Download US and South America - ADM Investor Services

MARKET OUTLOOK FOR THE UNITED STATES AND SOUTH
AMERICA
Grain Market Outlook for the United States and South America
By Steve Freed, Vice President Research, ADM Investor Services
Financial Market Outlook for the United States
By Alan Bush, Senior Research Analyst, ADM Investor Services
The following report is an overview of the US and South American
economic, political and crop situations as of February 23, 2017. This
report is intended to be informative and does not guarantee price
direction.
From mid-January to mid-February, soybean futures dropped then
firmed, corn futures firmed and wheat futures firmed. USDA lowered the
US 2016/17 corn and wheat carryouts from January and left soybeans
unchanged. USDA lowered the 2017 Argentine soybean crop. Potential
changes to US trade policy and attempts to stimulate the US economy
could impact financial and grain markets.
May soybean futures are trading near $10.40. May corn is trading near
$3.75. May Chicago wheat is trading near $4.52.
The US stock market is trending higher and is now near 20,680. The
Trump rally continues. April crude oil futures are near $54.75 a gallon.
UNITED STATES
 The USDA estimates the US 2016/17 corn carryout at 2,320 million
bushels (mil bu), down 35 mil bu from January.
 The USDA estimates the US 2017-18 corn carryout at 2,215 mil bu.
 The USDA estimates the US 2016/17 soybean carryout at 420 mil bu,
unchanged from January.
The information and comments contained herein is provided by ADM Investor Services, Inc. (“ADMIS”) and NOT Archer Daniels Midland
Company. Futures and options trading involve significant risk of loss and may not be suitable for everyone. Therefore, carefully consider
whether such trading is suitable for you in light of your financial condition. This report includes information from sources believed to be
reliable and accurate as of the date of this publication, but no independent verification has been made and we do not guarantee its accuracy
or completeness. Any reproduction or retransmission of this report without the express written consent of ADM Investor Services, Inc. is
strictly prohibited. Again, the information and comments contained herein is provided by ADMIS and in no way should be construed to be
information provided by Archer Daniels Midland Company. Copyright © ADM Investor Services, Inc.



The USDA estimates the US 2017/18 soybean carryout at 335 mil bu.
The USDA estimates the US 2016/17 wheat carryout at 1,139 mil bu, down 47 mil bu
from January.
The USDA estimates the US 2017/18 wheat carryout at 989 mil bu.
WORLD
 The USDA estimates World 2016/17 corn ending stocks at 217.5 million metric tons
(mmt), down 3.5 mmt from January.
 The USDA estimates World 2016/17 soybean ending stocks at 80.4 mmt, down 1.9 mmt
from January.
 The USDA estimates World 2016/17 wheat ending stocks at 248.6 mmt, down 4.7 mmt
from January.
ARGENTINA
 The USDA estimates the 2017 Argentine soybean crop at 55.5 mmt vs 56.8 mmt in 2016.
The 2017 Argentine corn estimate at 36.5 mmt compares with 29.0 mmt in 2016.
 Although Argentina’s GDP is expected to have contracted again in Q4, there are some
incipient signs of economic recovery. Stronger growth in the automotive and food
sectors is shoring up industrial activity, while recent consumer confidence readings
suggest private consumption has likely bottomed out.
BRAZIL
 The USDA estimates the 2017 Brazilian soybean crop at 104.0 mmt vs 96.5 mmt in 2016.
The 2017 Brazilian corn crop is estimated at 86.5 mmt vs 67.0 mmt in 2016.
 Economic data have picked up from rock bottom, suggesting that the battered economy
is nearing a recovery phase. Industrial production in December recorded the fastest
growth in over two years, likely supporting a reduced fall in Q4 GDP. At the onset of
2017, signs of improvement continued to emerge, with business and consumer
confidence rising in January.
