TFM Daily Market Summary 04-29-2022

MARKET SUMMARY 4-29-2022

This week, the U.S. Dollar Index (USD) traded to its highest levels in 20 years.  The USD had a strong week, gaining over 2 basis points, topping at 103.92, before seeing some softness to end the week.  The 103.92 level pushed through the 2017 high at 103.82 and ranged back to levels last seen in 2002.  Since the middle of 2021, the USD has been trending higher, but has recently surged to these lofty levels over the past month.  The strength in the move is tied to the concerns regarding inflation and the action of the Fed in monetary policy.  The Fed meeting is next week, and the market is anticipated a firmer interest rate raise to help curb inflationary pressures.  This tightens money supply, supporting the dollar’s value.  In addition, economic concerns in China due to COVID lock downs and economic struggles in Europe have sent investors into the USD as a hedge against other currencies, further strengthening the greenback.  The trend is still looking to work higher and push through those historical levels.  The strong dollar will make markets cautious, waiting to see the impacts on the demand side of the market due to the strong dollar index.

 

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CORN HIGHLIGHTS: Corn futures limped into the close, finishing mixed and well off the daily and contract highs posted earlier this morning. May corn added 2-1/4 cents to close at 8.18-1/4, while July finished unchanged at 8.13-1/2 and 11 cents off today’s high of 8.24-1/2. July posted another new contract high today of 8.24-1/2. December lost 0-1/2 to close the week out at 7.51-1/4, after posting a new contract high of 7.57 this morning. For the week, July corn added 24-1/2 cents and December gained 26-3/4. A less than ideal planting start this spring, as well as strong export sales, provided a lift for prices this week, keeping the overall uptrend intact.

Despite today’s less than stellar close, there was little doubt the corn market was factoring in potential supply concerns in the form of both U.S. and South American weather. Another week of  unannounced sales of over 1 mmt underscores the shortfall of inventory from Ukraine. We continue to view that part of the world as a “mess” for Agriculture and a sad state due to the negative impact of war. Regions of the western Corn Belt will make rapid planting progress for many farmers likely to complete sooner than normal due to dry weather. In other parts of the Midwest, continued pesky rains and, in some areas, saturated ground will keep farmers out of the field for the very foreseeable future. The most recent 6 to 10-day forecast has most of the Midwest at or below normal temperatures and turning to a more normal precipitation outlook. Still, we want to be careful not to draw any strong conclusions to yield expectations. In a week or two, stronger correlations will occur.

SOYBEAN HIGHLIGHTS: Soybean futures firmed though out the morning session, but sagged into the close with May ending the day 17.08-1/2, up 1-3/4, July steady at 16.84-3.4 and November down 6-1/4 cents to close at 15.14-3/4. Most futures finished near 20 cents off the daily high. A drop in the US dollar (after 6 consecutive positive closes) was viewed as supportive, yet the strong gains in the dollar this week may be taking their toll on traders who need bullish news. Price support from Indonesia banning exports of palm oil is supportive, but likely now old news. Soybean oil futures in the US are considered cheaper than canola and sun oil.

Yet, the news from Indonesia also seemed to point toward the ban on palm oil exports to only last through the end of May. While the market didn’t end on a very firm note today, this week still suggested that prices held together well, as today was last trading day for the month. July futures lost 3-1/4 cents to end the week at 16.84-3/4, while the November contract gained 9-1/2 cents, compared to last Friday’s close. A less than an ideal weather forecast has provided support, along with continued tight old crop inventory. Surging world vegetable oil prices and US exports, as of this week’s figures, have met the USDA projections for expected sales. The market may yet have to move higher to ration inventory.

WHEAT HIGHLIGHTS: Wheat futures closed sharply lower on expectations of improved weather in the US southern Plains and news that the White House may be trying to encourage farmers to grow more wheat. May Chi lost 30-1/4 cents, closing at 10.43-3/4 and July down 30 at 10.55-3/4. May KC lost 42 cents, closing at 10.94-1/4 and July down 35-1/2 at 10.05-3/4.

