PM Comments January 29 2025
Good afternoon. Ag markets saw sharply higher trade on Wednesday as fresh speculative input poured into the space, though there again wasn't a lot of fresh news besides the drier shift in the forecast for Argentina.
CH closed Wednesday at 4.97, up 11 3/4. CK was up 11 1/2 at 5.07 1/2. SH closed at 10.60 1/2, up 15 1/2 cents. SK finished at 10.75 1/4, up 15 3/4. WH was up 17 and 1/4 at 5.62 1/2. New highs for the move in corn and also new crop soybeans, while wheat futures closed nearly 30 cents off the lows made yesterday. Products were mixed, March soybean meal closed at 309.80, up $8.20/ton, and March soybean oil closed at 44.97, down 16 points. Meal needs to trade 313.0 to fill the open chart gap; inside day for bean oil. Breather day in the livestock markets finally; February live cattle closed at 207.02, down $1.52, and March feeders closed at 275.27, down $2.97. Both made new highs again before reversing and closing lower. February hogs finished at 83.90, unchanged on the day. Outside markets are quiet/mixed, crude oil futures are down 60-90 cents/bbl, the Dow Jones index is down 90 points and the US$ index is up 10 points. The S&P500 is down 25 points and the NASDAQ is down 60 points. Inside day for the Dow as of this writing.
Spreads again finished mixed, corn spreads were up a quarter of a cent to up 6 cents, and soybean spreads were down a penny to up 3/4 of a cent. CH/CK closed at -10 1/2, up a quarter cent, and SH/SK closed at -14 3/4, down a quarter of a cent. New low for the move at -11 for CH/CK and at -15 1/4 for SH/SK. SK/SN made a new contract low at -14.
Price determining themes in the ag space remain rather two-fold, and there are only so many ways to describe that this will largely remain the case until more is known on South American crop production or trade policy. We find it interesting that funds are as apt to add to existing long positions as they are with the White House Press Secretary reiterating on Tuesday that the February 1 deadline for tariffs on Mexico and Canada still looms. We have little insight today as to how this might effect trade Sunday evening or the rest of the next week, but would remind that it is the retaliatory tariffs from these countries that would presumably be negative US ag, not the initial measures applied. As this has been well discussed by the Trump team for weeks, we also are not sure whether this retaliatory action is prepared and will be immediately released or if there will be a period of time before a response. As such, volatility likely stays heightened.
Ethanol data this morning showed a pull back in both stocks and production, as both came in below what the trade had expected. Frigid temps throughout the Corn Belt in the week likely contributed in part to the decline in production, but the drop-off was nowhere near as extreme as was seen last year, when production dipped to just 82 mil bbls/day. For the week ending January 24th, production averaged 1.015 mil bbls/day, which was the lowest since the end of September and also matched the second lowest of this marketing year; the figure was down 7.6% compared to last week, but was still up 24% from the same week last year. Stocks in the week were seen at 25.722 mil bbls, which was down 0.6% from last week but still the second highest figure of this marketing year; stocks were also down 0.4% from last year. We estimate corn usage in the week at 100.28 mil bu's, which brings cumulative marketing year use to 2.234 bil bu's; this compares to the USDA's full-year forecast of 5.500 bil bu's. Also out in the EIA report was petroleum stocks data for the week; crude oil stocks were up 3.463 mil bbls to 415.126 mil, gasoline stocks were up 2.957 mil bbls to 248.885 mil bbls, and distillate stocks were down 4.994 mil bbls to 123.951 mil bbls. Implied gasoline use in the week was estimated at 8.302 mil bbls/day, compared to 8.086 mil last week and 8.144 mil last year.
In the financial space, the Federal Reserve expectedly held interest rates steady which produced little fanfare in either the stock index futures or currency markets. Overall, just minor adjustments were made to the committee's statement issued at the end of their last meeting in December, with the overall theme of remaining in a comfortable position and having flexibility to act as needed going forward still intact. Said Fed Chair Jerome Powell, "The economy is strong overall and has made significant progress towards our goals over the last two years." The biggest question for policy makers going forward seems to be to what degree current policy is restricting economic activity, which will likely be an ongoing theme of coming meetings. The Fed is next scheduled to meet again on March 18-19.
Forecasts for both Argentina and Brazil took a negative shift through mid-day on Wednesday. Starting in Argentina, precip through the next week has been all but eliminated through most of the country's growing areas. And even in the extended week-two outlook, only areas in the far north are expected to see meaningful precip. In Brazil, all but the far south will see continued regular rainfall for at least another week, before the week-two maps show drier conditions through the central part of the country. It will be interesting to see how these shifts develop over the next couple days and into the weekend, as runs just 48 hours ago were significantly different than those seen today.
There continues to not be a lot of note with the US forecasts, as unseasonably warm temps keep precip through the majority of the country limited to rainfall. A low pressure system is still being advertised to provide 2+ inches of rainfall to an area from east Texas north and east through Arkansas and into Tennessee/Kentucky. Lighter totals will be seen further to the north and out through the east coast, while the New England and area and far northeast are expected to see snowfall of a few inches Friday into Saturday. The EU AI model trended drier in the week-two period at mid-day today, but neither of the ensembles or the CPC outlook followed this trend. Lastly, temperature maps were again largely unchanged from the morning runs, with the coldest air over the next two weeks limited to parts of the northwest and northern Plains.