MARKET SUMMARY 07-29-2022
The soybean oil market has been a key piece to the price of soybeans the entire marketing year. This week, soybean oil prices surged higher as the Sep contract added 7.67/pound, helping push soybean futures to one of the largest weekly moves higher in years, and Sep soybeans added nearly 1.60/bushel this week. A strong drop in global edible oil prices and weakness in crude oil prices recently pushed soybean oil values to their lows for the year just a week ago. This past week, crude oil has found some footing, up 4.00+ in Sep futures, and supply concerns for edible oils help start the turn higher in soybean oil prices. The passage of the Inflation Reduction Act of 2022 through the Senate helped accelerate the move higher, as the legislation provides even more support for renewable fuels, which soybean oil is a key ingredient. The soybean oil market is in the process of making a corrective recovery, and the strength in that market, as well as soybean meal, helped bring the buyers into the soybean complex this week.
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CORN HIGHLIGHTS: Corn futures rallied strongly by midsession trading 15 or more cents higher, however, they limped into the close. Sep finished 1-1/4 cents firmer ending the session at 6.16-1/4. Dec closed at 6.20, up 1 cent for the session and 16-1/2 cents from the day’s high. For the week, Sep gained 52 cents and Dec 55-3/4. Some calls for less heat and more rain by the end of the weekend may have pressured prices from their high at midsession as did traders likely reducing positions into the weekend. Sharply higher soybeans again provided support.
The corn crop is behind the five-year average silking pace (62% as of Monday versus the 5-year average of 70%) which suggests over the next three weeks rain is critical for crop production. Keep in mind the five-year average also includes 2019, a historically late crop. The implication is that the crop is a long way from being made. Bulls will argue that with 14% of the crop rated as poor or very poor along with the crop behind schedule would suggest a national average of 177 bpa is not likely. Bears will argue that little drawdown in yield is expected and a mid-day forecast, differing from the latest NOAA outlook, is offering rain late this weekend for parts of the Midwest. In addition, today a picture of President Zelensky of Ukraine standing at a port ready to ship grain may have provided a vote of confidence to the world that the grain is about to leave the war zone. How much and when for future ships is not known, but it is a positive advance for Ukrainian exports not seen since February.
SOYBEAN HIGHLIGHTS: Soybean futures closed higher today for the sixth session in a row as hot and dry forecasts continue through the next two weeks. Aug soybeans gained 27-3/4 cents to end the session at 16.37 and Nov was up 28 to 14.68-1/2. For the week, Aug gained 2.02-1/2, and Nov gained 1.52-1/4.
This was a big week for the entire soy complex as weather concerns dominated the trade. Aug soybean meal gained 63.8 for the week, and Aug soybean oil gained 8.28. Aug soybean oil closed 4.66 higher today, the leading percentage gainer of all the grain-related contracts. This was in part due to an extension of biodiesel tax credits in a bill that is expected to be proposed by Senate Democrats, as well as gains in palm oil. For weather, most of the Midwest will be dry for the next two weeks with hotter temperatures arriving in the western Plains this weekend until mid-August when chances for cooler temps and rain will increase. These next two weeks will be tough on the soybean crop and may impact yields, and the USDA’s 51.5 bpa estimate seems too high. With ending stocks already estimated at a low 230 mb, any reduction in yields could leave supplies dangerously tight. Private exporters reported today sales of 132,000 mt of beans for delivery to unknown destinations for 22/23, adding to the bullishness. Nov soybeans closed comfortably above their 50-day moving average and came just a penny short of closing above the 100-day. Sep soybean meal closed at resistance at the top of its Bollinger Band, and Sep bean oil closed right at its 40-day moving average.
WHEAT HIGHLIGHTS: Wheat futures set back today as news reports were released that one or more Ukrainian vessels were ready to leave port. Sep Chi lost 9-1/4 cents, closing at 8.07-3/4, and Dec down 9-1/2 at 8.25-3/4. Sep KC lost 15-1/4 cents, closing at 8.74-1/2, and Dec down 15 at 8.81-1/2.
