MARKET SUMMARY 03-13-2023
The soybean complex is under pressure, but the drop in the soybean oil market could be an indicator of where the complex may be headed. Soybean oil broke through trendline support last week and triggered additional technical selling, as prices are looking to challenge the July low from last summer. Strong selling pressure in the crude oil market added to selling pressure today, but the ramping up of the Brazil soybean harvest is the main pressure on soybean oil and the complex in general. Last week, Brazil had set multi-year highs in soybean oil exports, a sign of the fresh supplies available to the market. Brazil soybean premiums are on the decline as more producers are moving freshly harvested soybeans. Technically, the soybean complex is struggling, and the impact of the South American will make rallies very limited.
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CORN HIGHLIGHTS: Corn futures ended mixed with Mar gaining 0-1/4 cent, May dropping 3-3/4 and new crop Dec down 0-1/2 at 5.57-1/4. May closed at 6.13-1/2 and Dec at 5.57-3/4, both consolidating between the closes of Thursday and Friday of last week. Futures are still holding near their lowest level since mid to late summer. A neutral export inspections figure and financial worries after the collapse of the Silicone Valley Bank on Friday had the trade nervous. Tomorrow is the last trading day for Mar futures.
Export inspections at 39.3 mb were encouraging but not enough to feed the bulls. When prices went positive during the session it appeared there were plenty of sellers waiting to sell. It looks like Friday’s late session gains (plus near 6 cents) were likely nothing more than traders exiting shorts into the weekend or bullish traders buying in hopes of follow through today. Near 40% of the second crop corn in Brazil is estimated to be planted outside the optimal window. This creates potential for prices to rally, however, just as here in the U.S., late planted may not mean much unless weather conditions warrant. It certainly should keep the bears on alert that conditions and crop projections could change rapidly. Currently there is no catalyst to suggest a short cover rally or that new buying is ready to happen. Word is that Russia will consider extending the corridor for a short period of time (whatever that is), almost an about-face from the most recent rhetoric suggesting it would take sanctions being lifted to extend the corridor.
SOYBEAN HIGHLIGHTS: Soybean futures closed lower today as commodities in general began the week on a bearish note following last week’s bank collapse. The dollar, crude oil, and both bean oil and meal moved lower today as funds appeared to take money out of most commodities and move it into metals and cryptocurrency. May soybeans lost 15-3/4 cents to end the session at 14.91-1/4, and Nov lost 18-1/4 cents at 13.39-1/4.
The soy complex struggled today coupled with a sharp selloff in crude oil despite a decline in the dollar by nearly a whole point. Most commodities closed lower today, along with equity markets that have been struggling since the Silicon Valley Bank was officially shut down over the weekend, and panic in the financial sector set in with runs on some smaller banks beginning to spread until the FDIC stepped in. Either way, there was a definite trend today of money coming out of ag products and into precious metals and crypto. This morning the USDA reported that 22.7 mb of beans were inspected for export last week which was a solid number and put total inspections at 2% above a year ago. The U.S. only needs 188 mb more in export sales to reach the USDA’s estimate. Brazil’s harvest is now estimated at 53% complete which is a bit behind pace while Argentina’s crop has been revised lower yet again by the Buenos Aires Grain Exchange at just 29 mmt and possibly the worst harvest ever. Crush premiums have slipped a bit in this recent selloff but still remain profitable. May beans closed on their low of the day and sit just above their 100-day moving average while Nov beans closed below their lower Bollinger Band.
WHEAT HIGHLIGHTS: Wheat futures finished with moderate gains after fading from earlier highs today. The issues with some U.S. banks appear to be affecting financial and commodity markets, but the decline in the U.S. Dollar was supportive today. May Chi gained 5-1/4 cents, closing at 6.84-1/2 and Jul up 5-1/2 at 6.95-1/2. May KC gained 2-1/4 cents, closing at 8.00-1/2 and Jul up 3/4 at 7.89-3/4.
