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From all of us at Total Farm Marketing, have a prosperous and happy new year!
MARKET SUMMARY 12-29-2022
The live cattle contract continues to push to new highs as buyers have stayed active in the live cattle market going into the end of the year. The recent strong buying has been triggered by the confirmation of tight cattle supplies going into 2023 by last Friday’s Cattle on Feed report. This tight supply picture and a jump in retail carcass values keeps the live cattle market optimistic. Cash trade this week is starting to develop, and expectations are for trade to be firmer than last week. A strong move in retail carcasses, with Choice carcasses trading at $279.00 at midday on Thursday, have helped improved packer margins, allowing them to bid up for cash cattle. The sharp drop in temperatures last week and warm temperatures this week may impact feedlot conditions, making good weight gain difficult. With February closing at 158.850 on Thursday, that is the highest February close since November of 2015 as the trend in the near-term continues to work higher for live cattle.
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CORN HIGHLIGHTS: Corn futures, on old crop, ended a 3-day winning streak, giving up 3-1/4 cents to end the session at 6.79-1/2. December added 0-3/4 to close at 6.12-1/2. Despite today’s losses, corn futures are holding their own after closing above major moving averages this week. It is likely that, with a three-day weekend in front of the markets, traders may have moved out of some long positions today. Supporting prices is a weaker dollar and talk China could be interested in securing U.S. corn. Less than ideal conditions in Argentina are also acknowledged.
Today’s ethanol report (normally released on Wednesday’s) confirmed a major slowdown in corn grind, perhaps more than expected. Between a major storm system and a holiday-shortened week, the grind was only 96 mb instead of the usual range of 102 to 106 mb. Ethanol stocks also rose from 24.1 million barrels to 24.6, not necessarily the type of news to support higher prices. Yet, the focus will turn to South America where areas of Argentina continue to lack rain. Scuttlebutt is that China is interested in buying U.S. corn. Bear spreading was noted today as futures in front months are likely reflecting an increase in farmer selling. March futures have gained just under 50 cents since early December, enough to likely encourage those who had regrets not selling in October or November now willing to pull the trigger. Some conversations are centered around long lines at elevators.
SOYBEAN HIGHLIGHTS: Soybean futures closed slightly higher today and managed another close above 15 dollars. Meal closed lower, but March bean oil gained over 2% despite a slip in crude oil. Jan soybeans gained 2-1/4 cents to end the session at 15.08-3/4, and Mar gained 2 cents at 15.16-1/4.
Soybeans held firm above the 15-dollar level which had acted as strong resistance for so long and may turn into support if it continues to hold. March beans have already gained over 30 cents on the week, so another decent day tomorrow would show beans sending off 2022 with a bang. The bullish themes remain the same and can be attributed to the dryness and heat in Argentina, relaxing Covid policies in China, and solid domestic and export demand. Domestic demand has been a huge source of support as demand for soybean oil as biofuel has really taken off, and this has caused crush margins to reach historical levels strengthening basis nationally. Argentina continues to get their hopes up for rain only to have forecasts change and miss them which has severely impacted their crop. The Buenos Aires Grain Exchange said today that only 10% of the crop was rated good-to-excellent which is down from 12% last week and down from 57% a year ago. Additionally, only 72% of beans have been planted which is down from the 5-year average of 86% for this time of year. Technically, March beans remain in a solid upward trend above all moving averages but are nearing overbought territory. It will be interesting to see if they can remain above 15 dollars at the start of the new year and making some cash sales at this level is encouraged.
WHEAT HIGHLIGHTS: Wheat futures closed lower today but recovered from their morning lows, which saw prices down as much as 20 cents. Heavy rains in the 10-day forecast for much of the country was a bullish factor with many crops needing the moisture. Mar Chi lost 11-1/2 cents, closing at 7.74 and Jul down 11 at 7.85-1/4. Mar KC lost 15-3/4 cents, closing at 8.66-1/2 and Jul down 15-1/2 at 8.61-1/4.
