Commodities Overview Jan 2024 Edition

MONTHLY FUTURES MARKET OVERVIEW

>>Read the full January 2024 Edition HERE

Grains

Last year’s record U.S. corn crop was increased another 108 mil. bu. to 15.342 bil. with the average yield rising to a record 177.3 bpa.  Harvested acres were cut by 500k acres.  Production was 115 mil. above expectations, however within the range of estimates.  December 1 stocks at 12.168 bil. was 118 mil. above expectations and up 1.355 bil. from a year ago.  The USDA raised usage 75 mil. bu. with a 50 mil. bu. increase for ethanol production with feed usage increased by 25 mil. bu.  Ending stocks increased 31 mil. bu. from the December estimate to 2.162 bil., which is roughly 55 mil. above expectations and the highest in five years.

Live Cattle

2023 will be remembered as the year cattle prices surged to historic highs. On September 19, 2023 December 2023 live cattle futures topped at $192.05. The highest futures price was for April 2024 live cattle trading to $199.82. A steep drop in cattle numbers throughout the year drove prices higher. By year end December 29, 2023, year-to-date U.S. federal cattle slaughter was down 4.2% or 1,414,000 head.

Lean Hogs

Increasing hog inventories moved hog prices down throughout 2023 and December 2023 was no different. December 29, 2023 was the last slaughter day and federal hog slaughter was up 2.1% year-to-date to 2,669,000 head. On February 21 and 22, 2023 December lean hogs topped at $85.50, by October 20,2023 December hogs fell to $65.40. The contract settled at $67.17 on December 14, 2023.

Stock Index Futures

Stock index futures advanced to a new record highs in December due to the Federal Open Market Committee’s December 13 dovish policy statement and Federal Reserve Chair Powell’s press conference. The Federal Reserve held interest rates steady and signaled inflation had improved more rapidly than anticipated, which opened the door to interest rate cuts in 2024.  Most officials penciled in three interest rate reductions in 2024 in economic projections released after the Fed’s policy meeting.

US Dollar Index

Economic reports were mixed. Nonfarm payrolls in December increased 216,000 when up 164,000 was expected, rising from a downwardly revised 173,000 in November. The consumer price index for December increased 0.3% when up 0.2% was expected. On an annualized basis the consumer price index was up 3.4% when a gain of 3.2% was predicted. The producer price index for December unexpectedly declined 0.1% when up 0.2% was expected. On an annualized basis the producer price index was up 1.0% when a gain of 1.3% was anticipated. The January Empire State manufacturing index was -43.7 when -4.7 was expected. The new orders index was  -49.4, which compares to  -11.3 In December.

Euro Currency

The euro currency topped in late December. Economic reports have been mixed. Germany’s seasonally adjusted jobless rate increased to 5.9% in December 2023, as predicted, which is a slight increase from November’s revised 5.8%. This was the highest rate since May 2021.

Crude Oil

Crude oil futures gained as the International Energy Agency raised its 2024 demand growth forecast to 1.2 million barrels a day from 1.1 million previously. The EIA reported a larger-than-expected decline in crude oil inventories, including a 2.1 million barrel draw at Cushing, Oklahoma. The IEA’s higher demand growth estimate was tempered by its expectation that oil supply will increase this year by 1.5 million barrels a day due to increased output by non-OPEC+ producers

Gold

Gold futures advanced in December due to a weakening U.S. dollar and declining Treasury yields after the Federal Reserve at its December13 policy meeting signaled three interest rate reductions in 2024 as a result of a faster than anticipated decline in inflation. Fed Chair Jerome Powell said a discussion of a reduction in borrowing costs is coming “into view.”

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