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MARKET SUMMARY 5-26-2022
With grain markets struggling this week, the soybean market has held its ground, and on Thursday, saw strong buying support. Soybean futures surged higher on Thursday as Jul soybeans gained 45-1/2 cents and Nov soybeans added 32 cents, with both futures posting new contract high closes with the move. The strong bull spread tone in the market indicates favorable demand news as processers in the U.S. have been firming bids looking for cash soybeans. In addition, weekly export sales saw another good week with a mixture of old and new crop sales. Even though China canceled 4 million bushels of old crop soybeans, the export report saw a good variety of non-traditional buyers, reflecting the concerns on soybean supplies. Rumors have been in the market that China has been looking for more old crop supplies in the August time window, but nothing recently has been reported on daily export announcements. Beyond old crop supplies, the market is watching the weather and planting pace for soybeans in the northern Plains. North Dakota and Minnesota are well behind pace, and long-range forecasts are calling for additional precipitation in the next week, which could really tighten the planting window. While the wheat and corn markets have struggled this week, it is apparent that money flow wants to support the soybean market, given the global supply/demand outlook.
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CORN HIGHLIGHTS: Corn futures closed lower today following disappointing export sales and talk of Russia allowing food exports to leave Ukraine. Between this and the Brazil/China news from yesterday, Jul corn lost 7-1/4 cent, closing at 7.65, and Dec lost 4-1/2 cents at 7.18-3/4.
Corn faced pressure today following the news from Russia’s Defense Ministry that said sea corridors of safe passage will be opened for exports of food to leave Ukraine. No U.S. sanctions have been eased, but Ukrainians are reportedly wary as Russia continues its attacks. The other bearish news has been the agreement for Brazil to export corn to China, but the exports require an agreement about genetically modified grains before effectively beginning. China is rumored to have already made advance purchases of Brazilian corn for shipment in September. Export sales were disappointing today at just 151,600 mt of old crop corn and 58,300 mt of new crop, down significantly from the previous week. Ethanol margins have remained rangebound which hasn’t been supportive either. Second crop corn in Brazil is nearly finished with drought continuing, meanwhile, U.S. weather has moisture forecast for most of the Corn Belt with warmer weather into the weekend.
SOYBEAN HIGHLIGHTS: Soybean futures closed much higher today following crude as demand for soybean oil intensifies. Both soybean meal and oil closed higher with crush premiums continuing to strengthen. Jul soybeans gained 45-1/2 cents, closing at 17.26-1/2, and Nov gained 32 cents at 15.44-3/4. Both old and new crop contracts closed at new contract high prices underscoring tight supplies and planting delay concerns. Strong gains in crude oil were also viewed as the source for sharp gains in soybean oil. Indonesia is sending signals that a re-evaluation of exports may be necessary, implying tight supplies.
Despite China announcing that its economy is slowing, soybeans rocketed higher today. With COVID lockdowns probably reducing their demand for soybean oil and possibly reducing soybean imports (at least some in the near-term) one might think this would weigh on the market. The opposite happened though. This analysis can get tricky, yet if the bigger picture stays mostly as is, then higher crude oil prices, tight world vegetable oil supplies, and expectations for lockdowns to be limited, overall demand should remain firm. Talk continues to circulate that Brazil exports will be diminished by late summer and the need to supply China is keeping expectations for strong front-loading of sales on the mind of traders. Perhaps just as important, the corn planting pace at 72% as of Sunday was ahead of expectations prior to the report suggesting a large-scale switchover to soybean acres is not likely. Wet weather in the forecast for the northern Plains and northern Midwest is and will delay soybean planting.
WHEAT HIGHLIGHTS: Wheat futures slipped again today as talk of some Ukraine grain shipments pressured the market, and export sales data was disappointing. Jul Chi lost 5 cents, closing at 11.43-1/4, and Dec down 4-3/4 at 11.58-3/4. Jul KC lost 4-3/4 cents, closing at 12.28-1/2, and Dec down 3-3/4 at 12.40-1/2.
In a similar pattern as yesterday, Chi and KC wheat posted modest losses but were well off of session lows. It is noted that both of those classes had gains in the Jul ’23 contract forward. MPLS futures did manage to gain roughly 10-12 cents today and Paris milling wheat futures gained 5 euros per metric ton (each) in Sep through Mar. Today’s export sales data was a mixed bag with the USDA reporting net cancellations of 845,000 bushels for 21/22 but an increase of 9.0 mb for 22/23. Ultimately wheat appears to remain well supported, but recent weakness could be linked to talk that Russia will allow Ukraine to ship some grain. As we mentioned yesterday though, this is unlikely to happen as Russia would require sanctions against them to be removed. In other news, the US ag attaché in India has lowered their wheat crop estimate to 99 mmt, which compares to the USDA at 108.50 mmt. India struggled with a recent heatwave, which may ultimately turn them from a net exporter to a net importer. U.S. weather is still a major talking point with overall drought in the southern Plains and delays to spring wheat planting in the northern Plains because of wet, cold weather.