Wheat managed to show some green on the board to end the session today. Along with U.S. futures, Paris milling wheat was higher for the first time in seven days. Initial weakness may have stemmed from news regarding the U.S. banking situation in which a California bank couldn’t meet some of its losses in trading of treasuries. There was also another crypto bank in New York that had a run on its deposits. The FDIC and federal bank announced a plan to make all deposits good in all banks, but traders may have been taking risk off in concern about the U.S. bank system nonetheless. Wheat began to show strength after the opening, however. At midday, wheat was 10-15 cents higher, but faded a bit into the close. This could be the result of profit taking by traders who bought on the low last week. The decline in the U.S. Dollar Index likely also lent some support to wheat today as compared to corn and beans. As of this writing, the index is currently down about 0.975 at 103.60 and may have seen a top last week (at least in the near term). In other news, today’s export inspections data came in at 9.8 mb for wheat, bringing total 22/23 inspections to 584 mb. As a final note, the deadline for an extension of the Black Sea grain deal is fast approaching, but it is being reported that Russia may only agree to a 60-day extension, and there is still much uncertainty surrounding this issue.
CATTLE HIGHLIGHTS: Cattle futures saw additional profit-taking to start the week, as upward momentum has slowed in the cattle markets. Steady cash was disappointing last week and outside market pressures limited cattle futures. Apr live cattle lost 0.725 to 163.550, and Jun cattle dropped 0.450 to 158.200. Feeders saw profit-taking again after a good close last week. Mar feeders lost 0.650 to 190.825 and Apr fell 0.575 to 197.075.
The cattle market saw additional selling pressure as outside markets were pressured early by the SV Bank failure and concerns in the economy. Commodity and equity markets started the day with strong selling pressure. The live cattle market gapped lower, and that triggered additional long liquidation. Apr futures did find support at key moving averages after the open, but the technical picture looks weak, supported by poor price action. This could open the door for some further price correction, technically, as the week goes on. The cash market trade was undeveloped to start the week on Monday and will be key for the week. Last week, cash trade was mostly steady, which disappointed the market. Retail values were mixed at midday with Choice slipping 0.33 to 284.51 but Select added 1.45 to 272.99. The load count was light at 39 loads. Last week, the Choice cutout moved $3.90 lower and the Select cutout decreased by $1.53, which limited the futures market. Feeder cattle saw profit-taking and long liquidation again on Monday. Feeder charts were overbought and poised for some correction. Daily charts posted a topping signal with last week’s reversal lower and got additional follow-through today. This leaves the technical picture looking weak, influenced by the price gap lower to start the session. The Feeder Cash Index was up 0.94 to 189.77 continuing its climb, as the cash market stays supportive. 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. Technically, cattle charts are struggling, and the market is overbought. Prices are still trending higher in the long-term view, but the winter highs may likely be in the charts and some more correction is possible.
LEAN HOG HIGHLIGHTS: Lean hog futures followed the cattle market lower, despite a firm retail market and positive trending cash trade. Apr hogs lost 1.225 to 86.225, and Jun dropped 0.175 to 102.600.
Outside market influences pressured hog futures to start the day, and prices never recovered in the front-end Apr futures. Despite the weakness to start the week, Apr consolidated at the top end of last week’s trading range and the current path looks higher in the hog futures. The CME Lean Hog Index gained 0.23 to 79.62, continuing its trend higher, looking for its 7th consecutive week of gains. Midday direct trade was softer on the day down 2.85 to 74.98, and the 5-day rolling average was also higher to 77.59. The recent soft tone in the direct cash trade likely help limit gains on the front-end April contract. Pork retail values were higher at midday, gaining 4.77 to 92.57. The load count was light at 125 midday loads. Pork retail values have trended higher, and that should help cash bids. The afternoon close and keeping retail values above the $90 mark would be supportive. Hog slaughter could still be a limiting value. Hog slaughter is still running heavy, and that has limited the front-end futures market. Last week, total hog slaughter was nearly 2.497 million head, down slightly from last week, but up 1% over last year. The heavier slaughter run has kept production steady to slightly over last year, limiting hog market gains. 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. The chart technical picture is improved, but outside markets may be a negative influence.
DAIRY HIGHLIGHTS: Now that the block cheese to barrel cheese spread has tightened out, buyers appear to be a bit more aggressive at these sub-$1.85/lb cheese price levels. In Monday’s trade, blocks rebounded 3c to $1.81/lb on 3 loads traded while barrels added 2.50c to $1.7950/lb on 9 loads traded. After today, the spread remains tight at just 2.50c after being over 30c just a week ago. The rebound in cheese helped support Class III milk futures as the nearby months gained 7-9c today. The butter market also found some buyers as it recovered 4.75c to $2.38/lb. Butter remains in a downtrend, however, and it appears that the milk futures trade didn’t see enough to bid up milk. Class IV futures closed mostly lower on the session. The dairy trade overall remains in a downtrend and the market is looking for support. A catalyst is needed to bring the market back to the upside.
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Author
Bryan Doherty