Global Commodities Newsletter May 2022

Market Outlook for US and South America Regions

Read full May 2022 edition HERE

Grains

Grain prices are adjusting to higher food, fuel and wage inflation. Commodity prices are also trying to adjust to higher demand versus lower supply. In May, the USDA left the U.S. 2021/22 corn carryout at 1,440. The USDA estimated the U.S. 2022/23 corn carryout to be near 1,360. Some feel U.S. corn export demand could increase U.S. corn exports to 2,750 mil bu versus the USDA’s 2,500. The USDA’s May U.S. corn yield of 177 was lower than expected. Late plantings could lower final acres and yield.

Live Cattle

Live cattle trading in April gave bulls and bears times to feel good about being in the market. For example, June 2022 live cattle, the most actively traded month in April on April 1, opened at 137.25 and dropped to 132.47 on April 6. By April 21 June live cattle moved off the lows to settle at $139.90. There was profit taking on April 21 the day before the April 22 bearish Cattle on Feed report and June ended the month on April 29 at $132.65. Traders and analysts did not expect 2.0% more cattle on feed as of April 1, and as many cattle placed.

Lean Hogs

Unlike the quiet cash hog and pork markets, lean hog futures were active in April. With April 2022 lean hogs moving to convergence with the cash hog market and settling on April 14, April lean hogs traded in a similar range of the cash. April lean hogs on April 1 opened at $102.10/cwt, dropped to $96.67/cwt low on April 5 and then closed the month’s trade at $99.87/cwt.

Stock Index Futures

In late March through early May stock index futures stair-stepped downwards as the dominant fundamentals prevailed. These were the geopolitical tensions in the Eastern Europe and the hawkish central banks, including the Federal Reserve.

US Dollar Index

The U.S. dollar index advanced to 20-year highs, as expectations of further Federal Reserve monetary tightening to combat inflation and fears of slowing global economic growth drove investors into the safety of the U.S. dollar.

Euro Currency

The euro currency trended lower from late April, as most economic reports came in weaker than expected. For example, the economic sentiment indicator in the euro area dropped by 5.4 points from a month earlier to 108.5 in March, which was below market expectations of 109. This was the lowest reading since March 2021, mainly due to plummeting consumer confidence.

Crude Oil

U.S. West Texas Intermediate crude oil futures are trading near seven-weeks. The catalysts behind the rally are declining Russian oil production, the European Union’s ongoing push for a ban on Russian oil imports that would tighten supply and the possible easing of lockdowns in China that would drive demand higher.

Gold

Gold futures have trended lower since mid-April due to the sharply higher U.S. dollar and the hawkish Federal Reserve. There has been some support due to the precious metal’s safe-haven status amid ongoing geopolitical uncertainties. 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.

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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