FUTURES MARKET OVERVIEW
Read the October 2022 Edition HERE
The USDA’s October report was bullish for corn, soybeans and wheat. The USDA’s new estimates of the U.S. 2022 soybean and corn crop yield and acres were below trade estimates. This suggested lower crops and carryouts. Commodity prices are also trying to adjust to talk of recession, a higher U.S. dollar and lower energy prices. China continues to be a major influence on soybean and soyoil prices. The Ukraine export situation is also causing increasing volatility in corn and wheat prices.
Live cattle trading in September was a repeat of how futures traded in August. Live cattle futures rallied at the beginning of the month, peaked going into the third week and fell to end the month similar to how live cattle traded in August. October 2022 live cattle, the lead month, on September 1 opened at $142.75/cwt, moved up to $146.77/cwt on September 20 and then dropped to $143.27/cwt to end the month for a gain of .52/cwt. Cash cattle markets traded independently of the futures markets. The highest cash cattle prices were at the beginning of the month and dropped by the second week to drift sideways to close out the month just slightly better.
The August trading pattern carried over into September. Lean hogs had a market top on August 11, the day before August 2022 lean hogs stopped trading. August 2022 lean hogs on August 12 settled at $122.72/cwt and October 2022 lean hogs settled the day at $100.02/cwt. The spread difference between August and October was already wide and for the remainder of August into the first week of September 2022, traders continued to sell lean hogs. From August 12 through September 8, October 2022 lean hogs dropped to a low of $89.12/cwt and settled the same day at $92.12/cwt.
Stock Index Futures
Stock index futures quickly declined on news that the September consumer price index increased 0.4% when up 0.2% was expected. On an annualized basis the consumer price index was up 8.2% when a gain of 8.1% was anticipated.
US Dollar Index
The U.S. dollar index advanced to a 20-year high in mid-September 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 in early September, falling to below parity against the U.S. dollar. Pressure on the euro was linked to a growing disparity 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 bottomed in late September, falling to the 75.70 area before a rebound to the 92.30 level on October 10. Fears of a potential global recession driven demand downturn continued to hang over the market more recently. Investors remain worried about a deteriorating outlook for growth and demand due to intensifying macro headwinds, including high inflation and tighter financial conditions. Pressuring prices further were reports that the U.S. government would continue releasing crude oil from its reserves.
Gold futures declined toward the lowest levels in three weeks and remain under pressure from expectations that the U.S. Federal Reserve will continue raising interest rates aggressively to control inflation. In the latest Fed commentary, Minneapolis Fed Bank President Neel Kashkari said the central bank may need to lift its policy rate above 4.75% if “underlying” inflation continues to accelerate. Gold also continued to underperform as a safe-haven asset despite persistent inflationary pressures and mounting risks of a global recession, as rising U.S. interest rates drove investors to seek shelter in the U.S. dollar.
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.