PM Comments January 21 2025
Good afternoon. The soy complex paced the day's rally to start the week on Tuesday, leading most of the rest of the ag space to higher closes also. That the first 24 hours of Trump's second presidency have passed without any new tariffs on China, Canada, or Mexico is being taken as bullish by grain traders, which produced sharply higher price action throughout most of the session.
CH closed Tuesday at 4.90, up 5 and 3/4. CK was up 6 and 3/4 at 4.99 3/4. This was also the high for the day on May corn, with the last time the contract traded above $5 being May 29th of last year; CN traded to 5.01 today. SH closed at 10.67 1/4, up 33 and 1/4. SK was up 33 cents at 10.77 3/4. Both had gap-higher starts to open trade last night, but the gaps are not open on the daily chart. WH finished at 5.58 3/4 Tuesday, up 20 cents. This the first close above the 50-day average in WH since last October. Products were higher, March soybean meal closed at 311.0, up $13.80/ton, and March soybean oil closed at 45.77, up 8 points. Livestock markets were mixed, February live cattle closed at 197.05, up 30 cents, March feeders closed at 267.25, down 80 cents, and February hogs closed at 81.20, up 7 cents. Inside day for live cattle. Outside markets are sharply mixed, crude oil futures are down around $1.30/bbl, the Dow Jones index is up 550 points, and the US$ index is down 140 points. The S&P500 is up 50 points and the NASDAQ is up 160 points.
Spreads were mixed in corn and mostly higher in soybeans; CH/CK closed at -9 3/4, down a penny, and SH/SK closed at -10 1/2, up 1/4 of a cent. CK/CN made a new high for the move at -1/4, which is the highest its been since December of 2023.
As we mentioned this morning, what the trade sees as bullish today could very quickly change at the click of a button should Trump decide to throw incendiary rhetoric towards any of the aforementioned trade partners on social media in the coming days. Sources indicate that the President has ordered members of his administration to look into trade practices involving China, and also to investigate whether the nation had been complying with a trade deal signed during his first term, meaning that should he be unhappy with these findings, the all-of-a-sudden cordial relationship with Beijing may quickly deteriorate. A looming February 1st deadline on tariffs for Canada and Mexico also looks to linger over the coming days, as any sort of announcement here would also likely be taken as negative and cause a quick pull-back from the recent run up in prices. As we remember from Trump 1.0, it is simply difficult from an analysis standpoint to predict what headlines will occur overnight while the majority of the trade in the US is sleeping.
Aside from the tariff news, or lack-there-of, other ag-specific policy headlines from Trump's first day back in office included a pledge by Health and Human Services Director nominee Robert F Kennedy Jr to ban high fructose corn syrup and seed oils, and also a plethora of items focused on immigration and border security. Starting with the immigration, several of Biden's policies implemented over the last 4 years were immediately overturned, and Trump also declared a national emergency at the border with Mexico, which would allow him to send US troops to assist immigration agents. The proposed ban on high-fructose corn syrup is interesting, and comes just days after #3 red food coloring was also banned. Data indicates roughly 8% of annual US corn production goes to the making of high-fructose corn syrup, meaning any ban of the product would likely lead to a notable reduction in domestic demand.
Other news to start the week included an acreage estimate update from S&P Global (formerly the Informa group), and also regular weekly export inspection data, which was delayed a day due to Monday's Martin Luther King Jr holiday. S&P Global updated their acreage estimates for the coming season to 93.5 million planted acres for corn and 83.3 million planted acres for soybeans; these figures compare to 90.6 and 87.1 mil last year respectively. The group also estimates corn yield next year at 183.0 bpa, with total production pegged at 15.6 bil bu's (179.3 and 14.9 last year). For soybeans, the group estimates yield in 2025 at 53.0 bpa, while production is seen at 4.37 bil bu's (50.7 and 4.1 last year). Export inspections for the week ending January 16th were once again good (borderline great) for corn, and relatively poor for soybeans and wheat. The corn inspection figure for the week was seen at 1.541 mmt's, which was above the upper end of trade guesses and also up nearly 76% from last week. Soybean inspections were seen at 973k mt's, which was below trade expectations and down nearly 25% from last week, while wheat inspections totaled 262k mt's, which was also below trade expectations and down 36% from last week.
Weather in Argentina remains the other ongoing market factor, with rains over the weekend seen as some of the best in several weeks for the central part of the country. Forecast-wise, models continue to show decent rain chances for areas in the west and northwest through the rest of this week, while areas to the south and southeast look to remain mostly dry. The week-two forecast is then dry again for nearly all of the country's growing areas besides the far west. In Brazil, parts of RGDS in the south saw rains over the weekend also, with forecasts showing continued chances at light/scattered precip through the rest of this week. Areas to the north look to continue receiving rain, but as harvest has started or is close to starting, a drier pattern will be desired in the near future to aid in harvest progress.
Back in the US, not a lot of forecast updates were seen at mid-day with the main feature continuing to be the winter storm that is making its way across the Gulf Coast and through the southeastern part of the country today and into tonight. Models see the system as relatively quick moving, with it expected to exit the East Coast by early tomorrow morning. Otherwise, the Northern Plains and into the Great Lakes region is expected to see light/scattered snowfall for the remainder of this week, while dryness is largely expected elsewhere. Then, as we get into next week, the GFS is forecasting another low pressure system providing moisture to the mid-south and southeast coming out of the Gulf starting Sunday, with subsequent short-waves seen impacting the area through most of next week. Temperatures will see a moderate warm up into the end of this week starting in the west, while the East Coast and southeast look to see one more day of mostly frigid temps on Wednesday. 10-15 day outlooks are then in fair agreement on a return to warmer than normal conditions for most all of the country into the first 5 days of February, but this will need monitoring into next week.