MARKET SUMMARY 5-20-2022
Weekly soybean export sales have stayed strong for old crops soybeans. On Thursday’s USDA Export Sales report, the USDA reported new net sales of old crop soybeans at an increase of 27.7 million bushels (752,700 mt) of soybean export sales for the 2021-22 marketing year. With those sales totals, Soybean export commitments for the 2021-22 marketing year now total 2.175 bb, which is 35 mb above USDA’s export estimate. This factor is very supportive of soybean prices, as the strong demand tone has helped lift old crop soybean values this week. The key going forward will be shipments and getting these strong sales out. The export pace has stayed relatively strong as well, in a window where U.S. shipments tend to slow due to the competition from South American soybeans. Last week’s export shipments of 35.2 mb were above the 23.0 mb needed each week to achieve USDA’s export estimate of 2.140 bb in 2021-22. With the current numbers, it is likely the USDA will need to make further demand adjustments on upcoming Dupply/Demand reports.
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CORN HIGHLIGHTS: Corn futures closed lower for the fourth session in a row, with July losing 4-1/2 cents to close at 7.78-3/4 and December dropping 4 to end the session and week at 7.32. Compared to last Friday, July lost 2-1/2 cents and December lost 16-3/4. While there was not much of a change for the week, the slide in price from Monday’s positive close suggests the trade is running out of new supportive news. Yet, a drop in the dollar on the week, more delayed planting concerns, potential frost and continued dry weather in Brazil remain reasons for corn market to find support.
A potential concern for price we have is rebalancing of commodity funds by money managers. With the stock market losing significant ground over the last 30 days, (12% of more in the Dow Jones), there is a growing chance money managers will weigh commodities versus stocks in their portfolio and find they are overweight to commodities. This could mean liquidation, a potential reason for prices in commodities to be under pressure this week. Dry weather in the southern half of Europe and in key areas of China are noted and a potential concern, yet it may be a few weeks too early to call it a concern. Rain next week for the southern Plains states is forecasted next week and could help alleviate drought conditions.
SOYBEAN HIGHLIGHTS: Soybean futures closed higher again today, with strong fundamentals providing support despite lower corn, wheat, and the equity market. Both soybean meal and oil were higher today, and export sales have already surpassed USDA expectations. July soybeans gained 14-3/4 cents, closing at 17.05-1/4, and Nov gained 7-1/4 cents at 15.21-3/4.
Soybeans gained 58-3/4 cents on the week, which is impressive considering the hit that corn, wheat, and the stock market took. At the end of the day, soybean fundamentals were strong enough to keep soybeans propped up despite outside bearish influences. Soybean oil has continued it’s move higher, along with meal, and soybean crush premium was near 2.50, still incentivizing processors. The weekly export sales numbers were strong, and cumulative soybean sales have reached 102% of the USDA’s forecast for the 21/22 marketing year vs a 5-year average of 98%. The USDA reported 2.175 bb of soybean export sales for 21/22, already 35 mb more than expected. Yesterday, the Buenos Aries Grain Exchange said 67% of Argentina’s soybeans were harvested and the exchange expects 1.54 bb of production, similar to the USDA’s estimate, but still lower than normal. China is likely to remain an active buyer with soybeans on the Dalian exchange closing at the equivalent of $21.89 a bushel today.
WHEAT HIGHLIGHTS: Wheat futures continued a pattern of long liquidation today. There is not much to point to as to why; fundamentals are still supportive. One could argue that negative technical signals are the cause, however. July Chi lost 31-3/4 cents, closing at 11.68-3/4 and Dec down 30-3/4 at 11.79-1/4. July KC lost 42-1/2 cents, closing at 12.52-3/4 and Dec down 41 at 12.61.
It was another weak day in wheat, as selling pressure followed through in the face of underlying bullish fundamentals. This week, wheat had limit up moves, as well as moves sharply lower. With the DOW down over 1,100 points (in one day) this week too, majority of the commodity complex traded lower and wheat has not yet rebounded. Ultimately though, there is not much bearish news in the wheat market. The wrap up of the Wheat Quality Council HRW tour confirmed drought issues in the southern Plains; it looks like some areas will get rains early next week, but that may be too late to do much good. The northern Plains are not only wet, but some areas of North Dakota and Canada are getting snow and weekend temperatures could be into the 30’s. Spring wheat planting has already been delayed there and this will likely further the problem. Globally, there are concerns about the crops in India, Europe, and China as well (due to heat and dryness). Perhaps part of the reason that wheat traded lower this week is due to recent news that SovEcon increased their estimate of Russia’s wheat crop to 88.5 mmt (a record high).