All three wheat contracts closed lower today with Minneapolis as the biggest percentage mover, closing over 2% lower as beneficial rains fall over the western US and southeastern US, which includes much of the eastern US. The moisture will come as a mix of both rain and snow, but areas affected by dryness in the fall will get some relief. Tomorrow’s weekly sales report will most likely show small numbers for wheat which trade has come to expect and should be mostly in line with the USDA’s estimate of 775 mb of exports for 22/23. Yesterday’s CME report showed 48.3 mb of deliverable HRW wheat stocks on December 23, which is down 32% from the same time a year ago. SRW wheat stocks were 45.1 mb and were up 10% from a year ago. As the fighting and drone/missile attacks increase in Ukraine, many private insurance providers are saying that the will no longer offer coverage for ships leaving Russia, Ukraine, and Belarus after January 1, and this development could be supportive for prices. Technically, March Chicago wheat is in an upwards trend from the end of November and looks to be finding support, but the stochastics are overbought which could cause some technical selling. Further developments with world supply and the war in Ukraine should give wheat a more prominent direction to follow.
CATTLE HIGHLIGHTS: Live cattle finished the day with solid buying strength on optimism in the potential cash market this week, fueled by the recent strength in the retail market. Dec cattle which expire on Friday, gained 1.050 to 158.500, and Feb cattle added 1.050 to 158.850. In feeders, January feeders gained 0.325 to 183.800.
The live cattle market pushed to new contract highs again on Thursday as buyers remained optimistic in the cash trade developing this week. Cash trade started some action today as bids firmed. Light trade occurred in Texas at $157, which is $1 higher than last week’s totals. Northern trade is still developing but asking values and existing bids are trending higher than last week. Cattle feeders are still holding out for higher money on the week and looks like they are going to get rewarded. Cash trade will develop more going into the end of the week, but the higher overall values are supporting the market. The strong retail trade has provided improved packer margins allowing them to bid for quality cattle. Retail values have rallied aggressively off the December lows as beef supplies are tightening and demand is still strong. At midday today, carcass values were mixed. Choice carcasses slipped .34 to 279.07 and Select was 2.30 higher to 249.58. The load count was light at 71 midday loads. With Choice carcasses near $280 at midday, this is over $30 off the December Choice carcass lows. Feeder cattle follow suit with buying strength. The strong live cattle market and softer corn and wheat markets provided support. The Feeder Cash Index jumped 3.76 high to 179.84. The index is still at a discount to the January futures, but the trend could be turning. December live cattle expire on Friday, and that could bring some volatility into the cattle market for the last trading day of the year. The trend is still higher, and the cattle market currently has the fundamentals to support the near-term strength.
LEAN HOG HIGHLIGHTS: Lean hog futures saw strong selling pressure as the market tightened the spread between the futures market and the cash market. Feb hogs traded sharply lower 2.125 to close at 88.675 and Apr lost 0.875 to 95.700.
February lean hog futures were trading at $10 premium to the cash index going into the trading session on Thursday. The market was under pressure going back to Wednesday after price reacted positively to the quarterly Hogs and Pigs report from last week. The hog supply is tighter than last year, but the fundamentals in retail values and cash have been lacking to support a sustained rally in this window. Direct cash hog trade at midday was 1.55 lower to a weighted average price of 75.87. The lean hog index did jump 2.06 higher on Thursday to 80.69. This was the largest one-day jump in the index since Feb. 2021. The CME pork cutout index has turned the corner higher, gaining 1.09 to 88.41 on Thursday. These two indexes turning higher could be a signal of a possible turn in the fundamentals going into 2023. Retail pork values have trended higher off the December low, helping build some optimism. At midday, retail carcasses lost .80 to 87.87 on light demand of 147 loads. The technical picture in the hog market looks tired after prices peaked on Tuesday in reaction to the Hogs and Pigs report. since then, price action has been week, and the market may be due for some additional pullback going into the end of the year.
DAIRY HIGHLIGHTS: Light volume and small market moves characterized the dairy trade today, but the January Class III contract closed higher for the fourth time in five days at $19.73 with a gain of 12 cents. Despite the drastic spread between blocks and barrels, spot cheese managed to pop back over the $2.00/lb mark today on six total loads traded. Class IV action was non-existent as only a handful of contracts traded and spot butter was unchanged with no volume. Tomorrow caps off what has been a volatile but opportunity-laden year for dairy producers, typified by strong milk prices mixed with a large upswing in input prices.
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Author
Bryan Doherty