MARKET SUMMARY 12-6-2022
Soybean meal prices broke out to new contract highs during the session on Tuesday, helping to support soybean futures prices. The past few trading sessions, soybean meal prices have been trending higher, but strong buying pushed futures to their highest levels since September, trading nearly 4% higher during the day. Prices pushed through the psychological $450/ton level before slipping slightly into the close. Weather in Argentina and end users concern for global soybean meal supplies was the driving force the recent price strength. Weather in Argentina has been very difficult as dry conditions are likely to limit the size of the country’s soybean crop. In some areas of Argentina, drought conditions are comparable to conditions last saw in 2009. This has led to private analyst making downward adjustments on both the corn and soybean crop from Argentina. The soybean meal market has had a strong move and may have priced in most of the weather risk at this time frame, but if weather persists in Argentina and further crop reductions are expected, the poor production should help support soybean and soybean meal prices.
Like what you’re reading?
Sign up for our free daily TFM Market Updates and stay in the know!
CORN HIGHLIGHTS: Corn futures failed to hold gains from early in the session finishing lower for the sixth day in a row losing 3-1/4 cents in December to end the day at 6.25-1/2. March also lost 3-1/4 cents to close at 6.387-1/4 and December 2023 gave up 2 cents to close at 5.93-1/4. Wheat prices were lower, again, as was crude oil futures while at the same time the dollar positive. Expectations that Friday’s USDA WASDE report and a lack of positive news are also viewed as reasons why traders are shedding long contracts.
As attention focuses on southern Hemisphere crop prospects, Argentina remains dry. However, most of Brazil is experiencing near ideal crop growing weather except for the very southern states, namely Rio Grande do Sol, which borders Argentina. The technical picture looks very challenged with most futures contracts breaking all near term support and still pointing downward. In each of the last sixth closes, futures finished near the bottom end of the trading range a sign that buying interest lags later in the day or, bearish traders grow more brash and add to short positions. The demise of the wheat market (now trading lower than any time in 2022) has influenced corn prices to the negative, yet the lack of exports, coupled with slowing ethanol demand, is keeping prices on the defensive. End users are finding value, yet there is no urgency to book ahead as long as it looks like managed money is moving out of the long side of commodities, including corn. The is a price gap on the March contract at 5.91. This could be a target for bearish traders.
SOYBEAN HIGHLIGHTS: Soybean futures closed higher today, bolstered by a new flash sale to China and huge gains in meal that sent prices to contract highs. Bean meal has now switched tracks with bean oil which closed lower for the fifth consecutive day. Jan soybeans gained 17-1/4 cents to end the session at 14.55, and Mar gained 16-1/2 cents at 14.61-1/2.
Soybeans rallied back to the top of their trading range today and have recovered nearly all of the losses caused by the EPA announcement regarding biofuel, proving that the selloff was an overreaction to data that came in as expected. Soybeans were strong today when looking at corn and wheat which have trended significantly lower and taken out levels of support while beans have stayed in their range. The main reason for the strength in beans comes from continued export demand which has not been present for corn and wheat. This morning private exporters reported sales of 264,000 mt of beans to China and an additional sale of 240,000 mt to unknown destinations for the 22/23 marketing year, and this follows yesterday’s 4.8 mb sale of beans to China. Exports and prices should remain firm until Brazil’s new crop is ready and China ramps up purchases from Brazil. Bean meal has now risen to contract highs while bean oil has sold off sharply as crude continues its descent. Today crude oil fell over 2.50 dollars a barrel and is now below 75 dollars a barrel, and this drop has triggered fund selling in bean oil where they had previously been long over 100,000 contracts. Argentina is still dealing with drought while forecasts for Brazil remain mostly favorable. On Friday, the USDA Supply and Demand report will be released and it’s still up in the air whether any significant changes will be made. March beans bounced off the top of their Bollinger Band but still closed near the top of their trading range.
WHEAT HIGHLIGHTS: Wheat futures sank again today as funds add to their short positions and money is moving out of commodities. Mar Chi lost 10 cents, closing at 7.29 and Jul down 11-1/2 at 7.45-1/2. Mar KC lost 11-3/4 cents, closing at 8.30 and Jul down 11-3/4 at 8.22.
Wheat struggled again today. Despite making small gains earlier in the session and holding close to neutral for a while, prices faded by the close. Money appears to be flowing out of commodities; without support from higher meal prices soybeans would likely have traded lower today in addition to corn and wheat. Crude oil and the stock market are also lower at the time of writing, with the US Dollar slightly higher. Renewed concerns over inflation and recession may be weighing on the market. Follow through selling in wheat may also be coming from yesterday’s news that Australia’s crop agency increased their wheat production estimate by about 2 mmt. Funds continue to add to short positions in the face of tight US and global supplies. In terms of US prices, it does not help that Black Sea wheat is at a discount. Recent weakness in the Russian Ruble has made their wheat the cheapest world offer. If there is a silver lining, it is the fact that US wheat futures are very oversold and are due for a technical correction. Friday’s USDA report may provide some more direction to the market but no major changes are expected at this time.
