Ag Markets to Tighten Up

11/22/2019 10:45 am EST

Focus: COMMODITIES

Shawn Hackett

President, Hackett Financial Advisors, Inc.

U.S. pork production is about to fall off a cliff in the first half of 2020, reports Shawn Hackett.

Given the Thanksgiving Holiday next week and delayed release of the Commodity Futures Trading Commission’s Commitments of Traders (COT) data until Monday Dec. 2, the next report on all Ag markets will be released over the weekend with the next one in the middle part of the first week of December.

As we highlighted previously with regards to unusually strong cash basis levels seen in many Ag markets from grains to coffee etc...we may be about to see the true fundamental tightness of many Ag markets call the bluff of the computer algorithms who may have taken things too far with extended periods of low prices.

This week the coffee market was pushed down by algorithms on Tuesday based upon good rains expected in Brazil and a very weak Brazilian real (BRL) only to see a wild bullish reversal to new rally highs today on extremely strong cash market and large draw-downs of certified stocks from the ICE coffee warehouses.

We believe that the coffee market is expressing a trend that we will see repeated in many Ag markets as we move closer to the end of the year where the cash market tightness will become the bullish driver of price discovery and not the ill-conceived algorithmic program’s bearish inclinations.

In terms of the Grain Complex good buying was seen last week by smart money (commercial traders) and we would expect an acceleration of that buying to be seen this week on the follow through weakness that we warned was likely based upon smart money becoming bearish a month ago.

Our favorite market in the grains based upon our decades worth of experience in measuring and monitoring commercial capital flows is the corn market. We believe that a buy signal could be triggered very shortly the first one since late April of 2019.

We are also becoming excited for the Lean Hog Market on the current collapse in prices. Smart money has not given us a buy signal since the beginning of the year but based upon current trends it also seems likely a buy signal will be triggered soon.

Pork prices in the United States are very high but we have too many hogs looking to be processed as animal weights surge. This temporary backing up of pigs that is depressing hog processors demand for hogs is about to end and end in a big way as we move into the first and second quarter of 2020 as supplies contract by 600 million pounds.

U.S. pork production is about to fall off a cliff in the first half of 2020. This should offer a period of high demand for hogs for processing as demand remains robust.

Have a Blessed Thanksgiving and we thank you for your support.

This is a special update of Hackett Agricultural Smart Money Insiders Report. Shawn Hackett is founder and President of Hackett Financial Advisors, Inc. hackettadvisors.com You can sign up for his bi-monthly Ag report here

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