This week’s action:
Corn March unch at $6.76
Beans March down 23 at $15.06
KC Wheat March up 4 at $8.44
Feeders March at down 1.825 at $180.975
Fats Feb down 1.225 at $156.625
Hogs Feb down .700 at $77.825
Crude Feb up 1.16 at $81.23
Corn Dec23 down 4 at $5.95
Beans Nov23 down 33 at $13.52
KC Wheat July23 down 2 at $8.35
Spot corn and soybean futures rallied to multi-month highs midweek but falter into weekend. The nearby Mar23 corn contract traded its highest level since mid-November (6.8875) while the nearby Mar23 soybean contract traded its highest level since mid-June (15.4850). The markets appeared to shrug off a wetter Argentina weather forecast and a poor NOPA crush report initially, but it looks like the early week action was a false upside breakout on March corn as we spent Thursday/Friday trading back to the 100-day moving average (6.7450). March bean chart is still friendly looking despite late week pressure, but corrections are oftentimes healthy and necessary (see below).
US ethanol production posted a sharp rebound last week. Weekly output of 1.008mil barrels per day was +6.9% on the week but -4.3% vs. the same week last year. This was the best weekly print since early December. Ethanol stocks were -1.7% on the week at 23.4mil barrels. The print was -1% vs. the same week last year. Ethanol stocks have fallen for three consecutive weeks are no longer at record seasonal highs. Implied US gasoline demand was +6.6% on the week but -2.1% vs. the same week last year. Demand is tracking 2021 closely, which is poor considering the COVID implications during that time (Jan 2021).
US acreage estimates are emerging. Farm Futures magazine conducted a survey of 560 US farmers from November 28th to December 30th. The survey indicated that US farmers plan to plant 90.5mil acres of corn in 2023 vs. 88.6mil in 2022, a projected increase of 2.2%. US farmers intent plant 88.9mil acres of soybeans vs. 87.5mil in 2022, an increase of 1.7%. All wheat acres are estimated at 48.8mil vs. 45.7mil last year, a projected increase of 6.8%.
Weeklong theme of rains falling over Argentina. From today through Tuesday next week, some key corn/soybean areas will see up to 2″ of rain. Accumulation continues through next week. Some areas will see up to 3″ or even 4″ locally between today and January 29th according to this morning’s Euro model. The extended GFS run calls for additional rains during the first few days of February, although these longer-term forecasts are generally unreliable.
Crude oil trades fresh multi-week highs this morning. The nearby Mar23 WTI contract traded above $82/bbl this morning for the first time since December 5th. The general hope is that Chinese demand will rebound amid the grand “reopening.” The Intranational Energy Agency projects a supply surplus in the first quarter, but a tightening later in the year. The group projects average demand to hit a record level in 2023. The Bloomberg Commodity Index has rallied 5.6% since bottoming on January 6th.
Inflation continues to decline. The US Bureau of Labor Statistics released monthly Producer Price Index (PPI) data yesterday. PPI measures inflation on the wholesale side.PPI rose at an annualized rate of 6.2% in December; this was the lowest annualized monthly print since March of 2021. Traders had expected a print of 6.8%. The annualized rate of wholesale inflation has declined for 5 consecutive months. The monthly decline of 0.5% was the largest since the start of the COVID pandemic. The biggest declines were noted in energy and food products. Lower inflation numbers should impact Fed decisions regarding interest rates and policy. Traders generally expect a 0.25% hike to the Fed Fund rate in February; there is no January FOMC meeting.
Something that Probably Means Nothing:
The US hit the “debt ceiling” yesterday. Treasury Secretary Janet Yellen told Congress yesterday that the US has reached its existing borrowing cap of $31.4tril. The government will use what it calls “extraordinary measures” to fund the government until at least June. These measures include suspending some investments and exchanges different types of debt. We’ll need a simple majority vote in both the House and Senate to increase the borrowing limit. “Raising the debt ceiling” does not authorize new spending; it simply allows government to spend money that has already been appropriated. The whole “debt ceiling” issue is mostly a political issue.
Breaking that $31.4 trillion debt down across the population, each citizen arrives at -$94,225 in the red while each taxpayer sits at -$246,867.
US mortgages rates have fallen to their lowest level since September. According to Freddie Mac data, the average rate for a 30-year fixed rate mortgage fell to 6.15% from 6.33% the week prior; this was the 2nd consecutive weekly decline. The housing market has undoubtedly cooled during the last year, as the cost of borrowing has nearly doubled. Bloomberg noted that buyers continue to face an uphill battle, “At the current 30-year average, a borrower with a $600,000 mortgage would pay roughly $3,655 a month, about $940 more than a year ago, when rates were 3.56%.”
Thanks and have a great weekend!