Commodities Overview February 2025 Edition

MONTHLY FUTURES MARKET OVERVIEW

>>Read the complete February 2025 Edition HERE

GRAINS

The USDA left U.S. ending stocks unchanged at 1.540 bil. Bu. vs. expectations for a 15 mil. bu. drop.  The average U.S. farm price was raised $.10 to $4.35 bu. Global stocks were cut 3 mmt to 290.3 mmt, below the range of estimates. Production in both Argentina and Brazil was cut 1 mmt.  Chinese imports were cut 3 mmt to only 10 mmt. While the USDA report was mildly supportive due to the lower global inventories, the initial market reaction was lower. I suspect traders were disappointed not to see higher U.S. demand and lower stocks. Usage data since the USDA WASDE report has been strong, enabling spot futures to break through the $5.00 level for the first time since October 2023 on the spot weekly chart.

The USDA also left soybean ending stocks unchanged at 380 mil. bu., in line with expectations.  The average U.S. farm price was lowered $.10 to $10.10 bu. The balance sheets for both meal and oil were also left unchanged. Global stocks were cut 4 mmt to 124.3 mmt, below the range of estimates as Argentine production was cut 3 mmt and Paraguay cut .5 mmt. Production in Brazil was surprisingly left unchanged at 169 mmt. Chinese imports were cut 2.5 mmt to 8 mmt. Despite the lower global inventories, the markets initial response was also to the downside as the market likely anticipates higher Brazilian production in future reports. Even with South American production (Brazil, Argentina, and Paraguay) down 3.5 mmt from the previous month, combined production at 228.7 mmt is up 7.8% from last year’s previous record.

The USDA cut ending stocks 4 mil. bu. to 794 mil. due to increased usage for food. They kept the average farm price unchanged at $5.55 bu., $1.40 below the average price from the 23/24 MY.  Global stocks were cut 1.2 mmt to 257.6 mmt vs. expectation for no change. Global inventories remain at a nine-year low. Russian and Ukrainian exports were trimmed .5 mmt each, while they were lower by 1 mmt in the EU. Chinese imports cut 2.5 mmt to 8 mmt. The USDA made no changes to Australian production, waiting for an update next month from ABARE. Argentine production was raised only .2 mmt to 17.7 mmt. Tighter global supplies should continue to bode well for U.S. exports.

COCOA

The cocoa market has spent two months consolidating after trading at a record high on December 18. The West African main crop harvest got off to a strong start in October, but the emergence of drier than normal conditions (during the traditional dry season) in late 2024 lowered expectations. The arrival of timely rains in early February did ease grower concerns a bit, but a full-throated rainy season has yet to emerge, and this has traders reluctant to push prices lower. As of February 20, periodic rains were expected to continue, but there was still no generalized rain event in the forecast.

 

 

COFFEE

NY (arabica) coffee prices achieved all-time highs this year on the back of low expectations for Brazil’s 2025/26 coffee crop. A long, severe drought accompanied by excessive heat in 2024 set the stage for a poor outcome for 2025. The arrival of timely rains in late 2024 allowed for an active flowering season, but stress brought on by the drought may have deprived trees of enough energy to develop a strong crop. A dry trend has emerged over the past few weeks, which has raised concerns about cherry development. This is also an off-year in Brazil’s biennial production cycle. However, a weak off-year could lead to a strong on-year in Brazil’s production cycle. Early reports had strong branch growth, which could mean an exceptionally strong crop in 2026/27.

SUGAR

Sugar prices fell to their lowest level in almost two years in late January. Since then, they have rallied 18% off their lows. The peak of selling came amid news that India had decided to allow 1 million metric tons of sugar exports for their 2024/25 marketing year (October-September) after suspending exports in 2024/25 due to a disappointing crop. Reports that India may struggle to meet that quota have helped lift prices off their lows. There were reports that Indian sugar mills were shutting for the season earlier than normal, and some analysts have called for exports to top out at 700,000 tons, well short of the 1 million allowed.

