Commodity markets experience winter thaw, stock markets remain frozen

As 2023 seeks a foothold, both commodity and equity markets continue on the paths charted by last year’s higher-than-expected inflation, Russia’s brutal war, a likely escalation of the global pandemic and a growing power vacuum in American politics. . Stock markets hated the bad news of 2022 and most market indices hit yearly highs in early January. After that, most of the time was downhill. The Dow Jones Industrial Average, for example, fell 9% last year. A broader market measure, the S&P 500, lost 19.4% of its value and the tech-heavy Nasdaq lost 33.1%.

In all, the Spectator Index tweeted on New Year’s Day, global stock markets lost a collective $18 trillion worth in 2022, or the equivalent of roughly three-quarters of US annual GDP. No chicken feed.

Conversely, commodity markets often shrug off pessimism and use both as rocket fuel to shoot for the moon, place large bets, on prices. That’s exactly what happened in December, when harsh weather forecasts here and abroad and declining US livestock and poultry numbers sent futures prices soaring.

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For example, year-end inventory reports from the US Department of Agriculture strongly suggest that reduced US hog and cattle numbers will keep red meat markets on their current price path. tall. That’s especially true for live cattle, whose April futures ended in December just a mark off the yearly high of $1.62 a pound.

Grain futures also rose at the end of the year. Reflecting growing production problems in Argentina, November 2023 soybean futures rallied during the holiday season and ended 2022 near their contractual high of $14.50 a bushel. That quick rally in soybeans inspired both new crop wheat and new crop corn contracts to shake off their winter slumber early for an equally quick move and follow the leader higher as well.

However, none of the small rallies seem as sustainable as the strong move in soybeans. Lingering questions about the South American crop will keep world markets on edge until concrete answers, best provided by working combines, start to arrive sometime in mid-February. Until then, an even bigger wild card, China’s fast-spreading COVID-19 pandemic, could easily undermine almost any other market driver, bullish or bearish, in both the stock and agricultural commodity markets. The reason is that COVID-centric deadly math is now increasingly taking advantage of the people and economy of China.

It is the almost inevitable consequence of China’s deeply controversial national COVID isolation policy for years. Designed to prevent the disease from spreading, it resulted in widespread political discontent and eventually open defiance. When China’s chastened leaders lifted restrictive rules last month, COVID, as expected, quickly filled hospitals and morgues.

With China claiming not to track COVID hospitalizations or Covid deaths, at least officially, it’s hard to judge the immediate impact of the pandemic on the world’s largest national population and second-largest national economy. Comparing what the US has experienced since 2020 with what China may see in 2023 suggests very bleak times lie ahead for the biggest buyer of US agricultural exports.

For example, as of December 2022, the total number of US COVID-related deaths stood at 1.1 million out of a population base of 332 million. If China, with 4.3 times as many people (or 1.43 billion in total population), loses the US equivalent to COVID, it can expect 4.7 million COVID deaths.

That estimate on the back of the envelope is nothing more than that, it is not a prediction or forecast. Yet it’s a market-altering possibility that looms over nearly every commodity and stock market, from Chicago to Shanghai.

Initially, as Bloomberg News suggested in late December, China’s reopening is “poised to boost crop demand.” And it did, witness the rally in commodities at the end of December. January could see a similar kick because, starting Monday, China will lift restrictions on “imported chilled and frozen foods.” Chilled, or perhaps frozen, might be the best word to describe the 2023 political possibilities in Washington, DC, given the spiteful House Republican caucus and slim majority.

On second thought, let’s go with frozen. Or, better yet, “Let it go.”

The Farm and Food File is published weekly in the US and Canada. Source material and contact information is posted on

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