Written Commentary
CLOSING COMMENTS
Macroeconomics:
The market has adjusted their opinion on the outcome of the upcoming Fed meeting in December. Following the presidential election last week and the increased economic optimism the market has lowered their expectations of further cuts now through 2025. There are 9 Fed meetings between now and the end of next year. With talk of a blanket 10-20% tariff on all US imports and an additional 60-100% tariff on all Chinese goods, some believe this could be inflationary and may cause headwind. Currently, by July of 2025 the Fed is expected to cut between 50 and 100 basis points. The DOW, S&P 500 and NASDAQ are taking a step back from their post election rally today. The dollar is up again today trading at 12 month highs and nearing levels seen in June of 2023.
Ag Fundamentals:
Winter wheat crop conditions improve from 41% good/excellent to 44% week over week. Corn and Soybean harvest near their end in the US as corn is reported at 95% and beans at 96% harvest. Malaysian palmoil futures had one of its worst days in months as it’s premium to crude oil leads some to believe Indonesia’s government will drag their feet on the B40 blend rate policy taking place in 2025. Soybean oil is down -1.80+ today alongside Malaysian palm oil’s decline overnight. Soybean futures also dropped with little concern for South American weather, and the 110K MT flash sale of corn to Mexico this morning was not enough to keep corn in the green. Both Argentina and Australian wheat offers are getting more aggressive as yield estimates are reported slightly higher than expectations. Australia is expected to export up to 25 million MT of wheat this year, but could see that increase if production estimates are raised. Rains over the next 10 days in major Aussie growing areas could slow harvest and possibly lower test weights.
The Fed Watch Probability has shifted closer to a 50/50 chance of another 25 basis point cut or zero cut on December 18th.
The RealClearMarkets Economic Optimism Index is up 13.4% following the US election, now at 53.2. This is a key measure of consumer confidence and is currently at the highest level in 3 years.
Australia’s Wheat Crop Calendar below shows they are partially through their wheat harvest season. Australia is projected to produce 32 million MT of wheat this year, up 6 million MT from last year. Export expectations are 25 million MT up 5 million from last year. China bought 500K MT of Aussie wheat this morning.
Australia’s Growing Regions are below accompanied by the 10 day precipitation anomaly map.
Australia Production Estimate for this harvest is similar to 2017 and 2021. The continent averages 23.7 million MT per year for the last 10 years.
NASS Winter Wheat Crop Conditions Ratings
Winter Wheat Crop Conditions improved 3 points good/excellent week over week. Missouri leading the charge higher, followed by Arkansas Kansas and Illinois. The “Wheat Belt” is still in the redbut has time to improve before red flags are raised.
Corn and Bean Harvest Progress
Corn Harvest in the US added 4% from last week and is 11% ahead of the 5-year average. All states aside from Colorado will finish ahead of pace this year due to favorable working weather this fall.
Soybean Harvest progressed 2% from last week and is reported 4% ahead of the 5-year average. Only 2% ahead of the pace this time last year, but rains over the last week slowed pace slightly. Some farmers are probably happy they dragged bean harvest into this last week with rains improving their average moisture numbers.
Calendar Spreads
Spread | Last | Chg | Full | % of FC |
CZ24/CH25 | -11 3/4 | +1 | -31 | 38% |
SF25/SH25 | -12 | +1 | -26 1/4 | 46% |
SH25/SK25 | -12 3/4 | +3/4 | -27 1/4 | 47% |
SF24/SN25 | -36 | +2 | -80 1/4 | 45% |
MWZ24/MWH25 | -22 3/4 | -2 1/2 | -30 1/4 | 75% |
WZ24/WH25 | -14 3/4 | +1/4 | -24 | 61% |
KWZ24/KWH25 | -14 1/4 | – 3/4 | -23 3/4 | 60% |
Cost of Carry
Corn spreads are back trading within the range we saw between late February and June of this year. US harvest is essentially complete and it is now up to the producer to sell the remaining 60% of their corn crop. Stair stepping bean spreads from now until July seems to be the best play as South American weather foreshadows a solid start to their growing season.
Daily Trading Limits: Corn $0.30 (expanded $0.45); Soybeans $0.85 (expanded $1.30); Minneapolis Wheat $0.60 (expanded $0.90); KC Wheat $0.40 (expanded $0.60); Chicago Wheat $0.40 (expanded $0.60)
>>Interested in more commentary by Joe Mauck? Go HERE
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