After the Covid-era fallout, 2022 was a tough year for the world’s stock markets as they dealt with a number of geopolitical and economic challenges.
Nasdaq reviews 2022 global economy
The Russia-Ukraine war, China’s zero-covid policies, supply chain disruptions, changing consumer spending from services to goods, robust employment and wage growth, and the ultra-stimulative fiscal and monetary policies all contributed to inflation gauges reaching 40-year highs.
One of the largest rate-hiking cycles in decades was the response of global central banks to persistently high pricing pressure. In 2022, more than 80 central banks tightened their monetary policy, including 15 of the top 20 global market-impacting central banks.
In the final seven meetings of 2022, the Federal Reserve raised the overnight FFR by 425 bps, which is the equivalent of 17 25bp rate increases. Three 25bp rate increases were all that the markets have priced in for 2022.
2022 global commodity markets
The extraordinarily high volatility of commodities, especially food and energy, was primarily caused by Russia’s invasion of Ukraine in late February.
The Bloomberg Commodity Index (BCOM), which peaked in March at a gain of up to 41.8%, ended the year up 13.8%. This came after a 27% increase in 2021, which was a 42-year high at the time. WTI crude also reached its price apex in March at $130.50 (+73.5%), before sliding to $80.26 (+6.7%).
Late in the year, precious metals soared, leaving spot gold and silver with small gains of 2.8% and 0.3%, respectively.
Due to gold’s apparent underperformance over the past ten years, it appears that investors are substituting growth stocks, cryptocurrencies, or steadily growing treasury bonds for gold in their portfolios. The trend of gold’s poor performance, nevertheless, might be about to change.
Growth stocks were among the worst-performing companies in 2022, and it would be predicted that they will continue to underperform if the Fed follows through on its prediction to keep rates high for the entirety of 2023.
Feed Grain Outlook in 2023
The USDA forecast 92 million planted acres of corn in the U.S. for 2022 during the Outlook Forum in February 2022. According to the March Prospective Plantings report, farmers planned to plant $89.5 million acres.
The amount of corn grown reached 88.6 million by the autumn. From 181 bushels per acre in February to 172.3 in November, the yield estimate decreased.
The Office of the Chief Economist at the USDA has published its long-term agricultural projections, and for 2023, the projections for corn fundamentals show a rise in corn acres, greater yields, and output once again exceeding use (+515 million bushels).
Prices would be under pressure to decline as a result of these basic supply and demand factors. Under these circumstances, the season-average farm price is predicted to be $5.70 per bushel.
According to long-term estimates, the fundamentals for grain sorghum in 2023 will be very similar to that of corn, with more acres, higher yields, more output, and lower pricing ($5.60 per bushel).
However, the rise in production could enhance per acre revenue even in the face of reduced prices if the Southern High Plains see drought relief in 2023. In comparison to 2022, sorghum revenue is up $91 per acre and costs are down $5 per acre based on a return to average yields.
Under those conditions, sorghum’s net return on an acre is $96 greater.
As fundamental pressures push prices lower while input costs remain relatively high, 2023 appears to have the potential to be a year with narrow profit margins. Market unpredictability and volatility will continue to be increased by the weather, world economic conditions, and geopolitical instability.
The difficulties for 2023 are to manage profitable pricing possibilities, lower break-even levels, and limit costs.
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