BQC Afternoon Comments Aug 30.24

Macroeconomics: The Federal Reserve has not changed interest rates since July 26th, 2023. It feels like people talk about rates as if the last move was a “cut”. We have not made any moves this year, only heard Jerome Powell talk about when the next cut will most likely be (next month). The 30-year mortgage rate averaged nearly 7% through 2023 and fell to a 16-month low of 6.44% last week. the 30-year is forecasted to average 6.7% in 2024, and possibly declining to 6% average next year. 9 out of 10 homeowners have mortgage rates lower than 6% so they are reluctant to lose that rate by selling their home. This has created a supply shortage and has kept prices higher than the Average Joe can afford. When it comes to building new homes, the number of “new privately-owned housing units started” has fallen from a peak 1.828 million in April of 2022 to 1.238M as of July 2024 (-32% change). Home buyers on a $3000 monthly mortgage payment budget have lost about $30K in purchasing power since February of 2023 (purchasing power went from $480K to $450K). That is the power these rates hold. Markets have plugged in a 100% chance of a 0.25 pt cut in September and a 33% chance of a half point.

Ag Fundamentals: Green across the row crop boards going into the long weekend. Oats continue their climb higher. December corn saw a key reversal with a close at 401’0. November soybeans close over 988’0 which is the first close above the 20 day moving average since May 28th. Th US reported a flash sale of 132K Mt of soybeans to China this morning, along with 100K MT of soybean cake and meal to Colombia. Grain markets will be closed Monday in observance of the Labor Day Holiday. The evening session will reopen markets at 7:00pm Monday for overnight trade (Livestock opens @ 8:30am Tuesday).

Weather:  The National Weather Service now has 3 possible tropical systems developing. There is a large area of disorganized showers and thunderstorms just off the gulf shores of Texas and Louisiana today that have gained strength but still has a less than 30% chance of developing. Near the Lesser Antilles, and Caribbean Sea there is a higher chance of a tropical depression developing over the next 5 days. Then a third following over the eastern Atlantic. We should know much more about the development of these storms after this holiday weekend.