The CME and Total Farm Marketing offices will be closed Monday, February 20, 2023 in observance of Presidents Day
MARKET SUMMARY 02-17-2023
Live cattle cash prices have maintained a steady climb higher since the fall. This past week, the Six State Fed Steer price pushed above the $159 level, as packers have bid up for cattle supplies. Cash trade development has been slow to get organized this week, but on Friday, cash bids continued to firm, and trade was registered at $161 in the south, up $1+ over last week. The cash market has been supported by the tight supply numbers, but a still strong demand tone for retail beef. Choice beef carcasses gained $4.51 last week, and the trend is still working higher this week. This has helped the packer maintain those firmer bids with some retail beef gains helping their bottom line. The strong cash trade has helped drive futures higher as the front-end Feb contract traded to new contract highs again on Friday.
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CORN HIGHLIGHTS: Corn futures again traded in a tight range with Mar closing up 1-3/4 cents to end the session at 6.77-1/4. Dec added 2-1/4 cents to close at 5.95-3/4. For the week, Mar lost 2-3/4 and Dec 0-1/4. The trading range in Mar was four cents for the second session in a row. An announced sale of 128,800 mt this morning was supportive. Warmer and drier in Argentina as about 70% of the crop is headed toward pollination was supportive, yet a lack of other supporting news along with near 3.00 losses in crude oil today weighed on futures. The markets are closed on Monday in observance of Presidents Day.
In addition to weaker crude oil, the dollar was firmer again gaining about 3% in the last two weeks as inflation concerns are suggesting more interest rate hikes by the Federal Reserve. Aside from this news, the market may be marking time waiting for more information that will likely come in the form of USDA baseline projections for budgetary reasons next Thursday and Friday at the Outlook Forum. Tight world supplies keep bullish hopes alive yet as the old saying goes, “you need to feed the bull”. Basis is considered steady to weaker this week yet still holding unseasonably firm for old crop. New crop is a different story as end users remain reluctant to chase prices and are willing to wait it out, at least for now. Wheat and soybeans also finished without much change today.
SOYBEAN HIGHLIGHTS: Soybean futures closed slightly higher on a very quiet day of trading, and both meal and bean oil closed lower. The biggest mover today was crude oil which fell over 2 dollars a barrel on fears of further rate hikes from the Federal Reserve. Mar soybeans gained 3/4 cent again to end the session at 15.27-1/4, and Nov gained 2-1/2 cents at 13.86-1/4.
Markets drifted around pretty listlessly today without much news to go on. Soybeans had very limited gains, while meal had small losses, but bean oil moved a bit lower as a result of the sell-off in crude. It has been seeming like the Fed is signaling that they will continue hiking interest rates to combat inflation and this fear caused a big jump in the dollar as well as the downturn in crude. Argentinian weather is a supportive factor as cool and dry conditions are forecast over the next 10 days and the crop is in desperate need of moisture. Crop conditions were significantly lowered by the Buenos Aires Grain Exchange yesterday as a result of the drought. In Brazil, things are going well and approximately 35 mmt of beans have already been harvested out of the estimated 153 mmt. While US exports are expected to drop of soon in favor of Brazil, the US is only 157 mb away from reaching the USDA’s export estimate for the marketing year. Domestic demand is helping keep prices stout, and based on the Mar futures, the value of crushed beans exceeds those of uncrushed by 3.48, incentivizing processors to continue buying cash. The trend for Mar remains higher with support near 15 dollars and resistance at 15.55.
WHEAT HIGHLIGHTS: Wheat futures had another mixed close. There simply seems to be a lack of news right now to push prices very far in either direction. Mar Chi gained 1/2 cent, closing at 7.65-1/2 and Jul up 1/4 at 7.81. Mar KC gained 8 cents, closing at 9.06-1/2 and Jul up 8-1/2 8.83-1/4.
In a similar pattern to yesterday, Chicago futures are losing with respect to Kansas City. Additionally, today’s trade was relatively quiet with about a twelve-cent range for both of those Mar contracts. Both Minneapolis and Paris milling wheat futures also had a mixed close. The wheat market just seems to be lacking news at the moment. The recent rise in the U.S. dollar may be preventing much of a rally, but support from tight supplies still appears to be upholding the market at current levels. The Mar Chi 21, 40, and 50-day moving averages are all between 7.55 and 7.58 which is an important area of support. Of course, much will depend upon the Black Sea export corridor. With an expiration date of March 19, there is the question as to whether or not Russia will allow it to continue or not. Negotiations regarding the deal are set to take place next week. Ukraine still claims that Russia is intentionally delaying inspections so it will be interesting to see what the outcome is. Also, the Ukraine Grain Union recently said that the 2023 harvest could reach 64.8 mmt of grain, with the possibility of 14 mmt of wheat exports (if the export deal continues). Here in the U.S., recent moisture in the southwestern U.S. plains is much welcomed but has not been enough to curb the drought on its own. And as a reminder, markets will be closed on Monday in observance of Presidents Day.
