MARKET SUMMARY 5-17-2022
All three classes of wheat futures saw the July contract trade to new contract highs on Tuesday afternoon. The newest surge of strength in the wheat market started on Thursday last week, as the USDA WASDE report projected global wheat supplies to be tighter than expected and made cuts to the potential hard red winter wheat crop. The USDA forecast a 21% drop in production from last year to 590 mb, down from 749 mb in 2021-22. This bullish news helped break prices out of the most recent trading range and targeting higher. Over the weekend, India announced an export ban for their wheat supplies, and prices responded with a limit up move across the wheat complex. India is not a major wheat exporter, but it was another sign of tightening global supplies, and a market very concerned with food security issues. There are still many variables to go in the wheat market. Slow planting pace on the northern Plains for spring wheat crop, lowered crop rating in the southern Plains due to drought conditions and other global weather issues. At this stage, wheat prices are looking likely to make another strong run to challenge possible all-time highs.
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CORN HIGHLIGHTS: Corn futures retreated today, losing 8-3/4 cents in July and 4-3/4 in December. Planting progress was at 49% pre-progress report expectations. July closed at 8.00-3/4 and December at 4-3/4. On the one hand, there was little to no technical damage today, yet with wheat surging higher again (gains of 30 to 40 cents) and beans 13 to 21 firmer, corn failed to participate.
All three I states, (Illinois, Iowa, and Indiana) are behind on planting due to wet conditions. As of Sunday, Iowa was 57% planted versus a five-year average of 80% and 93% a year ago. Illinois was 55% planted, an increase of 15% the previous week, but behind last year at 84%, and the five-year average at 70%. Indiana at 40% complete, trails last year 60% and five-year average of 54%. There is work to be done throughout the entire Midwest. North Dakota was 4% planted versus 59% last year and 41% on average. Yet, the market didn’t seem overly concerned with those numbers the way it behaved today. Turn around Tuesday? Perhaps, yet the corn market needs some new friendly news if it is to rally in price at least an old crop to contract highs. (July at 8.24) December futures reached a new contract high yesterday (7.66-1/4) and with lack of follow through today will probably need to gain the confidence of traders to buy. Currently there is a lack of fresh fundamental new news.
SOYBEAN HIGHLIGHTS: Soybean futures closed higher today with strong demand for both crush and exports, some delayed planting concerns, and Argentina’s crop looking poor. July soybeans gained 21-1/2 cents, closing at 16.78, and Nov gained 13-1/2 at 15.25-1/2.
Yesterday, the National Oilseeds Processors Association said that 169.8 mb of soybeans were crushed in April, which is 6% more than the same month a year ago. According to the USDA’s NASS, soybean crush pace in 21/22 is running 1% above last year at this time, so another month of high production would put the pace well above the USDA’s estimate for a 5% decline in 21/22. If soybean processing continues at this pace, the ending stock estimate of 235 mb will likely be too high. Export demand is strong, and with China potentially easing their lockdown restrictions this week, demand could pick up even more as they look to buy more US soybeans. July soybeans on the Dalian exchange closed near their highest level of the year at the equivalent of $21.64 a bushel. Here in the US, 30% of soybeans have been planted as of May 15, down from the five-year average. 9% of the bean crop has emerged, which is down from the five-year average of 12%. North Dakota is 2% planted and Minnesota 11%, with more rain on the way and further delays. Argentina’s bean crop is two-thirds harvested with a good to excellent rating of only 10% due to dry weather.
WHEAT HIGHLIGHTS: Wheat futures traded in a wide range as initial reports that India would still allow some exports offered some early weakness to the market. By the close, however, wheat was sharply higher as the general sentiment remains bullish. July Chi gained 30 cents, closing at 12.77-1/2 and Dec up 24-3/4 at 12.79. July KC gained 15-3/4 cents, closing at 13.67-3/4 and Dec up 15-1/4 at 13.70.
