Written Commentary
MONTHLY FUTURES MARKET OVERVIEW
>>Read the full February 2024 Edition HERE
Grains
In the February 2024 WASDE report the USDA raised U.S. corn ending stocks 10 mil. bu. to 2.172 bil., which is roughly 40 mil. above expectations. The only change to the balance sheet was a 10 mil. bu. cut to FSI usage, not ethanol. We were expecting no change to the balance sheet this month. World stocks fell 3 mmt to 322 mmt, slightly below expectations. Brazilian production was cut 3 mmt to 124 mmt, while their exports were reduced by 2 mmt to 52 mmt, now slightly below the U.S. export forecast.
Live Cattle
The 2024 cattle market began like many other past years. The boxed beef market in the first week of the year saw a drop in demand for top primal cuts, rib and loin sections, with prices falling and an increase in demand for less expensive beef cuts, briskets, short plates and flanks, with increases in price. Consumers slowed going out to eat for holiday parties and buying for home celebrations. Consumers shifted and opted for cheaper beef to offset December holiday spending. During the first week of January 2024 choice boxed beef prices dropped $8.18/cwt and select beef was $1.41 lower, indicating consumers’ desire for cheaper beef.
Lean Hogs
January 2024 began with above normal temperatures and very little precipitation. But conditions quickly changed to blowing and drifting snow with subzero temperatures on January 9. With hogs raised in confinement and out from the harshest weather, there became a problem moving hogs to a packer. Many roads throughout the Midwest were closed for three to four days. Producers also did not want to move hogs in subzero temperatures.
Stock Index Futures
Stock index futures have been very strong this year, including recent record highs for S&P 500, NASDAQ and Dow futures. However, there was selling when the January consumer price index came in at up 0.3% when a gain of 0.2% was expected, and the January consumer price index, excluding food and energy, was up 0.4% when an increase of 0.3% was anticipated.
US Dollar Index
The U.S. dollar has been strong in 2024, which coincides with the consensus view that the Federal Reserve may be slow to reduce its fed funds rate this year. Also, economic reports have held up relatively well. For example, nonfarm payrolls in January increased 353,000 when up 170,000 was expected, and private payrolls were up 317,000 when an increase of 142,000 was anticipated. The unemployment rate was 3.7% when 3.8% was forecast.
Euro Currency
The euro currency topped in late December and recently declined to its lowest level since November, 2023. Economic reports have been mostly weaker than anticipated. Germany’s industrial production declined more than anticipated in December, posting the seventh consecutive month of falling output. Output declined 1.6% compared with the previous month, from an upwardly revised 0.2% drop in November. This compared with a forecast of a 0.3% contraction. For the entire year of 2023 industrial production fell 1.5%.
Crude Oil
Crude oil prices are edging higher due to growing tensions in the Middle East and by OPEC’s optimistic demand growth forecast, along with a dip in U.S. fuel stocks. OPEC’s report predicted an increase in global oil demand through 2024 and 2025. U.S. gasoline and distillate fuel stockpiles saw significant declines, surpassing analysts’ expectations, which was also supportive. However, gains were limited by U.S. crude oil inventories increasing by a larger-than-forecast 8.52 million barrels, reflecting reduced crude oil consumption and fuel production due to refinery downtime.
Gold
Gold futures drifted lower in February in response to U.S. dollar strength. In addition, prices quickly declined when the January consumer price index came in at up 0.3% when a gain of 0.2% was expected. The January consumer price index, excluding food and energy, was up 0.4% when an increase of 0.3% was anticipated.
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