CATTLE HIGHLIGHTS: Live cattle futures used an improved cash market to help push prices higher to end the week. Feb cattle were a.800 higher to 163.575, but Apr cattle added 0.575 to 164.650. Mar feeders were firmer in a mixed feeder market, gaining 0.300 to 186.525. For the week, Feb live cattle added 2.375, and Apr was 0.700 higher. In feeders, the Mar contract was 0.125 higher on the week.
The cattle market was watching for cash trade to develop this week in order to find some direction. On late Thursday and into Friday, cash trade started to come together. In the South, trade was active at $161-162, which was $1-2 higher than last week’s averages. Northern dress trade has similar results with $256-257 catching most business, ranging $2-3 over last week’s averages. The stronger cash tone pushed the Feb futures to new contract highs on the close. Feb is close to expiration, which is on February 28, so its value stays tied to the cash market, but the strength in the cash supported the entire market. Retail values have trended higher, allowing the packer to bid up for cash cattle. At midday, choice carcasses were 1.34 higher to 280.89 and select added 4.01 to 266.65. The choice carcasses at midday were trending nearly $11.00 higher than last Friday’s afternoon close. The load count was light on Friday at 42 midday loads. The strong trend in retail and the cash market will bring more optimism into the market next week. Feeder cattle failed to rally with the live market. A mixed to higher grain market limited gains as well as the premium of futures to the cash index. The feeder cattle index traded 0.30 lower to 183.03 and hold a $3.94 discount to the futures. The uptrend in the cattle market continues as the cash market is the driver of prices. Cattle supplies are tight, demand is good, and the cash trend support, the live cattle market will likely be optimistic next week for the trend to continue.
LEAN HOG HIGHLIGHTS: Lean hog futures failed to hold early session strength, as the premium of the futures market to the cash market limits the buying support. Soft midday retail values added to the selling pressure. Apr hogs lost 0.500 to 85.275, and Jun hogs lost 0.425 to 102.750. For the week, Apr hogs used early-in-the-week strength to gain 1.950 and Jun added 1.075.
The hog market is still struggling to find traction as long as the large difference between cash and the futures market persists. Prices look like they have placed a seasonal low last week, and got some follow-through this week, but it is still a nervous 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 0.23 to 75.85 and was 2.04 higher on the week overall. The index is still trading at a $9.425 discount to the Apr futures. That gap has caused futures prices to keep consolidating around the $86 area. Direct cash hog trade was not comparable due to yesterday’s confidentiality trade but traded at a weighted average of 76.19. and a 5-day average of 75.35. Cash markets have firmed recently, and that has helped lift the futures off recent lows. Retail values are also trying to trend higher, but midday pork carcasses slipped 1.08 to 81.98, pressuring the market. The load count was light at 122 loads. The afternoon close will still be key in the retail prices. For the past couple sessions, the market has been unable to hold midday prices in the retail pork. The hog market is taking a pause as prices have recovered off recent lows, but the premium in the futures over the cash market stays a limiting factor. At least cash is working in the right direction and retail values are trying to build some upward movement as well. The price action on Friday was disappointing as prices closed near the low of the day, this could bring some additional liquidation on Tuesday.
DAIRY HIGHLIGHTS: Despite the rebound in prices last week, all eight quarters for Class III and Class IV milk sustained losses this week. These losses come despite US dairy futures being vastly oversold. Likely scenarios for the downward movement of prices would be export demand for US dairy products waning, moderate growth in milk production, and increasing cheese and butter inventories. Next week will provide multiple fundamental reports in both Milk Production and Cold Storage. The spot market for cheese was extremely active this week with a whopping 51 loads trading, despite this activity, the spot price of cheese was nearly unchanged on the week. Feed markets traded mainly sideways this week as corn continues to coil tighter and bean meal failed in staying over $500 per ton on the front month contract and carries a substantial premium over future months.
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Author
John Heinberg