PM Comments November 26 2024
Good afternoon. Two sided trade was seen through the day on Tuesday as ag markets tried to digest what new tariff threats from President-elect Trump meant to longer term market fundamentals. Soybean oil stayed strong all day on ideas that imports of both UCO from China and also canola oil from Canada would be reduced, while an initial grain rally led by wheat faltered throughout the morning session.
CZ closed at 4.20 on Tuesday, down 4 and 3/4. CH was down 5 cents at 4.28. SF finished at 9.83 1/2, down 2 1/4. SH was down 1/4 of a cent at 9.94. WZ was up 3 3/4 at 5.39 1/2. Inside day for WZ. Products were mixed, December soybean meal closed at 288.10, down $5.60/ton, and December soybean oil closed at 42.59, up 1.38. Livestock markets were higher, December live cattle closed at 186.90, up 40 cents, January feeders were up $2.62 at 258.10, and December hogs closed at 83.10, up $1.12. Inside day for feeders, and was the fifth consecutive day of higher closes for hogs. Outside markets are mostly higher, crude oil futures are trading either side of unchanged, the Dow Jones index is up 125 points, and the US$ index is up 10 points. The S&P500 is up 30 points and the NASDAQ is up 120 points. New contract highs today for the Dow and an outside day lower for the $ index.
Spreads were mostly lower with the exception of the CZ/CH; corn spreads were down a quarter cent to down 2 and 3/4, and soybean spreads were down a penny and 1/4 to down 4 and 1/2 cents. CZ/CH closed at -8, up 1/4 of a cent, and SF/SH closed at -10 1/2, down 2 cents. New high for CZ/CH at -7 1/4.
Tariff talk was the name of the game across the commodity space today, as markets from corn and wheat to gold and silver are trying to figure out just how upended their current fundamental situations are going to be by incoming President Donald Trump. It has long been assumed that Trump would reignite the Trade War that he started with China during his previous term, but new threats of 25% tariffs aimed at Mexico and Canada were not necessarily anticipated. The corn market today reacted accordingly, as Mexico's new President Claudia Sheinbaum said that her country would retaliate with like tariffs in response should Trump go ahead with his threats; said Sheinbaum, "one tariff would be followed by another in response, and so on until we put at risk common businesses." It is assumed that US corn would be on the receiving end of this retaliation, with many in the trade assuming the hefty export pace through the first half of the marketing year is in preparation for tariffs later on.
Other possibly affected ag-specific markets include the aforementioned soybean oil, as well as beef, wheat, canola, and oats to name a few. The US is the world's number 1 importer of oats, while almost all of Canada's canola exports end up in the US; on the other side of the country, more than 80% of Mexico's beef exports come to the US. The automobile industry is another that will potentially see significant impacts, as it is fairly common for companies like General Motors to build their cars at factories across the border in Mexico and then ship them back into the US to sell to the consumer. The other question mark surrounding all this is the current US-Mexico-Canada Agreement, which Trump worked to establish during his first term; the agreement explicitly prohibits the implementation of tariffs on member countries, which raises questions as to what ability Trump actually has.
Mid-day weather again saw little change on Tuesday; the southeast will see rains from a system that moves through the area on Thursday, while the rest of the country sees limited precipitation into the end of the week and weekend. Beyond Saturday, models are showing a good chance at lake effect snow in the northeast and through the Great Lakes areas, while also still showing a snow event impacting parts of Colorado and Utah. Week-two forecasts also saw little change over the last 24 hours, as areas along the northern Plains and also along the Gulf coast in the south see above average precip chances in the period, while the mid section of the country from east to west looks to hold in a direr pattern.
Five day precip maps for Argentina show rainfall of up to 4" through most of the northern growing areas, while southern areas see a lighter 0.1-1" possible. Southern Brazil will catch moisture from the same system as northern Argentina, while central and northern Brazil look to receive similar totals but areas will be more widespread. Outlooks for week two still show dryness returning in most of central and southern Argentina, while the whole of Brazil is still expected to continue receiving good rains. The city of Goiania in central Brazil has received record rainfall in the month of November, which has increased the odds of disease pressures as the season goes on. However, there are currently no concerns regarding yield loss in this area as of today.