The information and comments contained herein is provided by ADM Investor Services, Inc. (“ADMIS”) and NOT Archer Daniels Midland
Company. Futures and options trading involve significant risk of loss and may not be suitable for everyone. Therefore, carefully consider
whether such trading is suitable for you in light of your financial condition. This report includes information from sources believed to be
reliable and accurate as of the date of this publication, but no independent verification has been made and we do not guarantee its accuracy
or completeness. Any reproduction or retransmission of this report without the express written consent of ADM Investor Services, Inc. is
strictly prohibited. Again, the information and comments contained herein is provided by ADMIS and in no way should be construed to be
information provided by Archer Daniels Midland Company. Copyright © ADM Investor Services, Inc.
US STOCK INDEX FUTURES
S&P 500, Dow and NASDAQ futures made new historical highs, with the S&P 500 topping $20
trillion in combined market capitalization for the first time ever. Much of the strength can be
attributed to expectations that President Donald Trump will lower corporate taxes, reduce
regulations and increase infrastructure spending. Recently, President Trump promised to make
a major tax announcement in two to three weeks.
In addition, there has been support from recent economic reports that have come in stronger
than anticipated. For example, January nonfarm payrolls increased 227,000, which compares to
expectations for a gain of 180,000, and private payrolls were up 237,000, when an increase of
175,000 was estimated. The labor participation rate also showed an improvement, increasing to
62.9% from the 62.7% reported in January.
Many of the international reports have come in better than anticipated as well. There were
strong gains in stock index futures after a report showed China’s January trade data blew past
expectations. Exports climbed 7.9% in U.S. dollar terms, while imports soared 16.7%, making for
a trade surplus of $51.35 billion, the highest since January 2016.
Earnings for S&P 500 companies are estimated to be on track for their strongest growth in nine
quarters. Some analysts are now predicting earnings increases for S&P 500 companies in the
fourth quarter of 2016 could be as high as 5.8%, and earnings growth estimates are in the
double-digits range for the first and second quarters of this year. It is likely that the U.S.
economy will grow at above the consensus view rate. Also, any geopolitical issues that arise
may only have a temporary negative market impact.
Stock index futures are likely to be well supported as the fundamentals continue to improve.
ENERGY
Production cuts from the Organization of Petroleum Exporting Countries are providing
underlying support for crude oil, especially when official data on February 10 confirmed
forecasts that OPEC's pledge to cut output was holding. OPEC’s data for January showed a
monthly decline of 890,000 barrels per day to 32.1 million bpd. This represents a record 90%
compliance level by producers who had agreed to reduce their output. This supply data was in
line with that of the International Energy Agency the prior week.
In addition, the compliance level was well above what many analysts were expecting. If the
pace of output reduction continues at the current rate for the next six months, the global oil
market could cross into a deficit position by the second half of this year.
The information and comments contained herein is provided by ADM Investor Services, Inc. (“ADMIS”) and NOT Archer Daniels Midland
Company. Futures and options trading involve significant risk of loss and may not be suitable for everyone. Therefore, carefully consider
whether such trading is suitable for you in light of your financial condition. This report includes information from sources believed to be
reliable and accurate as of the date of this publication, but no independent verification has been made and we do not guarantee its accuracy
or completeness. Any reproduction or retransmission of this report without the express written consent of ADM Investor Services, Inc. is
strictly prohibited. Again, the information and comments contained herein is provided by ADMIS and in no way should be construed to be
information provided by Archer Daniels Midland Company. Copyright © ADM Investor Services, Inc.
Our view remains that because of ongoing economic stimulus in many parts of the world,
demand for crude oil will be stronger than generally anticipated, which will drive prices higher.
Natural gas prices this week fell to the lowest level in three months, as forecasts for warmer
weather weighed on market sentiment. Ongoing forecasts for above-average temperatures
pushed demand expectations for February even lower than at the beginning of the year.
There is major support at a gap area on the weekly chart at the 2.850-2.890 level.
