MARKET SUMMARY 03-30-2022
While the ag markets are looking toward the corn, soybean, and wheat Planting Intentions report on Thursday, the cotton market has been making a push for acres of its own. Cotton futures for December have rallied strongly since December, but the month of March has brought an acceleration in prices. On Wednesday, December 2022 cotton futures posted a contract high close at $112.44/bale. This Thursday, the USDA will issue its planting intentions data. Industry estimates have 2022 cotton acreage near 12.30 million. The 2021 intentions were 12.0 million acres and USDA’s Ag Forum in January was 12.7 million acres. With the appreciation in prices, supported by an inflationary market, and dry weather in Texas and the South, cotton has been making a reach for additional acres, like most commodities overall. This could set up one of the potential surprises on Thursday, the increase in cotton acres at the expense of acres of corn.
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CORN HIGHLIGHTS: Corn futures reversed course today by gaining on the over-night trade, eventually finishing 3 to near 12 cents higher. Though the market did not make up all of yesterday’s losses, May futures closed 24-1/2 cents above yesterday’s close. May ended today’s session 11-3/4 cents higher at 7.38 and December added 3-1/4 cents to end the session at 6.56. Talks between Russia and Ukraine were said to be progressing, but from what we know, Ukraine is not willing to give up territory and wants Russia to leave. USDA acreage and stocks reports are due out tomorrow. Position squaring ahead of the report was a likely feature in today’s trade.
The pre report expectations have corn stocks at 7.885 bb and acres at 92 million. Last year, stocks on March 31 were 7.696 bb. Farmers planted 93.4 million acres in 2021. High input costs and availability are reasons to expect corm acres to go to soybeans. Yet, keep in mind that generally poor winter wheat conditions could have farmers switching to other commodities this spring, mainly corn. Only time will tell. We expect export sales to continue to be strong and the reality of smaller first crops out of Argentina and Brazil, along with a high likelihood that corn from Ukraine will be limited, are macro supportive factors. Unless the reports contain negative surprises, there is little downside price potential. Avian flu is a growing concern to the demand side of the market.
SOYBEAN HIGHLIGHTS: Soybean futures firmed with solid gains posted after double digit losses yesterday adding 18-3/4 to 21-1/2 cents. Nearby May gained 21 to end the session at 1664. November added 21-3/4 closing at 14.70-1/2. Expectations of exports out of Ukraine anytime soon are unlikely as Russia continue to mine ports. Markets were also consolidating in front of tomorrow’s acreage and stocks reports. Besides supportive Ukraine news, China lockdowns continue, a concern for the demand side of the markets, as are what seems like a never end string of Avian bird flu.
The average pre-report estimate for acreage is 88.8 verses 87.2 last year. We would not be surprised if the report indicated even higher acres as the cost of fuel and fertilizer make beans a better value, or less risk, than corn at current deferred futures prices. After tomorrow, the market will have more information to utilize to establish a price trend. We stay with a bias that supplies are significantly tight and that pullbacks are still considered buy opportunities. When anticipating the April Supply and Demand report, will have a supportive tone anticipating lower supply on hand and increased exports. The crush pace continues to favor usage and so do the margins. Acreage at 88.7 mb will be termed negative, but it is expected. Overhead resistance at 17.00 stays as the big stopping point for soybeans old crop.
WHEAT HIGHLIGHTS: Wheat futures recovered, though did not fully make up for yesterday’s losses. It appears that peace talks may not have gone as well as reported. May Chi gained 13 cents, closing at 10.27-1/4 and July up 13-3/4 at 10.23. May KC gained 20 cents, closing at 10.44-1/2 and July up 20-1/2 at 10.44-3/4.
Wheat regained some of yesterday’s losses as there appears to be less chance for peace in Ukraine. Apparently, the Russians said that peace talks broke down (but they will still continue to talk). Ukraine wants the Russian troops to leave the country and are not willing to give up territory. There are some reports suggesting that Russians will allow vessels to leave Ukrainian ports, however they did not indicate if they will be allowing ships into the ports. With the destruction of Ukrainian elevators and the fact that there are mines in the waters of many of these ports, there are still logistics concerns about moving grain, even if the Russians let vessels through. Here in the US, there have been some rains in eastern HRW wheat areas, but the 8-14 day forecast suggests warm and dry conditions will return to the southern plains. Some areas east of the Mississippi have seen perhaps too much rain (which could delay spring planting of crops). Tomorrow’s stocks and acreage reports will be released at 11 AM central. Expectations are for wheat stocks at 1.064 bb vs 1.311 bb last year and all wheat planted acreage at 47.8 million vs 46.7 million last year.
