Midweek hits and the underlying feel to the market is risk off. There are ratcheting tensions between Russia and Ukraine. Then there is the lingering concerns about global recession and US recession.
In the equity market Wednesday gives us a glimpse at investor confidence which was better than some expected. The State Street Investor Confidence Index increased 0.5 to 76.5 this month. The increase came largely on the heels of a 5.7 increase in confidence in the Asian markets. The Asian index rose 5.7 to 92.5 this month. The North American index rose just a very modest 0.7 points to 73.1. The lack luster one of the group was the European index, which dropped 0.3 points to 102.2. On paper the European market continues to have the best confidence and the US market seems tied down by concerns of where the Federal Reserve will go with interest rates. The Fed FOMC will meet next week and most analysts believe they will raise interest rates 0.25%. The bigger looming question on all of this is do interest rates keep going up after that? The US is already at it’s debt ceiling and the US treasury is using creative accounting and money flow to keep paying bills. Secretary Yellen believes the US can do this until June then something will need to be done. If Congress acts and raises the debt ceiling the US will be paying more interest on it’s debt and will likely roll older debts into higher interest rate notes. The Fed is no longer buying those notes and that could cause interest rates to increase even more. That is compounding the money needed to just service the debt. So this may force the Feds hand to stop or lower interest rates sooner rather than later.
In the grain complex corn is under pressure on Wednesday, but soybeans and wheat are higher. Mike Zuzolo highlights really well in his midday market commentary why the market may once again be pricing in war risk premium. That comes as headlines circulated of a ship being hit with a missel in the Black Sea near a major Ukrainian port. Meanwhile India is pulling wheat from their state reserves to try and cool food inflation in the country. That Brings back some supply and demand concerns to the market.
For soybeans Brazil’s harvest continues to be a sticking point, but John Payne noted in his closing grain commentary that Brazilian farmers are well undersold as they are waiting for more favorable currency conditions. With the US dollar eroding the conditions may be starting to improve for the Brazilian Real and encouraging Brazilian farmer selling. That will likely cause a near washout of US beans in the global market as the more well supplied Brazilian beans hit the global market.
In corn US ethanol production increased to 1.012 million barrels per day. US ethanol stocks declined another 400,000 barrels to 23.4 million barrels. Soybeans still seemed to attract the buyers more and made corn the short side of spreads.
In the livestock complex cattle were higher on Wednesday. The cash market has yet to develop and seems to be holding the cattle market back. This could create a choppy pattern on the charts and encourage the bears to sell the market. The beef cutout also continues to decline in seasonal fashion. On the hog side the pork carcass is weak and it’s tough creating a bullish story for the market.
The fed cattle cash trade has been very quiet so far this week. Asking prices in the South appear to be $157, but there have been no bids from the packers at this point. The Fed Cattle Exchange also didn’t see any bids from packers on Wednesday.
For the week ending January 14, 2023, Imported Beef Passed for Entry in the U.S. totaled 50,759, 144.05% of the previous week and 119.19% of the 4-week average.
Daily slaughter estimates Thursday
126,000 hd today 120,000 hd wk ago 121,000 hd yr ago
491,000 hd today 434,000 hd wk ago 474,000 hd yr ago
Thursday Midday Carcass Cutout
Choice up 0.23 268.51
Select dn 0.15 251.65
C/S Spread 16.86
Carcass up 2.74 81.85
Bellies up 0.77 90.95
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 1-19