PRECIOUS METALS
Since the mid-December lows, gold has rallied almost $120 an ounce and silver has advanced
$2.42 an ounce. Much of this strength can be attributed to ramped-up inflation expectations
that are being stoked by President Trump’s tax cuts and infrastructure spending plans. In
addition, his immigration plan may also push up wage inflation. Analysts are paying far too little
attention to the potential massive inflation aspects of a planned infrastructure surge. It is likely
that commodity and wage inflation will accelerate this year.
There was only limited selling pressure for gold and silver when Federal Reserve Chair Janet
Yellen, in her semiannual monetary policy testimony, offered hawkish on balance interest rate
comments.
The fundamentals are improving for the precious metals, suggesting upward price pressures.
U.S. DOLLAR
The U.S. dollar advanced to a 14-year high on January 3 on the belief that President Trump’s
policies will encourage economic growth. However, since then, prices have drifted lower with
most of the post- presidential election gains given back. Much of this backsliding, in spite of
mostly stronger-than- expected economic reports, is due to the belief that the Trump
administration is not interested in pursuing a strong U.S. dollar policy and, in fact, could be
doing just the opposite. Bolstering this belief are comments from the president saying the U.S.
currency is “too strong” and from U.S. Treasury Secretary Steven Mnuchin, who said an
“excessively strong dollar” could have a negative short-term impact on the economy.
Comments from St. Louis Fed President James Bullard that he feels only one rate increase will
be appropriate for the rest of the year may also have contributed to the weakness. In their last
projections, a group of Federal Reserve policymakers said they see the central bank raising the
fed funds rate three times this year.
It will be difficult for the U.S. dollar to match last year’s gains.
The information and comments contained herein is provided by ADM Investor Services, Inc. (“ADMIS”) and NOT Archer Daniels Midland
Company. Futures and options trading involve significant risk of loss and may not be suitable for everyone. Therefore, carefully consider
whether such trading is suitable for you in light of your financial condition. This report includes information from sources believed to be
reliable and accurate as of the date of this publication, but no independent verification has been made and we do not guarantee its accuracy
or completeness. Any reproduction or retransmission of this report without the express written consent of ADM Investor Services, Inc. is
strictly prohibited. Again, the information and comments contained herein is provided by ADMIS and in no way should be construed to be
information provided by Archer Daniels Midland Company. Copyright © ADM Investor Services, Inc.
EURO CURRENCY
Since multiyear lows for the euro currency were made late last year, prices steadily marched
higher in January and early February. Most of the economic reports out of the euro zone have
been better than analysts expected. For example, German factory orders surged by the most
since July 2014. Orders on a seasonally adjusted basis in December increased 5.2% versus
November’s decline of 3.6%. The median estimate called for a .7% increase.
Also, it was reported that the euro zone economy expanded .5% in the fourth quarter. This
increase allowed the euro zone economy to grow more rapidly than the U.S. during 2016 as a
whole, the first time this has happened since 2008.
The currency of the euro zone has held up in spite of increasing concerns over political risks in
Europe, including worries about the financial condition of Greece. The increasing yield for
Greece’s two-year debt yield, which at one point climbed above the 10% threshold,
underscores the concerns.
In light of recent better economic data from the euro zone and the Trump administration’s
apparent disinterest in a strong dollar policy, the euro currency is likely to be well supported.
The information and comments contained herein is provided by ADM Investor Services, Inc. (“ADMIS”) and NOT Archer Daniels Midland
Company. Futures and options trading involve significant risk of loss and may not be suitable for everyone. Therefore, carefully consider
whether such trading is suitable for you in light of your financial condition. This report includes information from sources believed to be
reliable and accurate as of the date of this publication, but no independent verification has been made and we do not guarantee its accuracy
or completeness. Any reproduction or retransmission of this report without the express written consent of ADM Investor Services, Inc. is
strictly prohibited. Again, the information and comments contained herein is provided by ADMIS and in no way should be construed to be
information provided by Archer Daniels Midland Company. Copyright © ADM Investor Services, Inc.