Commodities Overview August 2022 Edition

FUTURES MARKET OVERVIEW

Read full August 2022 edition HERE

Grains

The USDA’s August report was neutral for corn and wheat and negative for soybeans. Grain prices adjusted to feelings that U.S. central Midwest weather is normal and demand for U.S. corn, soybeans and wheat is below pace to tighten the U.S. carryout. Commodity prices are also trying to adjust to the higher U.S. dollar and lower energy prices. China continues to be a major influence on soybean and soyoil prices. The Ukraine export situation is also causing increasing volatility in corn and wheat prices. Indonesia and Malaysia supply, and reduced demand from China appears to be increasing volatility to world vegoil prices.

Live Cattle

In July 2022 packers drastically changed how they priced cash cattle. There often is a price difference between finished cattle in the Southwest and the Midwest from $2.00/cwt to $4.00/cwt with higher prices paid for Midwest cattle. However, in July packers showed they were desperate for heavier high grading cattle and proved it and paid much higher prices for the cattle grading high choice and prime and weighing 1,400 pounds to 1,500 plus pounds in the Midwest.

Lean Hogs

There is a very good reasons why lean hogs rallied in July 2022, and the reason hogs have been high throughout 2022. The lack of hogs, and compared to beef and poultry, pork is cheap and in demand in the U.S. At the end of July 2022, the U.S. federal hog slaughter year to date was down 3.7%, to  2,747,000 head. The U.S. hog market has yet to recover from the liquidation during the spring of 2020 because of the COVID 19 pandemic. The news in 2020 was about hog euthanasia but the long term effect was the breeding stock slaughtered and producers not replacing it. Another reason breeding stock has not been replaced was the high grain and feed prices from the summer of 2021 followed by the big move up in 2022, finally spiking in mid-May 2022.

Screen trading

Stock Index Futures

Stock index futures advanced to four-month highs in August despite Federal Reserve officials discussing a faster timetable for raising interest rates this year. Federal Reserve officials’ comments have remained hawkish in recent days despite last week’s reports that the rate of inflation as measured by the consumer price and produced price indexes may have peaked. Several policymakers have pointed out that a dovish pivot is unlikely.

US Dollar Index

The U.S. dollar index advanced to a 20-year high in mid-July as interest rate differential expectations drove the greenback higher. Most of the strength was linked to Federal Reserve officials indicating a readiness to take more aggressive steps to bring inflation under control as most inflation measures have come in hotter than expected.

Euro Currency

The euro currency declined to the lowest level in 20 years in July, falling towards parity against the U.S. dollar. Pressure on the euro was linked to a growing disparity between the European Central Bank and Federal Reserve policies, economic and political concerns, which could make it more difficult for the European Central Bank to tighten monetary policy.

Crude Oil

Crude oil prices topped in early June, falling from the 115 area toward their lowest in three months to near 85. Much of the weakness is linked to falling global demand.  The market fell sharply as a result of weak U.S. housing and manufacturing data that some economists say point to recession.

Gold

Gold futures trended higher since mid-July as some of the fundamentals turned more favorable. The U.S. dollar came off its highs. Gains have been limited more recently as Federal Reserve officials have ramped-up their hawkish rhetoric.

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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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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