Wheat sold off hard today as little fresh news is available to drive the market upwards. In fact, an improving chance for rain in the HRW areas caused significant weakness. KC wheat crop ratings are expected to show a decline on Monday though. Additionally, some news outlets are reporting that the Biden administration is seeking approval from congress for $500 million for the farm sector; the goal is to get farmers to plant more wheat. Traders may have interpreted this as negative news, as more acres likely mean more supply and lower prices. A tough day was not limited to the US markets though. Paris milling wheat was also down sharply – the May contract lost 15.75 to 400.75 euros per metric ton. Even so, most Paris futures are still near contract highs. In global news, Ukrainian farmers are reportedly finding Russian mines in their fields. This only increases the danger they face and will likely reduce the number of people willing to work. With Reuters reporting 13 million people now displaced and $565 billion in property damage, it is hard to imagine any normalcy there this season. On a final note, the CME is reducing the daily trading limit for both Chi and KC wheat futures from 85 to 70 cents, effective Monday, May 5.

CATTLE HIGHLIGHTS: Cattle futures saw moderate to strong selling pressure to end the week as the charts posted their lowest closes in weeks. April cattle ended its trading life on Friday, finished at 141.900, gaining 3.400 on its last day.  June cattle led the live cattle market lower, losing 1.250 to 132.650.  Feeders saw triple digit loses across the board with May dropping 1.600 to 156.300.  For the week, June live cattle lost 5.775 and May feeders were 7.525 lower.

Strong selling pressure was across the livestock complex, led by the hog market on Friday.  June cattle posted its lowest close since March 4, and trade within one tick of the 132.475 April low.  The market is technically hanging on by a thread and could be susceptible to more pressure next week, as the market is looking for a near-term low. The expiration of the April contract may have helped weigh on the cattle complex, and June may look like a value compared to the cash market and the final trades in the April contract.  Cash trade was completed for the week, with the early activity this week. Throughout the week, southern live cattle have traded for $140 and northern dressed cattle have sold for $232. Some regional buyers in the North stepped up cash and dress bids reflecting a stronger market.  The trend in cash markets will be a key for price stability next week. Boxed beef prices were softer at midday (Choice 261.49 -1.11, Select 248.98 -2.08), trending lower into the end of the week.  Movement was light at 82 loads. The demand concerns for beef are weighing on the market as the consumer may be looking for alternate protein source, given high retail prices.  This is a trend that will be in focus.  Feeder cattle futures had some optimism on Thursday and that faded quickly on Friday. Prices opened firm, but quickly broke to new lows on the week. The feeder cash index gained .72 to 155.64. A corn market tone helped pressure the feeder market, as prices are searching for a bottom.  The trend is still lower, and that is being driven by technical selling, backed by demand concerns.  There is no sign of a low in place currently.  The cash market may be the best chance of building that low next week.

LEAN HOG HIGHLIGHTS: Hog futures saw strong selling pressure to end the week, and technical support levels broke, triggering another round of selling and long liquidation.  Demand concerns on the export front and the retail consumer are the fundamental concerns pressuring the market.  May hogs were 3.065 to 100.900 and June closed 4.600 lower to 106.375.  For the week, May hogs dropped 10.950, and June dropped 12.400 or just over 10% this week.

June hog futures broke through the 100-day moving average at $109.700 and that triggered more technical selling, as price pushed the 4.750 limit down during the session.  Despite a little price recovery, June still looks pressured, and may be headed for a small price gap on the chart for Jan 19 at 101.950. The premium that has been on the front end of the market to the cash market has evaporated.   The lean hog cash index was .53 lower to 101.81 on Friday.  For the week, the Lean Hog Index traded .56 higher.  With the trade today, May hogs are at a .910 discount to the index, but June is still 4.565 higher.  Midday Direct Trade was not compared to yesterday’s confidential trade, but the weighted average price was 99.58 and the five-day average settled to 97.69, trending lower on the week. Pork retail values were .17 lower at midday to 104.32. Product movement was moderated at 211 loads.  Hog retail values trended lower on the week, with midday trade down approximately 1.40 from Monday’s close.  Lean hog charts look defensive, and the trend is still lower as the market searches for a bottom.  The hog market is moving into oversold territory, but the path of least resistance at this point still looks to be searching for a low.

DAIRY HIGHLIGHTS: Class III futures were two-sided today with the calendar year average falling a penny to $23.21, down 15 cents on the week but up 17 cents for the month. The second month May contract closed a dime lower this week as it shifts to the front month, finishing April down 2 cents overall. While the short-term trend has turned down over the last couple weeks, this month brought a new all-time high for the second month chart and plenty of good hedging opportunities for milk producers. Spot cheese fell 2.6250 cents this week with a close at $2.3550/lb and is still hanging near its recent high. The possible seasonal pressure for milk, the higher trend in the dollar, and the ebbing of global dairy product prices may leave the market on the defensive entering the new month.

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

Bryan Doherty

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