September 4, 2018
The week of September 3, 2018, starts a new market month, and a Huge positive: U.S. and global growth will be maintained at all costs. Global Uncertainties will be managed through fiscal, monetary, and trade policy. To name a few: Potential Turkish default, China’s debt crisis, Argentine currency crisis, Canadian disarray, BREXIT uncertainties, European instability, Market turbulence, and others.
U.S. Trade Disputes. Is the glass half-empty or half-full? From a big picture, the glass is half-full. Not addressing ongoing trade issues today would be catastrophic soon for the United States. Reality is the heavy lifting has just begun, but the U.S. has a major advantage in trade talks. Individual market impact will be addressed separately below.
U.S. Equities. Most U.S. equity markets should be sideways to up in September for several reasons, including stimulus-driven growth, stock buybacks, global safe-haven status, foreign currency advantages, etc.
Global Equities. Global equity index (EFA), emerging markets (EEM), and frontier markets (FM) are moving mostly sideways to up, but each chart structure should be evaluated on its own merit. The strongest performing index will likely be the global index, followed by the emerging market index, and the frontier index will likely be the weakest index in September.
Currencies. The U.S. Dollar moves mostly sideways with a slight downside bias and more strength than weakness in other key currencies. Otherwise, we will be doing articles on the unfolding global currency crisis.
U.S. 10-Year Treasury. The U.S. 10-Year Treasury Yield trades mostly sideways in a range of 2.78 to 2.92.
$WTIC Oil. $WTIC oil may show some price firmness to strength in the first week of September, but any price strength will likely be followed by a revisit of the $65 per barrel area.
$CRB Index. The $CRB Index will likely be reasonably correlated to the price of oil since many other commodities will be facing varying headwinds going into November, limiting their growth potential.
Soft Commodities. Fundamentals, coupled with stable but not strong global growth, continue weighing on these markets. For September: Coffee, more price weakness than strength; Cocoa, more price strength than weakness; Sugar continues searching for a bottom; Cotton holding 78 cents remains bullish; Orange Juice, more price weakness than strength; and Lumber continues searching for a bottom.
Grains: The grains are interesting. I am talking about rice, soybeans, corn, and wheat. Chinese policy issues and/or fundamentals will likely weigh heavy on these markets in September 2018, so we will let price action define our outlook. (See comments below)
Gold and Silver. Gold and silver could find some near-term price support if the dollar continues to correct its upside move, but this sector still appears to be in search of a strong bottom.
Livestock. Lean Hogs, Feeder Cattle, and Live Cattle all appear to have potential price weakness through September.
Weekly Market Outlook - Beginning September 3, 2018
Commodity Index, $CRB
Commodity bulls need to see the $CRB Index close the week of September 3, 2018 above 193 (August 31, 2018 – 192.96). Charts (B1-B5)
Commodity bears need to see this index lose support at 185. This would likely imply major across-the-board commodity weakness due to commodity fundamentals and global economic uncertainties with the index falling to at least 179. Near term, the commodity bears have the upper hand unless oil sustains or exceeds current price levels.
Oil, $WTIC – This market has defined a sideways trading range between $65 and $70 per barrel. Holding above $68 per barrel the week of September 3, 2018 would be bullish. (August 31, 2018 - $69.80). Charts (B6-B9). Big Picture: An interesting array of factors from fundamentals, to global policy drivers, to social, economic, political, and military uncertainties keep this market at elevated levels, and they do not appear to be losing their influence anytime soon, which limits the downside.
Soybeans: Soybeans (August 31, 2018 - $8.43 per bushel) now appear to have price weakness into the $8.00 per bushel area. Fundamentals and global political, trade, and economic uncertainties are major headwinds, but tightening aggregate global grain stocks are raising global food security concerns and possibly price supportive. Charts (B10-B13)
Corn: This market needs to end the week of September 3, 2018 above $3.75 to suggest additional upward price momentum is sustainable. Otherwise, a retest of the previous low at $3.39 per bushel with further potential downside to $3.23 per bushel is a possibility (August 31, 2018 - $3.65 per bushel). Charts (B14-B17)
Wheat: Bullish, wheat ended the week of August 31, 2018 at $5.46 per bushel sustaining a series of higher lows and higher highs. (B14-B17)
Long Grain Rice: Fundamentals are weighing heavily on this market. Rice prices appear intent on spending the next 2-plus weeks sideways to up before committing to a price direction. Closing the week of September 3, 2018 below $10.13 per cwt. implies additional price weakness ahead. (Chart B18-B20)
Cotton: Key consideration: If cotton can remain above December 77.9 cents per pound, this market has potential to regain a bullish posture, given today’s global economic setting. Finishing the week of September 3, 2018 below 77.9 cents per pound would likely indicate some serious price weakness lies ahead (August 31, 2018 – 82.22-cents per pound). Charts (B21-B24)
U.S. Dollar: The U.S. Dollar mostly sideways with a slight downside bias and more strength than weakness in other key currencies. The U.S. Dollar mostly sideways to down and other currencies sideways to up the week of August 27, 2018.
Rice Outlook Videos: August 30, 2018 USDA Economic Research Service’s Dr. Nathan Childs discussed U.S. and Global Rice Situation and Outlook and USDA NASS Regional Director Eugene Young discussed their latest Rice Stocks Report.
Title: Rice Situation and Outlook & NASS August 1 Rice Stocks Report Analyzed
Viewing Link: Website http://www.uaex.edu/ag-webinars
Brazil, NAFTA, China Video: Agricultural Trade: China, NAFTA and Brazilian Agriculture in Focus with Dr. Luis A. Ribera, Professor and Extension Economist, Texas A&M, August 23, 2018
Description: This video focuses on how important trade is for the well-being of U.S. farmers and how trade agreements impact trade flows. Then NAFTA was analyzed and current renegotiation issues were discussed. Trade issues with China and the growth of Brazilian agricultural production were examined.
Viewing Links: YouTube https://youtu.be/8PGVY0ffgT8 Website http://www.uaex.edu/ag-webinars
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].
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