MARKET SUMMARY 3-29-2023
The USDA will publish the Quarterly Hogs and Pigs report on Thursday after the trading session. The hog market will be watching the number to see if the contraction of the hog herd has ended. Expectations are for All Pigs as of March 1 to be slightly above last year with a .3% increase. This should have the pig crop just over 32 million head. Overall, the number estimates for the report are expected to show a slight increase over last year, with most category groups reflecting a less than 1% increase. Current hog slaughter has been heavier than expected, another area of concern will be any revision made to previous reports by the USDA. The lean hog market has been heavily sold during the month of March as the market is anticipating a heavier supply picture. Very likely that these estimates are already priced into the market at these levels.
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CORN HIGHLIGHTS: Corn futures finished mixed. May gained 3-1/4 cents to end the session at 6.50-1/2 and December lost 1-3/4, closing at 5.70=1/2. Another sale to China (8.37 mb) was supportive and is a weather forecast suggesting the northern Midwest will experience well below normal temperatures, which will likely delay field work.
Today’s ethanol report indicated 101 mb used last week. That puts the year-to-date total at 2.905 bb, which is a daily average of 14.17 mb. At the current pace total ethanol corn use would be 5.172 bb. The current USDA projection is 5.250 bb. Is there a potential decrease in store for the next USDA report? At this time, maybe, however, margins have improved and expectations for an increase in demand as the driving season approaches would likely suggest not. The pre-report estimates for Friday’s reports are corn acres at 90.8 million acres (range of 87.2 to 92) and quarterly stocks at 7.480 bb (range of 7.240 bb to 7.830). 2022 corn acres were 88.6 million with stocks at 7.758. With such wide ranges, the actual figures could create high price volatility. The recent rash of buying by China is encouraging. Attention will focus on Brazil and U.S. weather. Brazil’s weather is more impactful as more of crop enters key growing stages. Although we respect the concerns Midwest farmers are feeling regarding a start to the season, it might be a little early to suggest any correlation to a crop that is less than average.
SOYBEAN HIGHLIGHTS: Soybean futures closed higher today as confidence has returned to the market in the absence of further bank crises. Bean oil moved a bit higher, along with crude oil and world veg oils, which have recovered significantly. May soybeans gained 9-1/2 cents to end the session at 14.77-1/4, Nov was down 1-1/4 to 13.02-1/2.
May soybeans posted good gains today, while the Nov contract slipped slightly and hasn’t rallied off its lows quite as well as the front month, indicative of the very tight stocks currently. May is at a 1.75 premium to Nov and that spread only widened today. Overall, the feel in the commodity markets have been friendly this week thanks to a lack of further banking woes that caused the selloff in the first place. A strengthening in world veg oils have helped support bean oil with EU rapeseed gaining 15% above its low from last week and solid gains in canola futures as well. Friday’s Stocks and Acreage report will likely add some volatility to the market, but the range of acre estimates is wide with the low end at 84.5 million acres and the high side near 89.5. It’s possible that more acres are taken from wheat than expected and added to both corn and bean acres. In Brazil, harvest chugs along at over 70%, but the going has been slow due to their wet weather. China has been mostly absent from US bean purchases with Brazil’s offers as much as 1.60 below those in the US. The strength of crush demand in the US could be what’s keeping soybeans higher, along with the tightness of old crop supply. May beans closed above their 200-day average again, while Nov is only just above its 10-day, but below all other major averages.
WHEAT HIGHLIGHTS: Wheat futures had a mixed close with small gains in Chicago, but small losses in Kansas City and Minneapolis futures. Early session gains came from uncertainty regarding the Russian export situation. This premium was mostly erased by the close. May Chi gained 5 cents, closing at 7.04-3/4 and Jul up 4-3/4 at 7.16-1/4. May KC lost 2 cents, closing at 8.70-1/2 and Jul down 2-1/4 at 8.57.
After strength in the wheat market early this morning, the mixed close was somewhat of a disappointment. After the open, Chi wheat was nearly 25 cents higher, but gave up most of those gains into the close. The support this morning appears to have stemmed from news outlets reporting that Cargill would halt grain exports at their Russian terminal starting in July. These concerns seemed to subside throughout the day, though, as prices faded off of daily highs. The reason being, Cargill’s presence in Russia is not that large and the slack is likely to be easily picked up by other exporters. Fundamentally, there is still support for the HRW crop in the form of continued drought. This week, however, parts of the Plains area and Midwest could see severe weather with the potential for heavy rain, hail, and even tornadoes. Additionally, several northern states are still facing cold weather and snow, which may lead to delays in planting the HRS crop. As a final note, Friday’s reports could have the potential to be big market movers. The average pre-report estimate for all wheat acres is pegged at 48.7 million acres vs 45.7 million in 2022, and 49.5 million at the USDA’s outlook forum.
