Good morning!
Grain futures rebound overnight… As of 6:00 a.m. CST, March corn futures were up 3 1/2 cents, January soybeans up 3 cents, and March SRW and HRW wheat futures were up 4 to 4 1/4 cents. The grain futures markets are seeing corrective rebounds from Wednesday’s selling pressure that pushed soybeans to a five-week low and SRW wheat to a six-week low. Trading in corn remains choppy and sideways, suggesting more of the same in the near term. Soybeans, meal and winter wheat futures are stuck in price downtrends, suggesting the path of least resistance for prices will remain sideways to lower in the near term. The key outside markets early this morning see the U.S. dollar index lower and hitting a six-week low. Nymex crude oil prices are lower, hit a two-week low and are trading around $57.50 a barrel. The yield on the benchmark 10-year U.S. Treasury note is presently 4.14 percent.
Old Man Winter keeping a tight grip on the Plains, Midwest… The National Weather Service today reported an amplifying West Coast ridge will dislodge Arctic air southward into the Northern Plains late this afternoon. Much- above-average temperatures over the Northern Plains today will plummet 30 to 40 degrees in parts of the Northern Plains as the front surges southward, translating to daily high temperatures in the single digits across North Dakota into central Montana by Friday. As the frigid airmass spreads southeastward into the upper Midwest and upper reaches of the Ohio Valley, daytime highs will struggle to break the teens by Saturday. Cold air moving across the relatively warm great lakes will also support active lake effect snows downwind of Lake Erie and Lake Ontario, where snow totals of 6-10" and wind gusts of 40 mph are possible through Friday morning. Accumulating snow is also possible today into early Friday in association with a fast-moving area of low pressure dropping southeastward from the central Plains into the Ohio Valley. This will support a narrow axis of 2-4" of snowfall on the northern flank of the low track through the Mid-Mississippi Valley, Ohio Valley, and Central Appalachians. West of the snowfall axis, upwards of a tenth of an inch of freezing rain is also possible today over the central Dakotas and eastern Montana.
Fed leans surprisingly dovish, wrong-footing the marketplace… The Federal Reserve’s Open Market Committee on Wednesday afternoon delivered a 0.25% interest rate cut, which was fully expected by the marketplace and was the third quarter-point rate cut in a row at the FOMC meetings. The FOMC voted 9-3 to lower the benchmark federal funds rate by a quarter point to a range of 3.5%-3.75%. The FOMC statement suggested greater uncertainty about when the Fed might cut rates again. The Fed surprised markets by saying it will begin buying $40 billion of Treasury bills per month starting Friday, in a move to further ease short-term funding costs by rebuilding reserves in the financial system. Money markets have been flashing signals in recent months that pressures were building up in the $12.6 trillion market while the Fed was shrinking its balance sheet. U.S. stock indexes rallied, U.S. Treasury yields dipped, the U.S. dollar index sold off, and gold and silver prices rallied following the FOMC meeting’s conclusion and Fed Chair Jerome Powell’s press conference Wednesday afternoon. In the days leading up to this week’s FOMC meeting, most of the marketplace came to reckon that despite the expected rate cut, the Fed and Powell would deliver a somewhat more hawkish tone on U.S. monetary policy. However, the marketplace saw the Fed’s dovish move to buy U.S. Treasury bills as usurping any other Fed rhetoric that might have been deemed hawkish.
China economic officials hint more interest rate cuts coming… China‘s economic policymakers have pledged to adopt supportive monetary and fiscal policies, hinting at interest rate cuts and a sizable budget deficit as the world’s second-largest economy’s momentum weakens toward the end of 2025. The leadership will “flexibly and efficiently” use interest rate and reserve requirement cuts to ensure sufficient liquidity, according to an official readout released Thursday, and as reported by Bloomberg, following the conclusion of the Central Economic Work Conference attended by senior officials including President Xi Jinping. The meeting sets economic policy priorities for the coming year. The government will also continue to adopt a “moderately loose” monetary stance, signaling efforts to fight deflationary pressures. The readout stated that policy would target a “reasonable recovery in prices,“ acknowledging the drag caused by weak domestic demand, said Bloomberg.
Dairy prices decline amid rise in global milk production… Butter, milk and cheese prices are falling as a surge in global milk production floods the market, prompting warnings of a looming period of weak prices, according to a Rabobank analysis and as reported by Bloomberg. “Too much milk for the market, combined with strong milksolids growth, has contributed to a sharp decline in commodity prices,” Rabobank senior agricultural analyst Emma Higgins said in a report today, describing the output as “stunning.” Global production has accelerated across major exporters. New Zealand farmers set new monthly milksolids records from May to September, with October marking the third-highest peak on record, according to the report. The EU, U.K., U.S. and South America have also delivered strong growth. That means supply is now outstripping demand, Fonterra Cooperative Group Chief Executive Officer Miles Hurrell said in a statement ahead of the cooperative’s annual meeting today. Butter has fallen 9% since the start of October and sits 24% below its peak earlier this year, while whole milk powder and cheese are each down about 7% this quarter, Rabobank said in its Global Dairy Quarterly Report. It’s an abrupt shift from a few months ago when butter prices in most of the world were lingering near record highs, resulting in more cost pressure on consumers’ favorite foods.
IEA lowers global oil supply surplus… The International Energy Agency has lowered its estimates for a global oil supply surplus this year and next as demand strengthens and output growth slows. World supplies will exceed demand by 3.815 million barrels a day in 2026, which trims last month’s IEA estimate by 231,000 barrels a day. The revision reflects several factors, including OPEC+'s decision to pause supply increases, slightly reduced production estimates for the cartel’s rivals, and a stronger outlook for world oil consumption.
Malaysian palm oil futures rebound… Malaysian palm oil futures rose around 1% to above MYR 4,100 per MT on Thursday, rebounding from the prior session’s weakness amid gains in edible oils on the Dalian exchange. In the meantime, monthly data from the Malaysian Palm Oil Board showed November production shrank 5.3% to 1.94 million MT, supporting prices, while expectations of stronger seasonal demand ahead of the Lunar New Year and Ramadan added further optimism. Still, the contract was down about 0.8% so far this week, reversing gains from the previous two periods due to soft early export estimates. Cargo surveyors noted that December 1–10 shipments fell 10.3% to 15% from the same period in November. Meanwhile, end-November inventories jumped 13% from October to 2.84 million MT, the highest in 6-1/2 years. The stock build comes as Malaysia’s full-year output is on track to exceed 20 million MT for the first time, supported by improved labor availability, more efficient harvesting, and maturing plantations.
Cattle futures markets poised for more upside… February live cattle on Wednesday rose $1.575 to $228.525 and poked to another five-week high. January feeder cattle rose $2.875 to $338.375. The cattle futures markets saw more chart-based buying from the speculators, as the near-term technical postures have turned bullish. Both markets are trending higher on the daily charts, which means the path of least resistance for prices remains sideways to higher. Solidly higher cash cattle trade last week and very light trading so far this week at higher money also supported buying interest in the futures markets. USDA at reported that so far this week very light cash cattle trading has taken place at $222.00. The average cash cattle trade for last week was $221.21.
Lean hog futures prices trending up… February lean hogs on Wednesday rose 55 cents to $82.425. Hog futures saw some modest technical buying as the near-term chart posture for the market has turned bullish. Hog traders are also reckoning the cash hog market has put in a seasonal bottom, which is keeping a floor under futures prices. The latest CME lean hog index is up 5 cents to $81.89. Today’s projected cash index price is up 27 cents at $82.16. Wednesday’s national direct 5-day rolling average cash hog price quote was unavailable due to packer submission problems.