Global Commodities Newsletter March 2022

Market Outlook for US and South America Regions

Read full March edition HERE

Grains

The USDA’s March report was neutral for corn, positive for soybeans and negative wheat prices. Grain futures are becoming more volatile as the geopolitical uncertainties remain, and the increase in China’s Covid cases could reduce commodity demand, especially for crude oil.

Live Cattle

Cattle and beef prices fell in February. Often February is a weak month for beef prices as consumers pay off credit card bills from the December holidays. They have higher home heating expenses and they go out to eat less during the winter.  Demand for beef drops especially for the expensive cuts such as steaks and roasts. However, in February 2022 another factor became a consumer concern; inflation. By February 2022 it was estimated that retail beef prices increased by 22.0% over the past year.

Lean Hogs

Pork benefited from high beef prices in February 2022 and a lower than expected hog slaughter.  Consumers were shopping for meats with lower prices.  Pork sales, especially ground pork sales were up 11.0% over the same period a year ago. Inflation has seen pork prices move higher with gains of 13.0%  but compared with higher prices beef, pork is cheaper. Pork prices were also higher in February 2022 with the year to date  hog slaughter on February 28 at 8.0% less than the same period in 2021.

Stock Index Futures

Stock index futures continue to come under pressure due to the dominant fundamentals, which remain the geopolitical tensions in Eastern Europe and to a lesser degree hawkish major central banks, including the Federal Reserve. Federal Reserve officials discussed a faster timetable for raising interest rates this year.

US Dollar Index

In light of tensions in Ukraine, safe-haven flow of funds have supported the U.S. dollar, which recently traded at its highest level since May 2020. In addition, the hawkish Federal Reserve has underpinned the greenback. The U.S. dollar has been well bid despite indications of weakening growth in the U.S. economy.

Euro Currency

The euro currency weakened to its lowest level since May 2020 despite news that new orders for German manufactured goods increased 1.8% month-to-month in January of 2022, following an upwardly revised 3.0% gain in December and much better than market forecasts of a 1.0% advance.

Japanese Yen

The Japanese yen declined to a five-year low. There was pressure on the yen when a Bank of Japan board member said the Bank of Japan will maintain its accommodative stance to ensure the Japanese economy strengthens enough to bring the inflation rate to the BoJ’s 2.0% target.

Crude Oil

Crude oil prices have surged since mid-December reaching multi-year highs. Most of the gains are related to geopolitical factors. However, some of the strength can be attributed to  unexpected production gaps.  The U.S. benchmark oil’s nearly $30.00 drop over the past week has been partly attributed to hopes for successful peace talks between Ukraine and Russia.

Gold

Gold futures this month were sharply higher due to the precious metal’s safe-haven status amid ongoing geopolitical uncertainty. In addition, there are the increasing inflation concerns. Any 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. However, more recently safe-haven longs were liquidated  due to more positive developments on the outlook for Ukraine-Russia talks.

Market Outlook for China and Asia Regions

The key Chinese and Asian events over the last 30 days are China’s resilient export performance,  improving Korea, Japan’s manufacturing activities and Australia’s recovering service PMI.

The IHS Markit South Korea Manufacturing PMI rose to an eight-month high of 52.8 in February 2022 from 52.8 in January, marking the 17^th straight month of growth in factory activity. Output expanded at the fastest pace in seven months, boosted by car production and semiconductors