MARKET SUMMARY 10-11-2022
Soybean export inspections are hitting the key window for shipments during the next few months. USDA released weekly export inspection totals on Tuesday, and last week saw a weekly inspection of 969,000 MT. This number was in the middle of trade expectations, but more importantly, well above last week’s total, reflecting shipments of the strong soybean export sales on the books for the start of the marketing year. With overall U.S. supplies tight, the market will be watching the pace of shipments in order to justify demand totals. Current conditions on the Mississippi River are a concern in getting soybeans to the gulf in order to be available for shipment. The goal of the U.S. exporter is to get soybeans moving on the export front before the potential record Brazilian soybean crop this spring becomes a reality.
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CORN HIGHLIGHTS: Corn futures finished softer today, losing 5-1/4 in December to end the session at 6.93. December 2023 lost 1-3/4 to close at 6.31-3/4. A lack of new news, harvest pressure and position squaring in front of tomorrow’s WASDE report were features in today’s trade. Sharp losses in wheat likely weighed on corn prices today, just as it added support yesterday when futures gained near 60 cents.
Export inspections were released a day later than normal. Today’s figure at 18 mb was uneventful and reflective of a slower export pace. Tomorrow’s report is expected to show a small yield decline and reduction in carryout (reflective of a smaller stocks figure). The average pre-report estimate for yield is 171.8 bpa, which compares to last month’s 172.5. Yield results vary with many suggesting better than expected, yet down from last year. Total production is estimated at 13.891 bb, below the September estimate or 13,994. As harvest pushes along, storage bins will fill and some may be pushed into the market, but not much. At least not as compared to a year where there is a significant supply over-run. Basis is widening along the Mississippi and there appears to be little end in sight to low water levels. The 6 to 10 day forecast suggests harvest will continue to move at a fast pace with mostly below normal precipitation expected. There is some concern the market is priced too high if there is not an upturn in exports soon.
SOYBEAN HIGHLIGHTS: Soybean futures closed slightly higher today as traders anticipate tomorrow’s WASDE report where ending stocks are expected to be mildly increased. Crude oil was lower, which pulled soybean oil lower, and bean meal closed nearly unchanged. Nov soybeans gained 2-1/4 cents to end the session at 13.76-1/4, and Jan gained 2-1/4 to 13.88.
The soy complex closed mixed with soybeans up a bit, October meal relatively unchanged, and soybean oil lower with lower crude oil. Tomorrow’s WASDE report is expecting the USDA to slightly increase soybean ending stocks, but much of that is likely priced in at this point. There is talk of China imposing new Covid lockdowns on as many as 36 cities which could put pressure on demand, but China has been largely absent as a buyer of US soybeans anyways. Even without China, export sales are currently running 9% above a year ago with last week’s inspections at 35.6 million bushels, but total shipments are 23% behind a year ago. Despite US beans being at a large premium to Brazilian beans, there are rumors that China has purchased several cargoes from the PNW for November-December delivery. November beans on the Dalian exchange closed near its highs at the equivalent of $21.16 per bushel, and China’s NGTC announced today that it plans to auction 500,000 mt of imported soybeans from its state reserves. Domestic demand remains strong with good crush margins, but shipment remains a challenge with low water levels on the Mississippi River causing barge traffic and a potential rail strike on the way. Nov beans are in a downward trend and remain oversold with a gap still to be filled at 13.49
WHEAT HIGHLIGHTS: Wheat futures settled sharply lower, just a day after strong gains. There was not much news to drive this decline; that in itself may have contributed, along with profit taking, to a lower close. Dec Chi lost 37 cents, closing at 9.01 and Mar down 34-1/2 at 9.17. Dec KC lost 33-1/2 cents, closing at 9.90-3/4 and Mar down 32-1/4 at 9.88-1/4.
