TFM Daily Market Summary 06-23-2021

MARKET SUMMARY 6-23-2021

Hog futures have been experiencing a major correction as the Aug contract closed Wednesday afternoon nearly $20.00 off its high established on June 7. Demand concerns with softening retail prices, and sharply declining Chinese hog prices have helped trigger the sell-off. In addition, a court order that could slow slaughter capacity by 2.5%, and is set to trigger on July 1, has brought reasons of concern and profit-taking to the hog market. On Thursday, the USDA will be releasing the Quarterly Hogs and Pigs report, which provides a snapshot of the U.S. hog herd. Expectations for the report are, on average, the June 1 all hogs and pigs number is expected to be down 2.5% to 75.430 million head which would be the lowest for the period in three years. Analysts are all expecting the breeding herd to decline 1.4% to 6.237 million head. Hogs kept for marketing are expected to decrease 2.6% to 69.191 million head. The decreasing hog supply could be the key to finding a bottom in this sell-off, so the report tomorrow may be key for hog prices going into the later summer.

 

 

CORN HIGHLIGHTS: Corn futures were under pressure throughout the session after firming on the overnight trade. Growing confidence that rain events will occur in a large portion of the Midwest had traders taking a defensive posture. Jul futures was the only bright spot for corn as it finished the session 4-1/2 cents higher at 6.64-1/4. Dec lost 3-1/4 cents to close the day 5.35-3/4. Today’s low was 5.28-3/4 taking out last week’s low before rebounding to its closing price. This could be a sign that selling interest is slowing. New news of consequence was lacking today, and this too may have weighed on futures. The reality is that corn prices are well off their high but still at very good prices as compared to the last seven years. Therefore, things need to be put into perspective. On the one hand, acreage could go up and demand lower in the year ahead, and consequently growing carryout is a concern. In part, the market likely believes the acreage report on June 30 will probably show at least 93 million if not up to 95 or even 96 million acres. The question then boils down to how good is the crop. Rains that occur in June are always viewed as beneficial unless excessive as in June of 2019. The big concern is dry areas that do not get enough moisture, the western Corn Belt. If this production area is off by more than 10% this could slice into carryout creating a rationing effect. In other words, all of the uncertainty yet lies ahead. This week the market is taking some of that uncertainty away assuming plentiful rain for many.

SOYBEAN HIGHLIGHTS: Soybean futures ended weaker with Jul leading today’s drop closing 9-1/2 cents softer at 13.85 while Nov closed 2 weaker at 13.00-1/4. A wet forecast for much of the Midwest along with softening demand weighed on prices again today. The technical picture continues to look soft as well. Soybean meal was the big loser today losing 8.00 to 9.00 lower on most futures closing at its lowest level since late October. Jul soymeal’s last peak was on May 12 at 457.20. Today’s close at 354.20 represents a drop of 103 per ton or a decline of 22.6% in just over a month. Traders were, however, buying oil today which ended up 146 points in Jul closing firmer for the fourth session in a row. Despite an announced sale of 333,000 metric tons (12.234 mb) to China, the market still softened. The focus instead appears to be on a conducive weather forecast, the expectation for more acres on the June 30 report, and fund liquidation.

WHEAT HIGHLIGHTS:  Wheat prices traded higher today, seeing some recovery of late session weakness. The Jul Chi contract gained 10-1/4 cents at 6.61-1/4 and Dec was up 9-1/4 cents at 6.70-1/4. Jul KC wheat was 15-1/2 cents higher to 6.12 and Dec gained 9-1/2 cents to 6.30 3/4. Spring wheat was the strength of the market with the Jul contract up 21-3/4 to 8.04-3/4. The spring wheat prices are still the fuel under the wheat market overall, as crop quality concerns are not going away, and long-range forecasts are looking extremely unfavorable for any sort of true relief in that region. Long-range forecasts hold the below-normal precipitation and above-average temperature well into July. Winter wheat harvest is ongoing, but running behind expectations, keeping some bids in the market. Chicago wheat futures followed suit pushing higher and may have been the product of some spread trading of buying corn and selling corn. The wheat market is closely watching demand and weekly export sales numbers will be key and could help move the market.  Prices are consolidating at the recent lows and looking toward the USDA report next week to find some overall direction. The quarterly grain stock could be a reminder of the U.S. stocks picture.

Author

Bryan Doherty

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