CATTLE HIGHLIGHTS: Cattle futures traded higher with the anticipation of a firmer cash trade to develop this week and the market looks undervalued compared to the cash potential. Feeders saw higher trade as well, tied to the strength in live cattle. March feeders are closing in on expiration, which is on Thursday. April live cattle traded .875 higher to 165.825, and June added ..750 to 159.650. March feeders were .625 lower to 191.725.
Cattle futures picked up more of a bid on Wednesday as the whispers of higher cash helped support the market. Futures saw some buying strength as prices pushed out through the highs of Tuesday. Cash trade is still undeveloped this week. Southern asking prices were $165-167, as bids were still quiet. Cash trade is expected to develop later in the week overall. The cash market tone will provide the direction for the live cattle market into the end of the week. Retail values were mixed at midday as choice carcasses gained .46 to 281.09 and select was .79 lower to 269.57. The load count stayed light at 60 loads. The trend early in the week is a firmer retail tone overall for choice beef. The cattle market will be watching weekly export sales on Thursday morning to gauge the export trend. Feeders followed live cattle higher with strong gains. March feeders expire on Thursday this week and prices are tied to the Cash Index. The Cash Index was .03 higher to 191.27, and running in line with the March futures. Cattle futures resumed their price recovery with the anticipation of the cash market working back higher. The direction in cash trade will be the key going into the end of the week.
LEAN HOG HIGHLIGHTS: Lean hog futures saw selling pressure as the cash market trend and retail values are failing to support the market. The hog market is looking toward to Thursday’s Quarterly Hogs and Pigs report and the prospect of higher hog numbers. Apr hogs lost .975 to 76.775, and Jun futures traded 1.900 lower to 90.825.
The prospects that lean hogs have put in a near-term look challenged after Wednesday’s trade, and prices posted triple-digit losses. The focus of the market may well be the USDA Quarterly Hogs and Pigs on Thursday, and the market is anticipating a slight increase in hog numbers. Analyst expectations for the report are All Hogs and Pigs as of Mar 1 at 100.3%, Animals kept for breeding at 100.6%, and Animals kept for Marketing at 100.3% all compared to last year’s levels. The hog slaughter pace is currently running ahead of expectations at 1.65% over last year and the report should reflect those increased hog numbers. The market will be watching for surprises, such as adjustments to previous reports, or any impacts of PRRS strains this past winter, which may affect pig totals. In fundamentals, the cash market has been trending lower, but firmed at midday as direct trade gained .09 to 75.54. The Lean Hog Index lost 0.32 to 76.25 as the index has moved to a discount to the April futures, limiting any front month gains. The cash market is still at a strong discount to deferred futures positions. Hog retail values were strong at midday, as carcasses were 1.16 higher to 81.16. The load count was light at 175 loads. In additional demand news, USDA will release weekly export sales on Thursday morning, and a strong number could help support the market. While a new low may be in place, traders will likely need to see a trend of higher cash and cutouts firm back up before buying into this market. With the weak price action today, a challenge of that low may be in place. Prices will likely stay choppy before the Hogs and Pigs report on Thursday afternoon.
DAIRY HIGHLIGHTS: Nearby class III milk futures finished the session just slightly lower, as pressure from a weaker cheese trade pushed the market red. Spot cheese is down 11.125c so far this week. The recent activity in the US spot cheese trade is a great reminder that the dairy market still remains extremely volatile. From March 1 to March 24, spot cheese added 30.50c. However, since the peak over the $2.00/lb level, the market has since fallen 11.125c and has given back about a third of the move in just a handful of sessions. It appears as though there may have been just a sudden demand shift in the spot trade as supplies got tight and buyers needed to get aggressive. The Midwest cheese report from March 22 said cheese inventories were balanced to tight in the region, and some cheesemakers had said they were behind schedule. It was thought that some were 20-40% behind normal in regards to weekly cheese production. So it’s possible we may have seen cheese rally quickly on that short demand window and, now that the inventory needed was purchased, the market could continue to soften.
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Author
Bryan Doherty