MARKET SUMMARY 3-28-2023
The strength in gold futures prices since the end of the year has been a reflection of the markets longer economic picture and concerns. Since the fall, gold futures have rallied nearly $350/ounce, touching the psychological $2000.00/ounce level last week. Gold price have been the opposite trade of the fed raising interest rates, and tightening money supply. The recent concerns regarding the banking system globally sent another round of money pushing into gold futures as a protection against economic instability. The April contract traded as high as $2104.90/ounce on March 10, the highest price level for gold since April 2022. Prices are now in consolidation trade and building a range between $1950-2000/ ounce level. The gold market will keep a close eye on the banking situation, and the trend with interest rates and money flow in the weeks ahead to help dictate the direction of gold futures prices.
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CORN HIGHLIGHTS: Corn futures ended the session mixed with nearby May dropping 1 cent to close at 6.47-3/4 and December adding 2-1/2 to close at 5.72-1/4, its highest close since February 27. Short covering, a sale to China, and strength in soybeans and wheat were factors to helping support corn prices today. A weaker dollar was also noted.
Another announced sale to China for 136,000 mt (5.36 mb) was viewed as supportive. While the quantity is not an overwhelming large figure, it is still symbolic that China is buying, sending a signal to other countries they should be buying as well. The recovery in the corn market is encouraging, but it will likely take additional supportive news to keep nearby futures moving higher. Friday, the market will have much more information to digest, whether it be acres or stocks. Estimates for planted acres varies from 87.7 million to 92.05. The USDA Ag Outlook Forum was 91. Quarterly stocks will have an impact as well. The wild card is feed usage. Will higher beef prices and increases in poultry and hogs suggest more feed usage or will generally good weight gain weather for feedlots keep cattle feeding downs limited? Poor winter wheat and pasture conditions this past fall might suggest more feed used.
SOYBEAN HIGHLIGHTS: Soybean futures closed higher again today with bean meal leading the way with gains of over 2.50% in the May contract. Soybean supplies remain tight, and Friday’s Stocks and Acreage report will provide more insight to upcoming supplies. May soybeans gained 25-1/2 cents to end the session at 14.67-3/4, Nov was up 15-1/4 to 13.03-3/4.
Soybeans continued their rebound today with the May contract closing back above the 200-day moving average, and Nov beans closing back about 13 dollars after the sharp selloff over the past few weeks. Bean meal carried the soy complex higher after becoming oversold, while bean oil moved higher as well following crude oil and other veg oils higher. Soybean futures on China’s Dalian exchange have not recovered much at all from their near 7 month lows, but they have seen gains in canola and palm oil futures. African swine fever may still be a growing issue in China that is effecting feed demand. In the US, bean meal prices in Illinois hold nearly a 10 dollar premium to the futures and are helping to keep basis firm for soybeans. The big event to watch this week will be the Stocks and Acreage report from the USDA on Friday, and more analysts are pointing to potentially fewer soybean acres and more corn. Recent estimates show corn acres as high as 92.5 million acres, with soybeans at only 84.5, which would be friendly for bean prices.
WHEAT HIGHLIGHTS: Wheat futures closed slightly higher in Chicago and with a much firmer tone in Kansas City. The continuing dryness in the southern Plains is helping futures to rally, especially in the HRW contracts. Today’s lower US Dollar Index was also supportive. May Chi gained 1-3/4 cents, closing at 6.99-3/4 and Jul up 2 at 7.11-1/2. May KC gained 12-1/4 cents, closing at 8.72-1/2 and Jul up 11-3/4 at 8.59-1/4.
