PM Comments December 17 2024
Good afternoon. Ag markets were lower Tuesday with soybeans leading the way to the downside as it seems increasingly likely that 2025 southern hemisphere soy production will produce a record large crop. AgRural increased its estimate of Brazilian soy production to 171.5 MMTs and some analysts are predicting as high as 175 MMTs. Of course, weather will need to cooperate through at least January for a chance for a crop that large, but near term weather forecasts (through the rest of December) are favorable, indicating near to below normal temperatures across most of Brazil and Argentina. Daily rain chances will keep northern and central Brazil well watered the rest of the month while southern Brazil is drier, which won't be an issue after receiving 1.50" to 4.0" of rain last week. Argentina will have more of a need for rain but does have three chances for rain between today and Christmas.
CH closed at 4.43 1/2 , down 1 1/2 cents. CK was down 1 3/4 at 4.50. SF finished at 9.76 3/4 , down 5 1/4. SH closed at 9.78 3/4, down 7 1/4 cents. All soybean months set life of contract lows today but did pare some of the losses late in the session with closes 5 to 6 3/4 cents above session lows. WH closed at 5.45, down 5, which is 4 3/4 cents above the lifetime low. Products were mixed at the close. January soybean meal closed at 287.20, up 30 cents/ton, and January soybean oil closed at 40.62, down 110 points. Livestock markets were mixed, February live cattle closed at 189.75, down $0.225, January feeders closed at 257.475, up $1.925, and February hogs closed at 83.20, down $0.35. Outside markets are mixed, crude oil futures are down 50-55 cents/bbl, the Dow Jones index is down 250 points, and the US$ index is down 5-10 points. The S&P500 is down 25 points and the NASDAQ is down 80 points.
Spreads were mostly firmer again today. Corn spreads were steady to a 1/4 cent firmer. CH/CK closed at - 6 1/2, up a quarter cent, and CK/CN was steady at -3 1/4. SF/SH closed at -2, up 2, after trading to -0 3/4 earlier in the session. SH/SK was 1 1/2 cents firmer to -8 1/2. WH/WK was 1 1/2 cents stronger, settling at -9 1/2.
Although U.S. soybean offers for February forward are significantly higher than Brazilian offers, we have seen additional flash sales announcements for 24/25 in recent days. This morning, 24/25 soybean sales of 187,000 MTs to Spain and 132,000 MTs to unknown destinations were announced. Additionally, a sale of 170,400 MTs of 24/25 U.S. corn to Mexico was announced, the first corn sale flashed since November 25th. During December, 24/25 soybean sales totaling 1,123,000 MTs have been announced.
The Brazilian real fell to a record low vs. the U.S. Dollar today as Brazil's worsening debt crisis weighs on its currency. The Real has lost about a quarter of its value this year vs. the Dollar as investors are concerned about the fiscal discipline of the Brazilian government. Brazil's Central Bank has been raising its benchmark interest rate (now at 12.25%) and has indicated that it will raise rates again early next year as it attempts to rein in Brazil's high inflation rate.
The Commerce Department this morning reported that U.S. retail sales increased by 0.7% in November compared to October as stronger than expected auto sales helped drive much of the increase. Analysts had expected a 0.5% increase. Early indications point to a strong showing for retail sales during December.
The Federal Reserve began its December meeting this morning. Fed officials are expected to announce a 1/4% decrease in the Fed's benchmark rate when the meeting concludes early tomorrow afternoon. Perhaps more importantly, officials will likely give indications as to the Fed's inclination on interest rates as we move into 2025.
If weather forecasts are correct, nearly all of the U.S. is in for a warm and wet Christmas. The updated 6 to 10 day forecast has all of the continental U.S. west of the Appalachian Mountains warmer than normal. Wetter than normal conditions will exist for the western 2/3rds of the U.S. excepting parts of the southwestern U.S. and a portion of the northern Plains which will see normal to below normal precipitation. The above normal warmth extends to all of the lower 48 states in the 8 to 14 day outlook with above normal precipitation slated for nearly all of the U.S. There are indications that a pattern change back to colder than normal may occur during early January.