MONTHLY FUTURES MARKET OVERVIEW
Read the full December 2023 Edition HERE
In December the USDA cut corn stocks 25 mil. as a result of higher exports. Ending stocks at 2.131 bil. bu. were slightly below expectations. Global stocks were basically unchanged at 315.2 mmt, which is roughly 2 mmt above expectations. The USDA left both Brazil and Argentine production unchanged at 129 and 55 mmt respectively. They increased production in Ukraine and Russia by 1 mmt each, while lowering production in Mexico by 1 mmt. Ukrainian exports rose 1 mmt to 21 mmt. No changes to China’s import forecast at 277 mmt. Although I was expecting stocks to remain unchanged I’m not shocked to see the modest 25 mil. bu. cut given the current pace to exports and the fact U.S. corn is priced below SA thru Feb-24.
Live cattle futures topped at historic contract highs on September 19, 2023 and then went into a steep decline. The contract high for December 2023 live cattle was $192.05. By October 31 prices dropped to $182.30 and continued to collapse throughout November to $169.10 by month-end. The drop in cattle prices was caused by several reasons, including slowing beef demand because of high retail beef prices for consumers in the U.S. and the slowing of beef exports with higher beef prices in the U.S. compared to prices and more available beef supplies in Brazil and Australia.
An increase in U.S. hog slaughter continued to pressured prices in November. U.S. federal hog slaughter has increased throughout 2023, and as of the beginning of November 2023 year-to-date slaughter was 1.5% more than the same period in 2022. During November 2023 slaughter increased to be 1.6% higher with 1,801,000 more hogs year-to-date. The CME lean hog index began November at $76.84 and by month-end the lean hog index was $71.35. Hog prices were also affected by a downturn in international prices and supplies. There was news from China on November 27 that Chinese hog futures posted record low prices, and the USDA reported hog production in Brazil was up 3.12% in 2023 to record high production.
Stock Index Futures
Stock index futures advanced, including a new record high for Dow Jones stock index futures, due to the Federal Open Market Committee’s 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 next year. Most officials penciled in three interest rate reductions in 2024 in economic projections released after the Fed’s policy meeting on December 13.
US Dollar Index
The U.S. dollar index quickly dropped to a four-month low due to the FOMC statement and Federal Reserve Chair Powell’s press conference. Severe technical damage was done to the greenback in November when major trendlines were penetrated on the downside as economic reports reinforced beliefs that the Federal Reserve has reached the end of its tightening cycle.
The euro currency trended higher since early October and into December. There has been some profit taking in early December. However, the uptrend for the euro resumed in light of changing interest rate differential expectations.
Crude oil futures increased to near the $73 per barrel level and were on track for the first weekly gain in two months. Much of this was due to dovish signals from the U.S. Federal Reserve, a weaker U.S. dollar and an improving forecast for global oil demand in 2024. Earlier this week, the U.S. central bank strongly hinted at possible interest rate reductions in 2024, pressuring the greenback, while boosting risk assets.
Gold advanced to a record high on December 4 in a spike to the upside move. Much of the gains were given back since then, although there was renewed buying in light of the Fed’s tilt to the dovish side. The yellow metal was underpinned by a weakening U.S. dollar and declining Treasury yields after the Federal Reserve signaled three rate reductions in 2024 amid a faster-than-anticipated decline in inflation. Fed Chair Jerome Powell said that a discussion of a reduction in borrowing costs is coming “into view.” Stronger than expected U.S. retail sales and a decline in weekly jobless claims did little to change rate cut expectations.
Interested in more futures market commentary? Explore our Market Dashboards here.
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.
ADM Investor Services International Limited, registered in England No. 2547805, is authorised and regulated by the Financial Conduct Authority [FRN 148474] and is a member of the London Stock Exchange. Registered office: 3rd Floor, The Minster Building, 21 Mincing Lane, London EC3R 7AG.
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.