MARKET SUMMARY 06-14-2022
Soybean export data for Brazil in the month of May still shows a lackluster performance as compared to recent history. Estimates for May showed Brazil exports close to 11 MMT of soybeans, which is down 25-30% off the prior 2 years’ totals. In the big picture, looking at the start of the year (Jan-May) total soybean exports out of Brazil are near 43 MMT. This is also trending lighter than the prior two years, reflecting an approximate 7% decline in comparison. The impacts of weather and the smaller-than-anticipated soybean harvest in Brazil are major contributing factors to the decline. In addition, the weaker Chinese demand pace has also been a factor, as high prices and the impacts of COVID lockdowns in China have slowed their overall appetite for soybeans. Regardless, the softer shipping pace out of Brazil is providing an extended opportunity for U.S. exporters to add additional soybean shipments, helping tighten the U.S. supply picture for the end of the marketing year and into next year.
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CORN HIGHLIGHTS: Corn futures were in no hurry to go anywhere today despite a 6-10 day as well as an 8-14 day outlook that calls for above-normal temperatures and below-normal precipitation. Another round of losses in the equity complex, weaker wheat prices, and a firmer dollar combined to keep prices in check. Jul lost 1-0 cents to close at 768-1/4 and Dec gave up 0-1/4 cents to end the session at 7.21-1/4.
Crop ratings indicated 71% good to excellent versus 72% last week. Planting progress at 97% is the same as a year ago. As far as preventive plant acres it would only be a guess at this time, but we think somewhere between 500,000 to 1.5 million. Yet, it is likely that from the March 31 acreage report, farmers may have intended to plant additional corn acres. So, in the end, it is likely that corn acres probably remain close to unchanged from March at 89.5 and soybean acres the same as the March estimate at 91 million, adding just under 4 million from the previous year. Whatever the case is, the focus will remain first on U.S. weather, other Northern Hemisphere countries, Ukraine, and the condition of competing crops. Supplies are tight, but not yet considered a critical period therefore, at the current price offer for Dec new crop futures, near 7.20, make sure and get current with where you want to be this time of year with cash sales. Last year not making sales paid dividends, yet we’re not willing to go out on a limb and suggest this will be the case in 2022/2023.
SOYBEAN HIGHLIGHTS: Soybean futures closed lower after a day of choppy trade, pressured by another sell-off in the stock market as well as lower crude oil. A hot and dry forecast for the next 6-10 days didn’t provide any support. Jul soybeans lost 9 cents, closing at 16.98-1/2, and Nov lost 8-1/2 cents at 15.25-1/4.
The soy complex was positive earlier in the day, as crude oil moved higher but fell into the close as crude went lower later in the day. The 6-10 day forecast has much of the Corn Belt hot and dry, a bullish scenario for prices that provided no support today. The first national soybean condition score came in at 70% good-to-excellent vs 70% expected and 62% last year. Planting progress for soybeans was estimated at 88% complete vs 90% expected, and 88% on average. 70% of the soybean crop has emerged compared to 56% last week and 74% on average but is only 24% emerged in North Dakota. On Monday, China returned to some partial Covid lockdown restrictions which could lessen their demand for soybeans temporarily. Soy inspections last week were 22.2 mb and just shy of the weekly total needed to reach the USDA’s forecast but remain down over 11% vs last year. Tomorrow the May NOPA forecast will be out and could show the largest crush for May on record. Soybeans, meal, and oil have been trading mostly sideways over the past two weeks with buyers hesitant to come forward.
WHEAT HIGHLIGHTS: Wheat futures slipped significantly today due to harvest pressure, a high U.S. dollar, and pressure from lower corn and soybeans. Jul Chi lost 20-3/4 cents, closing at 10.50-1/4, and Dec down 19-1/4 at 10.81-1/4. Jul KC lost 19-1/2 cents, closing at 11.42-1/4, and Dec down 19-3/4 at 11.57-3/4.
