Written Commentary
SOYBEANS
The soy complex is reversing course from Friday’s break and starting the week stronger. Part of the strength comes from a Washington Post report that President-elect Trump is exploring placing widespread tariffs on numerous countries, but the tariffs would only apply to “critical” imports. The news pushed the US dollar down sharply overnight and boosted commodities. In addition, the Buenos Aries Grain Exchange says the dry down in Argentina, especially in the southern crop areas, is a concern after crops had a good start and 93% of the crop is planted. In Brazil, Mato Grosso do Sul and Parana will see the lightest precipitation over the next 2 weeks, and beans are filling in those areas. However, the rest of the country will have very favorable crop conditions.
SOYBEAN MEAL
Soybean meal prices had a sharp selloff at the end of last week and are seeing a minor rebound to start the first full week of the trading year. Arctic temperatures and heavy snow moved into the Midwest over the weekend, and soy processing operations will likely feel the impact. Heavy snow can obstruct truck and rail deliveries of beans to the plants and the shipment of processed products to customers. Transportation disruptions can also raise freight rates, increase operational costs for processors, and create staffing shortages as workers may be unable to commute to the plant. The bottom line is that the crushing industry will likely feel some impact and logistical challenges due to the weather.
CORN
Friday’s pullback held 200-day moving average support, and prices are bouncing back to start the week. A significant overnight downswing in the US dollar has provided added support after a Washington Post report that President-elect Trump is considering placing tariffs only on ‘critical’ imports. In other friendly news, the Buenos Aries Grain Exchange says after the good crop start in Argentina, net drying is becoming a concern as 87% of the crop is now planted. In addition, the Rosario Grain Exchange says the Buenos Aries and Santa Fe regions had only 35 mm of rain in December compared to the average of 110 mm. In Brazil, most of the country will see favorable conditions for the next 2 weeks except for Rio Grande do Sul and Parana, where precipitation will be much lighter. ANEC lowered Brazil’s December bean exports to 3.62 million tonnes, down 480,000 from last week’s forecast.
WHEAT
March Chicago wheat made a new contract low on Friday in anticipation of beneficial snow across parts of the southern Plains. Snow did fall across central and eastern Kansas over the weekend, and the 8 – 14 day outlook shows precipitation chances in Oklahoma and Texas. Open interest rose nearly 12,000 contracts on the break, which is typically a bearish sign.
CATTLE
February live cattle rallied sharply early in the session Friday but fell back to close only modestly higher. The market did not get a reversal down or other bearish technical signal, and the long-term trend remains up. However, the long tail left on the daily chart Friday could result in a minor pullback this week, especially now that the winter storm across the Midwest will be winding down in the cattle feeding areas.
HOGS
February hog prices fell early in the session Friday and hit their lowest level since October 15 but rebounded to close slightly lower on the day. However, prices did make lower lows and lower highs each day last week after the chart breakdown last Monday, and the technical picture still points lower. Longer-term 200-day moving average support on February hogs comes in at 78.87 and 50% retracement back down to the August lows stands at 78.47.
MILK CLASS III
January Class III milk finished on Friday with a mild weekly gain after reaching a new contract high earlier in the week.
The USDA reported that farm-level milk production is steady in the East and Central regions and improving in the West region. Protein and milkfat levels remained strong throughout 2024.
ENERGIES
Crude oil extended its recovery to a 3-month high before finishing Friday with a moderate daily gain and a sizable weekly gain. The market has kept within a tight early range as crude oil shook off early pressure and climbed up to a new high for the move. Saudi Aramco said that they will raise their crude oil selling price to Asian customers by 60 cents a barrel next month, which is higher than expected and provided an early boost to crude oil prices. China has made several positive moves to shore up its demand outlook since the start of this year. Although they have not fully soothed concern over the Chinese demand outlook, they helped crude oil to maintain upside momentum since late December. Middle East tensions and the Ukraine/Russia conflict continue to boost risk premiums in energy prices which has kept crude oil near the January highs. Thursday’s EIA report featured a weekly drawdown in US crude oil stocks that supported energy markets, with PADD 3 (Gulf Coast) crude stocks at their lowest levels since December 2022.
The natural gas market turned sharply to the downside and closed Friday with a heavy daily loss and a negative weekly result. However, natural gas pivoted back to the upside and rose sharply early in today’s action as it has fully retraced Friday’s loss. There has been a significant change in the weather outlook for the US, as the latest 8 to 14-day forecast has below-normal temperatures across most of the lower 48 states.
COCOA
At the end of last week March cocoa managed to hold support at even number pricing of $11,000 and that level becomes key support early in the new trading week. Fortunately for the bull camp, Friday’s high was taken out early today as the market could have faulted in the face of stronger-than-expected Ivory Coast arrivals.
COFFEE
As in other markets we suspect trading volume will return with the passage of the holidays with the overall bias in coffee remaining up off the concept that supply will struggle to meet demand again for the 4th straight year. For now, the market appears range bound waiting for the outcome of weather in key growing regions. Over the past few weeks, there has been a shift towards wetter conditions over Brazil’s south Minas Gerais (their major Arabica growing region).
COTTON
After making a five-day high early last week cotton finished the week and year under pressure with the Friday close an eight-day low. While Cotton posted a fourth negative weekly result over the past five weeks the March contract did hold above extremely important support down at 67.48. So far this morning cotton has a tight inside-day range, and price action this week should be given more credence than action over the past two weeks.
SUGAR
Not surprisingly, sugar followed other markets in a sideways chop pattern ahead of and through the holidays. In fact, this morning March sugar sits just above the midpoint of a four week sideways consolidation bound roughly by 19.00 and 19.99. However, open interest has notably started to build since early December as if the trade sees prices under 20.00 as fundamental value.
METALS
February gold futures are lower in light of reports that the Trump administration is considering softer tariff measures.
March silver futures are higher with support coming from China’s optimistic economic outlook, as the country, the world’s largest silver consumer, recently committed to “more proactive” macroeconomic policies and lower interest rates in 2025 to boost economic growth.
March copper futures are higher and are trading at the highest level since December 16 and are now above a major downtrend line. Investors are reassessing China’s economic outlook, the world’s largest copper consumer.
EQUITIES
Stock index futures are higher across the board. Some of the strength today can be linked to reports that the Trump administration is considering softer tariff measures. The Washington Post reported that Trump’s aides are exploring tariff plans that would be applied to every country but would only cover critical imports.
CURRENCIES
The U.S. dollar index is lower today, retreating from the recent two-year highs. Today’s decline is due to reports that the new Trump administration is considering softer tariff measures, which was the catalyst for today’s flight to quality long liquidation.
INTEREST RATES
The December U.S. 30-year Treasury bond futures are lower and remain near the lowest level since November 2023. The yield on the 10-year U.S. Treasury note remained near 4.60% and is close to a seven-month high as markets continue to assess the extent of interest rate cuts the Federal Reserve may implement in 2025.
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