MARKET SUMMARY 03-09-2023
The USDA made a larger-than-expected cut on the Argentina soybean crop projection in its WASDE report on Wednesday. The USDA dropped expected production from 41 MMT to 33 MMT, a drop of 8 MMT, or approximately 308 million bushels, as hot and dry conditions pressure the development of the crop. While this was more than the market anticipated, the soybean market has already been pricing in these lower estimates. The USDA may still likely be too high in that estimate. On Thursday, the Rosario Grain Exchange dropped its estimates another 6.5 MMT to an estimate of 27 MMT. If realized, this would be the worst Argentina soybean crop going back to 2000-2001. The soybean market continues to battle different forces, the support of the strong soybean meal market supported by the poor Argentina crop, but still digesting the record supplies coming from Brazil, and the possible demand impacts. Weak soybean export sales for old crop soybean saw a net reduction on this morning’s USDA weekly export report. All these moving forces will likely keep the soybean market very volatile.
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CORN HIGHLIGHTS: Corn futures fell again today as momentum carries the market downward, and what little bullish news is available does not seem to excite traders. May was down 14 cents at 6.11-1/2 and Dec lost 4-1/2 cents to finish the session at 5.53-1/2.
Alongside corn in today’s risk-off session, soybeans, wheat livestock, and crude oil also traded lower. This did not help the fact that yesterday’s WASDE report was somewhat bearish. The market also doesn’t seem to have reacted to strong export sales last week or the downgrades to Argentina’s crops. The USDA reported an increase of 55.6 mb of corn export sales for 22/23 and an increase of 4.5 mb for 23/24. And yesterday’s USDA estimate of the Argentina corn crop at 40 mmt was lower than last month. However, the Rosario Exchange is below even that number, with an estimate of 35 mmt. Corn is also oversold on some technical indicators including stochastics and the RSI. Despite these things, Dec corn today hit the lowest level since July 2022. It seems that a few different factors are pressuring commodities. First, are the recent Fed comments about increased interest rates. Second is the Black Sea grain deal (which is likely to be extended in about 10 days). And third appears to be more fund selling, as they were estimated to have sold 15,000 contracts of corn as of noon today.
SOYBEAN HIGHLIGHTS: Soybeans closed lower today, pulled down by sharp losses in bean oil as well as net cancellations now on the books for last week’s export sales. Argentina’s bean crop was estimated to be lower as drought continues but did not offer support today. May soybeans lost 7 cents to end the session at 15.10-3/4, and Nov lost 11-1/2 cents at 13.60.
Soybeans closed lower today along with bean oil, while meal posted slight gains. Last week’s export sales report showed the first net sales cancellations of the main export window and signals that Brazil has taken over the large majority of business. The export sales cancellations of 852,000 bushels were a marketing year low and were a large bearish influence today, along with the sharp decline in bean oil which saw the May contract lose nearly 3.5%. While there were cancellations for the 22/23 marketing year, there were sales of 6.3 mb for 23/24 and export shipments were 21.3 mb, down 34% from the previous week and 62% from the prior 4-week average. There was a flash sale this morning of 184,000 metric tons of soybeans to unknown destinations for 22/23. The Rosario Grain Exchange lowered their Argentinian soybean crop estimates to just 27 mmt which is down from their previous estimate of 34.5 mmt and below the USDA’s estimate of 33 mmt. Crop conditions were updated this afternoon for Argentina, which showed the good to excellent rating unchanged at just 2%, but the poor to very poor rating increased to 71% from 67% as their crop continues to decline. May beans have fallen below their 50-day moving average while Nov beans have fallen below all major moving averages.
WHEAT HIGHLIGHTS: Wheat futures closed sharply lower as the downtrend continues and funds are thought to be again adding to short positions. May Chi lost 21-3/4 cents, closing at 6.65-3/4 and Jul down 20 at 6.77. May KC lost 23 cents, closing at 7.77-1/4 and Jul down 22 at 7.69.
