Written Commentary
MONTHLY FUTURES MARKET OVERVIEW
>>Read the full March 2024 Edition HERE
Grains
U.S. corn ending stocks dropped 50 mil. bu. to 2.122 bil. in the April-2024 WASDE report, which was in line with expectations and just above our estimate of 2.097 bil. Ethanol and feed usage were both increased 25 mil. bu., with no changes to exports. The average U.S. farm price slipped $.05 to $4.70 bu. Global stocks fell 1.3 mmt to 318.3 mmt, which was slightly above expectations. The USDA made no change to Brazil’s production forecast keeping it at 124 mmt vs. the revised Conab est. of 111 mmt.
U.S. soybean ending stocks increased 25 mil. bu. to 340 mil. at the high end of the range of expectations. We were looking for a 10 mil. bu. increase. Exports were cut 20 mil., imports reduced 5 mil. with seed/residual down 11 mil. The average U.S. farm price fell $.10 to $12.55. There were no changes to the domestic meal balance sheet. Bean oil stocks rose 45 mil. lbs. to 1.627 bil. after a 95 mil. lb. increase in production and imports, which was partially offset by a 50 mil. lb. increase in exports. Global bean stocks held steady at 114 mmt, roughly 1.5 mmt above expectations.
U.S. wheat ending stocks increased 25 mil. bu. to 698 mil. slightly above expectations, however within the range of estimates. We were looking for a 35 mil. bu. increase. Feed usage was cut 30 mil. bu., while imports fell by 5 mil. Exports held steady at 710 mil. By class stocks changes were HRW -5 mil., HRS +20 mil., white +6 mil. and durum +4 mil. The average U.S. farm price fell $.05 to $7.10. Global stocks slipped less than 1 mmt to 258.3 mmt, which was in line with expectations.
Live Cattle
U.S. cattle inventory began to decline when U.S. cow/calf producers sold cows during the peak of COVID in 2021 and because of severe droughts in the Southwest and Western states the summer of 2021. In 2022 there was another drought and cow selling, and less heifer retention continued. According to the January 2024 USDA Cattle Inventory report, the calf crop was the smallest calf crop since 1948 and the lowest of all cattle and calves since 1951. By the end of 2023 U.S. federally inspected slaughter was down 4.2% compared to 2022. When the first quarter of 2024 ended, U.S. cattle slaughter compared to the same period in 2023 was down 5.8%. With the drop in slaughter, U.S. packers in March made the decision to cut slaughter hours to guaranteed union hours at 32 hours per week.
Lean Hogs
Hog and pork prices benefited from the high prices for beef. By March 2024 U.S. federal hog slaughter was up year-to-date 1.4%, and at the same time consumers were eating more pork in the U.S. and U.S. exports were strong. During March 2024 the CME lean hog index started out the month at $79.42, moved up to mid-month to $82.19 and ended March at $84.64. Pork prices moved higher, while hog prices increased giving packers the incentive to maintain an active slaughter. The CME pork cutout Index began March at $91.25, moved up to $92.58, and by the end of March was at $94.67.
Stock Index Futures
Stock index futures continued to trade higher into March with S&P 500, NASDAQ and Dow futures advancing to new historical highs. However, there was long liquidation in April when it became apparent that the Federal Reserve will be even slower to pivot to accommodation. This view was enhanced by higher than expected inflation reports, including the February consumer price index excluding food and energy report that came in at up 0.4% when a gain of 0.3% was anticipated, and also when the February producer price index report showed an increase of 0.6% when up 0.3% was forecast. In addition, the producer price index, excluding food and energy, advanced 0.3% when a gain of 0.2% was estimated.
US Dollar Index
The U.S. dollar index has been strong this year and recently advanced to five-month highs. Much of the strength in the greenback has been due to interest rate differentials that have turned more favorable in light of the increasing view that the Federal Reserve is likely to remain restrictive for longer, while other major central banks will probably become accommodative sooner.
Euro Currency
The euro currency topped in early March as pressures started to build for a June interest rate reduction from the European Central Bank. Euro zone inflation slowed across the board last month, reinforcing expectations for easing conditions. Inflation in the 20 nations sharing the euro currency slowed to 2.4% last month from 2.6% in February. In addition, German wholesale prices fell by 3.0% in March compared with the same month last year.
Crude Oil
Crude oil futures trended higher in March through early April due to concerns about an expansion of the conflict in the Middle East. However in the last few days some pressure has developed with the market again worrying about demand. Demand concerns were rekindled by the EIA’s report of a fourth straight weekly build in U.S. crude stocks.
Gold
Gold futures advanced to new record highs on April 12 as central banks continue to be big buyers. However, since then there was some profit taking as Federal Reserve officials continue to indicate that the Federal Reserve will be slow to pivot to accommodation. Federal Reserve Chairman Powell recently make comments suggesting tight monetary policy will need more time to take effect. Recent strength in the U.S. dollar appears to be having only a limited negative effect on the price of gold, which is a sign of strength.
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