CATTLE HIGHLIGHTS: Live cattle futures finished mixed in a quiet trading session with support in the market in the front-month contracts. Feeders were strongly lower on technical selling after Wednesday’s weak price action, influenced by the expiration of May feeders on Thursday. Jun cattle finished 0.100 higher to 132.400 and Aug live cattle were 0.075 higher to 132.600. In feeders, Aug feeders lost 1.275 to 166.675.
Jun cattle futures traded in a narrow trading range. Jun prices dropped into a trading range with the 20-day moving average on top and the 10-day moving average on the bottom, holding that level in Thursday’s trade. Jun future posted a bearish reversal on Wednesday, but prices consolidated at the bottom of yesterday’s range on Thursday. Cash trade was light on Thursday with the bulk of the action likely wrapped up for the week. Southern trade was mostly posted at $137, down $1 from last week’s totals and Northern trade hit $140, with regional reports of strong overall trade values. Retail beef prices had a softer close on Wednesday, but were firm at midday Thursday, with Choice gaining 1.21 to 264.14 and Select was 1.29 higher to 245.35. Load count was light but improved at 84 loads. Weekly USDA export sales reported Thursday morning saw new net sales of 20,000 MT last week with Japan, South Korea, and China the top buyers of U.S. beef last week. This total was down 14% from last week but up 3% over the 4-week average. Thursday’s estimated cattle slaughter is 124,000 head, down 1,000 head from last week, but up 3,000 from last year. Maybe more importantly, beef carcass weights are softening, with weight for the week ending May 14, steer weights down 7 pounds to 891 pounds, which is 3 pounds below last year. Lighter weights will help tighten the beef production totals. Feeders saw lower trade, influenced by the expiration of the May contract. The May feeder contract expired this afternoon with a final trade of 154.575. Aug is the new lead month and the premium to the cash index is concerning. The Feeder Cash Index was 0.45 higher to 153.80, but trading at nearly a $13.00 discount to the August futures. The cattle market is a mix of information, with both supportive and negative factors. That is the reason for some of the choppiness in the cattle market. That choppiness will likely continue going into the 3-day holiday weekend.
LEAN HOG HIGHLIGHTS: Hog futures surged sharply higher with triple-digit gains, as a strong cash tone and retail demand continue to support the market. Jun hogs finished 2.050 higher to 111.100 and Aug hogs led the market higher gaining 3.875 to 111.825.
Jun hog futures had strong price action, trading outside yesterday’s range, but failed to push through the 100-day moving average over top the market. This was the third test of this barrier in the past four sessions. The strong close and the supportive fundamentals may lead to a push higher through this point on Friday. The midday cash market has trended higher but saw a softer tone at midday. Midday direct trade was 0.62 lower with the weighted average at 111.34 on Wednesday, and the 5-day average moved higher to 111.79. The CME Lean Hog Index is reflecting the higher cash tone and gained 0.84 to 103.87. On Thursday, estimated slaughter was at 475,000 head, up 2,000 from last week, but 8,000 head below the year-ago level. The market is closely watching the trend in hog slaughter numbers. Retail values trended higher at midday with carcass values 1.82 higher to 108.89. Movement was good at 123 loads. The CME Pork Cutout Index added 0.75 to 106.72 reflecting the recent strength. The USDA released weekly export sales on Thursday morning, and pork posted new sales of 36,700 MT in a strong week. This total was up 52% over last week and 39% above the 4-week average. Mexico, Canada, and China were the top buyers of U.S. pork last week. The rally is taking a pause but trying to push to another level, but the 100-day moving average is a strong barrier. Market fundamentals are staying favorable and may be enough to move prices higher for the next leg.
DAIRY HIGHLIGHTS: Class III action was mixed today with the second month June contract closing up a nickel at $24.25. What was surprising was the sturdiness of the market despite another drop in the block/barrel average, which fell 1.75 cents today for a weekly drop of 8.1250 cents. This brings the average to 2.2825/lb, down 13 cents from the fresh 2022 high posted last week. Class IV trade was equally hushed, but the second month chart did hit a new all-time high of $25.55, with the June contract closing up 8 cents. Spot butter was down just a half cent, while powder was bid 1.25 cents higher.
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Author
Bryan Doherty