MARKET SUMMARY 11-14-2022
The Soybean Export Inspection report released on Monday was a disappointment and pressured soybean prices. Weekly export inspections for soybean were at 1.858 MMT for the week ending November 10 and below market expectations. This has the soybean market concerned about the potentially weaker demand tone, which has been a focus of the market. After last week’s strong inspection number, the concern the export shipments for U.S. soybean may have peaked out earlier than anticipated. The USDA left the export demand untouched on the last WASDE report, when analysts were expecting some reduction. The weak shipment number may be open to possible revisions on future reports, but for this week, the market is seeing the realized potential of weaker export demand.
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CORN HIGHLIGHTS: Corn futures ended quietly and, once again, somewhat sluggish. A lack of new news, weaker soybean prices and a slightly firmer dollar allowed corn prices to drift. December lost 0-3/4 cents to close at 6.57-1/4, well below the middle of the trading range of the last two months (near 6.80) but in line with closes of the last three sessions. December 2023 lost 2-1/2 to close at 6.07-1/4.
Export inspections at 19.1 mb were again reflective of a slow export pace. Year-to-date, inspections total 194 mb, down near 30% for this same time last year. A factor to keep in mind was that a year ago, time was lost due to a hurricane. A low water level this year is keeping uncertainty as to when and how export loading may improve. It appears foreign buyers not only recognize this, but high barge rates are keeping U.S. Gulf prices less than competitive on the world markets. Harvest is in its final stages, and while the board price has been on the slide, instances of firmer basis, especially in the West, are encouraging farmers to be sellers. If you are offered strong basis, remember what it is you are storing for: either basis, cash price improvement or both. If futures rally, basis could decline. Bottom line, consider basis contracts or moving corn and use other tools such as calls or long futures if wanting to stay an owner. Though Argentina remains dry and parts of Brazil less than ideal, it is too early to draw conclusions that weather could reduce projected yield.
SOYBEAN HIGHLIGHTS: Soybean futures closed lower today as crude oil fell sharply, reports of rising Covid cases in China, and export commitments came in lower than expected. Both meal and bean oil closed lower as well. Nov soybeans lost 13-3/4 cents to end the session at 14.41-3/4, and Jan lost 9-1/2 cents at 14.40-1/2.
The soy complex fell today after multiple bearish pieces of news were released. After a short technical delay this morning the USDA released export inspections where 68.3 mb of soybeans were inspected for export last week, a strong number, but lower than the previous months. There is already concern about export demand falling as Covid cases in China ramp up again, and traders are weary of a trend downwards in export sales. The news of rising Covid cases in Beijing and other major cities comes right as China was about to ease up on Covid restrictions and now it is not known what that will look like, but demand from China has typically remained firm even through lockdowns. Argentina received much needed rains over the weekend and so did Brazil which pushed prices lower, but forecasts are calling for more dry weather to follow. Brazil is currently 69% planted and have benefited from plenty of moisture up until this point. While still historically high, the value of crushing beans has backed off a little from its highs and fell 40 cents in Illinois last week to 19.89 a bushel, a 5.18 difference above the cost of soybeans. This is still plenty high to keep processors interested but is something to watch if crush margins continue to slip. Crush totals will be released by the National Oilseeds Processors Association tomorrow morning. Jan beans are back to trading in a sideways pattern and today closed just under the 200-day moving average.
WHEAT HIGHLIGHTS: Wheat futures posted modest gains today with support from tight supply and the possibility of stress for the US winter wheat crop. Dec Chi gained 4-3/4 cents, closing at 8.18-1/2 and mar up 3 at 8.38-1/4. Dec KC gained 12-3/4 cents, closing at 9.56-1/4 and Mar up 10-3/4 at 9.49-3/4.
