Many equity and commodity markets rebounded the last week in October or the week before November 6, 2018, Midterm U.S. Elections. An array of key global market drivers could that justify the rebound, but presently all eyes are on the November 6th Election Outcome’s potential near term catalytic impact, positive or negative, on the world’s global markets.
Just the completion of the U.S. Midterm Election could serve as a near-term equity and commodity market catalyst, at least for a short period. Why?
· First, speculators have firmed up their speculative positions to capitalize on anticipated outcomes.
· Second, risk managers have fine-tuned their management strategies to minimize election outcome surprises that could negatively impact their portfolios.
· Third, passive investors will maintain their positions.
· Fourth, U.S. and global governments and central banks have every intention of maintaining order in global equity and commodity markets no matter the November 6th election outcome, or, for that matter, any other disruptive economic, social, or political event.
Market rebound extended the week of November 5th
The key reason the week of November 5, 2018, could see an extended market rebound from the previous week is the limited fear of a significant economic global contraction, and in today’s global economic setting, this tends to be supportive of market misdirection.
Why? Global government and central bank synchronized global growth intervention activities remain in force, which means globally, governments continue providing necessary stimulative support and global central banks remain accommodative to their respective economies.
Policy disputes likely limit any strong near-term market move. The U.S. President, Congress, and central banks are currently in serious negotiations with countries and/or regions globally to achieve fairness in their fiscal, monetary, trade, and regulatory policy country and regional relationships.
These negotiations will take time to solidify, possibly into the second half of next year. The outcome of these negotiations, coupled with collective global government intervention activities to maintain economic growth, will likely be highly positive for the U.S. and the world’s global economies.
Bottom-line. There are likely more equity and commodity market positives than negatives this week or the week of November 5, 2018. I expect the remainder of 2018 and much of 2019 will be about building an economic and policy base that will provide a few more years of economic and market strength, but for now we need to focus on weekly, monthly, and quarterly market dynamics.
Important USDA Information
USDA’s early-release agricultural projections for 2019 to 2028
USDA is providing an early look at the 2019 through 2028 crop and livestock balance sheets. USDA will release the complete USDA Agricultural Projections to 2028 report in February 2019. The complete report will include, in addition to the balance sheet tables released, a full discussion of the commodity supply and use projections and projections for farm income and global commodity trade.
The assumptions underlying USDA’s Agricultural Outlook Projections are The Agricultural Act of 2014 (2014 Farm Bill) is assumed to be extended and remain in effect through the projection period. The projections, which were prepared during August through October 2018, reflect a composite of model results and judgment-based analyses.
The projections use as a starting point the short-term forecasts from the October 11, 2018, World Agricultural Supply and Demand Estimates report.
Rice Full Balance Sheet Rice Full Balance Sheet
2017/18 Harvested Acres: 2.374 million acres, Farm Price $12.60 per cwt.
2018/19 Harvested Acres: 2.902 million acres, Farm Price $11.79 per cwt.
2019/20 Harvested Acres: 2.687 million acres, Farm Price $11.90 per cwt.
2020/21 Harvested Acres: 2.593 million acres, Farm Price $12.00 per cwt.
Soybeans Full Balance Sheet Soybeans Full Balance Sheet
2017/18 Harvested Acres: 89.5 million acres, Farm Price $9.33 per bushel
2018/19 Harvested Acres: 88.3 million acres, Farm Price $8.60 per bushel
2019/20 Harvested Acres: 81.8 million acres, Farm Price $8.75 per bushel
2020/21 Harvested Acres: 81.8 million acres, Farm Price $9.15 per bushel
Corn Full Balance Sheet Corn Full Balance Sheet
2017/18 Harvested Acres: 82.7 million acres, Farm Price $3.36 per bushel
2018/19 Harvested Acres: 81.8 million acres, Farm Price $3.50 per bushel
2019/20 Harvested Acres: 84.6 million acres, Farm Price $3.90 per bushel
2020/21 Harvested Acres: 85.6 million acres, Farm Price $3.95 per bushel
Wheat Full Balance Sheet Wheat Full Balance Sheet
2017/18 Harvested Acres: 37.5 million acres, Farm Price $4.72 per bushel
2018/19 Harvested Acres: 39.6 million acres, Farm Price $5.10 per bushel
2019/20 Harvested Acres: 43.1 million acres, Farm Price $5.20 per bushel
2020/21 Harvested Acres: 42.3 million acres, Farm Price $5.20 per bushel