CATTLE HIGHLIGHTS: Cattle futures saw mixed to lower trade, as steady cash markets and a recovery in grain prices weighed on cattle markets. April live cattle lost .725 to 140.175, and June cattle dropped .475 to 138.000. In feeders, April feeders were .675 lower to 163.675.
April cattle prices were choppy, as they held support above the 200-day moving average and the $140 psychological level. Further direction in April futures will likely be tied to the cash market, which saw some initial trade today. The cash market stayed steady with most of the trade triggered at $138 in the South and northern trade at $221.00. This was fully steady with the majority of trade last week. Trade was light overall and will likely keep developing into the end of the week. April cattle, as well as June, will likely stay tied to the cash market, and steady trade was disappointing, pressuring the market. April options expire this week on Friday, and the futures is getting in its last stages of trade, so cash direction will be a supportive or limiting factor. Midday beef retail values were higher with choice carcasses gaining 2.80 to 267.30 and Select was 2.09 higher to 256.93. Load count was light at 47 midday loads. Feeder cattle consolidated within Tuesday’s trading range, as a recovery in grain markets pressured feeders. March feeders expire on Thursday and are trading in line with the Feeder cash index. The index gained .12 to 155.41, and March closed at 155.975. Technically, cattle markets have improved chart actions, and the short-term trend is working higher. The grain trade will likely have some impact on the cattle markets this week, so expect some volatility as that market moves towards a key USDA report on Thursday, with grain stock and planting intentions numbers. Cattle price are still range bound, but with the strength on Tuesday are challenging the top of those trading ranges, the market will need some news and money flow to push prices to the upside.
LEAN HOG HIGHLIGHTS: Hog futures saw profit taking as cattle-hog spreads likely were in play, and profit taking before Wednesday’s USDA Quarterly Hogs and Pigs report. April hogs lost 1.525 to 106.050, and June dropped 1.425 to 124.625.
The USDA will release the Quarterly Hogs and Pigs report on Wednesday. Expectations for that report are as follows: All hogs as of March 1 at 99%, kept for breeding at 99,9%, and kept for marketing at 99%, compared to last year. In addition, the market will be keeping a close eye on farrowing intentions to gauge if the market has moved back into expansion, or at least stabilizing overall numbers. Trade tomorrow will likely see some choppiness build into the market on position squaring. Pork retail values were trending higher last week and got additional support at midday today. Pork values closed softer on Monday, but traded 2.19 higher to 109.60 at midday today, on a load count of 168.79 midday loads. The afternoon close will likely help the direction of the market on the open tomorrow. Cash markets have been turning softer. National Direct Trade at midday was 1.96 lower to 103.93, with the 5-day average at 106.22 The lean hog cash index was higher, gaining 0.68 to 102.93. The Apr contract has a premium of 3.120 over the index, which could be limiting on the front month with only three weeks of life left in the Apr contract. The market will be looking to the USDA report on Wednesday to set up the next direction. The path still wants to work higher, but validation of the supply picture will be a key.
DAIRY HIGHLIGHTS: The US spot cheese block/barrel average was offered lower for the third day in a row on Wednesday. Sellers moved 5 loads of inventory during the session, but the fact that blocks and barrels each settled above their intraday low kept buyers in the milk futures trade. Blocks had a low trade of $2.15 but settled up at $2.18, while barrels had a low trade of $2.15 but settled up at $2.16. The support shown by buyers allowed milk futures to rebound after the last couple down days. The new front month April Class III contract added 17c while May added 40c to $23.90. Additional market support came from a higher grain trade ahead of Thursday’s USDA reports. Rounding out the dairy spot trade had butter down 0.50c, powder up 0.50c, and whey down 1.25c to a new 2022 low.
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