With the new month, we have updated our price forecasts for various commodities in the cash market. Details are in the table below, with detailed explanations for select commodities as well.
Corn
Basis has widened in central Illinois as prices have seen relative strength more recently. Transportation and storage logistics have likely played a role in that, as has farmer selling as futures have rebounded from the August lows. Sideways action in both cash and futures is likely to continue ahead of the January production report from USDA. Remember, last year in January is when USDA took an axe to their expected yield. We do not anticipate much of a change in the planted/harvested acreage, but do expect a substantial drop in yield, which would significantly tighten ending stocks and provide some support for prices.
As we work into the summer, prices are likely to lean higher as demand remains quite robust on both exports and ethanol. Some concerns have popped up over safrinha corn production in Brazil, which is likely to underpin U.S. prices, especially if La Niña limits precip over much of Brazil, which it historically has a tendency to do.
Soybeans
Prices have turned sideways to lower in recent weeks as bullish momentum has slowed, partially hindered by heavier farmer selling, but largely due a shift in sentiment and rhetoric around export demand. China has been slow to advance purchases on U.S. origin crops despite the alleged purchase agreement. The market quickly advanced higher in October, negating any discount to Brazilian supplies the market held in September and early October. We still hold a more bullish stance, anticipating soybean exports to outpace what USDA anticipates and keeping ending stocks tight. There is not much wiggle room in the balance sheet and even poor exports when compared to recent years will leave ending stocks tight. Crush demand has proven robust and given recent plant openings, is likely to remain strong, making up for a portion of the lighter exports.
The export season has seemingly shifted and we anticipate export shipments to be above average in the latter portion of the marketing year, opposite of what is historically normal. That should keep the downside relatively limited over the spring and summer months before new-crop prospects begin to dictate price action.
Wheat
Cash bids on both hard and soft red winter wheat trended slightly lower over most of November but have shown some signs of stabilizing. Wheat prices continue to be pressured by hefty global and U.S. supplies that weigh on the market. Harvest in the southern hemisphere has begun and will be in full swing soon. This will lower the price of purchasing wheat in foreign markets, forcing U.S. sellers to keep their own prices competitive if they hope to continue to ship high volumes of the crop. Upward price movement is limited.
Spring and durum varieties of wheat have slightly better outlooks. Bids in the locations we track have been on a steady uptrend since September, which is expected as we move further from harvest and supplies tighten somewhat. While durum prices may not reach the highs of 2024 due to higher production, we expect some strength to remain in the market as crop quality was relatively strong.
Cotton
Cotton markets remain sluggish. The most recent seven-market average daily spot price was 60.54 cents, up from the marketing year low of 59.19 cents on November 13th. Trade has been mostly light lately, but picked up somewhat in early December. Prices struggle to entice farmers to sell. Our forecast includes slight rises in price as we move farther out from the harvest period. As merchants need to source cotton, mild spikes in price are likely from time to time but may not be sustained.
The average world price of cotton has sunk to 50.77 cents according to USDA and has made loan deficiency payments come in to play after falling below the base loan rate of 52 cents, which will slightly raise the net price producers receive. Outside of trade deals or weather problems in other parts of the world, prices are likely to continue to grind mostly sideways.
Cattle
Fed cattle prices have surged over the past week with technical momentum now favoring the bulls in the futures market. That is a significant shift from where trade stood over the past couple months as the market underwent a substantial correction. Though, as we have reported continuously as the market turned weak, the fundamental picture has not really changed. Supplies remain tight and that will continue even as the herd begins rebuilding… and the market shows that has not yet begun at a wide scale. As heifers begin to be held back, the cattle for slaughter supply becomes even higher, and barring demand destruction, that will continue to help lift both the cash and futures market. We anticipate this recent rebound to continue into the summer with records likely to be broken in both the fats and feeder markets.
Hogs
Seasonal weakness is nearing an end in the cash hog market and the futures market is anticipating a low is near at hand. We anticipate a seasonal bottom around the normal time, near the new year, before cash prices begin to work higher. Futures seem to be underpriced at current levels and we anticipate demand to remain strong into next year. Beef prices have shown no sign of slowing down which is likely to drive additional demand to pork at the meat counter. That shift in demand should help lift cash hog prices next year, as will anticipated export demand as countries look to book U.S. supplies to alleviate trade deficits with the U.S. as a part of Trump’s trade agenda.