Chicago Board of Trade Market News
Outlook
U.S. Federal Reserve Chair Jerome Powell emphasized the task of reducing inflation is ongoing and the central bank requires more assurance of easing price pressures before considering interest rate cuts. But he also reaffirmed the Fed’s intention to cut interest rates this year, despite the recent surge in economic activity, and premises the decision to cut rates on the expectation of declining inflation in the months ahead. Powell highlighted indicators suggesting the labor market is less constrained than in previous years, alleviating concerns of simultaneous increases in wages and prices. Despite market expectations indicating at least three rate cuts this year, Fed officials are expressing caution about easing monetary policy too quickly, aiming to strike a balance between controlling inflation and preventing an economic slowdown. Atlanta Fed President Raphael Bostic has said that rates should likely not be reduced until the fourth quarter of this year.
Trade Impact of Baltimore Bridge Collapse
- Efforts are underway to divert shipments to other ports in the wake of the Baltimore bridge collapse, whose weekly trade impact is estimated at around $1.7 billion.
- Major container shipping companies have declared force majeure and stated that they will not cover additional transportation costs to alternative ports.
- As a result, carriers and logistics operators faced increased transportation costs.
- The automotive and heavy machinery industries were particularly affected, with car carriers and manufacturers experiencing disruptions and financial losses.
- The port closure also caused traffic diversions and increased costs affecting truckers’ routes and fuel costs.
Agricultural Exports from Baltimore
- In 2023, the amount of agricultural products exported from Baltimore was approximately 605,000 metric tons valued at approximately $650 million.
- This is equivalent to 0.3% of total US agricultural exports by quantity and 0.4% by value.
- In 2023, 415,678 metric tons of soybeans exported from Baltimore accounted for 0.9% of all US soybean exports, valued at $243 million.
- In terms of value, the largest export markets for agricultural products leaving Baltimore are Taiwan, China and Colombia.
Technically the corn market pushed down to support levels below the 50-day moving average and seems to have run out of sellers and the same thing in soybeans. U.S. farmer selling has dried up as prices retreated from last Thursday’s report day highs. We’re hearing that farmers are just not interested in selling corn and soybeans unless basis improves significantly or the market rebounds. The roughly 400-million-bushel disappearance in corn in last week’s USDA Quarterly Stocks Report is also a positive factor. But for prices to move higher, the grain markets will now need some sort of catalyst to get funds to continue to cover their short positions, most likely in the form of weather concerns. As some traders have mentioned, all of the uncertainty of the new crop is ahead of the marketplace.
The pullback in the U.S. dollar index and higher crude oil and energy prices are also supportive. Crude oil is reacting to rising tensions in the Middle East and tightening inventory and is adding some risk premium. Longer-term this is supportive to corn pricing.