Market Outlook for US and South America Regions
Read full July 2022 edition HERE
The USDA’s July report was positive for corn, negative for soybeans and neutral for wheat futures. After the July USDA report, September soybean futures traded down from 14.23 to 13.21 and September corn went from 6.37 to 5.82. Grain prices are adjusting to feelings U.S. central Midwest weather is normal and demand for U.S. corn, soybeans and wheat is below pace to tighten the U.S. carryout. Commodity prices are also trying to adjust to the lower U.S. stock market, the higher U.S. dollar and lower energy prices. Putin appears to be a major influence on world energy prices. China continues to be a major influence on soybean and soyoil prices. Ukraine exports, or lack of, are also impacting increasing volatility in corn and wheat prices. Indonesia and Malaysia supply, and reduced demand from China appears to be increasing volatility to world vegoil prices.
The United States is known for its grain fed choice cattle and cattle buyers in June proved it. June 2022 had a split between the Southwest and Midwest cattle marketing. It is normal to have a cash difference between cattle fed in the Southwest and the Midwest from $2.00/cwt to $4.00/cwt with higher prices in the Midwest. But during June 2022 the spread was uncommonly wide as the demand from packers increased for higher grading heavier cattle fed in the Midwest. While the cash spread increased, live cattle futures mostly overlooked the strength in the cash cattle market.
Long-Covid is a term for the lasting complications after becoming ill from Covid-19. For some people two years after the initial illness of Covid-19 total recovery hasn’t happen. The same can be said for the U.S. hog industry. The liquidation of hogs, breeding gilts and sows along with the severe drop in hog prices in March through June of 2020 caused a long-Covid affect for hogs into June 2022 and with expectations into 2023. To add to the long term effects of Covid-19 devastation on hogs, high feed prices in 2021 and escalating prices in February 2022 with the invasion of Ukraine added to high grain prices and the problem of the decreasing U.S. hog herd.
Stock Index Futures
Stock Index futures fell to new lows for the move in June as Federal Reserve officials discussed a faster timetable for raising interest rates this year. The Federal Open Market Committee at its June 15 policy meeting increased its target interest rate by 75 basis points, which was the most since 1994 and Federal Reserve Chairman Powell signaled a similar move could come at the July 27 meeting.
US Dollar Index
The U.S. dollar index advanced to a 20-year high as interest rate differential expectations drove the greenback higher. Most of the strength was linked to Federal Reserve officials indicating a readiness to take more aggressive steps to bring inflation under control as most inflation measures have come in hotter than expected.
The euro currency declined to the lowest level in 20 years, falling towards parity against the U.S. dollar. Pressure on the euro is linked to a bigger discrepancy between the European Central Bank and Federal Reserve policies, economic and political concerns, which could make it more difficult for the European Central Bank to tighten monetary policy.
Crude oil prices topped in early June, falling from the 115 area toward their lowest in three months to near 86. Much of the weakness is linked to falling global demand. The recent weekly EIA report that showed U.S. gasoline demand is struggling at lows around 8.7M bpd, which is not much better than in mid-2020 when Covid-19 was in full force and many people were not even leaving their homes.
Gold futures have trended lower since mid-April due to the sharply higher U.S. dollar and the hawkish Federal Reserve. There has been only limited support due to the precious metal’s safe-haven status in light of ongoing geopolitical uncertainties.
Risk Warning: Investments in Equities, Contracts for Difference (CFDs) in any instrument, Futures, Options, Derivatives and Foreign Exchange can fluctuate in value. Investors should therefore be aware that they may not realise the initial amount invested and may incur additional liabilities. These investments may be subject to above average financial risk of loss. Investors should consider their financial circumstances, investment experience and if it is appropriate to invest. If necessary, seek independent financial advice.
ADM Investor Services International Limited, registered in England No. 2547805, is authorised and regulated by the Financial Conduct Authority [FRN 148474] and is a member of the London Stock Exchange. Registered office: 3rd Floor, The Minster Building, 21 Mincing Lane, London EC3R 7AG.
A subsidiary of Archer Daniels Midland Company.
© 2021 ADM Investor Services International Limited.
Futures and options trading involve significant risk of loss and may not be suitable for everyone. Therefore, carefully consider whether such trading is suitable for you in light of your financial condition. The information and comments contained herein is provided by ADMIS and in no way should be construed to be information provided by ADM. The author of this report did not have a financial interest in any of the contracts discussed in this report at the time the report was prepared. The information provided is designed to assist in your analysis and evaluation of the futures and options markets. However, any decisions you may make to buy, sell or hold a futures or options position on such research are entirely your own and not in any way deemed to be endorsed by or attributed to ADMIS. Copyright ADM Investor Services, Inc.