Commodities Overview Dec 2022 Edition

MONTHLY FUTURES MARKET OVERVIEW

Read the November 2022 Edition HERE

Grains

The USDA made few changes in its December report. Since the report, soybean and corn futures have trended higher on concern about Argentina weather. Wheat prices have dropped on lower Russian prices and the extension of the export corridor in Ukraine  In 2022, March soybean futures rallied to 15.72 on U.S. weather worries, dropped to 12.99 on demand concerns and since traded between 14.00 and 15.00. March soymeal trade between 375-425 until the EPA biofuel mandates were less than expected. March soymeal then rallied to 469 on the liquidation of the long soyoil and short soymeal spread.

Live Cattle

With the heavy demand and price increase for the seasonal beef cuts, the cattle rally beginning in October had cash cattle and live cattle futures up in November. On November 1 the average cash steer price was $151.92/cwt. By November 15 the price was $152.83/cwt and was $156.10/cwt on November 30. Live cattle futures climbed and were closely correlated to the beef and cash cattle markets.

Lean Hogs

November 2022 saw cash hogs, lean hog futures and pork prices dropping throughout the month. Lean hog futures had a big rally in October 2022 from a low on October 4 to the high on October 21 for December 2022 lean hogs. However, when the high was made in October, prices began to decline in November.

Stock Index Futures

The technicals for stock index futures are improving. The bottom for S&P 500 futures took place on October 13 when there was a one-day reversal pattern and prices have been higher ever since. Also, major downtrend lines have been penetrated on the upside. Most recently a downtrend line that started in March was taken out on the upside on December 13. This breakout to the upside was short-lived, however. Prices declined when the Federal Open Market Committee policy statement on December 14 was more hawkish than many analysts had expected.

US Dollar Index

The U.S. dollar index declined to its lowest level since late June due to speculation about a possible Federal Reserve policy shift. The U.S. dollar has underperformed in the last three months as interest rate differential expectations have turned against the greenback.

Euro Currency

Pressure on the euro in September was linked to a growing disparity between the European Central Bank and Federal Reserve policies. However, all of this has changed in recent months as the euro has been able to sharply advance against the U.S. dollar. Much of the reversal is due to increasing speculation that the Federal Reserve will implement a less hawkish policy stance.

Crude Oil

Crude oil prices peaked on November 7 and then fell to just above 71.00 by December 9. Much of the pressure was linked to fears of a potential global recession-driven demand downturn, which continued to hang over the market. Investors remain worried about a looming recession in the US, with a hawkish Federal Reserve signaling that interest rates will go higher for longer.

Gold

After falling under a double bottom at 1635.00-1636.00 area on the daily chart on November 3 February futures bottomed  at 1632.40. The subsequent rally took prices to 1836.90. Much of the strength in gold can be explained by a sharply declining U.S. dollar and increased speculation that the Federal Open Market Committee will be less hawkish going forward.  However, prices declined when the FOMC at its December 14 policy meeting indicated higher-for-longer interest rates than most investors were hoping for after recent inflation data.