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Globe and Mail
24-04-2025
- Business
- Globe and Mail
Can Grain and Oilseed Prices Higher?
I concluded my Q1 Barchart analysis of the grain and oilseed futures markets with the following: As the grain and oilseed sector heads into Q2, the 2025 crop year begins with the planting season. The weather across the fertile plains in the U.S. and other growing regions will determine the path of least resistance of prices over the coming months during the planting and critical growing seasons. I favor the upside in grain and oilseed prices because of the current low price levels. However, another year of bumper crops that satisfy worldwide requirements could send prices lower. Meanwhile, low prices tend to cure those low prices in commodity markets. Risk-reward dynamics favor the upside for prices after the bearish price action since the 2022 highs. The current risk-off action caused by tariffs could impact grain and oilseed, and all agricultural commodity prices over the coming days, weeks, and months. Corn, soybean, and CBOT wheat futures have increased since March 31, 2025, but they are not running away on the upside. The April WASDE was not bearish I contacted Jake Hanley at the Teucrium family of agricultural commodity ETF products for his opinion about the USDA's April 10 World Agricultural Supply and Demand Estimates Report. Jake told me: Grains overall have been holding up relatively well amid the chaos in outside markets. We've seen this movie before. The Teucrium Agricultural Fund Index is 8 for 8, outperforming the S&P 500 in every stock market correction going back to 2012. There is not necessarily a bullish story in grain markets, but rather at current levels most of the bearish news appears to be priced in. It's a good reminder that sometimes to outperform simply means to lose less. As it relates to the WASDE, the trade of the day goes to corn. The market has been waiting for the USDA to revise exports higher and today we got what we were waiting for. 100 million bushel increase to exports when combined with some other adjustments brought '24-'25 US ending stock projections down to 1.465 billion bushels. The U.S. corn stocks-to-use ratio now sits at 9.6%—a psychologically significant level that reinforces a bullish setup. Although expectations for a record corn crop this upcoming season remain high, the market is working off a much tighter beginning stocks number than anticipated just six months ago. Globally, the corn balance sheet also tightened. Ending stocks came in at 287.7 million metric tons, just below the average analyst estimate of 288 million. The global stocks-to-use ratio now stands near 23%, down from 25% last year and below the 26% range held since the pandemic. This signals a fundamentally bullish shift toward tighter global supplies. It was a rather friendly report for soybeans too. US ending stocks came in below the average analyst guess and at 375 million bushels are 7 million bushels lower compared to the March WASDE. US farmers are expected to reduce the number of soybean acres planted this year by 3.7 million acres. Plugging in the USDA's earliest forecast from the February Ag Outlook forum and plugging planted acres (83.5 million) and beginning stocks (375 million bushels) we're staring at a potential stocks/use for the '25-'26 crop of 6%. That assumes a record yield! For reference the last time we saw a stocks/use below 7% soybean futures were trading north of $12 per bushel. However, the global balance sheet presents a stiff headwind. The global stocks/use ratio is around 30%. It's likely that we would need to see the global stocks/use below 28% to even give beans a chance at taking on $12. The 2024/25 U.S. wheat outlook shows larger supplies, slightly reduced domestic use, lower exports, and higher ending stocks. Imports are raised by 10 million bushels to 150 million—the highest since 2017/18. Domestic use is trimmed 2 million bushels on reduced seed use, and exports are cut by 15 million to 820 million. Ending stocks rise to 846 million bushels, slightly above the average analyst estimate of 826 million. The domestic stocks-to-use ratio climbs to 42.9%, the highest in three years— the U.S. has plenty of wheat. Globally, the balance sheet continues its tightening trend. Ending stocks were reported at 260.7 million metric tons, just above the 260.4 million average trade guess. That puts the global stocks-to-use ratio around 32%, above the key 30% psychological level but still trending lower for the fourth time in five years—a long-term bullish signal, though not yet likely to ignite significant buying interest near-term. Grain and oilseed prices have moved mostly higher since the end of March. The full text of the April WASDE report is available through this link. Corn rallies CBOT corn for May delivery settled at $4.5725 per bushel on March 31, 2025. The daily chart shows the 3.23% gain to $4.7200 on April 23. U.S. and global corn stocks declined in the April WASDE report, supporting the coarse grain's price. Soybeans edge higher Nearby May CBOT soybean futures closed at $10.1475 per bushel on March 31, 2025. The daily soybean futures chart for May delivery shows a marginal 2.51% gain to $10.4025 per bushel on April 23. U.S. soybean inventories fell in the April WASDE report, while global stocks increased slightly. Wheat is slightly lower but has made