The CME and Total Farm Marketing offices will be closed Friday, April 15, 2022, in observance of Good Friday
MARKET SUMMARY 04-13-2022
U.S. ethanol production hit a 2-month low last week, as the possible impact of high corn prices has weighed on demand. Last week’s production of ethanol was 995,000 barrels/day as gasoline demand has slipped with the impact of high gasoline prices. Despite lower gasoline demand, ethanol usage spiked last week, and with the reduced production, ethanol stocks saw a 45 cut of their totals. Ethanol stocks in storage were 24.8 million barrels, down from the recent high of 26.5 million barrels just two weeks ago. This may be showing some additional demand besides fuel usage, possibly some ethanol exports helping move stock supplies out. The demand for ethanol and its impact on the corn market has been very supportive, and with President Biden’s announcement of supporting E15 through the summer, the ethanol market should maintain that overall price support.
Like what you’re reading?
Sign up for our free daily TFM Market Updates and stay in the know!
CORN HIGHLIGHTS: Corn futures finished with double-digit gains as rumors of more Chinese purchases circulated. In addition, signals from the administration wanting to waive the ethanol blend cap from 10% to 15% gave the market additional positive news. A weather system suggests further wet and cold for much of the Midwest delaying fieldwork. High winds and lack of moisture in the southern Plains have farmers concerned. Jul corn gained 13-3/4 to finish at 7.72-1/2, a new contract high close. Dec gained 13 to end the session at 7.31, also another new contract high close.
The trend remains higher as continued concerns that Ukraine will be lucky to grow half a crop, dry weather in parts of Brazil may limit production, and strong technical buying coupled with foreign buyers filling needs. Short covering was a noted feature today. While it is early in the season, it is interesting, and perhaps concerning, to have a conversation with producers who are struggling with extreme-dry conditions and high winds, and then in the next conversation visit with producers who are concerned about heavy snowfall and cold temperatures delaying fieldwork at least one if not two weeks. The availability of fertilizer is still a major concern for some, but it appears that it is a matter of cost and not necessarily supply for most. We must believe corn priced at 7.30 on Dec futures is one way or another buying acres.
SOYBEAN HIGHLIGHTS: Soybean futures ended mixed with bull spreading a primary feature late in the session. May futures gained 5-3/4 to close at 16.76 and Nov lost 1-1/4 ending the session at 15.05-3/4. Most soybean futures, even Nov, finished in the upper end of the daily trading range. Firmer corn and wheat prices spilled into the corn pit. Sharp gains of more than 200 points in soybean oil helped soybean futures to recover late in the session. Firming energy prices gave soybean oil a boost.
With inflation running wild at 8.5% and energy and corn prices holding firm, soybean futures likely have limited downside in the near futures. We anticipate further downgrades to the Brazilian crop in future USDA reports. Soybean oil will continue to find underlying support from tight world vegetable oil supplies. Yet, unless export sales pick up it is likely the soybean market will be choppy but range-bound, rather than extend higher from this point. 17.00 continues to act as an upside barrier against higher prices for old crop and 15.00 for Nov new. There is a chance Nov could trend to 16.00, however that only seems likely if soybean acres are lost to corn production.
WHEAT HIGHLIGHTS: Wheat futures posted modest gains despite a rocky start this morning. Peace talks between Russia and Ukraine are apparently at a stalemate and despite some forecasted moisture for the U.S. southern Plains, this spring will likely be drier and warmer than normal overall. May Chi gained 9-3/4 cents, closing at 11.13-1/2, and Jul up 8-3/4 at 11.21-1/4. May KC gained 11-3/4 cents, closing at 11.74, and Jul up 11-1/4 at 11.78.
The next week or so looks to remain dry in the U.S. southern Plains, but the later part of the 14-day U.S. weather map has rains moving across about two-thirds of the area. Central Kansas and Oklahoma should get moisture but western HRW areas may miss out. Dryness is still expected to prevail throughout the spring. New crop Paris milling wheat futures have again scored new contract highs as Putin reportedly made comments that the peace talks are at a dead end, which only increases concern about Ukraine’s agriculture production and exports. Europe is expected to pick up a lot of the slack. Egypt’s recent tender was originally for European origins only, but late yesterday they announced they were accepting offers from Russia as well. They did manage to secure wheat from the EU, with 240,000 mt from France and 50,000 mt from Bulgaria, but did purchase 60,000 mt from Russia to boot. In other news, the Consumer Price Index was pegged at 8.5%, which is the highest inflation in 40 years and could be bullish for commodities. As a reminder, the markets are closed this Friday, April 15.
CATTLE HIGHLIGHTS: Cattle futures finished higher as money flow stayed positive into the cattle market, supported by a trend higher in cash cattle markets this week. Apr live cattle gained 0.675 to 140.625, and Jun was 0.575 higher to 136.875. For feeders, May gained 1.025 to 161.950.
