The CME and Total Farm Marketing offices will be closed Monday, February 20, 2023 in observance of Presidents Day
MARKET SUMMARY 2-16-2023
Wet weather in Brazil is having a couple different impacts and the markets are closely watching. The harvest pace for soybeans is running behind, which has allowed the U.S. soybean export window to stay open a little longer, but the delayed harvest also pushes back the planting pace of the key 2nd crop Brazil corn. Mato Grasso, the country’s largest corn producing state, saw planting pace at 34% complete as of Friday vs 55% on same date last year, and below the 42% 5-year average. Brazil’s second largest corn growing state is Parana, which was only 12% planted versus 28% last year and below the 23% 5-year average. The late planting has the market concerned about the final production of the crop. The acres will get planted, but being later in the calendar sets the crop up to finish during the late-season dry pattern, which could set up potential crop yield impacts down the road.
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CORN HIGHLIGHTS: Corn futures closed mixed on a slow news day and tight trading range. March futures lost 0-1/4 cent to close at 6.76. May futures added a penny to end the day at 6.75. New crop December lost 1-3/4 to close at 6.64. The trading range for March was four cents. Export sales at 40.3 mb were termed neutral to supportive, however it was the slowest weekly sales figure for the last three weeks.
Year-to-date export sales are now 1.096 bb, well behind last year’s 1.832 bb. The expected yearly sales figures is 1.925 bb according to the most recent USDA report. Export sales would need to average near 30 mb per week to meet the current projection. While that seems possible, if Brazil has a large second corn crop, U.S. sales could struggle by early summer suggesting the next several weeks and months are critical for sales. Strong basis, especially in the western corn-belt suggests supplies are snug. Will this, however, be enough to hold prices higher into spring, especially if the drought monitor map continues to shrink. The price of natural gas has plummeted in recent week suggesting cheaper future fertilizer prices as well as lower drying costs form som. Bulls are the market is holding despite less than bullish news and it is a matter of time before price push higher. Bears will argue the trend is flat and it is a matter of time before they head lower. For now, it may be easier to side with the bears as it is easier to envision traders giving up on long positions than traders buying at higher prices without positive news or the perception of positive new coming.
SOYBEAN HIGHLIGHTS: Soybean futures closed slightly higher in the nearby months, but saw bigger gains in deferred contracts as bear spreading took place. Bean meal managed a small gain, while bean oil closed 1% higher again despite lower crude oil. Export sales were solid, and China was a top buyer. Mar soybeans gained 3/4 cent to end the session at 15.26-1/2, and Nov gained 8-3/4 cents at 13.83-3/4.
Soybeans benefitted today from a good export sales report, a new flash sale, and updated crop conditions in Argentina that saw ratings decline. The Nov contract was really the only one with significant gains as the nearby months only rose slightly. The USDA reported an increase of 18.8 mb of soybean export sales for 22/23 and 9.5 mb for 23/24 with top buyers being China, Pakistan, and Mexico. Shipments were very strong at 69.9 mb and far above the 19.1 mb needed each week to meet the USDA’s forecast. In addition, private exporters reported sales of 128,000 metric tons of beans for delivery to unknown destinations during the 22/23 marketing year. Following the more recent lack of moisture in Argentina, crop ratings were updated to show the good to excellent ratings for soybeans falling to 9% from 13% last week, and fair conditions dropping 4% to 35%. While Argentina’s crop suffers, Brazil’s harvest rolls on, but Ag Rural recently lowered their expectations for the crop to 150.9 mmt compared to the USDA’s 153 mmt. Southern Brazil has had issues with drought, but the main growing area, Mato Grosso, has been seeing larger than expected yields and a brisk harvest pace. The US likely has a few more weeks for good exports before cheaper Brazilian beans flood the market. The trend for March remains higher with support near 15 dollars and resistance at 15.55.
WHEAT HIGHLIGHTS: Wheat futures posted losses in Chi, but gains in KC and closed relatively quietly on a lack of news. Mar Chi lost 4-1/4 cents, closing at 7.65 and Jul down 4-1/2 at 7.80-3/4. Mar KC gained 4 cents, closing at 8.98-1/2 and Jul up 4-3/4 at 8.74-3/4.
