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Limit Up

By Tori Uhland

January 12, 2024

At the time you are reading this, the January USDA reports will have been released already – on Friday, January 12th to be exact. However, at the time of this writing, I am purely speculating on what those reports are going to say.

The feed business has been very slow this winter. Usually, there are some logistics snafus around the holidays or bad weather, or just some end-users scrambling to get supplies while they can. So far, though, feed demand has been pretty lackluster around the country. We are coming off a few years of high prices, small crops, and extreme volatility, and now facing what may be an agricultural recession. We also have very low livestock numbers, which doesn’t do anything to help demand. It will be interesting to see how it plays out, and I am curious to see if these USDA reports surprise us with any fireworks.

The market considers the January reports to be some of the most important of the year. We get to see the Januart World Agricultural Supply and Demand Estimates (WASDE) as well as final production numbers from the 2023 crop year and the quarterly stocks. All of that data is a lot for the market to digest and can absolutely cause some big moves in the markets, in either direction.

Corn and soybean conditions continue to improve in South America, though it isn’t record crops like initially thought, both Brazil and Argentina are expected to have large production. However, whatever numbers that the USDA puts out don’t actually matter as much as whatever the market is telling us. Futures spreads are moving back towards carries, which tells us that there is ample supply available. Demand for US products doesn’t seem to be increasing in the short term. Overall, the market seems to be trending down. There isn’t a lot of bullish news. In fact, at the moment, the only thing that would make me a little bullish is the fact that nearly EVERYONE seems to be bearish. When everyone gets on one side of the market, that can push things the other way…

Export reports last week (the week of January 8) were terrible. All commodities were BELOW the estimates, except corn, which was at the bottom of the trade guess. Exports have slowed down considerably since this fall, which goes to show that it isn’t just domestic demand that has an issue, it is world demand as well.

The winter storms have had some impacts. Last week’s snow across Kansas caused the Tyson packing plant in Holcomb, KS and the Cargill plant in Dodge City to shut down and halt production. Due to this, cattle slaughter was revised lower by 11,000 head. The winter storms are kind of a double-edged sword in the cattle industry because they are hard on feedlot performance, but the moisture will certainly help pasture conditions this spring and summer.

Geopolitical events are still something to keep an eye on. Last week, US and UK warships repelled the largest attack to date by Houthis in the Red Sea. This situation continues to evolve and will be interesting to see the impacts on the global supply chains.

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