MARKET SUMMARY 7-20-2022
The weakness in the soybean oil market has had spillover effects on the price action in the soybean futures. For most of the late winter into spring, the soybean oil markets aggressively traded to new all-time high prices as the concerns about the lack of edible oils available to the global market, and the possibility of a strong bio-diesel market supported the market. Since posting those highs in April and retesting that area in June, soybean oil prices have dropped over $20.00/pounds. The biggest reason has been the improvement of edible oil supplies, led by the recent harvest of palm oil globally. Due to high inventories of fresh supplies, Indonesia has scrapped its export levy for all palm oil products until Aug 31 in order to promote exports. This surge in exports has pressure the soyoil prices, and with the weak price action on Wednesday’s trade, opening the door for a retest of the recent lows. The strong selling pressure in the oil markets has kept the buyers on the sidelines in the soybean market overall.
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CORN HIGHLIGHTS: Corn futures traded weaker again today due to increased chances of rain on the 6-to-10-day forecast. Losses in the soybeans and soybean oil contracts as, well as crude oil, weighed on corn futures. It is likely funds are continuing to shed long positions as the market may not be as concerned today as it was early last week about weather. September corn gave up 4-1/2 cents to close at 5.92-1/4. December futures lost 5-1/4 cents to close at 5.90, its lowest close since July 12.
A general malaise continues to engulf the row crops. Rallies are shallow and short lived. Crop conditions are indicating a good crop and lockdowns in China continue to jeopardize long-term demand prospects. The 200-day moving average held prices in check this week. The market is not considered over-sold, yet with futures holding under the 200-day moving average, there clearly is a lack of bullish momentum. On the contrary, bearish traders are feeding a negative technical picture, along with crop conditions, basically indicates two thirds of the crop is in good or excellent shape. In other words, no new supportive fundamentals to support a rally today, other than if rain development is disappointing.
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 managed small price increases today as early strength faded throughout the day. Ukraine remains a concern, as does heat and dryness in Europe and Argentina. Sep Chi gained 7-1/4 cents, closing at 8.19-1/2 and Dec up 7-1/4 at 8.35-1/4. Sep KC gained 1-1/4 cents, closing at 8.70-1/2 and Dec up 1 at 8.77-3/4.
Wheat closed well off of daily highs, but still in positive territory. The exceptions are MPLS futures, which lost five to seven cents in the front months. Pressure from a higher US dollar today likely acted as a wet blanket over the wheat market. Spillover pressure from corn and soybeans did not help either. The influence of outside markets cannot be ignored with talk that Europe is relaxing sanctions on Russian banks in hopes that they would reopen the Nord Stream Pipeline. In Russia, domestic wheat prices are record high, but the farmer is not selling. The talks of opening up Ukraine export corridors are still on the table, and reportedly the Turkish president wants a deal in writing this week. This still seems unlikely as images are surfacing online of Ukrainian wheat fields on fire. Other global impacts include dryness in Argentina, and China talking that they might have a near record wheat crop (despite being too wet in some areas and drought in the north).
CATTLE HIGHLIGHTS: Cattle markets saw mixed trade in the live cattle futures, but momentum left the feeder cattle market on Wednesday. Aug live cattle closed 0.025 higher to 135.750, and Oct gained .225 to 141.325. Aug feeders lost .925 to 177.825.
Live cattle futures stay in their range bound trade, afraid to make the push through the top of the range. The live cattle market seems tied to the 100 and 200-day moving averages. Cash trade is still developing this week and saw additional light movement on Wednesday. Nebraska saw dressed trade at $227, down $2 from last week. More trade will likely build into the end of the day Wednesday and Thursday, but the trend is looking steady to slightly lower. Wednesday’s estimated slaughter totaled 124,000 head, 2,000 below last week, but 6,000 more than a year ago, but weights are still lighter than last year, helping support prices. Beef cutouts at midday were lower after yesterday’s overall strength with choice at 271.23, slipping 1.34 and select at 243.30, losing .43 with light to moderate box movement at 69 loads. Choice carcass values at $270+ are strong for this time of year, keeping buying support under the cattle market overall. Feeder cattle seemed to lose momentum on Wednesday, despite weakness in the corn market. Poor price actions in the feeder futures will leave the door open to further selling pressure on Thursday. August feeders are trading a premium to the Feeder Cash Index, which was .17 lower to 172.50, and that helped limit the front-end feeders. Friday will bring the next USDA Cattle on Feed report, and that could make the market choppy going into the end of the week. Overall, fundamentals and money flow has been supportive of cattle markets. The loss of momentum in the feeder market leaves it susceptible to further selling pressure into the end of the week.
LEAN HOG HIGHLIGHTS: Lean hog futures closed strongly higher as the futures market tries to keep pace with the cash and retail markets. Aug gained 2.050 to 114.875 and Oct gained 1.525 to 96.025.
The strong cash market tone and premium of the index to the August contract keeps the buying in the front month as prices gapped higher to start the session. October futures used the strength to clear the 100-day moving average, which has been a lid on prices for the past two months. The strong price action will keep the buyers active in the market on Thursday. Retail values and demand are overall strong, as retail pork values are at their highest prices since last August. Pork retail values were softer at midday on Thursday, losing 3.34 to 121.78. Movement was moderate at 139 loads. Cash markets were strong on Wednesday, with morning direct trade jumping higher, gaining 8.03 to 120.50 and a 5-day rolling average of 120.83. The Lean Hog Index is trending higher, reflecting the cash market tone. The index gained 1.02 to 115.91 and is trading at a 1.035 premium to the futures market, supporting the August contract. The spread between August and October hogs is wide at 18.875, which should help pull the Oct futures higher, given the cash market. Daily slaughter was estimated at 459,000 head on Wednesday, up 5,000 from last week, but down11,000 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 fundamentals in the cash and retail market are strong and keeping the buying strength in the hog market. With the price move today, the technical picture looks supportive, as well as the momentum works higher.
DAIRY HIGHLIGHTS: Class III and IV milk futures traded slightly higher on light volume on Wednesday ahead of tomorrow’s Milk Production report. The market will watch to see if, once again, milk production in the US will be down on a year-over-year basis. So far this year, production declines have been as follows: -1.70% in January, -0.90% in February, -0.40% in March, -1.00% in April, and -0.70% in May. Another decline in June could be viewed as bullish and could rebound milk prices a bit. Heading into the report, market conditions lean very oversold. Second month Class III milk has rebounded three days in a row though, as August is back up to $20.69. It gained another 23c today and is already 75c off of last week’s low. The spot trade today saw cheese, powder, and whey all bid higher.
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Author
Amanda Brill