higher lows CBOT soft red winter wheat futures settled at the $5.37 per bushel level on March 31, 2025. The daily CBOT May wheat futures chart shows the marginal 1.63% decline to $5.2825 per bushel on April 23. According to the April WASDE Report, U.S. wheat stocks increased, while global supplies are 3% below the previous year and at the lowest level since 2015/2016. The outlook for the 2025 crop year Corn, soybean, and wheat futures have made higher lows and higher highs since March, and have moved into short-term bullish trends, which is no surprise in April 2025. The prices are low, compared to the levels reached in 2022, when CBOT wheat rose to a record high, and corn and beans rallied to the highest prices since 2012. The grain and oilseed markets are in the heart of the planting season in mid-April. The weather conditions over the 2025 growing season will determine the crops and the path of least resistance of prices. The growing worldwide population means that each year's supplies must rise to keep pace with the increasing demand. Meanwhile, U.S. tariffs are trade barriers that will create a surplus in some regions and potential shortages in others, impacting prices. The bottom line is that the weather and tariffs can potentially move the soybean, corn, and wheat prices over the coming months. The current price levels could limit the downside potential, while the upside could become explosive if any surprises impact supplies. The most direct routes for risk positions in the grain and oilseed markets are the futures and futures options on the CME's CBOT division. The Teucrium family of agricultural ETFs offers CORN, SOYB, and WEAT ETFs that track the price of three actively traded futures contracts, excluding the nearby contracts to minimize roll risks. The Teucrium products tend to underperform the nearby futures on the upside, as most speculative activity occurs in the front-month futures. The ETFs often outperform on the downside for the same reason. As the grain and oilseed markets move from the planting to the growing season, we will better understand the 2025 crop levels that will determine the path of least resistance of prices.
Globe and Mail
03-04-2025
- Business
- Globe and Mail
Cattle and Hogs in Q1 2025- Where are they Heading in Q2?
In my on cattle and hog futures markets in Q4 2024 and last year, I concluded: The trend is always your best friend in markets, and it has been bullish in live and feeder cattle and lean hog futures since the April 2020 lows. As the animal protein markets move into 2025, prices remain on a bullish path. The peak grilling season begins in May and runs through September when the demand increases, and prices often reach seasonal highs. However, the potential for U.S. tariffs in 2025 could cause the most volatility in beef and pork prices. Live cattle futures settled 2024 at $1.9160 per pound, with the feeders settling at $2.63035 per pound. Lean hogs closed last year at 81.30 cents per pound. The beef and pork markets increased in Q1 2025 as the bullish trends since the 2020 lows continued to take prices higher. Live cattle rise by over 8% The nearby live cattle futures contract rose 8.46% to settle Q1 2025 at $2.0780 per pound. The quarterly continuous futures chart highlights that live cattle futures reached a new record high in Q1 2025 and closed at the record peak. Feeder cattle did slightly better Feeder cattle futures slightly outperformed the fat cattle, with an 8.91% Q1 2025 gain, closing on March 31 at $2.8645 per pound. The quarterly chart dating back to the early 1970s shows the feeders reached a new all-time high in Q1 2025 and closed near the peak. Lean hogs posted a nearly 8% gain Lean hog futures slightly underperformed the cattle futures but managed to gain 7.90% in Q1 2025, settling at 87.725 cents per pound on March 31, 2025. The quarterly chart illustrates the pattern of higher lows since the 2020 41.50 cents per pound pandemic-inspired bottom. The WASDE warns that prices are high The USDA's March World Agricultural Supply and Demand Estimates Report reflects high prices in cattle and hogs: Cattle price forecasts are lowered for the first half of 2025 based on recent prices. The second half is unchanged as demand for cattle is expected to remain strong. Hog price forecasts are lowered for the second and third quarters, based on recent prices and slightly weaker demand than previously expected. The full text of the March WASDE report is available through this link. Meanwhile, the USDA's Hogs and Pigs Report on March 31 told the markets that limited supplies could support prices. JP Morgan's analysis of the report is available through this link. The prospects for the 2025 peak grilling season beginning in late Q2 Beef prices are at all-time highs, and pork prices are making higher lows going into the 2025 peak grilling season, which runs from late May through early September. Meanwhile, the cattle and hog futures markets begin reflecting the increased demand as the BBQs come out of storage long before the Memorial Day weekend holiday, which marks the start of the peak animal protein demand season. The trend is always your best friend, so we should expect higher cattle and hog prices over the coming weeks and months. However, the risk of corrections will rise with prices. The bottom line is that those burgers, hot dogs, steaks, sausages, and ribs will cost more this year.