CATTLE HIGHLIGHTS: Live cattle futures saw mixed trade to mostly lower trade to end the week, as early price gains faded, influenced by a turn lower in equity markets, and market positioning before Friday’s Cattle on Feed report. June cattle finished .075 higher to 131.575 and August live cattle were .475 lower to 131.550. Feeders stayed under pressure, with the August feeders slipping 1.2745 to163.925. For the week, June live cattle traded .500 lower, and August feeders fell 4.100.
June cattle futures consolidated at the bottom of this week’s trading range, as prices seemed to be in pause mode for the May Cattle on Feed report. This month’s report found total cattle on feed totaled 12.0 million head on May 1, 2022. The inventory was 2% above May 1, 2021, and slightly above analyst expectations. At 12 million head, this is the highest May 1 inventory since the report series began in 1996. The closely watch placement numbers were at 99% for last year, but above the 96.5% expected by analysts. Marketings last month were in line with expectations at 98%. The higher-than-expected total cattle and slightly heavier placement number still shows plenty of cattle available and that could weigh on prices to start next week. The cattle market is heavily oversold, and a lot of negative news could be priced in, as the market may be close to a seasonal low for the spring. Beyond the cattle numbers, the weak equity market keeps the pressure on the cattle market. Economic concerns and its potential impact on the consumer keep the sellers in the market in general. The trend in those markets may have more additional impact on cattle prices next week, as the market worries about consumer demand. In fundamentals for the day, midday retail beef prices were mixed with choice gaining 1.08 to 262.78 and select was 1.03 lower to 245.03. Load count was light at 58 midday loads. Choice carcass values did trend slightly higher on the week overall. Cash trade was done for the week. This trade saw southern deals were being established at $138, down $2 from last week’s levels. Northern dress trade was at $226-$227, $2-3 lower than last week. Cash trade will be closely watched next week for direction. Feeders saw modest losses, as selling pressure maintained. The premium of front month contracts to the Feeder Cash Index is still concerning, with August trading at nearly a $10 premium to the index. Feeder Cash Index was 1.59 lower to 153.46. The cattle market still looks concerning for further downside pressure. Friday’s cattle on feed report initially shows that cattle supplies are still heavy and will likely weigh on prices. The cattle market is oversold, and most negative news may be priced in. Both cattle markets are looking toward to a seasonal low and will need some news to change the direction of the money flow.
LEAN HOG HIGHLIGHTS: Hog futures finished higher to end the week, as a stronger cash market tone and short covering pushed the hog market to strong triple digit gains. June hogs finished 3.575 higher to 108.875, August hogs rallied 2.025 to 109.000. For the week, June hogs gained 8.125 and August added 7.800
June hogs posted an outside trading day with strong price action, as the contract trade higher for the 5th time in 6 days. Prices pushed through keys short -term moving averages, may have the hog market looking to recover back to a possible test of the 100-day moving average at $110.00. Friday’s close in June was the highest close since April 29. The strength in the hog market has been tied to the improved direct cash hog trade this week. Midday cash market was higher again in morning trade, gaining 2.02 to 112.25 and a 5-day average at 108.26. CME Lean Hog Index started to reflect the higher trend at the end of the week, gaining .29 on Friday to 100.37, but was still .67 softer overall on the week. Weekly hog slaughter is estimated at 2.356 million head this week, approximately 30,000 over last week, but slightly under last year. Hog weights have begun to soften, tightening pork supply. In addition, retail values have trended higher this week on good product movement, helping support prices. Midday carcass values pushed 5.18 higher to 108.64. Movement was good at 160 loads. The CME Pork Cutout Index worked higher and reflecting the recent strength. On Friday, the index gained .90 to 102.26 and was up .85 on the week. The hog market is seeing some buying strength, being supported by a firmer retail market this week, and strengthening direct cash tone. Price strength was reflected across the entire hog complex again today, and the market is looking like it has turned the corner higher. The question is now, how high can this market climb on this recovery.
DAIRY HIGHLIGHTS: Class III milk futures were supported this week by steady cheese demand that pushed cheese to a new high of year. On Wednesday of this week, the US block/barrel average cheese price closed up at $2.4125/lb, its highest close since November 2020. The surge in demand and the recovery from the recent sell-off brought buyers back into class III milk futures and took the market back up to the $25 per cwt level. Contracts failed to make new highs, but were within striking distance. Late in the week, the barrel cheese market fell 5c lower on Thursday and 5.25c lower on Friday, so the rally subsided a bit. Class IV milk was supported by a rise in US butter this week, adding 14.50c for the week. A bullish milk production report on Wednesday also added fuel to the fire.
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Author
Bryan Doherty