Commodities Overview Jan 2023 Edition
- January 23, 2023
- ADMIS Research Team
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MONTHLY FUTURES MARKET OVERVIEW
Read the January 2023 Edition HERE
The January USDA report was a big bullish surprise to the market. After the report, corn, soybeans and wheat prices traded higher. March soybean futures rallied from 14.93 to 15.48. March soymeal trade between 474-487. March soyoil rallied from 61.89 to 64.75. March corn rallied from 6.49 to 6.88. March Chicago wheat advanced from 7.23 to 7.60.
A strong boxed beef market moved cash cattle prices and live cattle futures up in December 2022. Holiday beef demand had prices higher in December particularly the highest priced beef sections; choice rib and choice loin primals. From office holiday parties to home dinners, consumers forgot about inflation concerns and bought choice and prime rib roasts, loin roasts and steaks.
During December 2022 lean hog traders had conflicting fundamental news. Cash hogs on the CME lean hog index fell $3.15/cwt while the CME pork index fell into the middle of the month and then pulled off lows into the end of the year. The Hogs and Pigs report on December 23 showed all hogs as of December 1 were down 2% but kept for breeding unchanged with negative news that farrowing intentions were expected to up 1.0% to unchanged.
Stock Index Futures
Stock index futures advanced to five-week highs due to indications that global inflation is cooling. The December consumer price index declined 0.1% when unchanged was expected. The annualized consumer price index increased 6.5% when an increase of 6.6% was anticipated. This was the slowest annualized pace in 14 months. The December producer price index declined 0.5% when a decline of 0.1% was expected. In addition, there was support on ideas that major central banks may be less hawkish. Weaker on balance earnings from large banks only temporarily pressured futures.
US Dollar Index
The U.S. dollar index is lower despite recent hawkish comments from Federal Reserve officials. Much of the pressure on the greenback is linked to inflation reports that have come in weaker than expected which suggests the Fed cannot be as hawkish as their rhetoric suggests.
There was strength in the euro currency on news that the ZEW Indicator of Economic Sentiment for Germany improved sharply by 40.2 points from a month earlier to +16.9 in January 2023, returning into positive territory and remaining above market expectations of -15.0.
Since December, March 23 crude oil futures have traded in a range between 70.56 and 83.14. Recent strength is linked to hopes of a recovery in global demand. In its latest monthly report, OPEC sounded upbeat regarding the outlook for 2023, saying that demand for crude will increase by 2.22 million barrels per day, lifted by a recovery in economic activity among advanced economies. On the supply side, OPEC crude oil production increased in December, led by higher Nigerian output, despite the cartel’s agreement to lower production to support the market.
Gold futures have been supported by recent weakness in the U.S. dollar. After declining to under a double bottom pattern on November 3 there was no follow-through to the downside. Since the lows were made then, March gold futures advanced to the 1936.00 area.
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