PM Comments December 18 2024
Good afternoon. Corn and soybean markets were lower to sharply lower in Chicago on Wednesday with the bean complex being the downside anchor. Support levels in beans and meal that had been holding on for most of the last month finally gave out early in the day this morning, and this failure allowed the selling to spill over into the rest of the space. Fundamentally, the only real new development that would've added to the selling was a further weakening of the Brazilian real, but we would see this as more of an ongoing situation than a new development as it pertains to what went on today.
CH closed Wednesday at 4.37 1/4, down 6 1/4. CK was down 6 and 1/4 also at 4.43 3/4. SF closed at 9.51 3/4, down 25 cents. SH was down 25 and 1/2 at 9.53 1/4. New contract low for SF at 9.50 1/4. WH finished at 5.41 1/4, down 3 and 3/4. Outside day lower for Chi wheat. Products were lower, January soybean meal closed at 279.50, down $7.70/ton, and January soybean oil closed at 39.55, down 1.07. New contract low at 279.30 for Jan meal. Cattle markets also ended lower on Wednesday; February live cattle closed at 188.32, down $1.42, and January feeders were down 47 cents 257.00. February hogs closed at 83.70, up 50 cents. Inside day for Feb hogs. Outside markets are sharply mixed, crude oil futures are down 20-30 cents/bbl, the Dow Jones index is down 1200 points, and the US$ index is up 130 points. The S&P500 is down 180 points and the NASDAQ is down 800 points. Of note, this would be the tenth consecutive lower close for the March Dow futures. New contract highs again for the $ index.
Spreads were mixed/lower at mid-week, corn spreads were unchanged to down 3/4 of a cent, and soybean spreads were up a penny to two and a half cents lower. CH/CK closed unchanged on the day at -6 1/2, and SF/SH closed at -1 1/2, up a half cent. New high for the move for SF/SH at even.
USDA this morning announced a pair of daily sales flashes to Colombia; private exporters reported sales of 135,000 mt's of corn for delivery during the 2024/25 marketing year, and also reported 120,000 mt's of soybean cake and meal for delivery during the 2024/25 marketing year. Adding today's sale to the most recent weekly sales report, Colombia now has just over 1 mil mt's of unshipped corn sales on the books for the current crop year, while total exports counting all sales stand at 2.172 mmt's.
Like we said at the start, there really wasn't a lot of fresh news to point to explain the day's selling. The ongoing currency situation between the USD and the Brazilian real is certainly playing a logical part in the action though; the Brazilian farmers is getting ready to harvest a massive crop, and while prices in Chicago are falling, the weakening currency is offsetting this fall and giving the farmer here reason to get sales on the books. This in turn is allowing local basis there to weaken, which drops FOB values and makes their beans more competitive in comparison to those from the US. On top of this, one would have to assume from a technical standpoint that there were a fair amount of resting stop orders below the old contract lows that began to get hit over the past two sessions. The sharp rise in the value of the $ index also doesn't help things, but we would classify this as a 'tomorrow problem', as the jump didn't occur until the very end of the session at 1pm central when the Fed made their interest rate decision.
On the grain side, this morning's weekly ethanol report for the week ending December 13th showed a slight rebound in ethanol production from the past couple weeks back to levels that were similar to those seen through November. Daily production for the week was seen at 1.103 mil bbls, which was up 2.3% from last week and up 2.7% from the same week last year. Stocks were seen at 22.636 mil bbls, which was down just fractionally from last week but up 2.4% from the same week last year. We estimate corn grind in the week for ethanol at 108.98 mil bu's, while cumulative marketing year use has reached 1,588.9 bil bu's; this compares to the USDA's newly revised full marketing year forecast at 5.500 bil bu's. On the petroleum side, crude oil stocks were down 934k bbls at 421.016 mil bbls, gasoline stocks were up 2.348 mil bbls at 222.037 mil bbls, and distillate stocks were down 3.18 mil bbls at 118.155 mil bbls.
Circling back to the Fed, interest rates were in fact trimmed by another quarter percentage point on Wednesday, in a move that was widely expected and one that also marks a full percentage point of cuts since the beginning of the calendar year. Market reactions were sharp nonetheless though, as stock index futures and bonds quickly sold off, and the $ index took off higher shortly after the decision was announced. Speaking to reporters following the decision, Fed Chair Jerome Powell said "Today was a closer call but we decided it was the right call," adding that the fact they had cut rates a full percent so far gave them the ability to "be more cautious as we consider further adjustments to our policy rate." New projections also show officials expect to now make just two additional cuts in 2025, which is half the number seen following the FOMC meeting in September; Powell added though that a rate hike next year also doesn't appear to be likely at this time. Other notable comments from Powell included mention that while simulations based on the 2018 tariffs were a good place to start in studying potential outcomes from the move this time around, there is no way of knowing whether past outcomes will be good models in the current situation. The next FOMC meeting is scheduled for January 28th and 29th, after Trump will have returned to office.
The weather forecast for the US again was largely unchanged on Wednesday. Rains look to continue in the southeast through the evening tonight, before things turn drier through the weekend and first part of next week. Then in the northern Midwest, a snow event is likely for Thursday/Friday, as a system makes its way east into the weekend. The PNW also looks to stay wet into next week, with the national weather service today issuing warnings for increased chances of atmospheric river activity December 25th through the 28th that could bring heavy rains to parts of the West Coast. Week-two forecasts trended wetter at mid-day, as now the majority of the country besides the southwest sees an above average chance at moisture into the end of the year. No changes on the temp outlook, as models continue to show a significant warm up after one more brief shot of cool air in the east this weekend.
Forecasts in South America were also largely unchanged over the last 24 hours. There continues to be fluctuations in moisture forecasts for Argentina, but generally speaking, growing areas in the north/northwest will continue to see good rains over the next week while southern areas will be on the drier side. 10-15 day guidance continues to show a return to drier conditions, but we would note the models have been underperforming on rainfall all season, which leads confidence in this forecast to be low. And in Brazil, average to above average rains look to continue falling throughout most of all of the growing regions.