Despite a strong start, wheat gave up its gains into the close. Profit-taking may have played a part, but likely the larger reason for the selloff are news outlets that reported that Ukraine’s President Zelensky visited one of the Odessa ports and made comments that grain shipments would soon begin. This all comes in the face of news that there were new Russian missile attacks Thursday north of Kyiv. Additionally, there are still concerns about the quality of the grain that has been sitting in the vessels, and getting these ships insured. Some vessel owners may not want to take on the risk of shipping even if they can get insurance. Likely adding to the bearish tone today was the wrap-up of the spring wheat tour which found one of the highest yields in the U.S. since 2015 at 49.1 bushels per acre. Fundamentally though, there is not much different today compared with yesterday on a big picture scale; global supplies remain tight and we expect the recovery to continue.
CATTLE HIGHLIGHTS: Live cattle futures found some price recovery to end the week, as prices fought off early session lows to finish higher on the day. The strength was supported by price recovery in the feeder market as grain prices softened off session highs. Aug live cattle closed 0.275 higher to 136.450, and Oct added 0.400 to 142.225. Aug feeders added 1.150 to 178.575. For the week, Aug live cattle were 0.925 lower and Oct dropped 0.775. Aug feeders fell 2.975 on the week as corn prices rallied.
Cattle futures continue to consolidate overall with the 100-day moving average supporting the market under the Oct futures. The positive price action saw nice rejection of the lows for the week, which could stay supportive into Monday. Cash trade has stayed disappointing overall this week, with light trade at $135 in the south, steady to $1 lower, and northern trade at $225, down $2 from last week. Trade was wrapped up for the week, and Aug futures at 4136.450 were fairly priced with this week’s trade. Midday carcass values were firmer to end the week, helping to support the market. Choice carcasses gained 2.00 to 269.77 and select was 1.71 to 242.52. The load count was light at 50 midday loads. Beef retail values have traded mostly steady this week overall, bouncing between $267 to $269 for choice carcasses. Feeder cattle stayed under pressure from the strong grain markets to start the day, but as corn prices softened, the buyers stepped back into the feeder market. Prices rallied off early session lows and a complete technical reversal to the upside on the close. The direction of the grain markets will be a big influence on feeder prices next week. The cattle market is concerned about the overall economic situation and its impact on the consumer. Cattle numbers are still looking to tighten in the near future, and that still should stay supportive of cattle prices.
LEAN HOG HIGHLIGHTS: Hog futures were higher to end the week as the strong cash market tone keeps the buying support in the lean hog market. Aug hogs gained 1.525 to 120.650, and Oct was 0.900 higher to 97.225. For the week, Aug hogs were 1.950 higher and Oct added 0.900.
For the second consecutive week, hog futures finished toward the top of the trading range for the week. This will stay supportive for the market going into next week’s trade on Monday. The strong cash market tone is the fuel in the market. Midday direct hogs on Friday were unreported due to confidentiality, but the 5-day rolling average trended higher to 124.33. The Lean Hog Cash Index still trends higher and added another 0.85 to 120.58, pulling the Aug contract higher. For the week, the index has added 3.54 and is trading at its highest point since May 2021. The market will be watching the actions of the cash market as the forecast for extreme heat will be impacting the Midwest and will likely limit hog movement and weight gains. The retail market is trading at its highest levels in a year. Prices have been firm on the week, but midday saw some light softness with pork carcasses down 0.22 to 128.57. The load count was moderate at 152 loads. Estimated hog slaughter for the week is 2.291 million head, slightly above last week, but down 20,000 head from last year. Year to date, hog slaughter is running 3.7% under last year’s numbers. The cash market has been supportive and strong overall, leading futures higher. The consumer demand is still there, supporting the hog market as well. Prices look to stay supportive as the packer is looking to secure tightening pork supplies.
DAIRY HIGHLIGHTS: Class III futures posted a positive weekly close with the August contract up 18 cents and September gaining 42, an impressive feat seeing Wednesday and Thursday’s losses totaled $1.00 and 91 cents, respectively. This leaves a tail on the charts for these contracts with a break off the early week high, but the oversold nature of the markets and the fact $20.00 held on the continuous second month chart is encouraging. Spot cheese had an equally wild week, gaining 3.6250 cents in Friday’s trade, but dropping 3.1250 cents on the week to $1.88375/lb, the lowest weekly close in 2022. Things were quieter for Class IV, which saw its August contract up 34 cents this week to close at $24.81, as that market tries to re-establish an upswing after a moderate selloff in recent weeks.
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