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Today we saw a quiet trading day with tight ranges.
In outside-commodity news, the USD$ has rallied to three-month highs after inflation data was released this morning. Inflation clocked in at 3.1% versus expectations of 2.9% while core inflation came in at 3.9% versus expectations of 3.7%. This result is raising fears that the Federal Reserve may keep rates high for longer than traders expected. Fed fund futures traded odds of a March rate cut down to 8% - half of yesterday's odds - with odds of a May cut dropping to 39%, down from 61% yesterday. Higher USD$ casts a bearish tone on the commodities markets, as it makes exports more expensive on a global scale.
Commodity deflation continues to be the theme of managed money for these grain commodities that are currently struggling to find a story, but grain traders are also increasingly nervous about the sheer size of speculative shorts in the markets in a world filled with geopolitical risk that could trigger a short-covering rally. Big shorts have already pushed this market hard. Farmer still has lots to sell on both side of the equator. That being said, downside momentum seems to be slowing.
Thursday morning’s January NOPA soybean crush is expected to come in at 189.9 million bushels, down from the single-month record 195.3 mbu in December but still a January high (up from 184.7 mbu in Jan 2021), and above 179.0 mbu last year. Trade estimates range from 184.5-196.0 million bushels.
USDA will provide early estimates for the upcoming crop this Thursday February, 15 at 7am during the Agricultural Outlook. Corn will be the main topic as analysts expect 2024/25 production to likely exceed 15 billion bushels - similar in size to 2023/24. Soybean and wheat production is also expected to rise.
South American forecasts are still show rain chances moving from north to south over the next two weeks, limiting concerns to parts of southern Brazil and Paraguay into the later 6-10 day time frame. Argentina has received good rain in the prior week which has helped ease some of the concern over hot and dry conditions negatively affecting the soybean crop.
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