Commodity markets rode a wave of uncertainty this week, driven by macroeconomic pressures, unpredictable planting weather, and renewed discussions surrounding U.S.-China trade tensions. Shawn Hackett of Hackett Financial Advisors and Don Roose of U.S. Commodities joined the Weekly Market Roundup to unpack what it all means for agriculture. Macro Forces Dominate Early Week Trade “I think we went into the week with all this macro uncertainty and pressure, the stock market having schisms, the bond market having schisms and forcing a lot of long liquidation in commodities in general,” Hackett said.
“And then I think we’re ending the week with the idea that we’re seeing or hearing about some softening, maybe some trade deals with some countries.” He added, “This week has really been all about macro forces than much anything else up to this point.” Cattle Market Shows Strength, But Warning Signs Emerging Roose pointed to the cattle market’s strength as historic, but cautioned that it’s not without vulnerabilities. “Well, I think when you look at the cattle market, first of all, it’s one of the biggest bull markets in history,” Roose said. “But you’ve got some warning signs up here.
One, it’s all about the demand going forward… When does [the consumer] slow down?” He noted that carcass weights are up 34 pounds from a year ago, and packers are losing around $110 a head, unsustainable dynamics that could soon trigger a slowdown. “This is a market that it’s a long, a long running bull market… But really watch the box beef. When that starts to slow down, you’ve got some bulls.
Usually a bull cattle market, what happens is when the packer starts to back away… the feedlot starts to slow down his sale,” Roose explained. Corn Planting Outlook Hinges on Weather As attention turns to the planting season, Hackett said spring weather will likely play a critical role in how the season shapes up. “We’re worrying the most about a potential late spring May hard freeze,” Hackett said.
“We think the variables are in place for that to have a higher order risk than normal.” With corn planting progress ahead of pace, speculation has swirled about reaching the USDA’s 95.3 million acre projection. Hackett, however, was skeptical. “We’re really doubtful that the fringe acres that you need to have planted to get to that 95, 96 million… I just don’t think we’re going to get it done,” he said.
“Although we’re going to plant a lot of corn acres, I think we’re too optimistic on what that looks like when the June acreage report comes out.” Soybeans Could Be Surprise Market to Watch A potential shift in renewable diesel mandates could spark unexpected upside in soybeans, according to Hackett. “It does look like that the big oil companies are getting together with the refinery companies to push for a big increase from three point three billion gallons up to over five,” he said. “This would be huge… and if we get that kind of a mandate increase, then the crush demand that we’re going to need domestically is underestimated.” He said trade restrictions on imported feedstocks like palm and used cooking oil add to the bullish outlook.
“This could be the surprise market to watch… We may be significantly undervalued,” Hackett said. U.S.-China Trade Tensions: Signs of Softening Both Hackett and Roose pointed to subtle shifts in tone between U.S. and Chinese trade officials. “From what it seems… Trump is softening his rhetoric.
China is softening. They’re talking about exemptions of certain products,” Hackett said. “It should be positive for the grain trade, given how dark many have been.” Roose echoed the sentiment but noted recent setbacks.
“China did cancel, sent more negative signals, canceled Thursday afternoon some pork exports. So still on the negative side from that standpoint,” Roose said. “But… if we get much of a demand, there’s some support underneath the market.” Final Thoughts: Stay Nimble, Watch the Weather Roose offered this advice to livestock producers: “Don’t overstate your position… Watch the demand side of the market and watch the seasonalities.
But keep current on cattle.” Hackett urged producers to keep an eye on Russia and Ukraine. “A very significant cold air mass is expected to come in like it did last year… It could be the spark that maybe catches the market off guard.” The Weekly Market Roundup is produced by the Nebraska Rural Radio Association and presented by the Nebraska Soybean Board.
