PM Comments May 7 2025
Good afternoon. An overnight/morning rally in the ag markets failed to hold through the day session, with values bleeding lower for most of the day following this morning's 8:30am central time re-open. The overnight China headlines led to buying early, but traders seemingly need to see more than rumors of talks before getting more optimistic on a bigger picture trade deal.
CN closed Wednesday at 4.49 and 1/4, down 6 and 1/4. CZ closed at 4.40 and 3/4, down a half cent. Outside day lower and new lows for the move for both. SN closed at 10.39 and 1/4, down 2 cents. SX was up 2 and 3/4 at 10.22. WN finished at 5.34 and 1/4, down a penny and 3/4. Products were mixed, July soybean meal closed at 295.0, up $2/ton, and July soybean oil closed at 47.33, down 1.02 cents/lb. Inside day for meal and an outside day lower for soybean oil. Livestock markets traded lower on Wednesday, June live cattle closed at 212.52, down $1.15, August feeders closed at 298.60, down 60 cents, and June hogs closed at 97.32, down 25 cents. Outside markets have been two-sided today, with crude oil futures down around $1/bbl, the Dow Jones index up 120 points, and the US$ index up around 60 points; the S&P500 is down 10 points, and the NADAQ is down 90 points. Inside day for the $ index. Gold futures took out yesterday's highs, but are currently down around $45/oz.
Spreads were mixed to lower, with corn spreads finishing the day down a quarter cent to down 6 and 1/2 cents, while soybean spreads were up a penny and a quarter to down 7 cents. CK/CN closed at -8 and 1/4, down 1/4, and SK/SN closed at -8 and 3/4, down 2 and 1/4. CN/CU closed 5 and 1/2 cents lower at 19 and 3/4, and CU/CZ again made new contract lows at -11 and 3/4 before closing at -11 and 1/4. SN/SX closed at 17 and 1/4, down 4 and 3/4.
What started as the day's big news story largely died off throughout the morning hours as traders realized that preliminary discussions between the US and China that are largely expected to do nothing more than set the stage for further talks in the future did not have a lot of material impact on market fundamentals today. The headlines led algorithms to hit the buy button, but there was little buying beyond this once the day crowd got to their desks this morning. In any case, US Treasury Secretary Scott Bessent and US Trade Representative Jameson Greer are scheduled to leave for Switzerland tomorrow, where they will spend the next three days having trade discussions with Swiss President Karin Keller-Sutter, and also with China's chief trade negotiator He Lifeng. Meanwhile, Chinese President Xi Jinping is in Russia for the next four days for a visit that coincides with Russia's Victory Day celebration. He is expected to hold talks with Russian President Putin with an emphasis on expanding economic cooperation between the two amid ongoing hostilities from the West.
This morning's weekly ethanol production report from the EIA showed total production for the week at 7.14 mil bbls, which averages out to 1.020 mil bbls/day; this was down 2% from last week but up 3% from the same week last year, and was right in line with production levels from the past several weeks. Stocks in the week were seen at 25.191 mil bbls, which was down 1% from both last week and the same week last year. We estimate corn usage in the week at 100.8 mil bu, which brings cumulative marketing year use to 3.702 mil bu; this compares to 3.599 bil bu through the same week last year. For the petroleum data, crude oil stocks in the week declined 2.032 mil bbls to 438.376 mil bbls, gasoline stocks were up 188k bbls to 225.728 mil bbls, and distillate stocks were down 1.107 mil bbls to 106.708 mil bbls. Implied gasoline demand in the week was estimated at 8.717 mil bbls/day, compared to 9.098 mil last week and 8.797 mil in the same week last year.
The other talking point for Wednesday was the US Federal Reserve's interest rate decision and subsequent comments from chairman Jerome Powell. The Fed held rates steady for now the fifth consecutive meeting at 4.5%, which came as little surprise to traders. As far as the rest of the year goes, the market is still pricing in three cuts between now and December, with the first as of today predicted to occur in July; FedWatch this afternoon is showing a better than 75% chance that rates are again held unchanged in the June meeting. In the committee's statement this afternoon, they said that they recognize risks to both higher unemployment and higher inflation have risen, but otherwise generally echoed sentiment shown in past months that the economy is in a good place but that there are also significant unknowns ahead due to the presence of tariffs. Powell also didn't have a ton new to say other than that if tariffs stay, the US likely won't make any progress on inflation goals this year. He added that he could a scenario where rates went down but could also see them staying unchanged, which at least on the surface seems to be a more dovish tone than has been taken in recent months. The next FOMC meeting will be June 17th and 18th.
We continue to have little new to report on the weather front in the short term, as the Corn Belt and broader Midwest looks to remain almost completely dry the rest of this week and into next, as high pressure ridging over the north-central part of the US shunts moisture to the south and southeast. Amid fairly significant drought conditions in Florida and other parts of the south east, this moisture will be extremely beneficial here. Beyond next week, models see a pattern shift though with a low pressure system working through the northern tier of the US and Canadian prairies which is expected to bring moisture to these areas; what will be key in this forecast is whether this system can bring moisture far enough to the south on the back side to impact central and southern Midwest growing regions, which the models today are currently showing will happen. Overall soil moisture concerns are not abundant at this point, but there are pockets that are drier than desired and amid highs in the 80's/90's the next 10 days, will desire a shot of moisture by the end of the month should the previously mentioned rains not verify. Otherwise, there continue to be minimal weather concerns for most ag areas into the back half of May.
Global weather also hasn't seen a lot of run-to-run change lately; northern Europe has been dry and looks to largely remain that way over the next 10 days, while southern Europe has seen improving moisture with more expected in the same time period. This includes Ukraine and most of Russia's southern wheat belt. Further to the east, China's forecast continues to be hit or miss on the precip side but has kept mostly above average air temps intact through the rest of the week this week and into next. Long rage forecasts into summer for both areas of the world are showing signs of drought concern, which is something that will need monitoring as we get a little later into July and August.