Which Commodity Trades "Big Money" currently favors // USDA Outlook 24-25 Highlights
The Commodity Report #142
USDA Outlook 24-25 Highlights
In his presentation Thursday morning at the Agricultural Outlook Forum USDA Chief Economist Seth Meyer said input prices are not falling with commodity prices, squeezing margins.
"When commodity prices normalize and readjust, those input prices tend to be sticky, which shrinks producer margins," Meyer says. "...It was maybe easier to make a little bit of money in '22, '23. It's going to be a little bit tougher in the next crop year."
Corn
Planted: 91 million this year, down from 94.6 million in 2023
Production: yield of 181 bushels per acre to produce a total crop of 15.04 billion bushels (-2% vs. 2023)
Soybeans
Planted: expected to grow to 87.5 million, up from 83.6 million a year ago.Â
Production: Yield is expected to be 52 bushels per acres for a production total of 4.5 billion bushels, up 8% year-over-year.
Wheat
Planted: 47 million, down from 49.6 million last year.
Production: 1.9 billion bushels, up 5% from last year, and if realized would be the largest harvest in five years
CTA Momentum
In its biweekly CTA momentum outlook UBS said that flows should remain positive for oil, neutral for agriculturals and negative for metals.
'Contrarian' trades according to the bank are currently: bullish oil ex Brent and metals ex-Gold, bearish Cocoa, Gold and Coffee
'Go with momentum' trades according to the bank are currently: bullish Cotton, Cattle Feeder and Live Cattle, bearish LME Lead, Copper, Soybean Meal and Zinc
Major Fertilizer Player sees Earnings Dropping
In the fourth quarter, CF Industries Holdings Inc. reported a 40% decline in sales compared to the previous year, amounting to $1.57 billion. The company revealed that net income per share plummeted from $4.35 to $1.44, falling short of the average analyst prediction of $1.60.
This decline in results can be attributed to the decrease in fertilizer prices since 2022, when the Russia-Ukraine conflict disrupted global supplies, causing record-high prices. Despite these challenges, CF remains optimistic about the current year, anticipating improved profits in the U.S. agriculture sector.
The company expects this improvement as lower grain prices are balanced by reduced costs of farm inputs. Notably, the contract for spot Tampa anhydrous ammonia, considered the global benchmark, has experienced a significant 44% decrease over the past 12 months.
Over the next five years, commodities may emerge as compelling investments relative to the stock market. Economic shifts, geopolitical uncertainties, and inflation concerns are driving increased attention to tangible assets. As traditional markets face volatility and potential corrections, commodities like precious metals, agricultural goods, and energy resources become attractive for diversification and hedging strategies. Supply chain disruptions, coupled with growing global demand, could bolster commodity prices. Additionally, the tangible nature of commodities offers a sense of security amid digital volatility. Fundamental reasons are never timing tools though.
This week look out for the following:
Bank Holiday on Monday
Flash Manufacturing and Services PMI on Thursday
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Till next Monday, Lukas
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