BQC Afternoon Comments Feb 20.2025

Macroeconomics: The Bank of Japan is now expecting to raise rates to 0.75% in the third quarter this year. The rate hike could come as soon as July, but bets are favoring September. The current BOJ rate is 0.50% which is as high as it has been since the 2008 financial crisis. In 1999 the Bank of Japan set their interest rates at 0.0% and did not change them for 17 years! “The Carry Trade” became a highly googled term following their uprising increase in March of last year. since then they raise rates another 25% in November of 2024 and have set a goal of 1.00% by 2026.  
Ag Fundamentals: Ethanol production remains strong as US plants increased their output by 1 million gallons week-over-week to 319 million gallons last week. If production remains high, and we hit headwinds with our largest trade partner, Canada, then Stocks may continue to climb until margins decrease.  Corn export sales are expected to report another strong number tomorrow morning. I have heard ranges between 93 and 96 million acres of corn expected to plant in the US this spring. The corn board is attempting to buy the acres, but US new crop corn sales are only estimated to be 4% sold. To me, that suggests acres will be on the low end of that estimate range or farmers are bullish and betting on a possibly straining growing season here in the States. The last 26 weeks have given the drought theory a leg to stand on with a majority of the US major growing regions lacking crucial winter precipitation. There is a 60% chance La Nina will stick around until April then turn neutral. This has obviously been a piece of the winter wheat conversation for weeks as well. It has been 16 days since the 10% tariffs were placed on Chinese goods imported into the US and there has been no sign of their officials wanting to step up and negotiate. Trump mentioned yesterday that a trade weal with China is very possible considering his “relationship with President Xi”. It was not that long ago that Xi and the other BRICS nations, including Saudi Arabia, were talking about a new currency to serve the US sanctions and Dollar dominance. The dollar was sharply lower today hitting an 11-week low below 106.25 on the index.