After such a strong finish yesterday, it was disappointing that wheat could not follow through today. As we had mentioned in yesterday’s report, a key bridge between Russia and Crimea was recently bombed, which led to Russian missiles being fired into Ukraine cities. This also had the wheat market up sharply, but the majority of those gains were given back today. All three US futures classes closed sharply lower, as did Paris milling wheat futures. There were also rumors today of a potential summit between President’s Biden and Putin, though this has not been confirmed. All in all, profit taking after a strong rally, a lack of follow through news on the war, and positioning ahead of tomorrow’s USDA report all probably played a part in today’s decline. In regard to the report, the pre-release average estimate for US 22/23 wheat carryout comes in at 563 mb (vs 610 mb in September). The world 22/23 carryout number is projected at 267.1 mmt (vs 268.6 mmt in September). In other news, according to the French farm ministry, because of drought, their wheat yields are likely the lowest since 2005. Additionally, Australia’s potentially record large wheat crop may be somewhat in jeopardy. Heavy rains in the east are said to be affecting quality with 6-7 mmt possibly looking at being reduced to feed quality. As a final note, export inspections were delayed until today; wheat inspections were pegged at 22.6 mb with total 22/23 inspections now at 336 mb.
CATTLE HIGHLIGHTS: Cattle market saw some value buying, followed by short covering as prices finished with moderate to strong gains across the complex. A softer market tone in the grain markets and prospects of higher cash trade provided the market with buying support, October live cattle gained 1.100 to 145.800 and December cattle jumped 1.575 to 148.575. Feeders posted strong gains, reversing off yesterday’s lows as November feeders traded 3.325 higher to 176.200.
The feeder market has been the anchor in the cattle complex, but yesterday’s price action and today’s strong rejection of those price levels may have helped to indicate a low. The feeder market was heavily oversold and poised for a strong move higher, but the key will be follow-through off of today’s price action. The cash feeder market in the countryside has stayed at a premium to the market as supplies have been tight of available feeders. The futures market could be poised to reflect that fundamental tightness. USDA crop production and the reaction of grain markets on Wednesday will be key for the future direction of near-term feeder prices. In live cattle, cash trade has been slow to develop this week, as usual, but prospects are for the cash market to stay steady to higher helped support futures. Bids are still undefined as of Tuesday afternoon. Beef cutouts were mixed at midday, with choice jumping 2.04 higher to 246.67, but select slipped .71 to 216.47 on light to moderate demand of 85 loads. The choice/select spread jumped to a wide 33.56 at midday, reflecting the demand for higher quality beef and an indicator of the potential cash strength on the week. The strong price action was encouraging on the trade Tuesday, but follow-through strength will be a key for the remainder of the week. Cash trade and the reaction to Wednesday’s Crop Production report will go a long way in determining the short=term market direction.
LEAN HOG HIGHLIGHTS: Lean hog futures were bull spread on Tuesday with weakness on the front end of the market, but deferred futures finished with moderate gains. October hogs slipped .725 to 93.025 and December hogs were .075 lower to 79.525, but deferred futures traded .05-.625 higher on the day. October futures and options expire this week, closing trade on 10/14.
The hog market was strongly bull spread on Monday, and trade may have taken some profits off of those spreads. In addition, the October contract expires on the 14th, and that likely brings more volatility to the front end of the hog market. Prices are trying to build a base after turning off the break lower next week, consolidating today after being higher 3 out of 4 past sessions. December hogs look undervalued compared to the rest of the complex, with October expiration this week. December is trading at a 13.45 discount to the Lean Hog Index. The Cash Index did trade .33 higher to 92.98. The cash hog market is still struggling, but morning direct trade was 1.04 higher to 84.16 and a 5-day average of 87.54. Estimated hog slaughter for today is 489,000 head, 2,000 higher than last week, and 7,000 over last year. Pork retail values were higher, gaining 1.42 at midday to 102.81 on good demand of 187 loads. Hog supplies stay ample, and there are still plenty of animals for the packers to pursue. The technical picture has improved, and prices are trying to build off the recent lows. Cash trade and the overall demand may still be the key to maintain a seasonal rally.
DAIRY HIGHLIGHTS: Milk futures have struggled with steady selling pressure leading to two double-digit down days to start the week. The November class III contract fell 45c yesterday and lost another 27c on Tuesday to close at $21.13. Contracts rose to the upper end of their range last week, which is bringing about some selling pressure. There has also been a softer spot trade the past couple of days as well. In Tuesday’s spot trade, cheese fell 0.25c per pound to $2.11/lb while the butter market lost 4.50 and closed at $3.1850/lb. The market will watch to see what the results of tomorrow’s WASDE report are to see what the grain trade does. Feed costs still remain high. Expectations heading into the report are that US corn yield will be lowered and US soybean yield will be raised.
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Author
Brandon Doherty