MARKET SUMMARY 11-11-2022
Pork retail values are staying on a downward slide and staying in line with seasonal tendencies. As hog numbers and weight increase in the fall months, supported by fresh grain supplies, the seasonal tendency is for pork carcass values to decline as the market deals with comfortable supplies of pork. In 2022, the trend in retail carcass value is staying right on course with this typical path. On Thursday, pork carcass values closed at 96.54, catching some slight support on the day. With the yearly high near $128.00/cwt, the market has seen a steady downward slide. This has kept the cash market in check and limited any rally potential in the front end of the hog market. The end of November and early December is the typical end of this downward slide, as retailers are past the Thanksgiving Day holiday, and the retail focus moves back into pork for the Christmas holiday and into 2023.
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CORN HIGHLIGHTS: Corn futures recovered today following soybeans and wheat higher. Dec gained 4-3/4 cents closing at 6.58, making up about half of yesterday’s losses. For the week, Dec lost 23 cents and is testing nearby support. Dec 2023 closed 2 higher closing at 6.09-3/4 and finished the week giving up 15-3/4 compared to last Friday. A lack of new positive news, poor export sales, and a lot of suggestions that it will be announced the export corridor for Ukraine will be extended, kept a cap on today’s price recovery.
The bigger picture trend is bruised this week with prices closing lower Monday through Thursday. Was today nothing more than short position holders exiting for the weekend? Maybe. The western Corn Belt continues to experience tight basis. End users want the product and are willing to pay up for corn. Yet, basis is eroding elsewhere as concerns regarding shipping on riverways in the central and eastern regions of the upper Midwest remain problematic. With this week’s supply and demand report behind the market, there isn’t much new news for several weeks. The market will take its cue for price direction from farmer selling, outside news such as the war, and weather forecasts for South America. Yet, it is still early to put much stock in Southern Hemisphere weather affecting yield results. Technically this was a tough week for the market as it closed below the 200-day moving average for the first time since August. When prices break below a longer-term moving average it is reflective of slowing price momentum. Farmer selling is expected to remain light, however, cash strengthening basis could be the key to farmers securing better value. For now, the futures, while holding support, looks soft and vulnerable to further downside with an objective of 6.50 Dec. High shipping costs in the waterways may, in part, be helping to keep exports subdued.
SOYBEAN HIGHLIGHTS: Soybean futures took back nearly all of yesterday’s losses as meal and bean oil closed higher as well, while the dollar broke sharply lower. The lower dollar along with China now easing some of their Covid measures gave the soy complex the juice to move higher. Nov soybeans gained 25 cents to end the session at 14.55-1/2, and Jan gained 27 cents at 14.50. On the week, Jan lost 12-1/4 cents.
Yesterday’s break in the dollar didn’t help the grains out but it certainly did today with soybeans recovering all of yesterday’s losses apart from 2 cents. News has been back and forth regarding China and their either tightening or relaxing some of the Covid policies, but it now appears they will relax restrictions in an effort to help the economy. While this is encouraging, Chinese demand for soybeans remained stout even when they were under lockdowns, and they remain a top buyer of U.S. beans. Jan soybeans on the Dalian exchange closed today at the equivalent of $19.05 a bushel, near 4-month highs. Yesterday’s export sales report showed U.S. soybean commitments lower than a year ago, and shipments were down 11% from a year ago, but this recent decline in the U.S. dollar should incentivize other countries to rely more on relatively cheaper U.S. beans. It is not surprising that commitments were lower thanks to the traffic on the Mississippi River. Domestic demand remains the strong source of support for soybeans as crush margins continue to climb and, based off the Jan futures, the value of crushed beans exceeds the cost of soybeans by 3.68 a bushel as of today’s close. Brazilian production is estimated at 5.6 bb, but conditions are expected to turn drier, and Argentina has already been struggling with drought. Jan beans remain in an uptrend and closed back above their 200-day moving average today.
WHEAT HIGHLIGHTS: Wheat futures gained back some ground today on a lower U.S. dollar, and the potential for the Ukraine grain deal to be shut down. Dec Chi gained 10-1/4 cents, closing at 8.13-3/4 and Mar up 9-1/2 at 8.35-1/4. Dec KC gained 18-1/4 cents, closing at 9.43-1/2 and March up 17-1/2 at 9.39.
