TFM Daily Market Summary 07-19-2022


The higher price of grains has impacted the livestock production, and the hog sector is no exception.  Even with strong pork hog prices, hog producers are being challenged by the explosion higher in input costs.  Feed costs have jumped 20% year over year and are nearly 80% higher from two years ago.  The difficulty to meet margins has kept pork producers trimming production to balance the costs.  The latest quarterly Hogs and Pigs reports has reflected this trend, as production and total hogs are running under last year’s level and at multi-year lows.  The potential expansion in the hog industry in the United States has been extremely limited due to those factors.  The tighter hog numbers will still be supportive of price, and the trend of higher input costs will likely have longer-term impacts in hog numbers well into 2023.


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CORN HIGHLIGHTS: Corn futures were under pressure over-night and stayed that way throughout the session, losing 15-1/2 in September to close at 5.96-3/4. December also lost 15-1/2 to end the day at 5.95-3/4. Traders noted a potential change in the weather forecast calling for additional showers this weekend. Most weather models, however, continue to indicate above normal temperatures and below normal precipitation, which implies challenges for the crop. Yet timely rains are what matter most. The USDA 177-yield estimate is the number most analysts are continuing to use.

With the corn crop behind schedule, as was evident on last night’s Crop Progress report indicating silking trailing the five-year average by 11%, there is still plenty of time for the market to experience weather that could hinder yield potential. Yet, there is a growing reality that if another band of swath of rain moves across the same general regions it did this past week, a good crop is in sight. Iowa had 81% of its crop rated good to excellent. 64% of the nation’s crop is also rated good to excellent, the same as the previous two weeks. In other words, the crop has stabilized. The US dollar was weaker today and the equity markets sharply higher, yet none of this seemed to have much impact on row crop prices, which continue to struggle. So to summarize today, higher energy, a lower dollar, and sharp gains in equity didn’t provide support.

SOYBEAN HIGHLIGHTS: Soybean futures closed lower, but regained some ground from the lows of the day as crude oil reversed to go higher later in the day. Aug soybeans lost 20 cents to end the session at 14.77-1/4 and Nov lost 22 cents at 13.58-1/4.

Soybeans traded lower today, but ultimately closed 20 cents above their low of the day as crude oil reversed and gained for the day, giving soybeans some support. Crop ratings were released yesterday, and soybeans received a 61% good-to-excellent rating, down 1% from last week, with 48% of the crop blooming, down from the 5-year average of 55% for this time of year. Weather forecasts are showing hot and dry conditions forecast into the first half of August, the most critical month for soybeans. The overall picture seems bullish, but the thing weighing this market down are the Chinese purchases of beans from Brazil rather than the US. China has been cancelling old crop purchases in favor of the cheaper Brazilian beans, and the concern is that they will continue this trend for new crop beans. As a result, funds have continued liquidating their bean positions dragging prices lower. Soybean oil was down hard today as well as the previous concerns over food oil shortages are less of an issue as palm oil production increases. November soybeans have some support at the 13.40 level but are struggling to get back above their 200-day moving average at 13.80. The market will need to find some confidence from strong Chinese imports, or a weather scenario that puts the crop in jeopardy.

WHEAT HIGHLIGHTS: Wheat futures were a bit of a rollercoaster ride today, with swings on both sides of steady, but a lower end to the session. Ongoing talks to open up Ukraine grain exports still seem unlikely, but are viewed as negative. Sep Chi lost 1/2 cent, closing at 8.12-1/4 and Dec down 1-1/2 at 8.28. Sep KC lost 4-3/4 cents, closing at 8.69-1/4 and Dec down 5-1/4 at 8.76-3/4.

Closing with small losses in the wheat market today looks like a poor result on the surface after trading both sides of neutral throughout the day. However, considering that Chi closed about 20 cents off of daily lows, the picture could be viewed as a little more friendly. According to yesterday’s Crop Progress report, winter wheat is now 70% harvested, keeping in line with the five year average of 71%. Spring wheat condition was also raised 1% from last week to 71% good to excellent. Only 68% of that crop is headed though, vs an average of 90%. The US Dollar Index fading from the recent high is also easing the pressure on wheat. Bearish are the continued talks between Russia and Ukraine to try to get export corridors opened up. Reportedly, in June, Ukraine exported a total of 1.4 mmt of grain, but 1.1 mmt of that was corn. In other global news, dryness in Argentina is a concern as drought conditions worsen there. There could be some showers mid next week, but overall they will go into August with below normal rainfall. Their wheat crop quality and yield are being lowered because of this dry weather.

