PM Comments January 6 2025
Good afternoon. Markets traded mostly higher on Monday to kick off the first full week of trading in 2025, though in the case of the beans, were well off their morning highs by the time the closing bell rang this afternoon. Corn futures though largely held onto their gains, as it appears fund traders are still willing to add to new positions even as the market again made new highs for the move. This strength also spilled into the wheat space, where Chicago futures had one of their best up days of the last couple months.
CH closed Monday at 4.57 3/4, up 7 cents. CK was also up 7 cents at 4.65 1/4. SH closed at 9.97 3/4, up 6 cents. SK was up 5 cents at 10.08 3/4. WH finished at 5.40 1/2, up 11 and 1/4. Inside days for both the beans and the wheat. Products were mixed, March soybean meal closed at 307.30, down $1.30/ton, and March soybean oil closed at 40.33, up 40 points. Cattle markets were higher to start the week, February live cattle closed at 195.20, up $1.15, and March feeders closed at 265.55, up $1.37. New highs for the move in live cattle and an inside day lower for March feeders. February hogs closed at 79.65, down $1.12, and traded to their lowest level since mid-October. Outside markets are mixed/lower, crude oil futures are down 30-50 cents/bbl, the Dow Jones index is near unchanged, and the US$ index is down 60-70 points. The S&P500 is up 35 points and the NASDAQ is up 260 points. Of note, while still sharply lower, the $ index is some 50 points off the lows made earlier this morning.
Spreads started the week firm, as corn spreads ended Monday unchanged to 2 cents higher, and soybean spreads were up a penny to up 7 and 3/4. CH/CK closed at -7 1/2, unchanged on the day, and SF/SH closed at -5 1/4, up 5 and 1/2 cents. SH/SK was up a penny at at -11.
Strength in the marketplace to start Monday morning was seen from a Washington Post article stating that aides on President-elect Trump's trade team were exploring ways to implement tariffs that were more specific in focus as opposed to blanket measures that covered all goods coming from a particular country. The article cited three sources familiar with the matter, but Trump later in the morning posted to his Truth Social social media platform saying that the article was inaccurate. "The story in the Washington Post, quoting so-called anonymous sources, which don't exist, incorrectly states that my tariff policy will be pared back," penned Trump. "That is wrong. The Washington Post knows it's wrong. It's just another example of Fake News." At this point, traders are just hopeful that whether tariffs or no tariffs and regardless of what their levels are, details will just be known sooner than later once Trump takes office on January 20th. The latest example with the Washington Post further illustrates just how touchy a subject trade and tariffs will be through the first weeks/months of Trump's second term.
Also of benefit to the ag space through the morning hours was a sharply weaker dollar, which also fell as a result of the tariff news. In general, the idea that tariffs would've been lessened in scope was seen as deflationary, which in turn led to selling in the $. Weekend news from China's government outlining further stimulus was also viewed as a reason for weakness in the dollar, though to a lesser degree. News that Canadian Prime Minister Justin Trudeau would be resigning in March also likely impacted pricing in the US $ to an extent throughout the day, though was not announced until mid-morning when the market was already sharply lower.
Other news on Monday included weekly export inspection data for the week ending January 2nd, which was mostly in line with trade expectations for corn and soybeans, and was slightly above trade expectations for wheat. Corn inspections for the week totaled 847k mt's, which was down 6.7% from last week; cumulative inspections for the marketing year are up 24% from last year. Soybean inspections in the week were seen at 1.285 mmt's, which was down 21.8% from last week; cumulative inspections are similarly up 23% from last year. And lastly, wheat inspections for the week were seen at 412k mt's, which was up 21.5% from last week; cumulative pace here is now up 25% from last year.
Delayed CFTC data for the week ending December 31st was also released on Monday after the markets closed, and showed an expectedly large week of buying by the funds in corn. For the week, the CFTC shows managed money traders bought a combined 67,859 contracts of corn futures/options, bought a combined 25,435 contracts of soybean futures/options, and bought a combined 8,247 contracts of Chicago wheat futures/options. This now makes funds net-long 228,806 contracts of corn, net-short 42,447 contracts of soybeans, and net-short 86,762 contracts of Chicago wheat. In soy products, funds during the week bought 31,429 contracts of soybean meal (now net-short 64,942 contracts), and sold 9,015 contracts of soybean oil (now net-short 28,576 contracts). Of note, this is the largest the fund's net-long position in corn has been since February of 2023. This was also the largest week of buying by the funds in both beans and meal since the week of October 1st, and also the largest week of buying by the funds in Chicago wheat since the week of September 10th.
The southern tier of the Corn Belt received a good covering of snow over the weekend, with the Midwest expecting to now see a few days of drier conditions before winter weather returns even further to the south by Thursday/Friday. The GFS's mid-day run sees 1-4" of snowfall possible for an area from northeast Texas through Arkansas and then up into Tennessee/Kentucky/West Virginia. Lighter snows from this system are also expected to impact more of the central Midwest, while snows from a separate system are also seen impacting parts of the northern Plains and further north into Canada. Little updates to the temperature outlook, as most of the southern and eastern corner of the country will see high temps that are some 5-15 degrees F below average through the rest of this week and into next. Extended outlooks show a marginal warm up then next week with things just 5-10 degrees below average.
Argentina's forecast trended marginally wetter in the south central part of the country in the short term, but trended overall drier in the 10-15 day period; the northeastern half of the country stretching into southwest Brazil looks to continue holding in a dry pattern through at least January 20th. Temperature forecasts also show the warmest conditions over the next week in these same dry areas, which will look to add stress here. As we mentioned last week, its simply difficult to asses at this point exactly what net-changes in production are occurring, with Brazil's crop sizes seemingly growing at the same rate Argentina's look to be declining. Sources continue to indicate that the situation becomes a bit more intense should these forecasts verify for another 2-3 weeks; if no change by the end of January, yield loss in Argentina is likely.