With busy holiday and travel schedules last week, I opted to forego any writing, so while I may be a little late to the game here, I hope everyone has had a fabulous start to the new year. I think this will be a very interesting year in the markets as we are possibly coming to an end of an agriculture super-cycle while simultaneously seeing record crops in several parts of the world. There are also some major economic factors to take into consideration, and it’s an election year. The ag industry is evolving every day. 2024, I hope you are good to us.
Speaking of record crops, a lot of eyes have been on the weather in South America. Some rains fell last week in the driest areas of Brazil, which has made the bear camp happy to start the year. After the moisture, crop stress is expected to be lower by about 10-15 percent. However, the drier trend is expected to return later in the month. Some analysts have decreased their soybean and corn production estimates in Brazil. Prior to the new estimates, it was expected that they would have record production this year.
Corn futures prices have been moving sideways to lower, and corn didn’t end 2023 on a high note. On the final trade day of the year, January 29th, the corn price closed only a few cents off the 2023 low and was down 30.5 percent for the year. This was the largest decline in 10 years.
There have also been a few geopolitical events that have provided the market with some moves. Last weekend, a Maersk cargo ship in the Red Sea was attacked by Houthis and was then repelled by the United States. The Houthis are a group of Yemen rebels that support external movements against the US, Israel, and Saudi Arabia. They are believed to have been trained by Iran. On Thursday morning, the Houthis launched another attack against commercial shipping lanes in the Red Sea. This was the 25th Houthi attack on ships in the Red Sea since mid-November, and they show no signs of stopping, creating fears that the attacks could escalate and fuel a larger regional conflict. Because of the attacks, many shipping and oil companies are avoiding the area, creating concerns about the global economy.
Just before the new year, Russia unleashed their biggest air attack on Ukraine since the start of the full-scale invasion. This was only a few days after Ukraine struck a Russian Navy Ship in Crimea which caused severe damage to the vessel, adding another blow to their fleet in the Black Sea. Ukraine has continued their agricultural exports despite the escalation in tensions between Ukraine and Russia.
Though the geopolitical risks are certainly something to keep an eye on, they haven’t been huge movers and shakers in the ag markets so far this year. For now, we will continue to keep a close eye on the weather, especially in South America, as well as economic factors that will continue to impact us. I think it is safe to say that the year is off to an interesting start already, at least in terms of the markets.