Strategies for Thriving in 2024 Agricultural Market

Mar 21, 2024

Federal Reserve Impact on Commodity Markets

At the recent London Farm Show and Ottawa Valley Farm Show, Moe Agostino, Chief Commodity Strategist at Farms.com RiskManagement presented his outlook on the commodity markets for the next few months.

Despite the widespread negative outlook, Agostino confidently moved through the complexities of the market, offering a hopeful perspective for the future.

Diving into the heart of agricultural market trends, Agostino revisited his successful "store and ignore" strategy which reaped substantial benefits during the 2020 and 2021 seasons.

2023 was a volatile year in the commodity markets, due to surprising yield results that sparked a myriad of conspiracy theories concerning USDA reports, inflating tensions around food inflation, as well as several political influences.

A significant portion of Agostino's analysis was dedicated to the U.S. Federal Reserve's monetary policies and their impact on interest rates.

In January 2024 Agostino was forecasting a rate cut by March, but he has since had to modify that forecast because of the continued economic uncertainty with the US Fed, which signaled a delay, pushing market expectations towards a possible rate decrease not before July, with a 54% probability of a rate decrease in June.

This shift underscores the weight of external factors, such as weather conditions, on commodity prices.

Inflation's role in the commodity market was another focal point of Agostino's presentation. He illustrates the direct correlation between inflationary pressures and commodity pricing through the lens of corn prices, which soared from $3.75 to $7.51, serving as an inflation hedge. Agostino didn't shy away from comparing commodities' undervaluation relative to stocks, suggesting a potential rally to correct this imbalance.

This analysis is complemented by a discussion on global events, including the Russian-Ukraine conflict and its influence on wheat prices, alongside the drought in South America, which, despite forecasts, saw a considerable production that mitigated global supply concerns.

Focusing on the future, Agostino projects slight decreases in corn acreage for 2024, coupled with potential shifts towards crops like cotton, sorghum, and canola, depending on evolving market conditions and farmers' decisions.

The geopolitical landscape, with a US election looming presents a notable risk to the agricultural sector.

Agostino reminded everyone of the trade wars initiated by Trump, the resulting subsidies to farmers, and the overarching impact on agricultural exports and prices. He urged farmers to prepare for market volatility.

His optimistic yet practical outlook, supported by thorough market analysis and strategic advice, is designed to empower farmers and investors in navigating the complex landscape of agricultural commodities in 2024 and beyond.

For daily information and updates on agriculture commodity marketing and price risk management for North American farmers, producers, and agribusiness visit the Farms.com Risk Management Website to subscribe to the program.

Watch Agostino’s complete March 2024 presentation below.

Video: Will the 2025 USDA December Crop Report Be a Market Mover/Surprise?

Historically, the USDA December crop report is a non-event or another dud report as the USDA reserves any final supply changes to the final report in January of the following year in this case 2026. But after the longest U.S. government shutdown in history at 43 days and no October crop report will they provide more data/surprise and make an exception?
Our China U.S. soybean purchase tracker is now at 26.6% or a total of 3.2 mmt but for traders it’s taking too long to unfold.
The final Stats Canada production report was bearish canola and wheat projection a record crop in both (it adds to the global glut of supplies) and bullish local corn and soybean prices in Ontario/Quebec thanks to a drought. It will not help the fund flow short-term, the USDA may need to offset it?
A U.S. Fed interest rate cut of another 25-basis point next Wednesday (probability 87.1%) could help fund flow and sentiment in stock and ag commodities into year end.
More inflows into Bitcoin this past week saw prices rebound back above 90,000 with support at 82,000 and resistance at 96,000.
A V-shaped bottom in cattle suggest the lows are in after Mexico reported another new world screwworm case. Lower weights, seasonal demand and higher U.S. beef select/choice values with a continued closure of the Mexican border to cattle will result in a resumption of higher cattle futures into yearend.
Australia is expected to produce its 3rd largest wheat crop ever at 36 mmt adding to the global glut of supplies.
Reports of ASF in hogs in Spain the largest pork exporter in Europe could see the U.S. win more pork export business long-term.
If the rains verify into next week of 3-5 inches for Brazil it would go a long way to fixing the dry regions from the last 2-months, but the European weather model has been wrong for the past 2-months!
Natural gas futures are surging to the 3rd price count as frigid hold temps set in.
CDN $ is also surging to end the week on a very resilient economy and better employment numbers suggesting no interest rate cuts next week.
Finally, the CFTC report showed funds were net buyers of soybeans but sellers of corn, canola and wheat. In real time the funds have gone back to selling as they take some profits.