CRUDE OIL

Crude oil has traded in a choppy, sideways pattern this month as the market has tried to reconcile tariff threats, a cease-fire in Gaza, sanctions on Russian oil and a drone strike on a Russian oil pipeline. President Donald Trump announced 25% tariffs on imports from Mexico and Canada on February 1 and postponed them for a month on February 3 after he was able to reach agreements with both countries on steps to block illegal immigration and the flow of fentanyl over the borders. Canada represents approximately 60% of all U.S. crude imports and Mexico 11%. Midwest refiners need the heavy, sour crude that Canada delivers, not the light WTI crude oil that is produced in the U.S. If enacted, the tariffs would increase the cost of gasoline and diesel in the U.S.

NATURAL GAS

After two years of running at a surplus to the previous the year’s levels, U.S. natural gas storage is back in a deficit scenario. Frigid temperatures in the U.S. have accelerated the seasonal decline in storage. With the latest cold snap affecting much of the lower forty-eight states this week, another sharp draw is expected in next week’s report. As of February 14, U.S. gas in storage was down 14.9% from a year ago and down 5.1% below the five-year average. Storage had reached its biggest deficit to year ago levels since June 2022.

LIVE CATTLE

Cash cattle prices in January 2025 made historical highs. Cattle prices moved up to $212.00/cwt for cattle in Iowa, Minnesota and Nebraska. Consumers quickly shifted from the December holiday demand for rib and loin roasts and demand quickly shifted like a U-turn for cheap beef cuts and ground beef.  Beef supplies were low going into the New Year because the two weeks of Christmas and New Years it is normal to have a light slaughter but in 2025, they were followed by a week of snow and subzero temperatures that added a third week of light slaughter. It was the “perfect storm.”  Cattle inventories were already down to lowest levels since 1951. Consumer demand shifted to inexpensive beef on top of a light slaughter.

LEAN HOGS

Lean hogs ended 2024 on a weak note. Pork exports dropped off in December as U.S. consumers were spending money on the holiday presents, holiday dinners, buying more poultry and cheap proteins like ground beef and ground pork. But during January 2025 pork and hog prices quickly moved higher. For example, February 2025 lean hogs moved up more than $11.00/cwt during January. Like cattle, there were three weeks of light slaughter with the last week of December and the first week of January impacted by severe weather. Also, hog prices benefited when cattle prices moved to historic highs, tagging along with soaring cattle prices.

STOCK INDEX FUTURES

U.S. stock index futures have remained firm despite the headwind of expectations that the Federal Open Market Committee will be slow to add to accommodation. Currently analysts are predicting the FOMC will remain main on hold at it’s March and May meetings. However, a 25-basis point interest rate cut is expected either at the June policy meeting.

US DOLLAR INDEX

Flight to quality longs in the U.S. dollar have been liquidated in light of hopes of a peace deal between Ukraine and Russia. This bearish influence has more than offset the bullish impact of interest rate differential expectations that remain favorable to the greenback, especially versus the European currencies. There was only temporary strength in the greenback when Federal Reserve officials signaled the central bank should refrain from rushing to resume interest rate cuts, while it remains focused on curbing inflation.

EURO CURRENCY

The euro currency has remained firm despite increasing probabilities of the European Central Bank cutting its key interest rates several times in 2025. It is predicted that the ECB is on track to reduce its deposit rate by 25 basis points at each of the next three meetings, lowering it from the current 2.75%. Predictions now suggest that rates could dip below 2% by 2026.

GOLD

April gold futures advanced to new record highs, as ongoing uncertainty over U.S. tariffs fuels demand for safe-haven assets. Since taking office, U.S. President Donald Trump has introduced a 10% tariff on Chinese imports, announced but later postponed 25% tariffs on goods from Mexico and non-energy imports from Canada, planned 25% tariffs on imported steel and aluminum, and is preparing reciprocal tariffs for countries that impose taxes on U.S. imports.

 

 

 

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