MARKET SUMMARY 1-3-2022
Total beef production in 2021 was a record for the year. Total beef production, with a December estimate, should exceed any previous years and be a record at an estimated 27.9 billon pounds. This is approximately 763 million pounds or 2.8% over the previous record set in 2020. A combination of factors has aided that large annual production. The liquidation of cow herds for both beef and dairy added pounds to the supply pile. In addition, cattle weight for market animals stayed relatively high on a year over year basis, keeping production high despite a slightly tighter cattle supply picture. Going into 2022, the production is forecasted to remain strong, but that production will be offset by a strong demand tone domestically and in the export market. Export totals for 2021 are expected to set new records, as the demand for U.S. beef overseas continues to grow. The balance between production, demand and cattle supplies will be a key balance affecting prices in 2022.
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CORN HIGHLIGHTS: Corn futures started overnight firmer on continued concerns of dry weather in South America. Yet, prices struggled by mid-morning as traders were likely quick to exit when buying dried up. March futures lost 4 cents, closing at 5.89-1/4. December gained 1-1/2, closing at 5.47-1/2 as bear spreading was noted between old and new crop. Respect for last week’s bearish key reversal and slow export inspections pressured prices today. Today’s inspections at 23.5 mb was a disappointment with total inspections at 508 mb so far this year. Expectations are for 2.5 bb of sales for the marketing year. Farmer selling likely increases at the end of last week.
Weather forecasts are split with one model suggesting increased chances of rain over the next week for drier regions of southern Brazil and northern Argentina and another model suggesting a continuation of light rain with warmer than normal temperatures. Today, corn seemed to buy the concern early then shrug it off late in the week. The 40-day moving average held as support just as it did on the last drop in November. So, was today a buy opportunity? Perhaps, yet we will stay with a balance. Last week’s recommendation sold cash and purchased calls. We’ll see what the middle of the week brings before getting aggressive one way or the other. If behind on sales, you can consider using puts if you don’t want to be short futures or make cash sales.
SOYBEAN HIGHLIGHTS: Unlike the corn market, soybean futures rallied on the overnight and held their gains as weather concerns for South American production are the driving variable for price. March soybeans gained 16-1/4, closing at 13.55-1/2, and November added 14-1/2 to end the session at 12.83-3/4, its highest close since June 11. Private forecasters are beginning to reduce crop expectations from both Brazil and Argentina.
StoneX reduced Brazilian production by 11 mmt. While it is possible a record crop may still be at hand, a growing reality of struggling crops is keeping the recent recovery for soybean prices alive. Soymeal was again a big winner today, gaining 10.00 to 12.00 per ton and reaching new contract high prices. Despite higher energy markets soy oil finished with small losses giving back gains for earlier in the day. Strength in November new crop is impressive considering soybean acreage could be on the rise. The rally in November could be more reflective of expectations for tighter supplies deep into the summer until the US crop is viewed as on its way to a good harvest. In other words, adding weather premium as world supplies tighten.
WHEAT HIGHLIGHTS: Wheat futures slipped again today. A firmer US dollar, weak export inspections, and downward technical momentum caused prices to decline. March Chi lost 12-3/4 cents, closing at 7.58 and July down 9-1/2 at 7.55. March KC lost 10 cents, closing at 7.91-1/2 and July down 8-3/4 at 7.89.
Export inspections on today’s report totaled only 5.2 mb, with total inspections at 444 mb. This is down 20% from last year. Though it was lower on Friday, the US dollar index is back above 96 today, adding to the pressure in wheat. The upcoming USDA report on January 12 will give us the first look at winter wheat acres – current expectations are for higher acres than last year. Adding to today’s bearish tone is the fact that the Buenos Aires Grain Exchange suggested that Argentina’s crop may be larger than their last estimate of 21.5 mmt. (The USDA estimate is still at 20 mmt for comparison). Some analysts are also pegging the Australian crop to be record large, despite the concerns over quality and disease caused by heavy rains. US futures were not the only market under pressure today – Paris milling futures had their third consecutive lower close. There are a few bullish news items worth noting, however. First is Iraq’s tender for 500,000 mt which could include HRW wheat sourced from the US. Additionally, the Russian export tax has been increased yet again, to $98.20 per metric ton. Finally, the US forecast for the southern plains remains dry for at least the next two weeks.
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Author
Bryan Doherty