PM Comments February 3 2025
Good afternoon. Ag futures started the first week of February trading at the CBOT higher on Monday following gap-lower opens to begin the session Sunday evening. If nothing else, the mid-morning reversal on day 1 of Trump's alleged 'Trade War 2.0' illustrates just how volatile a ride traders are likely in for over at least the next couple months in the short-term, and more likely over the majority of the next four years as President Trump looks to rearrange longstanding global trade practices.
CH closed Monday at 4.88 3/4, up 6 and 3/4. CK was up 6 3/4 also at 4.99 3/4. SH closed at 10.58 1/4, up 16 and 1/4. SK was up 15 and 1/4 at 10.72 3/4. WH closed at 5.66 3/4, up 7 and 1/4. All five contracts had outside days higher, and also closed their gaps left from the open last night; corn trade a nearly 20 cent range, soybeans traded a nearly 30 cent range, and wheat traded a nearly 25 cent range. Products were higher, March soybean meal closed at 303.70, up $2.60/ton, and March soybean oil closed at 46.51, up 40 points. Bean oil closed more than 100 points off its highs. Livestock markets were mixed/lower, February live cattle closed at 202.97, down $1.62, March feeders closed at 270.50, down $5.22, and February hogs closed at 84.32, up 15 cents. Outside markets are mixed, crude oil futures are up 20-40 cents/bbl, the Dow Jones index is down 60 points, and the US$ index is up 50-60 points. The S&P500 is down 40 points and the NASDAQ is down 140 points. The Dow and $ both closed their chart gaps, but the S&P and the NASDAQ have not as of this writing. New contract highs in gold and coffee, and new contract lows in cotton.
Spreads were mostly higher to start the week, corn spreads were unchanged to a penny and 3/4 higher, and soybean spreads were up a half cent to up 4 cents. CH/CK closed at -11, unchanged on the day, and SH/SK closed -14 1/2, up a penny.
Markets started the week expectedly lower on the re-open Sunday night, with all three of corn, beans and wheat quickly gapping downward on the open as Trump signed into order 25% tariffs on most goods coming from Canada and Mexico. This sentiment was rather short-lived though, as mid-morning news out of both Trump and Mexican President Claudia Sheinbaum indicated that a meeting between the two had yielded an agreement on a one month delay in the duties in exchange for additional Mexican troops (10,000) being sent to the US-Mexico border to help curb the flow of both illegal immigrants and drugs. At the time of this writing, Trump is also said to be meeting with Canadian Prime Minister Justin Trudeau for the second time today, meaning a similar agreement could still be reached before midnight tonight when the tariffs officially go into effect. Furthermore, the Wall Street Journal reported throughout the day that the Chinese were interested in bilateral meetings with Trump to try and reach a trade agreement, though no further details were given. Deadlines spur activity, and there seems to be no clearer indication of this than Monday's happenings.
Other notable points of interest from the tariff news on Monday are mostly involving Canada, and include news that US ethanol imports were not included in the initial list of retaliatory goods put out by Canada's Finance Department, and also that oil imports from Canada to the US would be taxed at a 10% rate, as opposed to the 25% listed for most other goods. On ethanol, one member of the grain trading social media community during the morning hours quibbled that "corn futures would be down 30 cents" had ethanol been included in the list of tariffs; Canada accounts for more than a third of all US ethanol exports annually. Staying on the topic of energy, Opec+ officials on Monday said they would not be altering plans to gradually increase production from April onwards at this time, which would be in line with Trump's recent calls to lower oil prices that he says are helping Russia in its war with Ukraine. In the same meeting, Opec also said they would be removing the EIA as one of the sources used to monitor its production levels, but added the decision was not politically related. The group uses secondary sources to help monitor output after a history of disputes, and recently dropped the IEA (International Energy Agency) from the list in 2022.
Other non-weather related input in the ag space on Monday included the weekly export inspection report for the week ending January 30th, and also monthly soybean crush and corn grind data from the USDA in the form of the monthly Fats & Oils and Grain Crushings reports. Starting with inspection data, numbers showed corn inspections that were similar to last week, while soybeans rebounded and wheat declined; corn inspections in the week totaled 1.252 mmt's, soybean inspections totaled 1.013 mmt's, and wheat inspections totaled 253k mt's. The Fats & Oils report for December showed soybean crush in the month at 218 mil bu's, which was near trade expectations and a new monthly record; the figure was up 3.6% from November, and was up 6.6% compared to December 2023. Soybean oil stocks at the end of the month totaled 1.696 bil lbs, which was slightly above trade expectations, and also up from November. The figure was down 7% from December 2023. Lastly, the grain crush report showed corn used for ethanol in December totaled 473.179 mil bu's, compared to 471.563 mil in November and 484.226 mil in December of 2023. Total corn consumption in the month totaled 521 mil bu's.
Weekend weather was rather benign for the lower two/third's of the country the past couple days, with high temps well above average and moisture confined largely to the northeast and the northwest. Storms did provide heavy precip to the PNW, where snowfall accumulations at elevation exceed 20" in some places. The northern part of the Midwest through the Great Lakes and into the northeast also picked up significant snowfall, with totals ranging from 1 to 5 inches generally with some pockets of heavier accumulation. For this week, models see active weather remaining in the PNW through the remainder of the week and into next weekend, while upper level flow likely keeps the US-Canada border active into the end of the week as well. Elsewhere, low pressure is expected to provide more rain for the southeast and mid-south beginning on Wednesday and moving rather quickly, with another system seen providing moisture slightly further north by the end of the week and through the weekend. An intrusion of cold Canadian air begins to push warmer air south starting tomorrow, but the majority of the southern US from Nevada to Virginia will continue seeing temps that are well above average through this week and into the weekend. Week-two maps on the temp side show decent agreement on a return to colder air beyond the weekend, but the coldest conditions will remain centered on the upper Plains and Midwest and areas along the border with Canada. Week-two precip continues to show wetter than average conditions for a majority of the country.
Short term forecasts are wetter through southern and south-central Argentina and are drier in southern and central Brazil at mid-day on Monday, which is a good sign for both places. The CPC outlook sees rainfall east and south of Buenos Aires possibly reaching 2" over the next five days, which would be greatly beneficial, while less than an inch is expected in the same time frame for central and east-central Brazil. Forecasts for week two (February 12-17) now show good rains for northern and north-central Argentina, but have turned wetter through most of Brazil; the moisture will again be welcome in Argentina, but as we discussed last week, will continue to be a problem for the Brazilian producer who is already behind in soybean harvest. On the temperature side, not a lot of updates over the last 72 hours as models continue to show the bulk of Argentina remaining seasonally warm, while Brazil sees normal to below normal temps over the next week.
The tariff headlines are not a one-day event, and will continue affecting markets in the days and weeks ahead. Buckle up; and remember, risk management is the name of the game.