Federal rate cuts now expected to be as late as September
This week there are five key reports to watch that could have significant impacts on commodity markets the week of May 13th. This Farms.com column tracks key events in commodity marketing impacting the agriculture industry! The series of article shares issues to watch the following week, issues that may have an impact on commodity prices in the coming weeks.
By Devin Lashley
Farms.com Risk Management Intern
1. The U.S. 2024 Wheat Quality Council tour will commence next week ending on Thursday May 16th, last year's wheat quality tour found that despite the planting of an estimated 8.1 million acres of wheat in the fall, the Kansas wheat crop had suffered from a multi-year drought, leading to reduced yield potential. The tour projection for total wheat production in Kansas was 178 Mil Bu, with an estimated abandonment rate of 26.75%. Expect this year's wheat quality tour to suggest a larger crop vs. last year despite dry conditions with 33% of the U.S. winter wheat crop in poor/very poor condition vs. last year at 68%.
2. On Monday May 13th the USDA crop progress report, likely showing that there was limited U.S. planting progress from too much rain. Areas in Texas, Dakotas and Ohio are the wettest on record for the last 60 days, dating back to 1893! April rainfall in the U.S. corn belt is 1.74" above normal, the wettest April since 2013 & the 8th wettest on record! The 7-day outlook is drier, but planting will be limited again into next week as too many are soaked!
3. Southern Brazil has received 36 inches of rain in 1 month with a forecast for an additional 15 inches in the coming weeks to add more insult to injury as 40% of the 23/24 soybean harvest is at risk as is all of the silos full of grain that are flooded. This could take the total South American 23/24 soybean production down to 185 mmt equal to last year as Argentina remains wet and a reason why soybean futures have started to surge higher!
4. The U.S. PPI data (a measure of inflation at the wholesale level) will be released on May 14th, and last month's data showed a 0.2% increase for the month, less than the 0.3% estimate from the Dow Jones consensus. U.S. CPI will be released on May 15th and showed U.S. consumer prices rose higher than anticipated at 0.3%, driven by increases in gasoline and rental housing. This sustained higher trend over the past 3-months hints at a delay in Fed's rate cuts, now expected possibly as late as September of 2024. Look for a lower print in both as crude oil prices have come down and the U.S. 10-year yield to fall after spiking last month. The consumer may have finally tapped out.
5. The U.S. Drought Monitor will be released next Thursday on May 16th and will likely show improvements across the board once more, as the month of May remains wet as was the month of April. It’s welcome news for those who were very dry, but farmers would have preferred the rain after planting was complete. U.S. corn in a drought has dropped to 14% vs. last week at 19%, soybeans 11% vs. 17% and winter wheat was unchanged at 28%.
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