Natural 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.
Read MoreIn Friday’s cattle report, the USDA said feedlot inventories totaled 11.22M head on Aug 1, up 1.4% from a year ago. New placements onto feedlots were larger than expected in July, up 1.8%, following 3 straight monthly declines. Drought continues to be the driving factor, forcing producers to liquidate feeders at younger ages and lighter weights.
Read MoreButter prices hit 7-year highs of $3.06/lb on 8/3 before backing off to $2.9350 (8/12). Butter output in June was up 2.3% from a year ago, but first half 2022 production was down 2.8% from 2021. Cold storage supplies are 20.0% below year ago levels. Cream availability is tight and Thanksgiving baking season will likely be here before supplies can recover.
Read MoreHighly Pathogenic Avian Influenza (HPAI or Avian Flu) may finally have run its course this year, with no new cases over the past 2 weeks. But the damage has been devastating. By our calculations (so far in 2022) HPAI has resulted in the culling of 30.8M egg layers, 5.4M turkeys, and 2.4M broilers. Throw in pullets, turkey layers, and other species, and the U.S. lost 40M birds this year.
Read MoreThe AAA average for regular gasoline was $4.22 per gallon on 7/30, down from a high of $5.01 in mid-June, but still up 33% from $3.17 a year ago. WTI crude oil futures, at $98.62 per barrel, were still north of $120 just a month ago. Forecasts for weaker global oil demand, plus rising U.S. inventory levels, precipitated the price declines.
Read MoreIn Friday’s cattle report, the USDA said feedlot inventories were 11.34M head on July 1, up 0.4% from a year ago. However, new placements onto feedlots in June were down 2.4% - and will likely continue to decline through the 2nd half of 2022. Heifers accounted for 39.2% of feedlot inventory, up 2.9% from 2021, and far exceeding the 36% threshold that historically indicates herd liquidation.
Read MoreInflation fears remain front & center. Consumer prices (CPI) increased at a 9.1% annual rate in June, a 41-year high. The Fed raised the federal funds rate by 3/4 of a percentage point on 6/15, and another 3/4-point increase is expected later this month. Two more half-point increases are likely after that, taking rates from roughly zero to 2.5% in 2022.
Read MoreAfter peaking at $.90/lb in April, soy-oil futures have declined to $.6407 (7/8) – roughly where they were a year ago. What’s changed? Because of biofuel policy, soy-oil prices are now correlated (over 80%) with crude oil. Crude peaked at $123.70 per barrel in March but has since dropped to $104.79. Also, Indonesia rescinded its palm oil export ban and is still struggling to unload excess supplies accumulated during the ban.
Read MoreProtein supplies continue to tighten. In its June 24 cattle report, the USDA said feedlot inventories were 11.85M head on June 1, up 1.2% from a year ago. However, new placements onto feedlots in May were down 2.1% - and will likely continue to decline through the 2nd half of 2022, leading to lower beef supplies. Blame it on drought and sky-high hay & feed prices.
Read MoreThe Biden administration (and the country) need lower gasoline prices. Unfortunately, you can’t accomplish that when you condemn oil producers and the Saudis on one hand, and then ask them to invest in expanding output on the other. Even so, drilling/production right now are secondary to the need for additional refineries.
Read MoreThe Fed tried to lower the hammer on inflation last week, raising the federal funds rate by 3/4 of a percentage point. Economists are expecting 3 more half-point increases this year, which would take rates from roughly zero to 2.25% in 2022. The first casualty will be the housing market. Freddie Mac said 30-year mortgage rates hit a 14-year high of 5.78% last week, up from just 3.11% in Dec 2021.
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