MARKET SUMMARY 4-28-2022
Combined export sales for corn and soybeans for the 2022-23 marketing year are well ahead of normal, possibly at record levels overall. As of April 21, combined sales of the two grains reached 14.95 mmt, or 560 mb, up 63% from the same point last year. China has been the most active buyer, locking in 57% of that total. Individually, sales for both grains are running well ahead of normal. New crop corn sales are up 61% year over year, and soybean sales are 64% higher than last year. China represents 65% of the soybean sales and 37% of the corn totals. The strong export market has been triggered by supply concerns related to the Russia-Ukraine war, tighter supplies out of South America due to weather, and the competition for global grain supplies. The trend is still strong, and the aggressive demand tone will stay supportive of crop prices into the next marketing year.
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CORN HIGHLIGHTS: Corn futures edged higher today on announced export sales (rumored earlier in the week) and actual sales as listed on this morning’s USDA Thursday report. Bulls are concerned that weather is less than ideal for planting and are gradually adding risk premium as another week of cool temperatures and above normal rainfall is forecasted for most of the Midwest. July futures gained 1-1/4 cents to close at 8.13-1/2 and December added 2-1/4 to finish the day at 7.51-3/4. Both were new contract high closes.
Announced sales of 1.088 mmt, of which 476,000 mt were for the 2021/2022 and the remainder for 2022/2-23, confirmed rumors from earlier in the week. Export sales at 34.1 mb old crop and 33.2 for new crop on the weekly report were supportive. Year-to-date sales are 2.264 bb, or 90.5% of expected sales of 2.5 bb. Due to continued concerns that corn from Ukraine will be limited or nonexistent, we wouldn’t be surprised if the USDA added to export expectations. All focus will be on the southern hemisphere second crop safrinha corn as it matures, as well as conditions for US planting and early growth. The world is backed into a corner with must-have crops. Pandemic issues in China have accelerated lockdowns in recent weeks. We can’t help but believe that has a supportive tone for prices as logistically, this may make it more challenging for China to plant its crop without disruption.
SOYBEAN HIGHLIGHTS: Soybean futures lost ground today, with May dropping 20 cents on the eve of first notice day to end the session at 17.06-1/2. July gave up 8 cents to finish at 16.84-3/4 and November lost 3-3/4 to close at 15.21. Traders were selling meal (down near 10.00) and buying soybean oil (up near 2.80 points in May) as Indonesia confirmed halting exports of palm oil, both crude and refined.
USDA reported 17.7 mb sales for 2021/2022 for a total of 2.116 bb. The current projected sales expectation for the year is 2.115. This implies that sales have achieved expectations. New crop sales were 21.3 mb, also supportive. The Indonesia news is indicative of a growing concern of tight world food supplies and a country taking action to keep inventories in house. While this could be temporary, if weather conditions in the norther hemisphere in 2022 are less than ideal, it would not be a surprise to see more governments take similar action. The trend remains higher, yet there isn’t enough weather concern yet to rocket futures much above 17.00 old crop and 15.00 new crop.
WHEAT HIGHLIGHTS: Wheat futures settled with moderate losses. Poor export sales and the potential for moisture next week in the southern Plains pressured the market. May Chi lost 6 cents, closing at 10.74 and July down 5-1/2 at 10.85-3/4. May KC lost 12 cents, closing at 11.36-1/4 and July down 12-3/4 at 11.41-1/4.
The forecast for the US southern Plains is somewhat mixed. The European model puts rains into some of the driest areas, but the American model conflicts with this, keeping those areas dry. In any case, drought is still a major concern and any rains that do fall are not likely to significantly change this. Just the prospect of these rains caused some selling pressure though. The USDA is again expected to lower HRW crop ratings on Monday. In addition, poor export sales weighed on the wheat market with the USDA reporting an increase of only 1.2 mb of export sales for 21/22 and an increase of 4.6 mb for 22/23. Rain in the northern Plains is also a concern in Canada where delays to spring wheat planting may be an issue. This may somewhat offset the higher estimate of Canadian wheat acreage. In Ukraine, there is no end in sight for the war and reports that Russia is cutting off natural gas to Poland and Bulgaria may be significant. It is also noted that Sov Econ reduced their estimate of Ukraine wheat production by 500,000 mt to 23.1 mmt. This compares to last year’s production of 32.1 mb.
