TFM Daily Market Summary 02-03-2023


The Class III milk market has been on a slippery slope since last summer when the contracts traded at their highs. Since that time, milk futures have placed a series of lower highs and lower lows as the market has steadily lost value. The combination of increased milk production, demand concerns, and a steady decline in the price of cheese and other products have helped lead the path lower in the milk market. In the March contract, milk futures lost over $4.00/cwt on a 200,000-pound milk contract. Since the late fall, the sell pressure seemed to accelerate setting a recent low at $17.35 on Wednesday. Wednesday’s trade did show some indications of a bottoming-type action as prices did post a reversal on the daily chart. Milk prices have traded higher since, but some price recovery could be limited unless the value of products and the demand for those products can pick up some support.



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CORN HIGHLIGHTS: Corn futures saw choppy two-sided trade before finishing slightly higher to end the week, as the news is lacking in the market for some form of direction. Mar corn gained 2-1/4 to $6.77-1/2 and May 1-3/4 to $6.75-1/2. For the week, Mar corn was 2-1/4 cents lower, and May slipped 2 cents.

The news was quiet on the day, and the price action in the market reflected that. Recent rains in Argentina showed some improvement in the country’s corn crop. The Buenos Aires Exchange reported that the good to excellent portion of Argentina’s corn crop moved 10 points higher to 22% G/E, but the crop deemed poor to very poor did fall, it remains at a high 32%. The U.S. corn had a good week of export sales totals from last week, at 62.7 mb, but total commitments are still down 43% versus a year ago. It was encouraging to see China step into the U.S. corn export market, but still not at levels needed to move prices. Even with the export window more open and activity picking up recently, the corn sales have a lot of work to do, or the USDA will need to make further adjustments to the export sales totals. Domestically, basis levels are still strong as the demand in the U.S. is friendly, especially in the west with the reduced crop this past season. This combination of factors has the corn market stuck in a sideways trading range at this time. If prices rally too much, the fear of demand loss is a limiting factor, and if prices fall, the cash market does the lifting. This will likely stay the pattern in the near future barring any major news.

SOYBEAN HIGHLIGHTS: Soybeans and bean oil closed slightly lower today with lagging exports but bean meal climbed to another contract high closing 1% higher on the day. Mar soybeans lost 2-1/4 cents to end the session at 15.32, and Nov lost 3/4 cents at 13.69-3/4.

Bean meal was the leader again today soaring to a new contract high in Mar, while beans and bean oil slipped. Argentina’s short-term weather forecasts are drier, but their recent rains apparently did benefit the crop in a notable way. Crop ratings were not expected to change much per the Buenos Aires Grain Exchange, but the good to excellent rating was increased to 12% from just 5%, still bad, but an improvement. Poor to very poor ratings also improved to 46%, but still reflect the severe drought. Brazil is chugging along with harvest, while China waits for soybeans that are reportedly a dollar below U.S. offerings, and a big signal that U.S. bean exports will slow down even more soon. Today, however, a flash sale of 132,000 mt of beans was reported to unknown destinations over the 23/24 marketing year. Tensions flared this morning after a Chinese surveillance drone was found over the U.S. and while China has said it was an accident, it could cause more friction down the road. Domestically, crush margins are historically high and are driving demand as processors purchase cash beans. The trend for Mar beans remains higher with resistance at 15.50.

WHEAT HIGHLIGHTS:  Wheat was heavily pressured by a sharp increase in the U.S. dollar today which gained 1.18 to 102.93, the highest level in a month. Wheat had a brief rally early in the morning that was short-lived. Mar Chi lost 4-1/4 cents closing at 7.56-3/4 and Jul fell 3-3/4 at 7.71-3/4. Mar KC lost 7-3/4 cents closing at 8.73 and Jul down 7-3/4 at 8.57-3/4.

Wheat had a brief rally early in the day but resumed business lower with KC wheat leading the way down for a lower close across the board. The southern Plains and red winter wheat areas can expect more precipitation going forward which weighed on prices, but the biggest bearish factor was a surging U.S. dollar today. Wheat is very sensitive to moves in the dollar with Ukrainian and Russian offers so much cheaper than the U.S. There was a sale reported of 60,000 mt of U.S. spring wheat for delivery to Egypt, but overall exports have been extremely poor. Russia was confirmed to have sold 535,000 mt of wheat to Egypt’s GASC last night at a far cheaper offering than the U.S. One friendly bit of news from today is that IKAR, private consultants, have lowered their projections for Russia’s 2023 wheat production from 87 mmt to 84 mmt due to the weather. While Oklahoma and Texas are expected to receive rain, Kansas is still on the drought monitor for conditions that could last through March. The trend for Mar Chi wheat is lower, and stochastics are showing an overbought sell signal crossover which could send prices lower from a technical standpoint.