The Jun live cattle futures are battling higher, crossing more moving average resistance on Wednesday’s trade. More upside potential is available, especially with the improving cash trade. A strong resistance barrier will be at the 50-day and 100-day moving averages near $137.500. A break of this area will likely trigger additional technical buying. The cash market has been key this week, helping fuel the rally. Some very light trade triggered in the South at $139, up $1 over last week, and Northern dress trade today was $225-227, $2-4 higher than last week. There has been individual regional talk of firmer price levels, pushing values into the low $140 as packer inquiry has been stronger this week. Beef cutouts were very quiet at midday (Choice 273.46 +0.01 Select 260.66 -0.05), with improved box movement of 87 loads. The trend in Choice boxes this week has been firmer, helping support the cash trend. Moving past the Easter holiday should help spur some additional retail buying as stores prepare for May and the Memorial Day holiday, and the expected uptick in grilling demand. The USDA will release export sales totals on Thursday morning, and that could help price direction going into the Easter holiday. The feeder market used the support from live cattle to hold onto gains. The market saw early session strength, but that was pressured by a recovery in corn prices, as that market pushed to new highs on Wednesday. Apr feeders are likely tied to the index, which gained 0.05 to 155.81 but is running at a discount to front-month futures and could be a limiting factor. Cattle prices are turning the corner in the near term, as a firmer cash tone and improved demand prospects going into the late spring are bringing some buying optimism and positive money flow. A strong close into the end of the week could help lead the market higher after the Easter holiday.
LEAN HOG HIGHLIGHTS: Hog futures saw selling pressure to finish with moderate losses as prices consolidated at the top of the most recent move higher. A concern for cash markets kept buyers on the sidelines, despite a firmer retail tone. Apr futures, which expire on Thursday, closed higher, gaining 0.275 to 99.900, but Jun hogs traded 0.875 lower to 117.600.
Jun hogs traded near the top of Wednesday’s range, supported by the 40-day moving average. The market was likely influenced by the expiration of Apr future and options on Thursday. If the upward momentum can continue, prices will be looking to test the price gap on the Jun chart at 120.225 from earlier this month. The cash market is still the largest concern in the short term. National Direct midday values showed no comparison to Wednesday due to “Confidentiality” on price yesterday, but the weight average price was 96.47 and the 5-day average dropped lower to 98.07, reflecting the trend. The Lean Hog Index was lower, losing 0.53 to 99.10. The deferred futures premium over the index is concerning and could be a limiting factor, especially with Apr expiration on Thursday. Pork carcasses showed strong midday trade, helping limit price pressure. Pork carcasses were 5.28 higher to 112.88 on a load count of 154 loads. A strong afternoon close could be key to supporting hog prices on the Thursday open. In addition, the USDA will release weekly export sales on Thursday morning and those totals could help influence price direction. Daily hog slaughter is estimated at 478,000 head, up 27,000 head from last week, and equal to last year. The hog market numbers are still expected to tighten, and the rate of slaughter may be our first indicator of supplies tightening. Unfortunately, with the premium in the futures market to cash markets, that tighter supply may already be figured in. Price paused on Wednesday, looking at Apr expiration on Thursday. The hog market has shown some overall strength in the recent move higher but will need to see a stronger tone in the cash market or retail values to lead. Overall, hog numbers are still looking to tighten going into the summer months, and the hog market likely hit a value point to trigger money flow into the group.
DAIRY HIGHLIGHTS: The US spot cheese price closed into a new high for 2022 up at $2.3550/lb. This is the highest price for US cheese since November 2020. During the Farmers to Families Food Box program, government purchasing in that year, the government pushed US cheese up to a record high of $2.7050/lb. As of now, cheese is just 35c away from that all-time high. Global demand for US cheese remains a strong driver behind the current move. In today’s European cheese report, the USDA said that European milk production is sluggish. As a result, they are unable to keep up with demand and cheese inventories remain low. Retail demand is strong in Europe as well.
Total Farm Marketing and TFM refer to Stewart-Peterson Group Inc., Stewart-Peterson Inc., and SP Risk Services LLC. Stewart-Peterson Group Inc. is registered with the Commodity Futures Trading Commission (CFTC) as an introducing broker and is a member of the National Futures Association. Stewart-Peterson Inc. is a publishing company. SP Risk Services LLC is an insurance agency. A customer may have relationships with all three companies. TFM Market Updates is a service of Stewart-Peterson Inc. Futures and options trading involve significant risk of loss and may not be suitable for everyone. Therefore, carefully consider whether such trading is suitable for you in light of your financial condition.
Author
Brandon Doherty