Cotton Full Balance Sheet Cotton Full Balance Sheet
2017/18 Harvested Acres: 10.9 million acres, Farm Price $0.68 per pound
2018/19 Harvested Acres: 10.9 million acres, Farm Price $0.73 per pound
2019/20 Harvested Acres: 12.1 million acres, Farm Price $0.70 per pound
2020/21 Harvested Acres: 10.9 million acres, Farm Price $0.70 per pound
U.S. macroeconomic assumptions
Global real GDP growth assumptions
Population growth assumptions
Acreage for major U.S. field crops and Conservation Reserve Program assumptions
U.S. feed grains
U.S. soybeans and products
U.S. upland cotton
Market expectations for the week of November 5, 2018
U.S. 10-Year Treasury. Yield Sideways – Scenario No.1 U.S. 10-Year Treasuries slightly lower if global equities bearish; Scenario No. 2 U.S. 10-Year Treasuries slightly higher with a second week of global equities strength. The intermediate yield trend is higher. (November 2, 2018 – 3.22) (Range 3.00 to 3.32) Charts (A1-A4)
U.S. Dollar. Possible Corrective Pullback Then Higher - The U.S. Dollar moves sideways to down correcting some of its upside gains against the Euro over the next few weeks. Beyond the expected near- term correction dollar strength could be a major headwind for U.S. exports into the middle of next year. (November 3, 2018 – 96.36) (Possible Upside 110) Charts (A5-A13)
U.S. Equities. Sideways – Big Picture: more price strength than weakness. That said, most U.S. equity markets likely need to finish correcting upside gains before moving higher. A number of policy factors will determine near-term price strength or weakness in U.S. equity markets. It would be desirable for price excess to be removed from these markets before moving higher. Possible rally into year-end. Charts (A14-A18)
Global Equities. Sideways – Near-term, ongoing policy discussions between the U.S. and its economic and trading partners likely limit upside potential of many of these markets. The Global Equity Index (EFA), Emerging Markets (EEM), and Frontier Markets (FM) mostly sideways to down over the next several weeks. The strongest and most stable index will likely be the global index, followed by the emerging market index, and the frontier index will likely be the weakest index over the next several weeks. Possible rally into year-end. Charts (A19-A29)
$WTIC Oil. Bearish - $WTIC oil prices have potential downside weakness to the $58 per barrel area. Political dynamics and fundamental crosscurrents are challenging, so just follow the price action. (November 2, 2018 - $63.14), Charts (B6-B9)
Soybeans. Sideways, defining a Trading Range - Soybeans (November 2, 2018 - $8.88 per bushel) to-date have not been able to overcome heavy resistance. Until soybean prices hold above $9.00 per bushel I remain more concerned about the downside to $8.12 or lower than the upside. Charts (B10-B13)
Corn. Neutral to Bearish - This market needs to end the week of November 5, 2018, above $3.80 per bushel for me to start embracing the bullish case. (November 2, 2018 - $3.71 per bushel). Charts (B14-B17)
Wheat. Neutral to Potentially Bullish - If wheat ends the week of November 5, 2018, above $5.15 we may redefine the trading range. (November 2, 2018 - $5.09) (B14-B17)
Long Grain Rice. Neutral – January rice holding above $10.22 per cwt would be positive for potential additional upside price strength. That said, fundamentals continue to weigh heavily on this market without significant new business. (Chart B18-B20)
Cotton. Potentially Bullish, Global Deflation Forces Weighing Heavy Cotton Prices - Key consideration: If cotton can finish the week of November 5, 2018, above December 77.86 cents per pound then this market has the potential to regain upside price momentum, given today’s global economic setting. Finishing the week of October 29, 2018 below 77.86 cents per pound would likely indicate additional price weakness lies ahead (November 2 – 78.79-cents per pound). Charts (B21-B24)
Livestock. Price Trend Bullish - Lean Hogs, Feeder Cattle and Live Cattle remain bullish.
Gold and Silver. Neutral to Bearish - Gold and silver could find some near-term price support especially if the dollar continues to correct its upside move.
Dr. Thomson on New Technologies for Rice Breeding with a Focus on CRISPR Gene Editing, Dr. Michael Thomson, Texas A&M AgriLife Research, Video Link
This video provides an overview of molecular breeding technologies for rice improvement, including next-generation sequencing, marker-assisted breeding, and an in-depth focus on gene editing using CRISPR-Cas technology. After an introduction to the various techniques and their applications in plant breeding, Dr. Thomson discussed the larger questions surrounding gene editing, including key regulatory, intellectual property, and consumer acceptance issues.
Bobby Coats is a professor in the Department of Agricultural Economics and Agribusiness, University of Arkansas System, Division of Agriculture, Cooperative Extension Service. E-mail: [email protected]