CATTLE HIGHLIGHTS: Both live and feeder cattle closed higher on the week as cash trade was slow to develop, but the trend is still supportive. Feb cattle, hitting first notice day on Monday, gained 0.525 to 160.275, and April added 0.300 to 164.125. Mar feeders added 0.175 to 186.100. For the week, Feb cattle gained 3.550, and Apr added 3.300.  Mar feeders closed the week 2.625 higher

Choppy trade in the cattle market on Friday as the market was working through Feb options expiration, and the late development of cash trade, but saw some strength into the close to push to new contract highs in the majority of contracts. Feb cattle hit first notice day on Monday, and that could bring some market volatility early next week. Cash trade has been very slow to develop this week as packer inquiry has remained light for cash cattle. Friday finally brought some light trade. Some northern dress trade occurred at $248, but trade was light and not enough to establish a true trend. Bids have still remained elusive, but asking prices are $158-160 going into the market close. Trade will likely pick up late in the afternoon, or packers could be short-bought going into next week. Retail values were mixed with choice slipping 0.20 to 264.90 and select +0.12 to 253.78. The boxed movement was light overall on Friday. Overall, carcass values were steady to softer during the week. Feeder cattle used the strength in live cattle to add to yesterday’s gains. The cash index was firmer on Friday, gaining 0.53 to 180.90, and has been trending higher this week, adding 1.33 on the week. The feeder cash market has remained strong, helping to support the index and the futures market in the face of tight supplies. The cattle market looks strong, supported by the inventory report on Tuesday, reflecting the tight future supply picture. This fact should support the market well into 2023.

LEAN HOG HIGHLIGHTS: Lean hog futures finished mostly higher with the exception of the front month Feb contract, which stays tied to the discounted cash market. Feb hogs were 0.325 lower to 75.0252, but Apr hogs gained 0.475 to 86.475. For the week, Feb hogs were 0.850 lower, but Apr added 0.025 for the week.

The Apr contract is still trying to find a bottom, and the weak price action and recovery may have helped signal that this week. On weekly charts, Apr futures have built a double bottom, hopefully a more positive technical signal. At this point, the $82.500 area on the Apr chart has rejected additional selling pressure. For a more complete recovery to occur, the hog market is still in need of some fundamental strength. The Lean Hog Index is starting to trend higher, gaining 0.34 to 72.85, and was 0.33 higher on the week. Maybe the first sign of a cash bottom. Direct trade on Friday was still soft at 0.21 lower to 72.65 but saw gains on the week. Feb is still at a premium to both the index and the direct cash trade. Retail values have improved, but have been holding around the $80.00 level. At midday, pork carcasses dropped 2.90 to 79.20, as the trade stays choppy. The load count was light to moderate at 174 loads. The hog market is trying to show some signs of a bottom, and the firmer close into the end of the week was encouraging.

DAIRY HIGHLIGHTS: There was a noticeable shift in the dairy spot trade this week as buyers finally started getting aggressive at these discounted prices. For the week, whey recovered 8.75c, butter added 10.25c, and powder gained 9.25c. There was steady buying across the board each session. The cheese market was pretty quiet, however, falling 0.875c overall and closing at $1.7475/lb for the week. Cheese had been the only product not in a strong downtrend, though. Dairy futures reacted positively to the strength in the spot trade and milk futures started working higher off of recent lows. Second month Class III finished the week 32c off of the low, while second month Class IV finished up 55c overall and up 70c from the low. News this week was quiet, but next week will have both a Global Dairy Trade auction and an exports report on Tuesday.

Total Farm Marketing and TFM refer to Stewart-Peterson Group Inc., Stewart-Peterson Inc., and SP Risk Services LLC. Stewart-Peterson Group Inc. is registered with the Commodity Futures Trading Commission (CFTC) as an introducing broker and is a member of the National Futures Association. Stewart-Peterson Inc. is a publishing company. SP Risk Services LLC is an insurance agency. A customer may have relationships with all three companies. TFM Market Updates is a service of Stewart-Peterson Inc. Futures and options trading involve significant risk of loss and may not be suitable for everyone. Therefore, carefully consider whether such trading is suitable for you in light of your financial condition.


John Heinberg

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