The mixed close in wheat comes with little fresh news to drive the market in either direction. Though it recently made 6 week highs, the US Dollar Index faded today by the grain close, and may have eased pressure on the wheat market to some degree. Russia continues to undercut the US in terms of exports, and there continues to be talk that they will launch a new offensive in Ukraine. With the one-year anniversary of the invasion coming up, most of their army is said to already be in Ukraine. There are also rumors that they may not extend the Black Sea corridor deal beyond the March 19 deadline, unless the sanctions against them are lifted. Today’s export sales data did not offer much support to futures, with the USDA reporting an increase of just 7.7 mb of wheat export sales for 22/23 and 0.8 mb for 23/24. In other news, Tunisia is said to be tendering for 100,000 mt of soft wheat. From a technical perspective, futures could still be considered at or near overbought levels, which may have weighed on the market today.
CATTLE HIGHLIGHTS: Live cattle futures finished mostly lower as the market has lost some momentum while waiting for cash trade to develop this week. February cattle were .225 higher to 162.775, but April cattle slipped 0.525 to 164.075. March feeders were also pressured, losing 1.100 to 186.225.
The cattle market is looking for cash news to develop this week, but trade has been very limited to this point, and what has been completed is not enough to establish a trend. Feb futures are holding some optimism for strong cash, and that is keeping some strength in the price. April and deferred futures are losing some upward momentum and have begun to grind sideways to lower. The live cattle market overall is still very well supported by the fundamentals. The slow developing cash trade saw some light packer bids on Thursday. Early bids were $160, but below last week’s levels and were rejected. Southern asking prices are $163-plus, and $260 in the north. Trade will likely start building on Friday, but may take until the market closes. Retail values are trending firmer. Choice carcasses gained 3.86 to 279.53 and select was 2.10 higher to 263.29 at midday. The load count was light at 51 loads. Weekly export sales for last week saw new reported sales of 28,100 mt, which were up 72% from the previous week and 34% from the prior 4-week average. Japan, South Korea, and China were the top buyers of U.S. beef last week. The feeder market saw moderate losses as well on the day, pressured by the weakness in the live cattle market and the premium of the futures to the index. The Feeder Cash Index was .27 lower to 183.06. The index is trading at a $3.00 discount to the March futures, which is a limiting factor. The grain market was choppy, failing to provide any direction. The cattle market looks like it is losing some momentum. The fundamental picture will keep the market supported, but seasonally the market may want to drift sideways to lower. The cash market will still be king overall for price direction.
LEAN HOG HIGHLIGHTS: Lean hog futures traded lower on Thursday as the premium of the futures market to the cash market limited gains. April hogs lost .725 to 85.775, and June hogs lost 1.150 to 103.150.
The premium of the April contract and deferred futures to current cash levels has helped trigger some long liquidation and profit taking in the hog market. Cash markets are turning the corner higher and may be starting to make the climb to the spring/summer highs, but the futures market remains skeptical given the gap between the two. The CME Lean Hog Index gained .44 to 75.62, but is trading at a $10.15 discount to the April futures. That gap has caused futures prices to begin to consolidate around the $85 area. Direct cash hog trade was not reported due to confidentiality, but the 5-day average firmed to 75.39. Cash markets have firmed recently, and that has helped lift the futures off recent lows. Retail values are also trying to trend higher. Midday pork carcasses gained 2.14 to 83.08. The load count was light at 147 loads. The afternoon close will still be a key in the retail prices. The past couple sessions, the market has been unable to hold midday strength in the retail pork. Weekly export sales were strong with 45,000 MT of new sales last week. This was up 56% from the previous week and 30% from the prior 4-week average. Mexico, Japan, and South Korea were the top buyers of U.S. pork last week. The hog market is taking a pause as prices have recovered off recent lows, but the premium in the futures over the cash market stay a limiting factor. At least cash is working in the right direction and retail values are trying to build some upward movement as well.
DAIRY HIGHLIGHTS: Most Class III and Class IV futures held small losses on the day amidst a slow spot market trade. After second month Class III futures briefly pushed to a premium over Class IV in early January, March Class IV futures are now back to more than a dollar over March Class III futures. The protein feed markets remain strong as soybean meal futures hang at multi-year highs due to strong demand brought on by a reduced Argentine crop and a delay in harvest for what appears to be a substantial Brazilian crop. Corn continues to wind itself into a tighter range with a mix of bearish-trending domestic fundamentals and a plenty of global production question marks that have kept premium in place. Most of these markets enter Friday with losses so far for the week but without notable technical action.
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