MARKET SUMMARY 3-30-2023
With China stepping into the corn export market recently, the pace to keep up with the USDA export projections has tightened. As of March 23, U.S. corn export sales have covered 77% of the March USDA export target for the 2022-23 marketing year. This is up from 74% last week, and 68% two weeks ago. In the last 4 weeks, the U.S. has sold 14% of the full-year export forecast, which is the biggest percentage jump for the time frame in the last 15+ years. The impact of China was very dramatic, as they have picked up 45% of those export sales in that period. The USDA has reported new export sale in 9 out of the past 10 days, as U.S. corn has become very available to the export market.
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CORN HIGHLIGHTS: Corn futures ended quietly and defensively with May giving up 1 cent to close at 6.49-1/2 and December losing 3-1/2 to end the session at 5.67. Another export sale of corn to China for slightly more than 7 mb failed to ignite much support as it appeared position squaring in front of tomorrow’s report was a primary feature. The average pre-report estimate for corn acres is 90.8 million (up 2.2 million) and quarterly stocks at 7.4 bb (down from year ago at 7.758).
Weekly export sales were solid at 40.8 mb. Year-to-date sales are now 1.416 bb and below last year’s 2.112 for the same period. The current USDA projection is 1.850 bb, which means total needed sales to meet the USDA estimate is 434 mb, implying sales need to average near 22 mb per week. After tomorrow, all attention will focus on the weather. Until then, however, tomorrow’s numbers could have a big impact. If acres are greater than 92 million, projected carryout climbs to over 2 billion, not suggestive of 5.50 corn. Quarterly stocks could be a wildcard. Finding supportive numbers may be challenging with recent cattle on feed numbers down near 4% from a year ago and the latest Hogs and Pigs report considered neutral, implying little expectation for increased feed usage. The forecast for Brazil corn is on the drier side the next two weeks, which might become a story but for the moment is a mostly non-event.
SOYBEAN HIGHLIGHTS: Soybean futures traded relatively quietly today, but ended lower in the front months and a bit higher in the Nov contract. Export sales weren’t terrible, but trade is likely waiting for tomorrow’s report numbers before taking a firmer stance. May soybeans lost 2-3/4 cents to end the session at 14.74-1/2, Nov was up 1 to 13.03-1/2.
Soybeans have been recovering overall, but did lose a bit of value in the front months ahead of tomorrow’s report. 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. Export inspections last week were an increase of 12.8 mb for 22/23 and 0.1 mb for 23/24 with export shipments at 38.2 mb, above the amount needed to meet USDA expectations. Tomorrow’s Stocks and Acreage report at 11 central 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 another mixed close, but in the opposite fashion compared to yesterday. This time, Chi settled lower, while KC and MPLS were higher. The likely cause was simply traders positioning before tomorrow. May Chi lost 12-1/2 cents, closing at 6.92-1/4 and Jul down 11-3/4 at 7.04-1/2. May KC gained 1 cent, closing at 8.71-1/2 and Jul up 1 at 8.58.
Fundamentally, there is not much different for wheat today than in the past week or so, and there wasn’t much in the headlines today either. However, with the end of the month and quarter upon us, along with tomorrow’s USDA reports, there was likely some profit taking and squaring up of positions happening in the wheat market in today’s session. Early strength was given up into the close, resulting in double digit losses for Chicago, but Kansas City and Minneapolis contracts managed to stay afloat with small gains. Paris milling wheat futures were lower, which may have weighed on the US markets today as well. The export sales report did not provide much help either; the USDA reported an increase of just 5.6 mb of wheat export sales for 22/23 and 1.4 mb for 23/24. Aside from all of that, though, tomorrow’s USDA reports could be critical to price direction. The average pre-report estimate for wheat acreage comes in at 48.7 million acres vs 45.7 last year. The USDA is also expected to find 928 mb of wheat stocks vs 1,029 mb last year at this time. As a final reminder, the report is due for release at 11AM central.