CATTLE HIGHLIGHTS: Cattle futures had a difficult day. Retail market weakness and selling pressure from outside markets triggered some profit taking in both live and feeder cattle futures. December live cattle fell 1.675 to 151.550 and Feb cattle futures dropped 2.200 to 153.625. In feeders, Jan feeders dropped 1.975 to 181.800.
The selling pressure in the cattle complex was triggered by an aggressive drop in retail values on Monday’s close. Choice carcasses dropped 6.62 and Select was down 3.45 on Monday afternoon’s closing values. Since Monday, beef Choice carcasses have lost over $10.00. The sharp drop in retail values has the market concerned on cash bids this week with the weakened packer margins. At Midday, retail values stayed soft again with Choice slipping 0.96 to 242.35 and Select losing another .68 to 220.43. The cash market is still undeveloped. The market is hoping for steady trade at most, but the strong drop in retail prices may put that in jeopardy. Adding to the selling was another strong drop in the equity market and crude oil, triggering a risk-off trade in most markets. The weakness in Live cattle spilled over into the feeder market, which was vulnerable to profit taking after last week’s strength. The Feeder Cattle Index was 0.39 higher to 178.53. Jan feeders have stretched out a premium to the index, which added to selling pressure. Technically, charts broke down during the session today, and price action leaves the market more open to downside pressure this week. Cash trade could help stabilize the market this week, but that is still undeveloped at this time.
LEAN HOG HIGHLIGHTS: Lean hog futures fell under the selling pressure of the livestock sector as hogs saw additional long liquidation and profit taking. Dec hogs tied to the cash market was 0.200 higher to 82.275, but Feb hogs dropped 3.600 to 86.925.
Outside market were strongly lower again on Tuesday, and that triggered some additional profit taking. Strong selling pressure in the cattle markets spilled over and pressured the hog complex. The hog market has been fighting through a supply issue as daily slaughter has stayed strong building up product. The end of the year is a concern as retailers are less likely to carry additional inventory over into next year, and that has weighed on demand. February hogs have built a large premium to the cash market, and the market has made it a goal to pull that premium out the past few sessions. Dec hogs are moving closer to expiration on 12/14 and stay tied to the cash market and the index. The Lean Hog Index was softer, losing another 0.08 to 82.79. The cash index and Dec futures are trading near each other, which should limit gains or losses for the Dec futures. Direct cash trade was comparable due to “confidentiality” trade yesterday, but the weighted average was at 82.13, and the 5-day rolling average was 84.98. Retail values at midday were firmer, gaining 5.74 to 92.20. The load count was moderate at 193 loads. The strong retail tone of the past couple of session may be starting to indicate a seasonal turn in pork values. They could be key to prices finding some footing going into 2023. The price action was disappointing on Monday, and that likely set the market up for further selling pressure on the day today. The selling was likely triggered by weak outside markets with some “risk off” mentality and spillover weakness from the cattle markets. The front month Dec and Feb futures will be limited as the fundamentals are still lagging at this time.
DAIRY HIGHLIGHTS: It was a busy day for demand information as October Dairy Exports were released along with a Global Dairy Trade Auction. The GDT Index was up 0.60% to 1,101 points, up from a 22-month low of 1,069 points from the November 1st Auction. Cheese, skim milk powder, and whole milk powder were higher today while butter was down once again to its lowest level since August 2021. This puts US spot butter ($2.90/lb) 76 cents above the current GDT price ($2.14/lb), but US butter exports in October didn’t seem to notice as that month saw 8,646 metric tons exported. Overall dairy exports were 8% higher than October 2021 and up 2% from the month prior. Milk market action was pretty muted with most contracts holding small gains into the afternoon close. The rest of the week is quiet for fundamental updates with the exception of the December Supply and Demand report that will be released Friday. So far this month, corn prices have pushed to multi-month lows while soybean meal futures are testing the top end of their range.
Total Farm Marketing and TFM refer to Stewart-Peterson Group Inc., Stewart-Peterson Inc., and SP Risk Services LLC. Stewart-Peterson Group Inc. is registered with the Commodity Futures Trading Commission (CFTC) as an introducing broker and is a member of the National Futures Association. Stewart-Peterson Inc. is a publishing company. SP Risk Services LLC is an insurance agency. A customer may have relationships with all three companies. TFM Market Updates is a service of Stewart-Peterson Inc. Futures and options trading involve significant risk of loss and may not be suitable for everyone. Therefore, carefully consider whether such trading is suitable for you in light of your financial condition.
Author
Amanda Brill