Globe and Mail
28-03-2025
- Business
- Globe and Mail
Will Pigs Fly This Peak Season?
Lean hog futures prices rallied 19.60% in 2024, closing last year at the 81.30 cents per pound level on the nearby CME lean hog futures contract. In my early January quarterly Barchart article on the animal protein sector, I concluded: The trend is always your best friend in markets, and it has been bullish in live and feeder cattle and lean hog futures since the April 2020 lows. As the animal protein markets move into 2025, prices remain on a bullish path. The peak grilling season begins in May and runs through September when the demand increases, and prices often reach seasonal highs. However, the potential for U.S. tariffs in 2025 could cause the most volatility in beef and pork prices. Lean hogs were higher than the 2024 close on January 2, 2025, at 81.675 cents per pound. In late March, the price for May delivery was around 89.00 cents per pound, as the 2025 grilling season is on the horizon. The USDA lowered its hog price forecast in the March WASDE report The U.S. Department of Agriculture's March World Agricultural Supply and Demand Estimates Report (WASDE) told the live hog futures market: Pork production is lowered on a slower rate of slaughter in the first quarter, partially offset by heavier dressed weights. Pork exports are reduced on lower expected domestic supplies and increased global price competition. Hog price forecasts are lowered for the second and third quarters, based on recent prices and slightly weaker demand than previously expected. The report was bearish for pork prices. A bullish trend since early March Meanwhile, lean hog futures for May delivery have increased since early March. The daily May futures chart shows the 8.3% rise from the March 4 84.85 cents low to the most recent March 17 91.90 cents per pound high. At around the 89 cents level in late March, lean hog futures remain closer to the recent high. With the peak grilling season on the horizon, the forward curve over the coming months reflects the expectations for higher lean hog futures prices. The forward curve illustrates that lean hog prices peak in 2025 during the grilling season in July at around 97.50 cents per pound. The monthly chart shows resistance at $1 per pound The long-term monthly lean hog futures chart highlights that technical resistance is around the $1 per pound level. The July 2023 high was at $1.0075 per pound, the first resistance level. In April 2024, the hogs reached a $1.0965 per pound high. The monthly chart shows that annual price peaks tend to occur during the spring and summer months when pork demand reaches highs from the Memorial Day weekend in late May through the Labor Day weekend in early September. BBQs across the United States will be working overtime during the coming summer months, with ribs, sausages, and other pork products on the menu. Tariffs under the Trump administration is impacting commodity prices as the raw materials are global assets. The chart shows that China is, by far, the leading pork-producing country, followed by the E.U., U.S., Brazil, Russia, Canada, and Mexico. Tariffs could cause U.S. pork prices to rise over the coming weeks and months. Meanwhile, a Chinese multinational conglomerate paid $4.7 billion for Smithfield Foods, a leading U.S. pork producer and food processing company based in Smithfield, Virginia. The tariffs and push for ' Made-in-America ' products by American companies could change Smithfield's ownership dynamics over the coming months. After the Hong Kong-based Chinese company purchased Smithfield Foods, the company was a private enterprise. With punitive and reciprocal tariffs on the horizon, the Chinese WH Group spun off Smithfield Foods, which now trades on the NASDAQ under the symbol SFD. Time will tell if the Smithfield spinoff, tariffs, increased seasonal demand, or other factors cause pork prices to follow cattle higher over the coming months. Lean hogs reached a record high of $1.33425 per pound in 2014 and a lower high of $1.27325 in 2022, which stand as the long-term technical resistance levels. There are no pork ETF or ETN products- Futures are the only arena for pork price participation The only route for a risk position in the lean hog market is through the CME's futures and futures options contracts. No ETF or ETN products track the price action in the lean hog or any other pork futures. A lean hog futures contract contains 40,000 pounds. At 89.325 cents per pound, one contract is worth $35,730. The original margin is $1,870 per contract, translating to a 5.23% downpayment to control $35,730 of lean hog futures. The exchange requires variation margin payments if equity on a risk position falls below the $1,700 per contract level. Lean hogs are heading into the peak demand and peak price season over the coming weeks. As the forward curve shows, expectations are for higher prices. However, 2025 is no ordinary year, as trade barriers and other factors could cause increased volatility in pork prices. Time will tell if pig prices fly during the 2025 grilling season.
