MARKET SUMMARY 4-19-2023

Dow equity futures are testing a key level of resistance, as price is trying to push past the 34,000-point level.  The market is running into trendline resistance established when the futures hit an all-time high in January of 2022.  This is the fourth time the Dow futures have challenged this trendline, only to see the price pull back in some for a correction as price failed to push past the trendline.  The past handful of days, the June Dow futures have consolidated, trying to build the momentum to either push higher or reverse lower into the end of the week.  The price close today and at the end of the week could help signal the next direction for the equity markets in the short term.

CORN HIGHLIGHTS: 

• May futures lost 5-1/4 to close at 6.72-1/4 and December gave up 8 cents to end the session at 5.63, running into resistance for the second day in a row at 5.71.
• Ethanol production was the highest in 8 weeks using 103 mb. Total usage year-to-date is 3.195 mb or 60.85% of the USDA forecast for 5.250 bb. Usage will need to average 102.75 mb per week from this point onward.
• Double digit losses in wheat and soybeans likely spilled over into the corn market. Concern that the dollar could rise after inflation numbers indicated Europe’s inflation was stronger than expected suggesting the Federal reserve may have to raise rates here in the U.S.
• A cool and wet extended forecast will keep field work to a minimum for the northern Midwest. Brazil could be turning drier with less rain in the forecast for the end of April.
• May futures traded in what is termed an inside day suggesting the technical move down today was with little meaning. December, however, finished below yesterday’s low after testing yesterday’s high price, a somewhat weaker technical signal.
• Ethanol plants are said to be covered with corn needs through June but July and beyond could be a challenging environment to source corn. Strong basis to July and September is noted.

SOYBEAN HIGHLIGHTS:

• Soybeans closed lower today led by soybean meal, but soybean oil closed lower as well due to a decline in crude oil futures.
• Crude oil fell by more than 1.50 per barrel, which was not helpful, but palm oil fell by 1.6% as well following reports that Malaysian palm oil exports in the first half of March were down 21% from the previous month due to its high price.
• Soybean meal was pressured by news that China has put a plan in place to reduce the amount of meal in feed rations from over 15% in 2021 to just 13.5% by 2025, limiting their import needs.
• With Brazil harvesting their record crop and nearly complete, US exports have been very spare, but basis remains strong nationally thanks to good domestic demand.

WHEAT HIGHLIGHTS:

• May Chicago lost 16-1/4 cents, closing at 6.81-3/4, and July was down 16-3/4 at 6.92-3/4.
• May KC lost 19-1/2 cents, closing at 8.61-3/4, and July was down 18-1/2 at 8.49-3/4.
• Higher than expected UK inflation data may have been weighing on financial and commodity markets today. The US Dollar Index is also marginally higher around the 102 level.
• Many areas of the northern plains and Canada remain cold and wet, which will delay spring wheat planting.
• Yesterday, there were no vessels inspected in Turkish waters. There is still much uncertainty surrounding the Ukraine export corridor and whether or not Russia will walk away from the deal.
• Many parts of the HRW wheat area remain dry. Some of the weather models are putting rains in the forecast for parts of Kansas, but the European model is drier.
• Talk that Russia’s wheat crop could be down to 86 mmt (vs 92 mmt last year) could provide some support to the market.
• Sharply lower Paris milling wheat futures offered no support to the US market today.
• Poland has said they will agree to let Ukrainian grain shipments pass through their country. But Bulgaria is the latest nation to ban Ukraine grain imports.

CATTLE HIGHLIGHTS: 

• Cattle futures saw rounds of profit taking as inflation concerns and cash trade being undeveloped led the market to reverse of recent highs, setting up a weaker overall technical picture.
• April live cattle lost 1.050 to 175.425, and June dropped 1.600 to 163.600.  Feeders finished mixed with front month profit taking, but weaker grains supported the middle of the market.  April feeders lost 1.250 to 204.675.
• USDA will release the April Cattle on Feed report on Friday at 2:00 CST.  The report is expected to show continuing tight overall cattle supplies. Expectations for the report are: Total Cattle on Feed at 94.8%, Placements at 94.9%, and Marketings at 98.8% of last year’s levels.
• Cash trade has not yet been established yet with no bids developing, early southern asking prices are $177, higher than last week’s totals. The expectation is for cash trade to be higher again with packers knowing they will need to get aggressive again to obtain inventory.  Trade will likely develop late in the week.
• Boxed beef was softer as choice carcass was 1.12 lower to 305.94 while select lost 0.42 to 291.19 at midday. The load count was light at 45 loads.
• The Feeder Cash Index has moved steadily higher, gaining an additional 0.73 on Wednesday to 206.37.  The cash index is running a premium to the April futures, which should support the market.

LEAN HOG HIGHLIGHTS: 

• Hog futures finished mixed to mostly higher supported by improving retail market values. May futures stayed soft ,losing .050 to 78.775, but June was .675 higher at 86.425.
• Midday retail values are trying to find some footing, challenging the $80.00 level, gaining 1.12 to 80.05 at midday today.  The load count was light at 182 loads. Retailers may be looking to the cheaper pork product as summer demand is coming
• Chinese pork production is running strong as producers liquate due to disease concerns, dropping the Chinese pork price to its lowest levels in months.
• Bear spreading was noted, as the premium to cash limits the front end of the market vs deferred contracts.
• Estimated hog slaughter on Wednesday was 484,000 head, relatively steady with last week and last year.
• Managed funds are still holding a record short position.
• As of the close, May futures hold more than a $7 premium to the index – this could limit upside potential. The Lean Hog Cash Index gained .12 to 71.64.  This is the first time the index has traded higher since March 20th.

DAIRY HIGHLIGHTS: 

• US spot butter was bid 3.25c higher to $2.4025/lb, its highest close since March 21st. Meanwhile, spot powder added 3c to $1.16/lb.
• Although there were just six contracts traded total in the 2023 class IV milk strip, higher bids led to mostly double-digit higher closes across the board.
• The class III trade was choppy once again. The market is being weighed down by a weak spot cheese trade below $1.65/lb. Spot cheese has closed higher two days in a row, though.
• Second month Class III fell 12c to $17.35 while second month Class IV added 7c to $17.78.
• After the market close, the USDA released its milk production report for March. March milk production for the US was up just 0.50% year-over-year.

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Author

John Heinberg