Market Outlook for US and South America Regions
Read full June 2022 edition HERE
The USDA’s June report was neutral for corn, soybeans and wheat futures. After the June USDA report, July soybean futures traded up from 17.84 to 16.82 and July corn went from 7.58 to 7.88. Grain prices are adjusting to higher food, fuel and wage inflation. Commodity prices are also trying to adjust to lower U.S. stock market trends.
Live cattle trading in May 2022 continued to see traders push prices lower. After the April 22 Cattle on Feed Report traders expected to see a large drop in placements but ended up with more placements. From the close on April 21 at $139.90 to May 31, June 2022 live cattle fell to $130.52. The May 2022 Cattle on Feed report also pressured futures with placements at 99% of 2021 and once again above what traders were expecting. But in May, live cattle futures and cash cattle prices traded independently.
Hogs in May started out continuing the drop in prices that began in late March 2022 but reversed off of the lows on May 12. With strength from the cash hog market and from a strong pork market, June lean hogs ended the month at $107.90/cwt. The U.S. hog inventory is and has been since March 2020 declining. In 2020, because of slowdowns due to COVID, hog prices plummeted causing massive slaughter and euthanasia of breeding sows and gilts. In 2021 and 2022 there were reports of Porcine Reproductive and Respiratory Syndrome, predominately in northwest and north central Iowa, Minnesota, and South Dakota, which reduced slaughter, but it is unsure of the total amount of hogs that have died.
Stock Index Futures
Futures declined 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 is the most since 1994 and Federal Reserve Chairman Powell signaled a similar move could come at the July 27 meeting. The FOMC’s vote to hike rates was 10-1, with Kansas City Federal Reserve President Esther George dissenting in favor of a 50 basis point increase.
US Dollar Index
The U.S. dollar index recently advanced to the highest level in 20 years. Most of the strength is linked to Federal Reserve officials indicating a readiness to take more aggressive steps to bring inflation under control. Most inflation measures have come in hotter than expected. For example, the May consumer price index increased 1.0% when up 0.7% was expected and the consumer price index, excluding food and energy, was up 0.6% when a gain of 0.5% was anticipated.
The euro currency depreciated to under the $1.04 level, due to mostly weaker than predicted economic reports. For example, The S&P Global euro zone construction PMI fell to 49.2 in May from 50.4 in April. The reading was the first contraction in the construction sector in nine months, and the sharpest since February of last year.
Crude oil prices have trended higher since the first week in April due to the combination of relatively good demand and limited supply hikes.
Gold futures have trended lower since mid-April due to the sharply higher U.S. dollar and the hawkish Federal Reserve. There has been some support due to the precious metal’s safe-haven status in light of ongoing geopolitical uncertainties. Any conflict escalation in Ukraine will drive economic disruptions and more persistent inflationary pressures, which will lead markets to adopt a more risk-off mood, and in turn, underpin gold prices.
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