After trading both sides of neutral, the wheat trade ended quietly in Chicago with small gains, but double digit improvements in Kansas City contracts. The ongoing drought in the HRW region is still an issue that is supportive to price and 51% of US winter wheat is still said to be in drought conditions. This is about a 2% improvement from last week, but a large portion of the crop remains, which may struggle. In Texas, just 18% of the crop is rated good to excellent with 48% of the crop rated poor to very poor. Below freezing temperatures also hit as far South as the Texas panhandle today. Minneapolis wheat was also up today as fieldwork in the HRS region may be delayed due to snow and cold temperatures hanging around. Aside from the weather issues in the US, there is talk on a global scale that Russia may begin restricting wheat exports to fill their domestic reserves. This would be supportive to futures, but there is still much uncertainty not only regarding that situation, but also in terms of the Ukraine war. The biggest market mover this week will probably be Friday’s reports though. With both prospective acreage and quarterly stocks (and as always, the potential for surprises) wheat could see big swings.
CATTLE HIGHLIGHTS: Cattle futures traded slightly higher on Tuesday with talk and anticipation of a firmer cash trade to develop this week as prices held onto Monday’s gains. Feeders saw mixed to lower trade as March feeders close in on expiration. April live cattle traded .050 higher to 164.950 and June added .025 to 158.900. March feeders were .625 lower to 191.725.
Cattle futures traded relatively quiet on the session with a narrow trading range as the live cattle market is waiting for cash trade to develop. The market is expecting firmer cash tone this week, so prices consolidated at the top of yesterday’s gains. Cash trade is still undeveloped this week. Southern asking prices were $165-166, as bids were still undefined. The cash market tone will provide the direction for the live cattle market into the end of the week. Retail values were firmer at midday as Choice carcasses gained .52 to 280.88 and Select was .94 higher to 270.66. The load count stayed light at 57 loads. The trend early in the week is a firmer retail tone overall. Feeders trended softer on the day as the grain markets held value. March feeders expire on Thursday this week and prices are tied to the Cash Index. The Cash Index was .10 higher to 191.34, and running in line with the March futures. Deferred futures are running a premium to the index, and that limited gains on the day. Cattle futures traded nicely higher on Monday and held most of those gains on Tuesday, providing good support. The direction in cash trade will be the key going into the end of the week.
LEAN HOG HIGHLIGHTS: Lean hog futures consolidated within Monday’s trading range as price closed mixed to lower overall. New concerns of weakness in the cash markets and the index limited futures gains. Apr hogs lost .875 to 77.750, and Jun futures traded .350 lower to 92.725.
Lean hog futures looked to have put in a near-term low, but prices stayed cautious on Tuesday after Monday’s close was disappointing as prices failed to hold the highs of the day. This still keeps the picture a bit cloudy whether a low is truly in place, or this move is a bear market bounce. The cash market saw direct trade 0.58 lower to 75.45. The Lean Hog Index lost 0.42 to 76.57 as the index has moved to a discount to the April futures. Hog retail values were disappointing after Monday’s midday strength, giving up most of the gains going into the close. At midday, carcasses were .17 softer to 81.22. The load count was good at 349 loads. Hog slaughter is running ahead of last year’s pace, and that has been the blanket over hog markets. Last week, total slaughter was 2.457 million head, down slightly from last week, but up 1.9% over last year. For the year, total hog slaughter is up 1.65. Thursday will ring the next quarterly Hogs and Pigs report from the USDA. Overall expectations are to show a slight increase in hog number compared to last year. The market will be watching for any revisions to previous reports. While a new low may be in place, traders will likely need to see a trend of higher cash and cutouts firm back up before buying into this market. Prices will likely stay choppy before the Hogs and Pigs report on Thursday afternoon.
DAIRY HIGHLIGHTS: The block/barrel average fell 4 cents today to move back under $2.00/lb and unfortunately it brought out sellers in Class III milk futures after the recent run. The second month April contract dropped 24 cents to $19.52 while May futures, before taking over as the second month next week, fell 44 cents to $18.58. Resistance near the $20.00 mark was noticeable yesterday on the second month chart and left the market susceptible to spot market weakness, which was evident today despite the lack of volume. Class IV action was once again unchanged to lower with spot butter up 2.50 cents and powder unchanged. Outside of Friday’s Quarterly Stocks and Planting Intentions report, the week is devoid of much for fundamental updates.
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Author
Brandon Doherty