or lower yield)
  • S&P 500: Caution – Global investment demand remains supportive of prices, technology component of index up until this point has been supporting price strength, longer term trend remains up
  • Global Equities: Some consolidating gains; others near term bullish; any significant corrective activity in the S&P 500 will spill-over into many global equity markets (see slide show for individual countries)
  • U.S. Dollar: Remains Bearish: For a period the dollar should have more weakness than strength especially against the Euro
  • Oil $WTIC: Fundamentals are finally overriding OPEC verbal guidance and an array of other factors. Closing and holding below 45 implies weakness to 41 or lower 
  • Commodity Index: Global economic uncertainties and bearish energy fundamentals has this index dangerous weak, an additional leg down should be expected before bottom is in place 
  • Corn: Near term upside $4.55
  • Wheat: Price potential to $5.51 remains a possibility
  • Soybeans: Possible price bottom in place 
  • Rice: Slight bullish bias remains due to U.S. long grain 2017 acreage and production uncertainty, but slowly losing momentum 
  • Cotton: With the 84-cent-plus price objective achieved now we wait on price action to determine if additional price strength exists.

In addition to the following “Expanded near Term Market Considerations Week Beginning June 12, 2017”

Note: Click on the Download button below to see slide show for charts and expanded details.

This Week’s Select Summary Considerations:

  • 10-Year US Treasury Yield:
    • We enter the week ahead of the U.S. Fed FOMC meeting on Tuesday (June 13) and Wednesday (June 14) slightly bearish with a potentially higher yield (trend presently remains bullish or lower yield), due to Fed rate hike expectation at meeting’s end on June 14th. Fed written and verbal guidance will be important to market dynamics going forward.
    • Economic Weakness, Event Risk Concerns, or Other Market Concerns/Factors will likely take yields lower to 2 or below before significant move higher
  • US Dollar Index:
    • Remains Bearish: For a period the dollar should have more weakness than strength especially against the Euro
    • Big Picture: The dollar has a bullish bias given global economic, social, political and military challenges
    • Unless Middle East, North Korean, European, other anomaly events start to dominate market participant decisions for a period, then we are still DEFINING a trading range 95 -104
  • CRB Index:
    • Global economic uncertainties and bearish energy fundamentals has this index dangerous weak, an additional leg down should be expected before bottom is in place
    • Between Fed off-again and on-again accommodation and/or verbal guidance, building uncertainties surrounding fiscal, trade and regulatory policy simulative activities, the $CRB Commodity Index: a key economic indicator, has struggled
    • Bigger Picture: Though spastic global macro forces in general remain supportive of the commodity sector
  • $WTIC Light Crude Oil:
    • Fundamentals are finally overriding OPEC verbal guidance and an array of other factors
    • Closing and holding below 45 implies weakness to 41 or lower
    • Additional price weakness will likely be problematic for the $CRB Index and commodity sector
    • Sustained oil prices below $50 presents macro challenges and raises global economic momentum concerns
  • Soybeans:
    • Possible bottom in place
    • A resumption of commodity index weakness, a likely function of fundamentals and Fiscal and Monetary Policy and Global Economic Uncertainties, could translate into a final price low at $8.35 or lower
    • Simply stated watch the price action to define soybean price dynamics
  • Corn:
    • Near term upside $4.55
    • Cautionary Note: Sustained oil price oil price weakness could possibly be problematic for corn prices
  • Long Grain Rice:
    • Slight bullish bias remains due to U.S. long grain 2017 acreage and production uncertainty, but slowly losing momentum
    • This is a highly complex market with an array of factors impacting price from 2016/2017 fundamentals; 2017 acreage, production and quality uncertainties; present underlying aggregate commodity sector dynamics; problematic global economic momentum, geopolitical uncertainties, and/or global agronomic outlook
  • Cotton:
    • With the 84-cent price objective achieved now we wait on price action to determine if additional price strength exists
  • Wheat:
    • Global economic uncertainties weigh heavy on this market, but price potential to $5.51 remains a possibility
  • SPY SPDR S&P 500 ETF:
    • Cautionary period
    • Allow price action to unfold
    • Larger trend remains up
  • QQQ NASDAQ Power Shares:
    • Momentum driven by a select few technology stocks
    • Allow price action to unfold
  • EFA iShares ETF - Global Equities Excluding U.S. and Canada:
    • Trend remains up
  • EEM iShares ETF, Emerging Market Equities:
    • Entering a cautionary period
    • Trend remains up
  1. Bobby Coats is a professor in the Department of Agricultural Economics and Agribusiness, Division of Agriculture, University of Arkansas System. E-mail: [email protected]

DISCLAIMER-FOR-EDUCATIONAL-PURPOSES

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