We come into the end of the week with higher interest rates and what feels like little else changed.
The Federal Reserve announced a 0.25% interest rate increase bringing Fed funds to 4.75% Wednesday after the conclusion of the FOMC meeting. This was expected by analysts and Chairman Powell’s comments following the interest rate hike did not spark fear in the markets. The general consensus seems to be the Fed will likely raise interest rates another 0.25% in March when they meet again. Then there is mixed thoughts if they will continue to raise rates after that later in 2023.
Economic data released on Thursday shows Non-farm productivity 3.0% year over year in the fourth quarter of 2022. That topped analyst estimates of a 2.4% year over year increase. Arlan Suderman notes that, “Increased productivity tends to come when workers worry more about keeping their jobs, and yesterday’s data did show a lower job-quit rate, suggesting that employees are feeling a bit less secure in the job market. However, productivity for the third quarter was also increased to 1.4%, up from the 0.8% originally reported. The higher productivity lowered unit labor costs increases. Those unit labor costs rose at an annualized rate of 1.1% in the fourth quarter, down from 2.0% in the third quarter and below analyst expectations of 1.5%, suggesting some easing in the upward pace of wage inflation at least as productivity increases.”
In the grain complex as of Thursday the US has the cheapest corn for export at ports, Brazil has the cheapest soybeans and Russia has the cheapest wheat. It should be noted that despite the fact the US was actually the cheapest for an Egyptian tender on corn, the Egyptians cancelled the tender for reasons unknown.
Export sales and shipments went the way of prices with the US selling nearly 1.6 MMT of corn last week and only 736,000 MT of soybeans. This could be an early sign that China is switching over to South American supply. Stone X released their latest estimates on Brazil’s harvest and continue to expect a near record soybean crop. The Safrina corn crop is in a little more question as extended forecasts don’t point to as favorable weather
In the livestock trade Wednesday set an interesting look to the week. After small, but steady gains in cattle Monday and Tuesday, Wednesday erased those gains and set a new weekly low on the charts for feeders and live cattle. Then on Thursday short covering or general optimism in the market tried to erase a good portion of those losses. It still leaves the vulnerability on the charts of the weekly low if momentum traders find a selloff.
Hogs continue to have technical support to the topside, but are not finding support from the cash market. The pork carcass cutout continues to be mixed and offers little movement for the market. China was absent from pork export purchases from the US this past week.
In the country the fed cattle cash market has been slow once again to develop this week. Southern cattle feeders are pushing for higher prices once again this week asking $158-$160 live. Packers have been extremely hesitant to put bids out this week.
For the week ending January 21, 2023, Imported Beef Passed for Entry in the U.S. totaled 47,401, 93.38% of the previous week and 108.83% of the 4-week average.
Daily slaughter estimates Thursday
125,000 hd today 126,000 hd wk ago 114,000 hd yr ago
490,000 hd today 491,000 hd wk ago 411,000 hd yr ago
Thursday Midday Carcass Cutout
Choice up 0.11 265.18
Select up 0.68 253.46
C/S Spread 11.72
Carcass up 2.86 81.81
Bellies up 7.66 96.38
Pre-opening grains with Mark Gold of Top Third Ag Marketing
Pre-opening livestock with Jerry Stowell of Country Futures
Midday market commentary with Mike Zuzolo of Global Commodity Analytics
Closing grain market commentary with John Payne of Hedge Point Global Markets No Audio 2-2