CATTLE HIGHLIGHTS: Cattle futures saw mixed trade with additional selling pressure in the live cattle market as April futures expire on Friday and weak technical picture weighed on prices. April cattle finished unchanged at 138.500, and June cattle fell 1.125 to 133.900. April feeders expired on Thursday, losing .275 to 155.925, but deferred futures finished .600-1.450 higher.
June cattle may be under the influence of April expiration, as prices tested and held support at trendline around $134. This will be a key support line to keep the uptrend still intact. Trade on Friday will be key for live cattle to forge out a bottom in the market. April live cattle futures expire on Friday and will try and stay tied to the cash market, which is firmer than current futures prices. Selling pressure from the expiration of April futures likely pushed on June live cattle prices. Cash trade was quiet and likely done for the week with the early activity this week. Throughout the week, southern live cattle have traded for $140 and northern dressed cattle have sold for $232. Boxed beef prices were firmer at midday (Choice 262.65 +.71, Select 251.88 +.41), trying to find some support into the end of the week. Movement was light at 96 loads. Weekly export sales reported new beef net export sales of 11,400 metric tons for 2022 were down 24% from the previous week and 34% from the prior four-week average. The three largest buyers were Japan, China and South Korea of U.S. beef last week. Feeder cattle futures may be looking to carve out a near-term low. Buying support stepped into the market after yesterday’s strong sell off, possibly signaling some value buying in the market. A firm close tomorrow may be needed to truly show a low could be in place at this level. April feeder futures and options expired on Thursday and will stay tied to the index. The feeder cash index gained .15 to 156.36. The expiration of April future and options this week likely added to the selling pressure in the cattle markets. Prices are testing and holding key support levels on Thursday, and could be looking to form a low, but the technical picture is still weak.
LEAN HOG HIGHLIGHTS: Hog futures finished mostly higher, as value buying may have stepped into the market after this recent push lower in prices. Prices held key support levels, which triggered some short covering. May hogs were .200 lower to 103.975, but June closed .625 higher to 110.975. Jul hogs led the deferred contracts higher, gaining 1.450 on the day.
June hog futures held the 100-day moving average at $109.600 and brought support to the charts. June price action was positive, and some follow through money flow could help support the market into the end of the week on Friday. The premium of front-end futures to the cash market have stayed as a selling point and that limited trade in May and June futures today. The lean hog cash index has been trending higher, but was .55 lower to 102.34 on Thursday. The premium of the futures to cash has quickly evaporated during this price sell off. May is still holding a 1.6350 premium, and June is 8.635 over the index. Cash markets have been trying to find some support with strength on Thursday. Midday Direct Trade was unreported on Thursday due to confidentiality, but the five-day average settled to 97.33. Pork retail values were .77 lower at midday to 104.74. Product movement was light at 176 loads. Weekly export sales added new pork sales total of 31,500 mt for 2022 were up noticeably from the previous week and up 19% from the prior 4-week average. Mexico, Japan, and Canada were the top buyers of U.S. pork last week. Lean hog charts look defensive, but the price action was improved on Thursday. The path of least resistance at this point still looks to be searching for a low, and one day of firmer trade may be the beginning of the process. Overall, the trend is still lower.
DAIRY HIGHLIGHTS: Class III milk prices closed up today with the May contract jumping to $24.60, while the 2022 Class III average pushed 17 cents higher after threatening a move beneath the $23.00 mark. Spot cheese was 2 cents higher to move to $2.36/lb as blocks have started to gain on barrels in the spread. For Class IV, trade action was mostly green as well with the calendar year average jumping 16 cents, but the second month May contract was unchanged at $24.45. Next week will see that chart jump to the June contract which closed 43 cents beneath May futures today.
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Author
Bryan Doherty