Happy Thanksgiving from all of us at Total Farm Marketing!
Thursday, November 24, 2022: The CME and Total Farm Marketing offices are closed.
Friday, November 25, 2022: The CME closes at noon, and the Total Farm Marketing office closes at 1:00.
MARKET SUMMARY 11-23-2022
The U.S. Dollar Index is looking to test the most recent lows, helping bring some buying strength in grain markets on Wednesday. Consumer sentiment numbers surveyed showed improved confidence of the U.S. consumer in the face of inflation as a supportive tone in the markets in general on Wednesday. The positive economic data, as well as comments by members of the fed regarding the possibility of slowing interest rate hikes, helped pressure the Dollar Index lower. The more “dovish” tone regarding interest rates indicates the possibility of a weaker dollar monetary policy. The Dollar Index traded 1% lower, and close to challenging the recent lows from November 15. This keeps the chart of the Dollar Index trending lower, with the possibility of a further break to new low values. This trend, if realized, will likely help support commodity prices overall in the near term.
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CORN HIGHLIGHTS: Corn futures rallied into the close, gaining 6-1/4 to 7 cents as March futures lead the way higher, closing at 6.66-1/4. December added 6-1/2 to end the day at 6.63-1/4, breaking a two-day losing streak. December 2023 added 3-1/4 to close at 6.08-1/2. A drop in the U.S. dollar and firmer wheat and soybean prices added support, as did an escalation in the Ukraine/Russia war.
Today’s rally was encouraging for bulls who haven’t had much news to find support from. Export sales, normally released tomorrow, will be released on Friday due to the Thanksgiving holiday. Market hours are shortened as well, with no overnight trade today and futures closed until 8:30 a.m. central time on Friday. News of consequence was again lacking as prices have generally been drifting. Yet, buyers continue to buy December and March futures under the 6.60 level. Today’s technical picture looks somewhat encouraging with prices exceeding yesterday’s price range and closing firmer. Yet, with a holiday weekend upon the market and little new news, it might be a challenge for corn futures to hold today’s gains on Friday. Strong ethanol production proved support, yet a drop in crude oil prices likely tempered bullish enthusiasm. In the weeks ahead, the market will more closely monitor South American production prospects. Most of Brazil is currently considered in good shape from a weather perspective, but Argentina and parts of southern Brazil states are turning drier.
SOYBEAN HIGHLIGHTS: Soybean futures closed higher today, along with meal and bean oil, despite a sharp drop in crude, but a dip in the US Dollar Index. While China is struggling with increasing Covid cases, their demand is still strong, and a new flash sale was reported today. Jan soybeans gained 6-1/4 cents to end the session at 14.36, and March gained 5-1/2 cents at 14.42.
The soy complex ended up closing higher ahead of tomorrow’s Thanksgiving holiday thanks to a decline in the US dollar. Declines earlier in the week have been due to concerns over China’s increasing Covid infections that have caused them to close down cities, schools, and other public spaces. Fears of Covid lockdowns in China have not recently done much to dimmish Chinese demand for soybeans, and a flash sale today proves that they are still looking for soy products. Private exporters reported sales of 110,000 metric tons of soybeans for delivery to China during the 22/23 marketing year today. Soybeans on the Dalian exchange were up 1.1% today to the equivalent of $18.77 a bushel, so concern over China’s demand isn’t a worry just yet. Domestically, the US expansion into renewable diesel has been creating strong demand for bean oil and has driven crush margins to record levels, supporting bean prices. The recent declines in crude oil have hindered this growth, but bean oil prices have resumed their trend higher. Supplies of low sulfur distillates, which are used for both diesel and heating oil, have been running 14% below a year ago, which has helped keep demand for bean oil stout. Brazil’s bean crop is now 80% planted and forecasts remain favorable for most of Brazil with less rain in the southern region and Argentina. The trend for Jan beans remains sideways.
WHEAT HIGHLIGHTS: Wheat futures reversed off early session lows, supported by a weaker U.S. dollar to finish with gains on the day, closing 2 cents higher to 793-1/2. in Chicago December and 3-1/4 higher to 823-1/4 in July. December Kansas City gained 4-3/4 to end the session at 9.30-1/4, while December Minneapolis jumped 11-3/4 cents to close at 9.57-3/4.
