Making a call on the economy for 2023 has recently gotten even more difficult, in a good way. U.S. employers added a very impressive 223,000 net new jobs in December. The jobless rate dropped from 3.6% to 3.5%. And, while a number of financial and tech giants have announced large layoffs, most of these companies had staffed-up during the pandemic and are now just trimming back to 2019/2020 levels.
Read More2022 was an ugly year for commodities. The La Niña climate pattern precipitated a 3rd straight year of drought, cutting U.S. crop yields and scorching cattle pasture. Avian Flu decimated egg layers and turkey flocks. The Ukraine war stoked prices for crude and refined oil products. For 2022, cattle prices were up 11.4%, winter wheat +12.1%, corn +13.4%, diesel +27.4%, turkey breast +133.1% and large shell eggs ended the year 189.1% higher than where they started.
Read MoreIn Friday’s (pre-holiday) cattle report, the USDA said feedlot inventories totaled 11.67M head on Dec 1, down 2.6% from a year ago. New placements onto feedlots in Nov were down 2.1%. Meanwhile, beef demand remained strong with cattle marketings up 1.2% from a year ago in Nov. That combination (and trend) of smaller on-feed supplies, lighter placements, and strong marketings should be bullish for cattle prices.
Read More‘Twas the night before Christmas, and all through the White House, not a creature was stirring, when the Pres did arouse. Still dreaming of midterms and Herschel and Lake, the news was too good, it had to be fake. Then up on the roof there rose such a clatter, Joe sprang from his bed to see what was the matter. When what to his wondering eyes should appear, ‘twas Santa alone, no sleigh and no reindeer.
Read MoreIt’s a holiday miracle! Just in time for the peak shopping season, crude oil and gasoline prices have plummeted – giving inflation-weary consumers a welcome reprieve. WTI crude oil hit a 2022 low at $71.02 per barrel on Friday (12/9). Gasoline prices at $3.28 per gallon (AAA national average) are now below a year ago, down from $3.79 per gallon just a month ago, and light-years below the high of $5.01 in June.
Read MoreCME cattle futures set fresh 7-year highs on Friday (12/2), closing at $153.35/cwt. The USDA is forecasting 2023 cattle prices to average $164.00/cwt, up 8.2% from $144.15 for 2022. Beef supplies look to be tight through 2025. The USDA is projecting a cattle liquidation-driven 1.4% increase in beef output for 2022, followed by a huge 7.3% production drop in 2023.
Read MoreLogistics costs have improved dramatically in 2022 – but, unfortunately, for all the wrong reasons: the high potential for a global recession, Covid lockdowns in China (that are curbing oil and shipping demand), and faltering U.S. retail demand. WTI crude oil futures, which peaked in March at $123.70 per barrel, and averaged $104 for 6 months this year (Mar-Aug), closed at $76.28 on Friday (11/25).
Read MoreIn Friday’s cattle report, the USDA said feedlot inventories totaled 11.71M head on Nov 1, down 2.0% from a year ago. New placements onto feedlots in Oct were down 6.1%. Drought has been the driving factor, burning-up pastures and forcing producers to liquidate feeders at younger ages and lighter weights. Drought-stricken states appear to be tapped out on new placements.
Read MoreThe U.S. survived the mid-term elections with no major problems or fraud accusations. Despite Joe Biden’s low poll ratings and questionable fiscal policy, there was no “red wave” of rejection – nor much of a blue ripple of support. Consider it a victory for “purple” Americans mostly voting the issues of inflation, abortion, crime, and immigration.
Read MoreThe long-awaited rebound in chicken production finally arrived in September. Chicken in cold storage on Oct 1 was up 4.9% from Sept 1 and 18.5% above a year ago. The broiler hatchery flock is above year ago levels. Chicks placed for grow out are running 4.3% above a year ago since Aug 1. The USDA is forecasting Q4 chicken output to be up 3.2% from a year ago.
Read MoreNatural gas prices are a lot less scary than just a few months ago. The hot summer that drove high energy usage for air-conditioning has given way to a mild fall. Natural gas output is up, and storage facilities are now just 5.5% below the 5-year average, compared to -18% in April and -13% in August. As a result, natural gas futures have plunged by 41.3%, from highs of $9.68 per million BTUs in late August, to $5.68 on Friday (10/28).
Read MoreIn Friday’s cattle report, the USDA said feedlot inventories totaled 11.55M head on Oct 1, down 0.9% from a year ago. New placements onto feedlots in Sept were down 3.8%. Drought continues to be the driving factor, forcing producers to liquidate feeders at younger ages & lighter weights, while also unloading breeding inventory (heifers). In the lowest, under 600-lb category, Sept placements were 10,000 head above a year ago.
Read MorePossibly the only thing standing between the U.S. economy and a serious recession is employment levels. Employers added 236,000 net new jobs in Sept – a great number given how hard it is to find new workers. It’s hard to be in a full-blown recession with a 3.5% unemployment rate. However, inflation is still raging, with the CPI at 8.2% above a year ago in Sept.
Read MoreIf you are looking for an energy villain, OPEC is front and center. The Saudi’s and the United Arab Emirates have stonewalled President Biden’s requests to pump more oil. Instead, with WTI crude oil prices dropping to lows of $76.71 per barrel in late Sept (from highs of $122 in June), OPEC announced that it would cut production by 2M barrels per day, in an effort to put a floor under crude oil prices - and possibly even to help the Russians fund their war.
Read MoreThe Personal Consumption Expenditures (PCE) price index rose 6.2% year-over-year in August, down from 6.4% in July. This is the Fed’s preferred statistic for gauging inflation with a target of 2.0%. The largest contributors to the increase were spending for housing/utilities (+8.6%), transportation (+16.9%), and health care (+5.0%). The core PCE (less food and energy) jumped to 4.9% from 4.7% in July.
Read MoreIn Friday’s cattle report, the USDA said feedlot inventories totaled 11.28M head on Sept 1, up 0.4% from a year ago. New placements onto feedlots in Aug were also up 0.4%. Drought continues to be the driving factor, forcing producers to liquidate feeders at younger ages & lighter weights, while also unloading breeding inventory (heifers).
Read MoreButter prices hit record highs of $3.24 per pound last week before settling back to $3.13 on Friday (9/16). Year-to-date butter production through July is 2.2% below a year ago. Cold storage supplies are down 20.7%. With Thanksgiving approaching quickly, we are in the midst of a pre-holiday scramble by commercial bakers, retailers, and big end users to secure supplies in an extremely tight market.
Read MoreDrought and war are taking a toll on the world's energy resources. In the U.S., heat waves, plus a drop in hydroelectric generation due to drought, are threatening power supplies. Last week, large parts of California narrowly avoided blackouts only because text alerts to thousands of customers encouraged a voluntary drop in usage that prevented the power grid from being overwhelmed.
Read MoreIn its August WASDE report, the USDA made a conservative downward adjustment to its 2022/23 U.S. corn production numbers, while leaving its 2022/23 corn price forecast unchanged at $6.75 per bushel. That report was based on July numbers. Next week’s September WASDE (based on Aug data) won’t be as kind. Corn futures started 2022 at $5.89 per bushel and peaked at a 10-year high of $8.18 in late April on Ukraine war fears.
Read MoreNYMEX natural gas futures hit 14-year highs of $9.37 per million British thermal units (mmBtu) last week after Russian state-owned energy exporter Gazprom said it would shut down the Nord Stream natural-gas pipeline to Germany for maintenance this week, from Aug 31 to Sept 2. Russia had already cut pipeline deliveries to Europe by 20%, citing technical issues with its turbines.
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