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Global Commodities Newsletter Feb 2022

Market Outlook for US and South America Regions

Read full February edition here


Grain prices are adjusting to higher food, fuel, wage inflation and job shortages. Commodity prices are also trying to adjust to expectations that the Federal Reserve will raise interest rates in 2022. In February, the USDA left the U.S. 2021/22 corn carryout at 1,540. The USDA dropped the Brazil corn crop 1 mmt and left the Argentina crop unchanged. Further declines in 2022 South America corn supplies could increase U.S. corn export demand to 2,650 mil bu versus the USDA’s 2,425.

Live Cattle

January 2022 started out near contract highs for February 2022 live cattle at $144.20/cwt, but on January 4 traders reversed long positions and prices fell losing $5.17/cwt through January 24, 2022. There was a quick recovery from the January 24 low with February 2022 futures ending the month at $144.82/cwt. Live cattle futures tracked well with the cash market during January 2022.

Lean Hogs

Because of the COVID pandemic, liquidation and euthanasia in hogs and the extremely low prices in 2020 along with rising feed prices since the late summer of 2020, hog inventories have been dropping. As of January 28, 2022, year to date, U.S. hog federal slaughter was down 11.4%. Because of the drop in slaughter and rising beef prices in January, pork prices rallied. USDA pork carcass prices began January at $86.61/cwt and ended the month at $95.48/cwt.

Stock Index Futures

Futures trended lower in 2022 as Federal Reserve officials discussed a faster timetable for raising interest rates this year. Many market participants expect the Federal Open Market Committee will increase its fed funds rate six times this year with the first hike likely at the March 16 meeting

US Dollar Index

Since the beginning of the year, breakouts have not followed through in either direction for very long. There was only limited support due to flight to quality buying in light of tensions in Ukraine. Oddly enough, some pressure on the greenback took place soon after the Federal Open Market Committee ramped-up its hawkish rhetoric on monetary policy. Enhanced prospects of tighter credit policies are usually considered to be bullish for the U.S. dollar, which was not the case this time. The greenback only showed a limited bullish response to the ramped-up hawkish Federal Reserve rhetoric. This is an indication that the tighter credit policies from the Federal Reserve are currently factored into exchange rates. Expect a sideways trade for the greenback.

Euro Currency

The euro currency traded higher on news that the unemployment rate in the euro area declined to a record low of 7.0% in December of 2021 from a downwardly revised 7.1% in November, and slightly below market forecasts of 7.1%. Gains in the euro were limited due to a report that showed retail sales in Germany fell 5.5% in December, following a 0.6% increase in November.

Japanese Yen

The Bank of Japan made an offer for unlimited government bond purchases, moving to limit a surge in long-term interest rates. Japan’s central bank set the interest rate for purchasing 10-year government bonds at 0.25%. The market rate had risen close to that level recently on speculation the BoJ might begin reeling back its ultra-loose monetary policy to be in line with other central banks. The latest decision highlights the BoJ’s intention to keep interest rates low since inflation remains well below its target rate of 2.0%.

Crude Oil

Crude oil prices have surged since mid-December reaching multi-year highs. The reason for this is the unexpected production gap. So far for 2022 the oil market is short of product due to unexpected outages,  which have flipped from what was thought to be a pivot towards surplus into a deep production gap. Traders are watching the U.S.-Iran nuclear talks that could be bearish if an agreement is reached, and Russia’s possible invasion of Ukraine that would be bullish.


Gold futures are higher and may retest eight-month highs, due to the precious metal’s safe-haven status amid ongoing geopolitical uncertainty. In addition, there are the increasing inflation concerns. Any Ukraine conflict escalation will drive economic disruptions and more persistent inflationary pressures, which will lead markets to adopt a more risk-off mood and in turn, underpin gold prices.

Market Outlook for China and Asia Regions

The key Chinese and Asian events over the last 30 days are reduced manufacturing activities and industrial inflation. Japan’s GDP showed sharp growth in Q4, 2021.

In January 2022, due to tight measures to cope with the outbreak of COVID-19 infections in multiple cities, China’s factory activities eased. The CAIXIN China manufacturing PMI fell to 49.1 from last month’s 50.9, the lowest reading since March, 2020, indicating downward pressure. This was in line with the official manufacturing PMI, which dropped 0.2 percentage points to 50.1. Judging from the sub-indices of the Caixin Manufacturing PMI, both supply and demand  weakened. The production index fell back into contraction after recovering for two consecutive months, the lowest since September 2021.

Risk Warning: Investments in Equities, Contracts for Difference (CFDs) in any instrument, Futures, Options, Derivatives and Foreign Exchange can fluctuate in value. Investors should therefore be aware that they may not realise the initial amount invested and may incur additional liabilities. These investments may be subject to above average financial risk of loss. Investors should consider their financial circumstances, investment experience and if it is appropriate to invest. If necessary, seek independent financial advice.

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A subsidiary of Archer Daniels Midland Company.

© 2021 ADM Investor Services International Limited.

Futures and options trading involve significant risk of loss and may not be suitable for everyone.  Therefore, carefully consider whether such trading is suitable for you in light of your financial condition.  The information and comments contained herein is provided by ADMIS and in no way should be construed to be information provided by ADM.  The author of this report did not have a financial interest in any of the contracts discussed in this report at the time the report was prepared.  The information provided is designed to assist in your analysis and evaluation of the futures and options markets.  However, any decisions you may make to buy, sell or hold a futures or options position on such research are entirely your own and not in any way deemed to be endorsed by or attributed to ADMIS. Copyright ADM Investor Services, Inc.

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