PM Comments January 31 2025
Good afternoon. Happy Friday. What a day to end the week. On-again-off-again tariff talk throughout the day produced considerable volatility across the whole of the ag space, before values closed mostly lower at the CBOT in what was a large-volume trading session. While there was obviously some measure of risk adjustment, the day's action was entirely attributed to headlines regarding tariffs from the Trump administration.
CH ended the week at 4.82, down 8 1/4. CK was down 8 1/2 at 4.93. Both gapped lower to open last night. SH closed at 10.42, down 2 cents. SK finished at 10.57 1/2, down 2 1/4. WH closed at 5.59 1/2, down 7 cents. Products were mixed, March soybean meal closed at 301.10, down $3.60/ton, and March soybean oil closed at 46.11, up 1.13. Bean oil finished some 70 points off the highs. Cattle markets ended the week firm, February live cattle closed at 204.60, up 12 cents, and March feeders closed at 275.72, up $2.52. February hogs closed at 84.17, down 20 cents, and had an outside day lower. Outside markets are mixed, crude oil futures are up 50-80 cents/bbl, the Dow Jones index is down 370 points, and the US$ index is up 55-60 points. The S&P500 is down 30 points and the NASDAQ is down 60 points. Both the S&P and the NASDAQ closed their open chart gaps on the top side before reversing lower, while the Dow had an outside day down. Gold futures also made new contract highs before reversing lower.
Spreads ended the week mixed, corn spreads were up a quarter of a cent to down 4 and a half cents, and soybean spreads were up three quarters of a cent to down a quarter cent. CH/CK closed at -11, up a quarter cent, and SH/SK closed at -15 1/2, also up a quarter cent. SK/SN made new contract lows for the third consecutive session at -15 1/4.
For the week: March corn was down 4 and 1/2 cents; May corn was down 3 and 1/2 cents; March soybeans were down 13 and 3/4 cents; May soybeans were down 10 and 3/4 cents; and March Chicago wheat was up 15 and 1/2 cents.
Will start this afternoon's discussion with bean oil, as it was the market that saw the most volatility throughout the day. Values spent the night session trading moderately higher, and then saw steady buying throughout early morning trade on ideas that Canadian tariffs would lower canola oil imports, thereby leading to increased soybean oil demand. Roller coaster trading then unfolded after that, as headlines showing a possible delay in tariffs until March 1 caused values to sharply plummet, only to be refuted by the White House Press Secretary shortly thereafter, causing values to jump right back up. Bean oil also saw actual demand data today in the form of the EIA's monthly biofuels feedstock update, but the report was for the month of of November and amid all the tariff talk going on, was largely considered old news. Nonetheless, the data showed total US soybean oil consumption for biofuels in the month at 1.192 bil lbs, which was down 3% from October but up 12% from November of 2023. Also of note in the report, canola oil use for biofuel production totaled 410 mil lbs in the month, and yellow grease (used cooking oil) use for biofuel production in the month totaled 543 mil lbs.
Other markets traded largely as expected otherwise, with corn lower on possible retaliation from Mexico and the $ index sharply higher for most of the session. The other notable part of the tariff talk through the day on Friday was the inclusion of China, who was part of the verbiage and pegged to be given a tariff rate of 10%. China has been largely excluded from the rhetoric this week, with some in the trade thinking improving relations between Trump and President Xi Jinping may have actually spared Beijing from another round oof trade duties; this, however, seems now not to be the case. At this point, we have little clue what will develop politically over the next few days, but would simply advise caution as headline risk remains extremely elevated going into next week. This is an ongoing story and is subject to change nearly by the minute - volatility will remain elevated.
There wasn't a lot else being discussed in the trade on Friday, as even weather in Argentina took a back seat to the macro world happenings that affected a majority of commodity markets. Assuming the tariff ordeal becomes more of a known situation next week, we would assume South America gets back into the front of the discussion line, as this overall remains the number one supply/demand specific factor in the markets today. Soybean harvest in Brazil is no doubt behind, but yields are downright great and there continues to be hints at a pattern shift occurring that will allow for more timely harvest progress in the next three weeks. Should this verify, the world will be awash with soybeans in the coming months, as record production from the world's number one grower hits the market.
Forecasts at mid-day on Friday remain mostly the same as the morning runs, and continue to call for little to no rainfall across the majority of Argentina in the next week before storms are slated to return again roughly by February 10th. We continue reiterating, it is imperative that these rains arrive as forecast or further production cuts become more likely in the weeks ahead. Equal but opposite story in Brazil, as regular rainfall has caused the aforementioned delay in harvest activity, but looks to seasonally abate and work south over the next 10-20 days. Extreme heat remains mostly absent, but temps over the next week through Argentina will run above average; Brazil looks to stay on the cool side.
The US forecast remains largely uneventful for those in the Midwest, as once today's low pressure system exits the northeast through the night tonight and into tomorrow, the weekend looks to be mostly dry. Another system will sweep across the Great Lakes region and upper northeast providing snowfall to the area, but the bulk of this looks to fall north of the Canadian border. The PNW will be the most active area in the country, as an atmospheric river looks to provide heavy rain and snowfall to the area through the weekend and actually through most of next week. Midwest temps over the weekend will continue to be warm, with highs on Sunday eclipsing 50 degrees F as far north as southern Wisconsin and Minnesota. Cooler air creeps back into the north/northwest next week, but the remaining 3/4 of the country looks to remain on the warm side. Lastly, week-two precip maps continue to offer a wet outlook for the eastern 1/3 of the country and especially the southeast, while the southwest remains the one area with below average prcip chances in the period.
As we mentioned this morning, good luck with Trump's tariffs over the weekend; Sunday night looks to be a rather eventful one as of now. Have a good and safe weekend, and enjoy the warmer weather!