Commodities Overview June 2024 Edition

MONTHLY FUTURES MARKET OVERVIEW

>>Read the full June 2024 Edition HERE

Grains

There was limited fresh data for the corn market from the USDA as it made no changes to the U.S. corn balance sheet for either 2023/24, or 2024/25 marketing year in the June-24 WASDE report.  Old crop stocks were left at just over 2.0 bil. bu. and 2.1 bil. for new crop.  I was surprised to see no changes for either Argentine or Brazil 23/24 production holding steady at 53 and 122 mmt respectively.  We were expecting a 3 mmt drop in Argentina. 23/24 world stocks at 312.4 mmt and 310.8 mmt for 24/25 were both in line with expectations. U.S. corn plantings moved along at a historically normal pace this spring.

The USDA increased 23/24 soybean stocks by 10 mil. bu. to 350 mil. due to a lower crush, which is in line with our expectation for a 15 mil. bu. cut in the crush. Exports for now, held steady at 1.70 bil. bu. The higher 23/24 stocks carried right through to 10 mil. higher for 24/25, up to 455 mil., which also was in line with expectations. Domestic bean oil usage was cut 200 mil lbs. (not due to biofuels), while exports rose 100 mil. lbs. Bean oil production was lowered slightly due to the lower crush forecast. There were a lot of changes to the 23/24 meal balance sheet with production down 250 thousand tons, imports up 50, domestic use down 500, while exports were increased 200.

The USDA raised its winter wheat production 17 mil. bu. to 1.295 bil., which was exactly in line with our pre-report estimate. HRW wheat production rose 21 mil. to 726 mil., SRW was lowered 2 mil. to 342 mil. with white wheat production down 3 to 226 mil. Old crop ending stocks were left unchanged at 688 mil., which was in line with expectations. The old crop export forecast at 720 mil. still seems a bit lofty to me. The higher WW production was more than offset by a 25 mil. bu increase in 24/25 exports resulting in ending stocks falling to 758 mil., which is roughly 25 mil. below expectations. The revised export forecast at 800 mil. bu. if realized would be the highest in four years.  Global stocks for 23/24 were revised up nearly 2 mmt vs. expectations for unchanged. New crop 24/25 ending stocks are forecast to slip to 252 mmt, which is in line with expectations.

Live Cattle

Live cattle and beef prices usually rally before U.S. holidays and for Memorial Day, May 27, 2024, both moved significantly higher. On May 1 June 2024 live cattle had a low price at $172.70. By May 15 the price moved up to $179.20 and on Tuesday, May 28, the day after Memorial Day, the price peaked at $184.62. Boxed beef prices also moved higher. On May 1 choice boxed beef was $293.92 and select beef was $288.94. By May 31 choice beef was up $19.90 to $313.82 with select beef gaining $13.06 to $302.00. Fewer cattle do account for higher prices with year-to-date federal slaughter on May 31 down 623,939 head.

Lean Hogs

Hog trading during May 2024 was simply a case that high priced June 2024 lean hog futures were overpriced compared to cash hogs. On April 10 June 2024 lean hogs peaked at $109.65 and then went into a steady decline. On May 1 June lean hogs settled the day at $100.42 with the CME lean hog index at $90.26. Either lean hog futures would fall, or cash hog prices needed to move up. A simple convergence had to happen.

Stock Index Futures

Stock index futures have been strong with S&P 500 and NASDAQ futures advancing to new historical highs. Futures continue to advance despite hawkish rhetoric from Federal Reserve officials. Recently Philadelphia Federal Reserve Bank President Patrick Harker said the U.S. Federal Reserve would be able to cut its benchmark interest rate once this year if his economic forecast plays out. In addition, Minneapolis Federal Reserve Bank President Neel Kashkari reaffirmed that it was a “reasonable prediction” to expect a single rate cut this year.

US Dollar Index

Interest rate differential expectations are offering no clear advantage either way for the U.S. dollar, since many central banks, including the Federal Reserve, are on track to lower interest rates.

Euro Currency

The euro currency recently came under pressure due to political uncertainties in the euro zone, especially in France. The European Central Bank cut its key interest rate by 25 basis points at its monetary policy meeting on June 6 as expected.

Crude Oil

Crude oil futures prices have been strong in June as declining U.S. crude inventories and an escalating conflict in the Middle East supported oil prices. Data released on June 20 showed U.S. crude stockpiles declined by 2.547 million barrels in the previous week, exceeding predictions for a two million barrel draw. U.S. gasoline and distillate stocks also experienced surprise drawdowns, suggesting strong energy demand.

Gold

August gold futures advanced to near the 2383 per ounce level, hovering at two-week highs.  This comes as mostly weaker than expected U.S. economic data reinforced the belief that the Federal Open Market Committee may reduce interest rates this year one or two times. In addition, there is some flight to safety buying in light of increasing geopolitical tensions in the Middle East.

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