Despite earlier weakness wheat managed to hang on today. Talk of a purchase of 1 mmt of wheat by Saudi Arabia may have helped bolster the market along with reports that Iraq bought 150,000 mt. Additionally, the forecast this morning has snow moving into the Texas panhandle and Kansas – this has the potential to stress their winter wheat crops which are already struggling. In the southern hemisphere, Argentina’s wheat crop is rated only 8% good to excellent and Australia has been dealing with flooding. On the bearish side of things, the November 19 deadline for the Black Sea export deal is fast approaching and many expect an announcement this week that Russia will agree to an extension. Even if they do come to an agreement, the war continues to make life difficult in Ukraine as it rages on. Here in the US, wheat export inspections were poor at only 2.8 mb, which brings the 22/23 total to 364 mb. Wheat inspections are currently behind the pace needed to meet the USDA’s export goal of 775 mb.
CATTLE HIGHLIGHTS: Live cattle futures were mostly lower to start the week. Demand concerns and technical selling pressured the market. Dec finished 0.050 higher to 151.575, but Feb was down 0.700 to 152.550. Nov feeders, which expire on 11/17, were unchanged at 176.950 and Jan feeders led the market higher, gaining 0.875 to 179.450.
Recent weakness in retail demand has pressured the live cattle market on possible developing demand concerns. Retail values typically peak in early December for the season, but the past couple session have seen some weakness. Retail values were lower at midday, as Choice carcasses lost 1.04 to 257.90, and select trade lost 1.44 to 233.83 on light movement of 67 midday loads. Choice carcasses were trading in the mid-$260 levels early last week, so prices have softened quickly over the past couple of days. This can tighten the margin for the cash market. Cash trade was still undeveloped on Monday as bids and offers are still being put together. Expectations for the week is steady cash trade with last week. Slaughter last week was strong at 671,000 head, up 10,000 head over last year and 4,000 with last week. Slaughter is expected to stay heavy this week as well. Feeders finished mixed to mostly higher supported by ongoing weakness in the grain market. The Feeder Cattle Index traded 0.05 lower to 175.46. The cash index is currently at a discount to the Nov futures, which may limit the upside in the front month contract with expiration this week on 11/17. Relatively quiet, wait and see start to the week in the cattle markets. The retail value drop in price is concerning, and the market will be waiting for the cash market to establish a trend. Technically, Feb cattle has fallen to test key support and charts look soft in the near-term.
LEAN HOG HIGHLIGHTS: Lean hog futures finished mostly higher on prospects of improved demand news and the cash market trying to firm at the end of last week. Dec hogs gained 0.525, closing at 84.875 and Feb was 0.575 higher to 88.975.
Hog futures are tied to the 200-day moving average, trading on both sides of this technical point since mid-October, and that pattern held true again on Monday to start the week. Rallies are limited by the cash and retail market, but prices are staying range bound in the near term. The hog market did get some possible demand outlook news that helped support prices. Industry participants stated that China would need to increase pork imports to battle higher pork prices and tight supplies as Chinese producers reduced the herd size due to farmer losses last year. The reduction of hogs appears to be larger than anticipate. The possibility of export demand can be fleeting until those purchases do show up in export sales numbers. Currently, pork exports are down from last year’s totals, and that has weight on pork prices. Retail values where quiet at midday as pork carcasses traded 0.05 higher to 98.05. The load count was 161 loads. The Pork Carcass Index was firmer, reflecting some strength at the end of last week, gaining 0.14 to 95.96. Direct cash trade was weak on Monday, losing 4.68. The direct trade averaged 83.54, and a 5-day rolling average of 85.98. The Lean Hog Index traded 0.33 lower to 88.63. The cash index holds a 3.750 premium to the futures which failed to provide support for the front-month contract. Sideway trade, consolidating around the 200-day moving average for the past couple of weeks. The hog market is looking for some news for prices to move in either direction.
DAIRY HIGHLIGHTS: Class IV futures and spot butter continued higher today as December milk contracts gained 26 cents, to keep pace above its Class III counterpart, while butter moved higher after a precipitous drop in prices in recent weeks. The rebound in spot butter is nearly a 62% retracement of prices which began at the end of October, bringing prices from $3.14 per pound to below $2.61, settling at $2.93 today. Class III futures were mixed with solid gains in second month December contracts. The market will be paying close attention to the Global Dairy Trade event tomorrow as little fundamental trading information came out last week in regards to the dairy markets and regional reports show holiday cheese orders are beginning to wane and inventories remain strong.
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Author
John Heinberg