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The agriculture markets showed promise with a “Christmas rally,” but the first week of 2023 took a turn, according to Don Wick of Red River Farm Network and Randy Martinson of Martinson Ag Risk Management on Friday, Jan. 6, on the Agweek Market Wrap .
Wick said it appeared the commodities were taking a defensive stance to start out the year. Martinson described the sequence of events as an evening-up at the finish of 2022 and a reestablishment of positions in 2023.
“We had some negative news that came into play, as well,” Martinson said. “You know we’re starting to look at more rain events in Argentina; more rain events in the southern Plains in the U.S. for the winter wheat; poor demand as we’re seeing exports dwindle for wheat and for corn again.”
Wick pointed out some double digit gains in soybeans, while it appears South America expects record crops.
Martinson responded that Brazil's added acres and better production are going to more than offset expected losses in Argentina. He added that there is a difference in the two regions, though. Brazilian beans are more for whole bean export, while Argentina is more meal and oil focused for their soybeans. Brazil and U.S. farmers will have to make up losses.
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Energy focus
Wick pointed out that energy — natural gas, crude, ethanol — has picked up steam this new year.
“A lot of that is coming from concerns with China,” Martinson said.
Because China's reopening is taking longer than expected, likely due to the huge increase in COVID-19 cases, there remain unknowns about whether they will soon have demand for more commodities, Martinson said.
Next week’s crop report will provide an abundance of content on commodities. Martinson described it as drinking from a fire hose.
It will provide updated crop supply and demand, production estimates for corn, soybeans and wheat and a first look at winter wheat seeding.
“Yeah, there is a lot of information that’s going to come into this market,” Martinson said. “The market is going to pick what it wants to trade, and that’s going to be interesting to which one they focus on.”
Cattle gains
Wick brought up that there were some big gains in cattle prices this week including boxed beef and dressed cattle, which saw a 50 cent gain over last week. Live cattle were basically steady.
“The demand side of this market is still strong though,” Wick said.
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“It is, we still have strong demand,” Martinson said. Supplies coming to town are enough for now, but Martinson looks at lower production coming in 2023 that will tighten the market.
Martinson said once we step closer to Super Bowl season there will be a tightening of that market.
Winter weather woes
Continued winter storms are making it difficult for some cattle producers to get their cattle to market. It’s been several weeks for some who have seen back-to-back storms that have shut down roads and sale barns. Martinson was on his way home from marketing some of his own cattle on Friday and attested to the poor road conditions that persist.
“A lot of producers are trying to move product,” Martinson said. “There’s going to be a lot of calves hitting the ground soon so there is a lot of cow-calf guys that want to get those calves moved so they get room in their lot to start calving.”
He feels they should see a supply boost into the market soon, followed by a tightening of the feeder cattle supply.
(The Agweek Market Wrap is sponsored by Gateway Building Systems.)
