NTG Morning Comments www.nesvick.com - Monday, March 15, 2021 - Nesvick Trading Group
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Monday, March 15, 2021 NTG Morning Comments www.nesvick.com Weather No big changes to the US outlook this morning. The bottom line is we’re looking at a fairly active precipitation pattern for the next two weeks. The 7- day QPF is shown at the right. The big rains shown in the HRW belt will be mostly Tues/Wed before that area clears out for a few days. As shown in the map at the right, however, it is likely that above normal precipitation chances will continue into the 6-10 day period as well. Temps should mostly average above normal, but nothing major. Nothing new on the forecast in South America. Northern Brazil will see near to below normal precipitation over the next two weeks. Southern areas will see rainfall through the next few days but the area should clear out after that. Argentina should see some solid rainfall potential today and tomorrow with additional chances for rain early next week as well. Argentine temps should remain cool. Crops For a while there I had a habit updating Chinese domestic meal and corn prices every other week or so. At the time, prices were skyrocketing higher. I haven’t commented on them in a while, but it is worth a quick mention this morning as the direction of prices has certainly changed. In the case of soymeal, the first chart below shows that prices have been falling very sharply in the past several weeks. Since the peak earlier this basket of prices has dropped about 20%. What is the cause in the break? Maybe the big soybean import arrivals and strong crush pace has over-supplied the market. Or maybe the talk of a resurgence in ASF is legit? 1
Monday, March 15, 2021 NTG Morning Comments www.nesvick.com Basket of Chinese Cash Soymeal Prices 4,300 4,100 3,900 3,700 3,500 3,300 3,100 2,900 2,700 2,500 The situation in cash corn prices isn’t quite as dramatic but still perhaps telling. This basket of domestic corn prices rallied roughly 50% during 2020. After initially continuing the rally in early 2021, we’ve since been stuck at basically an unchanged price since the end of January. Hardly a disaster, but still an interesting change in dynamics. Basket of Chinese Cash Corn Prices 3,150 2,950 2,750 2,550 2,350 2,150 1,950 1,750 I once described Chinese grain/oilseed demand as insatiable. Has that now changed? 2
Monday, March 15, 2021 NTG Morning Comments www.nesvick.com Livestock Just a quick update on LC basis this morning. Not that anything has changed. Basis remains record weak virtually across the curve. The first chart below shows basis vs. the April contract. It has narrowed a bit recently but remains historically weak and with only a few more weeks until expiration we still have a lot of ground to cover. I’ll skip the June contract and go with a chart on the August basis next, but they look basically the same. Suffice to say this is very abnormal basis right now. April Live Cattle Basis History $30.00 $25.00 $20.00 $15.00 $10.00 $5.00 $0.00 -$5.00 -$10.00 -$15.00 -$20.00 59 54 49 44 39 34 29 24 19 14 9 4 Weeks To Expiration 2014 2015 2016 2017 2018 2019 2020 2021 August Live Cattle Basis History $30.00 $25.00 $20.00 $15.00 $10.00 $5.00 $0.00 ($5.00) ($10.00) ($15.00) 58 56 54 52 50 48 46 44 42 40 38 36 34 32 30 28 26 24 22 20 18 16 14 12 10 8 6 4 2 0 Weeks To Expiration 2014 2015 2016 2017 2018 2019 2020 2021 3
Monday, March 15, 2021 NTG Morning Comments www.nesvick.com Financials Nothing particularly new to pass along this morning. Generally speaking, the risk-on appetite continues this morning though the enthusiasm has waned since the open last night. As an example, earlier this weekend Bitcoin was trading above $60k but has since fallen fairly sharply and is trading near $56k as I type this morning. Equity futures are well off their highs from last night and the dollar has reversed higher since opening weaker last night. I don’t see any major headlines to get excited about. The big ticket item this week will be the Fed’s meeting on Wednesday. Both the BOE and BOJ will update their policies this week as well. I’m seeing some articles starting to get passed around hyping Biden’s plans to raise taxes in their next spending bill. We knew this was only a matter of time but interesting to see the media pushing it right after the Covid bill was passed. Meanwhile vaccines continue to roll out. Averaging 2.4 mil per day lately. At that rate every adult (18+) in America could have one shot by June 10th. Energy You might have seen these stories already if you were watching the news or Twitter during the weekend. Still, I think it is worth a quick mention this morning. The first one – TSA reported the highest number of passengers through security checkpoints since the pandemic started. You can see in the chart below we’re still a long way off from “normal”, but I honestly think we’ll close that gap pretty quickly this summer. TSA Throughput Numbers 3,000,000 2,500,000 2,000,000 1,500,000 1,000,000 500,000 0 1-Jan 1-Feb 1-Mar 1-Apr 1-May 1-Jun 1-Jul 1-Aug 1-Sep 1-Oct 1-Nov 1-Dec 2019 2020 2021 4
Monday, March 15, 2021 NTG Morning Comments www.nesvick.com The second story that was floating around Twitter this weekend was the resurgence in gasoline demand. The chart attached here was making the rounds. This shows GasBuddy’s estimate for US gasoline demand. This shows that US gasoline demand was up roughly 3% from the prior week but, more importantly, was just 0.98% below the prior year’s level. This was right about the time we started seeing lockdowns last year, so perhaps one could make the argument that US gasoline demand is now almost back to “normal”? Today’s Calendar (all times Central) • Empire Manufacturing Index – 7:30am • Export Inspections – 10:00am Thanks for reading. David Zelinski dzelinski@nesvick.com 901-766-4684 Trillian IM: dzelinski@nesvick.com DISCLAIMER: This communication is a solicitation for entering into derivatives transactions. It is for clients, affiliates, and associates of Nesvick Trading Group, LLC only. The information contained herein has been taken from trade and statistical services and other sources we believe are reliable. Opinions expressed reflect judgments at this date and are subject to change without notice. These materials represent the opinions and viewpoints of the author and do not necessarily reflect the opinions or trading strategies of Nesvick Trading Group LLC and its subsidiaries. Nesvick Trading Group, LLC does not guarantee that such information is accurate or complete and it should not be relied upon as such. Officers, employees, and affiliates of Nesvick Trading Group, LLC may or may not, from time to time, have long or short positions in, and buy or sell, the securities and derivatives (for their own account or others), if any, referred to in this commentary. There is risk of loss in trading futures and options and it is not suitable for all investors. PAST RESULTS ARE NOT NECESSARILY INDICATIVE OF FUTURE RETURNS. Nesvick Trading Group LLC is not responsible for any redistribution of this material by third parties or any trading decision taken by persons not intended to view this material. 5
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