Written Commentary
Market Outlook for US and South America Regions
Grains
After the May USDA report, soybean, corn and wheat futures traded lower. July soybeans traded from 16.67 to 15.22. July Chicago wheat traded from 7.40 and 6.22 and July corn from 7.35 to 6.33. Over the last few days new buying from China helped July corn to rally to 6.72. In May, the USDA did not lower the U.S. 2020/21 corn and soybean carryout as much as expected.
Lean Hogs
A meteoric rally is the best way to describe the hog market of 2021. Compared to a year ago, a complete opposite has taken place. On April 6, 2020 the April 2020 lean hogs fell to $37.50/cwt due to the packer industry shutting down facilities or severely curtailing slaughter because of the coronavirus pandemic. It was a disaster for hog producers.
Live Cattle
It was late January 2020 when reports that COVID 19 began to affect prices for agricultural commodities. At the time, the April 2020 live cattle contract was the highest priced 2020 cattle futures contract topping at $128.55/cwt. By April 24, 2020, the April 2020 live cattle contract also became the cattle contract making the extreme low at $81.45/cwt. It took close to fourteen months, but the April 2021 live cattle contract climbed out of the 2020 cellar to reach $126.70/cwt with December 2021 live cattle contract the first contract to meet the $128.55 on April 6, 2021.
Stock Index Futures
S&P 500 and Dow futures advanced to new record highs earlier in May due to vaccine and fiscal stimulus optimism, along with better than expected quarterly earnings results. In addition, recent gains were linked to ideas that the Federal Reserve will remain accommodative for an extended period. Federal Reserve Chairman Jerome Powell said in a U.S. media interview that it’s “highly unlikely” the Fed will raise rates this year, despite a stronger economy.
US Dollar Index
The U.S. dollar index has underperformed recently, ignoring bullish larger than expected increases in consumer price and producer price indexes. Some of the underperformance in the greenback can be explained by Federal Reserve officials persistently downplaying inflation risks, saying they are transitory.
Eurocurrency
The euro currency has trended higher since April. Some of the gains were linked to news that the ZEW Indicator of Economic Sentiment for Germany jumped 13.7 points from the previous month to 84.4 in May 2021, which is the highest level since February 2000 and is well above market expectations of 72.
Crude Oil
Crude oil futures have recently come under pressure in response to increased attention regarding production of oil in the Middle East, which was spurred by Iran’s potential re-entry into selling on the world market. The Iranian president said Iran had reached a broad outline to end oil sanctions but are still discussing final details.
Gold
Gold prices increased to their highest levels since early January, as Federal Reserve officials, including Federal Reserve Chair Powell, indicated the central bank will not withdraw easy monetary policies anytime soon. The Fed has maintained its dovish stance in spite of pressure on the Federal Reserve to ease back on its accommodation. In addition, recent weakness in the U.S. dollar and falling Treasury yields from the March highs have contributed to a stronger gold market.
Market Outlook for China and Asia Regions
The key Chinese and Asian event over the last 30 days has been China’s strong performance in foreign trade. Exports and imports jumped 32.3% and 43.1% year-on-year respectively. South Korea’s exports also saw an increase of 41.1% year-over-year.
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