CATTLE HIGHLIGHTS: Cattle markets were stronger on Tuesday, as strong retail values build buying support under live cattle and grain market weakness allowed feeders to surge higher.  Aug live cattle closed 0.100 higher to 135.725, and Oct gained .500 to 141.100. Aug feeders gained 2.075 to 178.750.

Cattle market continues to show its strength supported by good money flow, but live cattle prices are still struggling to break out through the top of the most recent trading range.  The 100-day moving average stays as a barrier over the top of the futures market.   Cash trade is still developing this week.  Some light trade has been reported in parts of Texas with live deals marked at $136, roughly $0.50 lower than last week. Northern trade is still inactive on the week. Beef cutouts at midday are significantly higher with choice at 272.98, gaining +2.43 and select at 244.93, adding +2.27 with light to moderate box movement at 54 loads.  Choice carcass values at $270+ are strong for this time of year, keeping buying support under the cattle market overall. Feeder cattle gapped higher on the open, fueled by selling pressure in the grain markets.  Feeder markets look supported, tied to weaker grain trade overall.  August feeders are trading a premium to the Feeder Cash Index, which was .05 higher to 172.67, and could limit the front-end feeders.  Fundamentals and money flow has been supportive of cattle markets.  Feeders completed the technical breakout on Tuesday and are poised to challenge the most recent highs.  Live cattle are still range bound and may need the cash market to provide the direction to go higher.

LEAN HOG HIGHLIGHTS: Lean Hog futures closed mixed with strength in the front of the market as the cash market remains strong.   Aug gained .700 to 112.825 and Oct gained .125 to 94.500.

The strong cash market tone and premium of the index to the August contract helps support the front month, but hog futures are still range bound with the 100-day moving average limiting the upside of the deferred contracts.  Cash markets were strong on Tuesday, with morning drect trade gaining 4.90 to 117.49 and a 5-day rolling average of 116.63.  The Lean Hog Index is trending higher reflecting the cash market tone.  The index gained .74 to 114.89 on Tuesday and is trading at a 2.065 premium to the futures market, supporting the August contract.  The spread between august and October hogs is wide at 18.275, which should help pull the Oct futures higher, given the cash market.  Pork retail values were firm at midday, gaining 3.76 to 125.22.  Movement was moderate at 143 loads.  The retail values have been trending higher, helping keep the packers active in the cash market.  Daily slaughter was estimated at 460,000 head on Tuesday, up 9,000 from last week, but down 8,000 from last year.  The forecast for hot weather across the corn belt will stay supportive the hog markets as weight gain may be limited, and cash market will need to bid more aggressive to ensure hog movement.  The hog market is looking to make a move higher if prices can break resistance.  The fundamentals in the cash and retail market are supportive.

DAIRY HIGHLIGHTS: The Global Dairy Trade was updated today and for the third straight report GDT was down. Today’s trade was down 5%, following July 5 down 4.1%, and June 21 down 1.3%.  The details of the auction are butter down 2.1%, cheese down 2%, skim milk powder down 8.6%, and whole milk powder down 5.1%.

August Class III futures closed higher for the second day in a row after 6 straight sessions in the red, finishing the day up 17 cents per CWT at $20.44. Spot cheese block/barrel today saw no loads traded and remained at $1.9925/lb. Spot whey traded down 0.0025 to finish at $0.4625/lb.

August Class IV futures were down a dime per CWT to settle at 24.56, likely pressured lower due to powder being down big in the GDT. Spot butter is up still this week but closed 0.025 lower to $2.94/lb. The spot powder trade was down 0.45 to finish at $16.45/lb.

We will be keeping a close eye on the Dairy Product Sales report tomorrow, Milk Production report Thursday, and Cold Storage report on Friday.

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.


Brandon Doherty

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