Wheat tumbled to double-digit losses across the board. Alongside U.S. futures, Paris milling wheat posted a lower close for the fifth session in a row. It is believed that funds are again adding to their short positions in wheat after a WASDE report that gave traders little to get excited about. Additionally, the deadline for an extension of the Black Sea grain export deal is fast approaching. It expires in just over a week but at this time many feel that it will in fact be given an extension as it also allows Russia to export as well. And today’s poor U.S. export sales data did not help the situation, with the USDA reporting an increase of only 9.8 mb of wheat export sales for 22/23 and an increase of 2.6 mb for 23/24. In other news, there is a Saudi Arabia tender for 480,000 mt, but Russia will likely be the origin of that. If there is a silver lining, it is the fact that the wheat market is very oversold, but that may not mean much if momentum continues to carry it lower.
CATTLE HIGHLIGHTS: Cattle futures saw some profit-taking pressured by the outside market and the lack of development by the cash market. Apr live cattle lost 0.650 to 164.800, and Jun cattle dropped 0.975 to 159.675. Feeders saw profit-taking after a good start to the week. Mar feeders lost 0.675 to 193.075 and Apr fell 0.925 to 199.150.
The cattle market still has a lot of value, and outside markets were in “risk-off” mode, led by the equity markets trading nearly 500 points lower during the course of the day. The February Jobs report will be released and that could trigger market concerns regarding interest rates, and the market was pricing those factors in on Thursday. Markets, like the cattle markets, have a lot of length and are set up for some profit taking. The cash trade finally saw some traction on Thursday. Light trade is being reported in parts of the South this afternoon at $165. This was fully steady with last week’s weighted averages. Packers will likely build more business as the day progresses, but it is very likely that significant trade volume will be delayed until Friday. Retail values were lower at midday with Choice slipping 0.11 to 284.67 and Select dropping 1.99 to 276.13. The load count was light at 45 loads. Today’s slaughter totaled 124,000 head, 1,000 less than last week, but 1,000 more than a year ago. Feeder cattle saw profit-taking and long liquidation on Thursday, after a good start to the week. Feeder charts were overbought and poised for some correction. Grain markets were strongly lower, but that still didn’t impact the trend in feeders for the day. The Feeder Cash Index is up 1.51 at 188.72 continuing its climb. The index is still at a discount to the front-end futures but talk on strong countryside cash markets has been lifting the index to the futures market. Cash trade developing steady is a disappointment to the market, but cash is still developing, and bids may improve. Outside markets triggered some profit-taking in both live cattle and feeder cattle. Markets are overbought, and some correction may be needed for prices to work higher in the future. The trend in cattle is still higher.
LEAN HOG HIGHLIGHTS: Lean hog futures finished mixed on the day. Prices are battling in choppy fundamentals and pressure from outside markets in a risk-off mentality. Apr hogs 0.675 to 85.075, but Jun gained 0.175 to 100.450.
Apr hogs saw big swings between the high and the low on the day, to finish in the middle of the range. This made today a consolidation day, as prices were looking for direction. Strong selling pressure in the markets on the day, as “risk-off” trade plagued the outside markets, and that limited any gains on the day. In fundamentals, The CME Lean Hog Index gained 0.18 to 79.09. Midday direct trade was softer on the day down 0.22 to 78.27, and the 5-day rolling average was also higher to 78.10 The higher trend in the cash market and the tightened premium of Apr to the cash has helped the buying strength in the past couple sessions and may have helped pull Apr off the lows today. Deferred contracts are still holding a relatively large premium, limiting their gains. Pork retail values were softer at midday losing 0.34 to 87.32. The load count was light at 146 midday loads. The CME pork cutout index has also trended higher and gained 1.01 to 86.68. Hog slaughter could still be a limiting value. Daily slaughter is estimated at 485,000 head, down 1,000 over last week but 12,000 higher than last year. The hog market is looking to work higher in the near term, supported by the cash and retail trend, as the market is finding some balance between front and deferred futures.
DAIRY HIGHLIGHTS: Thursday saw the block/barrel average jump 3.25 cents to $1.78/lb, which aided in double-digit gains for the nearby Class III futures. That close for spot cheese matched what is nearly a two-month high as prices have been stuck in the $1.70’s/lb for weeks on end. What has shifted dramatically is the spread between blocks and barrels. A week ago blocks closed at a 38 cent premium to barrels, but the proceeding five trading days has seen that drop to 9 cents. This, as of yet, has had little effect on spot cheese overall but does give the market a healthier feeling and shows some equilibrium is being found on barrel supply and demand.
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Author
Amanda Brill