Written Commentary
SOYBEANS
Friday’s USDA report tightened the US soybean balance sheet considerably more than expected on a surprisingly sharp yield cut and slightly lower harvested acres. Bean yields fell 4.8% in Indiana, 3.8% in Ohio, 7.9% in Kansas, and 4.4% in South Dakota. It seems the very low moisture conditions at harvest did take a toll on yield. Quarterly stocks were also under expectations. Implied usage for the quarter was up 13% year-over-year, and US ending stocks are now just 38 million bushels above last year. The bullish report should lighten farmer selling as producers see the potential for better prices.
SOYBEAN MEAL
Soymeal prices are higher to start the week following the strength in beans. The primary feature for the soy complex last week was the USDA January Supply/Demand and Quarterly Stocks report, which were surprisingly bullish for the bean market as yields were cut more than expected, which brought ending stocks down sharply.
CORN
Friday’s bullish USDA surprise was mainly due to a much larger yield cut than expected of nearly 4 bushels/acre (bpa) as dry conditions at harvest pulled yields down 11 bpa in Indiana, down 9 bpa in Kansas, down 6 bpa in Nebraska, and down 8 bpa in Ohio from the November report. US ending stocks are now significantly tighter than last season, and Q1 stocks indicated that usage for the quarter was a record high. In addition, the world corn stocks-to-use ratio was the lowest since 2014.
WHEAT
Wheat was left out of the bullish party Friday as USDA did not offer any surprises for the market. Winter wheat seeding was raised by 725,000 acres, but that was generally expected. Stocks were up 10% above last year, while usage was up 22%. On-farm wheat stocks were 467 million bushels, up from 401 million last year, and off-farm were 1.103 billion bushels, up from 1.020 billion last year. The US balance sheet was essentially left unchanged.
CATTLE
February live cattle finished strong Friday as strong cash trade and bullish technicals support the uptrend. Friday’s cash trade developed in the north at 202 – 204 and in the South at 200 – 201. The 5-area, 5-day weighted average for the week ended at 202.25, well above the previous week at 197.41. February live cattle prices look to be taking aim at the contract high from the fall of 2023 at 199.57.
HOGS
February hogs’ bullish turn higher last week pushed prices up for a strong finish on Friday. The gap higher last Thursday on strong volume may have been enough of a technical boost to move the market up to 50% retracement resistance at the late November contract high of 84.02.
MILK CLASS III
February Class III milk finished on Friday with a moderate weekly loss after reaching a new contract high earlier in the week. The USDA reported that farm-level milk production is steady to slightly stronger nationwide. Cold weather has farmers working to maintain cow comfort in the East and Central regions.
ENERGIES
March Crude Oil extended Friday’s rally overnight to trade to its highest level since early June. Brent crude traded above $80 for the first time in more than four months, and Mideast crude premiums are reportedly the highest since October 2023. The main catalyst for this rally has been a move by the US Treasury on Friday to impose wider sanctions on Russian oil, including on a couple of key gas and oil producers but also on 183 vessels that are part of the “shadow fleet” that has been used to ship Russian oil to India and China. This is expected to cause a severe disruption of supply to those countries and has reportedly left them scrambling for oil from the Middle East, Africa and the Americas.
March Natural Gas opened sharply higher overnight, at its highest level since June 13. The market has since sold off and appears intent on closing the overnight gap. Cold weather is expected to stick around for the next couple of weeks, which should allow for a more normal withdrawal from US storage. The NWS 6-10 day forecast shows a mass of much below temperatures covering the eastern Rockies, the Great Plains, and the Midwest and below normal temperatures elsewhere (except for southern Florida and Maine.) The 8-14-day is less extreme, but it still shows below normal temperatures dominating the lower 48, except for southern Florida and central California.
COCOA
March Cocoa was slightly lower overnight, as it continued to consolidate inside the December range. Ivory Coast cocoa arrivals for the week ending January 12 totaled 48,000 metric tons, down from 55,000 the previous week but up from 41,000 for the same period a year ago. Cumulative arrivals since the marketing year began on October 1 have reached 1.157 million tons, up 27% from 914,000 a year ago but down from 1.461 million for the same period in 2022/23. The trade is looking for a drop off in arrivals next month, as the dry weather of the past two months is expected to lower output. Reuters reported last week that while deliveries in Ghana had been running well above last season, dealers were saying they had begun to slow significantly.
COFFEE
March Coffee was higher overnight, trading to its highest level since December 26. A drier trend in key Brazil growing areas may be reawakening concerns about the 2025 arabica crop. World Weather Service said rain Friday through Sunday afternoon was a bit erratic, with some areas getting significant amounts while others saw only light amounts, resulting in some net drying.
COTTON
March Cotton traded in the lower end of Friday’s range overnight and was just barely holding Friday’s low this morning. The market saw heavy selling on Friday in the wake of the USDA monthly supply/demand report, which showed a significant revision higher in US production for 2024/25 and a jump in US ending stocks. US cotton production came in at 14.41 million bales, up from 14.26 million in last month’s update. Ahead of the report, the trade was looking for a decline from last month. Harvested area was lowered to 8.27 million acres from 8.63 million in December, but average yield was increased to 836 pounds per acre from 792 last month.
SUGAR
March Sugar sold off overnight and fell to its lowest level since August 23. Generally favorable weather in Brazil the past several months has improved the outlook for global supply. The USDA report on Friday put US sugar production for 2024/25 at 9.404 million short tons, up from 9.226 million in the December update and a new record. This was a result of an increase in beef sugar production to 5.338 million tons from 5.160 million forecast in December.
METALS
February gold futures are lower today after on Friday advancing to the highest level since December 12. Some of the recent gains can be linked to demand for safe-haven assets due to uncertainty surrounding the policies of the incoming U.S. administration.
March silver futures are lower today after on Friday advancing to the highest level since December 12. Much of today’s pressure on silver can be attributed to gains in the U.S. dollar.
On Friday, March copper futures advanced to the highest level since November 11. Much of the recent strength can be attributed to strong buyer demand.
EQUITIES
Stock index futures continued to trade lower on Monday following Friday’s declines in light of the stronger than expected U.S. December employment report. Pressure on futures is due to the belief that a strong employment situation will influence the Federal Open Market Committee to be slower to add accommodation. Traders will be closely watching tomorrow’s producer price index report and Wednesday’s consumer price index release.
CURRENCIES
The U.S. dollar index Is higher, extending Friday’s advance that was linked to the stronger than anticipated U.S. December employment numbers. The greenback traded at the highest level since level since November 2022 as traders scaled back expectations for Federal Reserve interest rate cuts this year.
INTEREST RATES
Futures are mixed today after declines on Friday that were linked to the stronger than expected U.S. employment data.
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