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Markets ended a memorable January with a wild session Friday, but it added up to a largely winning month for most agricultural commodities, even if the gains paled compared to the eye-popping surges seen for gold, silver and natural gas.
A brutal cold snap that spiked demand and disrupted production sent natural gas futures up 115% in January. It wasn’t the only commodity to go parabolic. Gold early this week topped $5,000 an ounce for the first time and then kept on soaring, while silver extended its run above $100 an ounce.
That left both metals overstretched, and a bounce by the dollar and President Trump’s nomination of Kevin Warsh, seen as a less dovish option, sent both down sharply Friday. Still, silver rose over 11% for the month, while gold gained over 8%, according to FinViz data.
See: What a Kevin Warsh-led Fed means for markets
And then there’s oil, which was initially expected to see pressure after the U.S. capture of Nicolas Maduro on Jan. 3 and Trump’s vow to sell sanctioned barrels, adding to a market already seen as in a glut. Instead, Brent advanced 16% in January, while West Texas Intermediate gained 14%, rallying into year-end as Trump threatened action against Iran.
It was a more “nuanced” picture for ag commodities, noted Ole Hansen, head of commodity strategy at Saxo Bank. Wheat prices rose on concerns about winterkills in the Plains and the Black Sea. Higher energy costs also provided an indirect lift to corn and soybeans through biofuel linkages and higher input costs, though this remains a secondary factor instead of a primary driver, he noted.
Soybean oil rose over 10%, while soybeans advanced 1.6%. SRW wheat rose over 6%, while corn was on the losing end, down 2.7%, after the production shock delivered by the Jan. 12 USDA report. Still, corn finished decently off its post-report low.
So what to make of it all? Hansen argues that commodities are proving their worth as a portfolio diversifier in a period of rising geopolitical and macroeconomic uncertainty. But it’s also a volatile atmosphere. He writes:
Cattle inventory lowest in 75 years: The U.S. cow herd continues to shrink, and is now at its smallest in 75 years.. Despite a year of strong prices, USDA’s annual Cattle Inventory Report released Friday shows the U.S. cattle inventory shrank another .35% now at 86.2 million head. When you look at just the beef cows, that inventory fell 1%, sitting at 27.6 million head. The one positive number was beef replacement heifers at 4.71 million, which is up 1%.
China cut proposed tariffs on some European dairy products, Reuters reported. The move comes as it finishes an anti-subsidy investigation widely seen as a retaliatory move in response to European Union tariffs on Chinese electric vehicles, the report said. In final tariffs communicated to the European side, China is proposing additional duties of up to 11.7%, compared with a maximum rate of 42.7% in provisional duties announced in December, the European Dairy Association (EDA) and Eucolait told Reuters. Many of the companies would be subject to a 9.5% rate, according to the report.
The Farmers’ Almanac is getting a new home.The publication, first published in 1818 – and not to be confused with the Old Farmer’s Almanac – has been acquired by Unofficial Networks, according to the Associated Press. Unofficial Networks is a digital publisher focused on skiing and outdoor recreation. That means the almanac will continue, despite announcing in November that its 208-year run was set to end. The new website will be “a living, breathing publication with fresh, daily content” and there are plans to bring back a print edition, said Tim Konrad, founder and publisher of New York-based Unofficial Networks.
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