Commodities Overview May 2024 Edition

MONTHLY FUTURES MARKET OVERVIEW

>>Read the full May 2024 Edition HERE

Grains

Forecasts for strong demand without aggressive cuts yet to South American production made the May USDA WASDE data supportive for corn. Old crop 23/24 ending stocks were down 100 mil. to 2.022 bil. at the very low end of expectations and 80 mil. below the average trade guess. No surprises on 2024 U.S. production at 14.860 bil. with yield a record 181 bpa. New crop stocks were projected at 2.10 bil, if realized would be the highest in six years, were almost 200 mil. below the average guess. Usage at 14.805 bil was 100 mil above Feb-24 Outlook Conference Both crop years saw exports and usage for ethanol production up 50 mil vs. the previous forecast. Production cuts to South America were modest with Argentina and Brazil both down 2 mmt.

There was no change to old crop soybean ending stocks at 340 mil. bu., which was in line with expectations. 2024 production in the U.S. was at 4.450 bil. with a record yield at 52 bpa. New crop stocks are forecast to grow to 445 mil. 15 mil., which is above the average guess. Usage at 4.360 bil. was down 40 mil. from the Feb-24 Outlook Conference. Exports were down 50 mil., seed/residual down 15 mil., while the crush was up 25. Argentine production was unchanged at 50 mmt, while Brazil was lowered only 1 mmt to 154 mmt.

2023/24 wheat ending stocks fell 10 mil. bu. to 688 mil., which is slightly below the average trade guess. Higher exports accounted for the lower stocks. New crop ending stocks are expected to rise to 766 mil, however, down 20 mil. from expectations. All wheat production at 1.858 bil. was 30 mil. below expectations. Winter wheat production at 1.278 bil. was 30 mil. below expectations, yet within the range of estimates. Nearly 74% of the planted acres are forecast to be harvested for grain, which is well above the historical low of 67.3% a year ago. The average yield at 50.7 bpa is barely above 50.6 a year ago.

Live Cattle

Because COVID was a fast spreading pandemic, reports about viruses can frighten people and spook commodity markets. These fears influenced trading in the cattle markets in April. During the first week of April 2024 it was reported avian flu, H5N1, from migrating birds was detected in dairy cows in Texas and Kansas. Online agricultural websites to national and international newspapers reported there was cross contamination from birds to dairy cows and insinuated that H5N1 could spread to beef cattle, and eventually to people. By the end of April, avian flu was found in 9 states in 36 herds of dairy cows. The reports often referred to “cattle” and not dairy cows and live cattle and cash cattle prices dropped with the possibility that beef could carry the virus and it could infect people eating beef. The USDA and the Center for Disease Control the last week of April tested 32 samples of ground beef from store shelves in the U.S. for H5N1 and did not find the virus.

Lean Hogs

Strong pork exports and cheap pork prices were price-positive for hogs in April. Beef prices were off the March highs in April but when compared to pork it was high priced, and pork supplies were readily available unlike beef where U.S. cattle slaughter was down. In the first quarter of 2024 total pork exports including variety meats were up 6.0%. Pork muscle cut exports were up 8.0% and that was on top of 2023 when pork exports were up 9.0% for two solid years of pork exports. The strong exports were additionally good since U.S. hog slaughter at the beginning of April 2024 was up more than 270,000 hogs.

Stock Index Futures

Major stock index futures are closing in on record highs despite the mostly bearish producer price index and consumer price index reports for April. Producer prices increased much more than expected, at up 0.5% when a 0.3% increase was expected, while the consumer price index was close to expectations. Also, Fed Chair Powell’s comments at the Meeting of the Foreign Bankers’ Association did not offer any new clues.

US Dollar Index

The U.S. dollar index recently declined to a one-month low as mostly weaker than anticipated U.S. economic reports put pressure on the Federal Reserve to lower interest rates. There was only temporary strength when the larger than expected increase in the producer price index was reported.

Euro Currency

The euro currency advanced to its highest level in five weeks, as investors adjusted their expectations for interest rate cuts by major central banks. The European Central Bank is expected to cut rates at its meeting on June 6 with market forecasts suggesting a potential decrease of approximately 70 basis points over the year.

Crude Oil

Crude oil futures advanced to above the above $79 per barrel on May 16, extending gains from the previous day as a larger-than-expected decline in weekly U.S. crude inventories supported oil prices. EIA data showed U.S. crude oil stockpiles declined by 2.508 million barrels, falling for the second consecutive week and exceeding forecasts for a 1.362 million barrel draw. Weaker U.S. economic reports bolstered beliefs that the Federal Reserve will start cutting interest rates in September, which is boosting the demand outlook. Meanwhile, the International Energy Agency reduced its global demand growth forecast for this year by 140,000 barrels per day to 1.1 million.

Gold

Gold prices were only temporarily pressured by the larger than expected increase in the producer price index. Countering the influence of the bearish PPI report, many economic reports in the U.S. came in weaker than expected, including a series of weaker than anticipated employment reports, which analysts believe could put downward pressure on interest rates going forward.

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