The wheat market found some bullish moment on Wednesday going into the Thanksgiving Day break. With the firm close, charts improved their technical picture, and could be poised for additional follow-through support when trade resumes on Friday. A break in the U.S. dollar, testing recent lows was the most likely driver of short covering action. Managed money has grown a relatively large short position in the wheat market, and took some profits on the turn higher. U. S. wheat still struggles from the export demand standpoint, and weekly export sales to be released on Friday morning will likely stay lack luster. Expectations are for sales last week to range between 250,000-600,000 MT. Sales were at 290,299 MT last week. Conditions of the U.S. winter wheat crop is still poor as 75% of the crop is still in drought conditions. Forecasts are still not favorable in the long-term and could provide support. The wheat market is set for some price recovery, especially if the funds feel they are on the wrong side of the market. The weaker U.S. dollar could be start, but demand news could be a triggered to get a true turn in the market.
CATTLE HIGHLIGHTS: Live cattle futures had a difficult day on the charts with profit taking and technical selling despite early cash trade trending higher than last week. Dec finished .450 lower to 153.350, and Feb was down 1.000 to 155.425. Feeders saw strong selling pressure as Jan feeders lost 2.425 to 179.250.
Sellers jumped into the cattle markets on Wednesday, taking profits before the holiday, and turning charts negative in the short term. Cash trade was triggered during the day, seeing prices jump higher over last week. Southern trade was starting at $154 to $155, and northern trade was catching a $157 bid. This was working $3-4 higher than last week’s trade. Packers are stepping into the market with supportive cash as numbers of market-ready cattle are beginning to thin out reflecting the cattle numbers. The spread from Dec to Feb has been working tighter, also showing that the cash market is still strong and not at a top. Despite that cash tone, sellers took control of cattle prices on the day, maybe signaling a short-term season top. Retail values have a tendency to peak in early December and this could be anticipated by the market. Beef prices were lower at midday as choice carcasses dropped 3.22 to 253.41, but select gained .33 to 234.51 on light movement of 85 midday loads. The weak choice market tone helped bring the sellers forward in the market. Feeders followed the weakness in live cattle and the strengthening grain markets to trigger strong selling. This set up a second day of profit taking across the group. The Feeder Cattle Index traded .19 higher to 174.83, but is at a 4.420 discount to the Jan feeders, which may have limited gains. Even with strong cash, cattle market sold off on Wednesday. The technical picture has turned weaker, and could bring additional pressure, especially with the thin holiday trade on Friday.
LEAN HOG HIGHLIGHTS: Lean hog futures were lower as spread unwinding in the front end and discount to the index supported the Dec contract, but weak retail values pushed futures lower overall. Dec hogs slipped .300 at 83.950 and f Feb was down 1.275 to 88.800.
The Dec-Feb hog spread has jumped the past few sessions, and profit taking on the spread going into the Thanksgiving holiday was noticeable again on Wednesday going into the holiday. The Feb contract has been tied to the $90 handle as prices have traded around that mark for 7 consecutive sessions, but broke lower from that area to test lower support. The 200-day moving average is trading just below today’s close at 88.400 is a likely support area to test. The fundamental picture still limits the Dec contract as it looks closer to expiration on 12/14. Direct cash trade was softer on Wednesday, losing .11 to 81.95 and a 5-day rolling average of 82.15. The Lean Hog Index was softer, losing another .43 to 86.54. The Cash Index holds a 4.900 premium to the futures, which could provide support for the front month contract. Retail values stay soft, tightening packer margins, and weighing on cash trade. Retail values were weak at midday. Pork carcasses traded 1.55 lower to 89.75, pushing under the $90 handle. The load count was moderate at 194 loads. The Pork Carcass Index was softer, losing 0.88 to 92.63. The retail market was looking optimistic that prices may have been looking for a seasonal bottom, but that still seems elusive at this point as selling pressure seems to be accelerating as pork values are down over $4.00 from Friday’s close. The fundamentals still keep the front of the market limited, but the market is hoping for a seasonal turn.
DAIRY HIGHLIGHTS: The wide spread between block and barrel cheese of almost 40c appears to have stalled out the cheese trade a bit. Buyers have been cautious and now the block/barrel cheese price is back below $2.00/lb. In today’s session, the spread did tighten a bit though as blocks fell 5c to $2.15/lb while barrels added 1.25c to $1.8175/lb. There were no loads traded during the session. The drop in cheese below $2.00/lb kept class III futures under pressure. December class III has now closed lower five sessions in a row. The contract gave back 69c today to $20.31. This could be farmer selling or profit taking after the recent rally. The drop in cheese as well added pressure. The cold storage report last night showed a shift in the inventory levels. Cheese inventories are dropping after recently hitting all-time highs, meanwhile it looks like butter inventories are slowly getting more in line with 2021 levels. In the class IV trade, second month fell 37c to $21.32.
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Author
Bryan Doherty