The winter wheat harvest is reported to be 10% complete but conditions remain questionable. The crop was rated 31% good to excellent but 42% poor to very poor. Spring wheat was reported as 94% planted, with a rating of 54% good to excellent. Additionally, there are estimated to be 700,000 spring wheat acres in North Dakota and Minnesota that may not get planted. The U.S. dollar is also at 20-year highs, putting pressure on the wheat market. The lower stock market is of no help either, with the Dow closing over 800 points lower yesterday, and as of this writing, down another 160 or so points. Recession and inflation concerns are on the rise and the Fed is expected to again raise interest rates this week. Inflation is at the highest level in 40 years and this is not an issue that will go away any time soon. Lower trade in corn and soybeans was also unhelpful and may have provided some spillover pressure. Despite all of this, there is fundamental support longer-term due to tight supplies down the road. As an example, Argentina will limit wheat exports to 10 mmt this year vs the USDA’s estimate of 14 mmt.
CATTLE HIGHLIGHTS: Live cattle futures finished higher on Tuesday as the prospect of a firmer cash tone helped support the market overall. Jun cattle gained 1.200 to 135.200, and Aug cattle were 0.200 higher to 134.075. Feeders finished the day mixed, looking for direction as Aug feeders were 0.025 lower to 171.300.
Jun live cattle are running at a potential discount to the cash market, and that helped support prices on Tuesday. Overall, Jun cattle still traded within Monday’s trading range but closed at the base of the price gap established on Monday and the 200-day moving average. The 200-day has acted as a swing point for cattle prices. Cash trade was starting to develop late in the day on Tuesday, but not enough to establish a significant trend. Light Southern trade was triggered at 4136, steady with last week, but the market saw some regional trade at $139 in Kansas. More cash trade will likely build into the end of the day and on Wednesday. The retail demand will stay clearly in focus as carcass values were softer to start the week and at midday with Choice values down 0.04 to 270.50 and Select was 0.30 lower to 247.15. The load count was moderate at 66 loads. The cattle slaughter pace is still running strong with ample animals available. Estimated slaughter on Tuesday was 122,000 head, down slightly from last week, but steady with last year. Feeder cattle were mixed to mostly lower in a quiet trading session, consolidating within Monday’s trading range, looking for direction. Like most markets, the cattle market is watching the outside markets very closely and the actions of the Fed with interest rates on Wednesday afternoon. The outside markets may go a long way in the price action on cattle markets into the end of the week.
LEAN HOG HIGHLIGHTS: Hog futures closed lower today despite being positive earlier in the day. Cash was significantly higher while the cutout fell. Jun hogs went off the board today at 108.450, and Jul has taken over as the front month. Jul hogs lost 0.050 to 106.625, and Aug hogs lost 0.850 to 103.550.
Hogs were off to a good start this morning until cutout values came out 2.23 lower in this morning’s report, wiping out the gains from yesterday afternoon. The cash market saw strong interest as anticipated with midday prices up 5 dollars at 7,861 head purchased. Last week’s slaughter was very low, and the packer will likely need to continue to be aggressive with purchases this week in order to make up inventory. Monday’s slaughter is estimated at 473k head, 2k less than a week ago, and 1k less than a year ago. If the cutout later today ends higher, hog futures should be supported into Wednesday. Jun hogs went off the board today at 108.450, with Jul becoming the new front month. Yesterday, Jul bounced off the 200-day moving average and today the 21-day acted as resistance.
DAIRY HIGHLIGHTS: The July Class III milk contract fell for its fifth straight day today, closing at $24.25 and now a dollar off its high from last week. Spot cheese is working on a fourth week of lower trade in a row by falling 3.8750 cents today to $2.18/lb, whereas spot whey trade was unchanged at $0.5150/lb. The Class III complex was getting to a crossroads with higher milk futures battling with lower cheese trade in recent weeks, and so far the trade action has pointed to the likelihood that they join hands on a move downward rather than vice versa.
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Author
Brandon Doherty