CATTLE HIGHLIGHTS: Cattle futures traded strongly higher as cash trade came in higher than expected, helping push the April contract to new contract highs on the close. The buying strength spread into the feeder market closing with triple digit gains. April live cattle traded 1.725 higher to 167.550, and June added .1.350 to 161.00. March feeders were .950 higher to 192.400 as the contract expired today, and April gained 1.700 to 199.90.
A surge higher in cash trade triggered buying in the cattle complex on the day. Cash trade began to develop on the day with Southern cash trade at $167, up $4.00 over last week’s totals. In northern dress trade, $267 caught most bids, trading $5.00 higher than last week. The stronger cash tone reflected the futures market was undervalued, and the buyer stepped in, lifting the April contract to new highs on the close. June futures looked poised to follow the April futures higher and also test the recent contract highs. Additional cash trade will likely develop into the end of the day and on Friday. Retail values were lower at midday as choice carcasses lost 1.04 to 279.25 and select was .56 lower to 268.34. The load count stayed light at 58 loads. Weekly export sales reported new net sales of 11,300 MT for 2023 were down 40% from the previous week and 10% from the prior 4-week average. Japan, China and Taiwan were the top buyers of U.S. beef last week. Feeders followed live cattle higher with strong gains. A softer tone in the grain markets helped support feeders as well. On Friday, USDA will release the Planting Intentions and Quarterly Grain Stocks report. This could likely bring high volatility to the grain markets and that may spill over into the feeder market on Friday. Cattle futures resumed their price recovery , turning it into a price rally as cash trade came in stronger than anticipated. April closed with a new contact high and June looks poised to challenge that level..
LEAN HOG HIGHLIGHTS: Lean hog futures saw some price support prior to the Quarterly Hogs and Pigs report, but April hogs stay pressured by its premium to the cash trade. Apr hogs lost .325 to 76.450, but Jun futures traded ..775 higher to 91.600.
Lean hog futures saw some price squaring before the USDA Quarterly Hogs and Pigs report, which was released after the market close. All hogs and pigs as of March 1 were .2% above last year. At 72.860 million head, this number is mostly in line with expectations. Breeding hog totals were up .5% from last year, and total market hogs were .2% over last year. The first initial reaction is a neutral report, close to expectations. The USDA did go back to previous reports and revised hog number higher, which has been reflected in large slaughter numbers this fall and winter. The friendliest side of the report was a reduction on potential farrow expectation going into the summer months. This showed some contraction and should support the deferred contracts on Friday. A lot of the negative news was priced into the market with the recent strong selling pressure, but Friday’s trade will give us the view of the trader’s overall view. The cash market saw direct trade .02 higher to 75.56. The Lean Hog Index lost 0.25 to 76.00 as the index moved to a discount to the April futures, limiting front month gains. Hog retail values were softer at midday, carcasses were .71 softer to 79.55. The load count was light at 173 loads. Weekly exports sales remain firm with new net sales of 30,400 MT for 2023 were down 20% from the previous week and 4% from the prior 4-week average. Mexico, Japan, and Australia were the top buyer of U.S. pork last week. The quarterly hog and Pigs report was in line with expectations, but with the recent weakness in the hog market, a lot of negative news was likely priced in. The cash market is still acting as a limiting factor as the futures market holds the premium to cash.. 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.
DAIRY HIGHLIGHTS: Despite the spot cheese trade working lower again, milk prices managed to mostly trade higher or sideways during today’s session. April for Class III and June for Class IV were the only 2023 futures contracts to be in the red today. This marks four days in a row for the May contract to be lower. The past two weeks have seen $20 work as firm resistance on the second month contract for Class III, while the second month Class IV contract has found support at $18. The spot markets were fairly quiet where cheese traded lower again today with only one load traded, butter was unchanged but active buyers purchased five loads, powder and whey were nearly unchanged and saw no loads trade hands today. This week has been extremely quiet for fundamentals for the dairy industry, but next week there will be a Dairy Products report on Monday and Global Dairy Trade event on Tuesday.
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Author
John Heinberg