Chicago Board of Trade Market News
Outlook
November US PPI came in above expectations at +.4% (+.2% expected). Producer prices were up 3.0% versus a year ago. Food prices surged 3.1% in November, energy up .2%. Food prices were led by a 55% jump in the price of eggs (bird flu outbreak). Producer prices ex food and energy were up .2% in November and are up 3.4% versus a year ago. Prices for goods are up 1.1% and prices for services are up 3.9% from a year ago. Nothing in this report changed the actions of the Federal Reserve in going with a 25-basis point rate cut which was announced on Wednesday. Some of the core numbers in the PPI numbers from Dec 12th are not going to affect PCE in a big way. But inflation, as was seen on Wednesday’s CPI number, is not yet dead and concerns about inflation will remain a part of the FOMC statements and future worries and decisions. Stock indexes on Wednesday sold off sharply, with the S&P 500 posting a 4-week low, the Dow Jones Industrials falling to a 6-week low, and the Nasdaq 100 posting a 2-week low. Stocks were hammered Wednesday afternoon, and bond yields soared even after the FOMC cut the fed funds target range by an expected -25 bp but signaled only 50 bp of rate cuts next year, fewer than 100 bp of rate cuts projected in September. The FOMC also raised its US GDP and inflation estimates for this year and next, suggesting a more restrictive monetary policy. Stock prices sank to their lows Wednesday afternoon when Fed Chair Powell said the FOMC will be more cautious as it considers further adjustments to policy.
The state statistical Bureau of China released 2024 Chinese crop production data and forecast a record grain harvest of 706 mmt, surpassing last year’s crop of 695.4 mmt. The 2024 Chinese corn crop was estimated at 294 mmt, up 2.1% from last year, and a new record. In 2025, China will allow and encourage the seeding of GM corn & soybeans, and the trade will be watching to see what happens to the size of China’s crops with the implementation of new technology.
China announced that it will halt the sale of corn from imported reserves to help prop up its domestic corn market that has seen declining prices. This strongly suggests that China will not be a large importer of 2024/25 corn with some private estimates suggesting 6-9 mmt versus the current WASDE estimate of 14 mmt. China’s 2024/25 wheat imports are forecast to drop to 6-8 mmt from the WASDE forecast of 11 mmt.
The Brazilian real has fallen to a record low 6.15 which is spurring farm sales of a looming record-large soybean crop and drops in soybean basis offers of 6-10 cents per bushel. US January soybean futures fell through weak support at $9.65/bushel and traded as low as $9.50/bushel on Wednesday and with the next major point of support being near the 2020 low near $8.05/bushel. Soybean meal is testing support near $280/ton and if that does not hold, may test market lows that have not been seen for a decade or more. USDA did report a private export sale of 120,000 mt of soybean meal to Colombia on Tuesday and meal sales this week are expected to be between 150,000 and 400,000 mt. Very strong soybean meal export sales are needed to stop the free-fall in soybean prices. Curtailment of used cooking oil (UCO) import supplies for biofuels could lead to more domestic crush for domestic soyoil supplies but also produces a veritable mountain of soybean meal that will need to find a home. The weakness in soybeans and soybean meal is bleeding over to the corn and DDG markets but DDGs remain a relatively good buy compared to soybean meal with the latest reported values showing a unit of protein costing $5.74 from DDGs and $6.03 from soybean meal.