Wheat managed to turn things around today and finish the week on a positive note – though down for the week overall, the bleeding was stopped today. While there still has been no word as to whether the Black Sea export corridor will be extended, Russia and Ukraine were meeting in Geneva today to discuss the deal. The original agreement is still set to expire on November 19. There may not be a decision made today, but Putin could make an announcement on the deal around the time of the G20 summit (even though he is not attending). Here at home, the U.S. Dollar Index was sharply lower again today, which may have offered some support to wheat. As of this writing, it is down about 1.80 at 106.40. Also supportive is the fact that the Rosario Grain Exchange lowered their estimate of Argentina’s wheat crop to 11.8 mmt (vs the USDA still at 15.5 mmt). With supplies historically tight, the winter storm moving across the western U.S. Plains is not helping. Subfreezing temperatures in those areas (and as far south as the Texas panhandle) may harm winter wheat crops without snow cover.
CATTLE HIGHLIGHTS: Live cattle futures saw strong selling pressure as cash trade seemed complete for the week, leaving the market open to some technical selling pressure. Dec finished 1.550 lower to 151.525 and Feb cattle dropped 1.775 to 153.250. In feeders, Nov feeders gave back 1.675 to 176.950, and Jan feeders led the market lower losing 3.125 to 178.575. For the week, Dec cattle traded 0.125 lower, connected to the cash market, while Feb lost 1.125. Jan feeders fell 1.050 on the week, but well off the week’s highs.
The cash market was wrapped up, for the most part, this week with little business on Friday. Dec futures looked to stay tied to the cash market range. Southern trade at $150 and Northern $152 trade caught most business, staying mostly steady on the week. The fact that cash was flat likely helped bring some selling in the market to end the week. Cattle futures failed to find a bid despite a strong sell-off in the dollar index this week. Retail values were lower at midday, which added to the selling pressure. Choice carcasses lost 3.72 to 259.55 and select trade slipped 1.64 to 235.19 on light movement of 591 midday loads. Feeders finished sharply lower pressure by the live cattle market and strong grain markets. The Feeder Cattle Index traded 0.05 lower to 175.46. The cash index is currently at a discount to the Nov futures, which weighed on the front month contract with expiration next week on 11/17. Tough close to the week in the cattle market. Technical chart damage was done, which will likely lead to additional selling pressure to start next week.
LEAN HOG HIGHLIGHTS: Lean hog futures finished mixed with pressure staying in the front of the market, fueled by weak overall retail values pressuring the cash market. Dec hogs lost 0.525 closing at 84.350 and Feb was 0.425 lower to 88.400.
Dec hogs stay to be tied to the 200-day moving average, trading on both sides of this technical point since mid-October. Rallies are limited by the cash and retail market, but prices are staying range bound in the near term. The concern is for a potential break in either direction. Retail values found some support again at midday, as pork carcasses traded 1.46 higher to 96.82. The load count was 142 loads. The Pork Carcass Index has paused its lower trend, gaining 0.02 to 96.82. The Pork Cutout Index is on a similar path to last year as index values dropped, hitting a low in early December. The previous couple of days, with firmness in the retail market, may indicate that the seasonal bottom for retail values may be near. Direct cash trade on rebounded gaining 4.01. The direct trade averaged 88.21, and a 5-day rolling average of 85.83. The Lean Hog Index traded 0.50 lower to 88.96, losing the week’s drop of 3.38, reflecting the weaker cash tone. The cash index holds a 4.610 premium to the futures which failed to provide support for the front-month contract. The hog market is choppy, trying to find some direction from a weaker cash market, but a firming retail market this week.
DAIRY HIGHLIGHTS: Class IV futures rebounded from a sluggish start to finish the week, with two solid days of gains. Second month December contracts gained 16 cents on the week, while Q1 ’23 contracts were up 45 cents and Q2 contracts gained over 19 cents, settlements being $21.63, $20.88, and $20.79, respectively. Along with mixed settlements on Thursday and Friday, Class III futures were mixed overall on the week. December Class III contract gained $1.24 on the week, while Q1 and Q2 contracts were slight losers, settlements being $21.56, $20.57, and $20.31, respectively. The spot markets were finding active buyers with gains in cheese ($2.13125), powder ($1.43), and butter ($2.90); only whey ($0.44) was lower for the week. Next week will be a quiet week for fundamental reports; opportunities in supporting these recent gains will come from holiday demand and strong spot demand.
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Author
John Heinberg