News that India may actually relax their wheat export ban had prices lower this morning and contributed to today’s wide trading range. Reportedly, there is about 1.8 mmt stuck in ports, but it is not yet clear what will happen to that wheat. July Chi almost closed the gap left on the charts from yesterday, with a low of 12.00-3/4 today (and the high from Friday at 11.98-1/2). This gap may need to be filled, but wheat has several factors that are supportive, and by today’s close, wheat was sharply higher. Winter wheat ratings overall slipped 2% to 27% good to excellent, whereas many were expecting a slight increase. This is the lowest rating since 1989. Texas remains an area of concern with only 5% rated good (0% excellent), and a staggering 81% poor to very poor. Oklahoma is also struggling, with 13% rated good to excellent and 52% poor to very poor. Spring wheat planting is 39% complete (up from 27% last week) but well behind the average of 67%. The slow pace in both Minnesota and North Dakota due to wet conditions is evident with Minnesota 5% planted vs 75% average and North Dakota 17% planted vs 60% average. Weather is also a concern with warm and dry weather in Europe, though Germany looks to get some rains.
CATTLE HIGHLIGHTS: Live cattle futures finished with moderate losses as a softer cash tone to start the week weighed on futures prices. Feeder prices were bled lower, pressured by overall strength in grains. June live cattle slipped .175 to 133.000, and August live cattle fell .425 to 133.475. In feeders, August feeder were .650 lower to 166.775.
June live cattle saw weak price action as values faded off early session highs, but still held support at the 10-day moving average at $133.00. The market is trying to build an uptrend over the past couple of sessions, the turn softer on Tuesday built weakened technical picture, which could limit the short-term upside. The cash market started seeing some action on Tuesday afternoon, and southern deals were being established at $138, down $2 from last week’s levels. Northern dress trade was at $226-$227, $2-3 lower than last week. The premium of the cash market is still present, but the softer tone helped push prices lower. Retail beef at midday, prices were firm with Choice gaining .73 to 261.04 and Select was 3.41 higher to 249.08. Load count was light at 70 midday loads. Tuesday’s estimated slaughter totaled 125,000 head, even with last week, but 5,000 more than a year ago, as cattle number stay relatively heavy. The USDA Cattle on Feed report out on Friday, and that could keep the market choppy for the remainder on the week. Feeders saw modest losses, despite a mixed tone in the grain markets on Tuesday. The weaker tone in live cattle futures and the value of feeder markets compared to the cash index limited feeder markets. The premium of front month contracts to the feeder cash index looks concerning, with August trading at a $11 premium to the index. Feeder cash index was .73 lower to 155.27. The cattle market still looks concerning for further downside pressure. The recent uptick in live cattle markets may be more of a bounce than a trend change, and the weak price action on Tuesday is concerning. The cash market, which is softer, and the retail markets will be key to price direction as we look towards Friday’s Cattle on Feed report.
LEAN HOG HIGHLIGHTS: Hog futures saw mixed trade as the market was bull spread and the front-end contracts saw additional price recovery with strong triple digit gains. June hogs finished 1.325 higher to 105.150, August hogs added 2.950 to 107.750.
June lean hogs’ climb continues as value and technical buying keeps lifting the hog market. The June contract trading back above the 200-day moving average, which improves the technical picture on the charts. Additional money flow may have the hog market looking to recover back to a possible test of the 100-day moving average at $110.00, with short-term resistance at the $107.000 level. Demand will still be a big concern as retail prices have struggled, pushing under the $100.00 level last week, but have trended higher on good product movement to start the week. Midday carcass values were 2.28 higher to 103.83. Movement was moderate at 204 loads. The CME pork cutout index has also been trending lower, reflecting last week’s weakness. It lost .50 today to 100.23. Midday cash market was higher in morning trade, gaining 3.32 to 104.63 and a 5-day average at 104.59. CME Lean Hog Index was 0.42 lower at 100.07 on the day. With the price strength in June futures, the premium of June futures to cash has grown back to 5.080, which could limit the market upside. The front-end of the hog market is seeing some buying strength, being supported by a firmer retail market this week and and improving direct cash tone.
DAIRY HIGHLIGHTS: Class III futures closed moderately higher with the June contract finishing at $24.59, up 18 cents, while the 2022 average rallied 11 cents to $23.21. Spot cheese hit a new 2022 high with a close at $2.41/lb, besting the April high of $2.40625/lb and led by barrels which currently hold an 8 cent premium to blocks. GDT cheese came in at $2.55/lb as those two markets have come together as of late. GDT cheese held a 92 cent premium over spot back in March but that has shrunk to 14 cents. Spot whey, unfortunately, has fallen all the way back down to where it was trading in July and August of last year before its impressive rally started.
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Author
Amanda Brill