TFM Daily Market Summary 12-16-2021

MARKET SUMMARY 12-16-2021 

The decline in retail carcass values has weighed on the live cattle futures and cash markets over the past couple of weeks. The main high value retail cut is the beef rib, and it is a major driver of the retail beef price trends. Typically going into the holiday season, the beef ribs show some premium as retailers secure supplies for the Christmas timeframe. Due to a historically high price this season, retailers seemed to back away from the rib cut and targeted other protein routes to feature. The soft rally carried over into the rest of the beef carcass value and reflected a less than aggressive demand tone. Cash trade had peaked two weeks ago, directly tied to the trend in the retail beef.

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CORN HIGHLIGHTS: Corn futures traded two sided today but ultimately finished the day with modest gains. March corn settled 5-1/2 cents higher to close at $5.91-1/4, while the July contract finished just a touch higher at $591-3/4, up 5-1/4. Prices remain in a range bound pattern, testing overhead resistance levels on daily charts. For March corn futures, the important technical and psychological $6.00 level remains a tough hurdle to climb above.

Coming into the morning session, corn futures faced pressure from yesterday’s hook reversal, which initially brought sell pressure into the market. However, a lower U.S. dollar and a change in the weather forecast for South America to warmer and drier, allowed for a turn higher in prices in the early morning session. Demand for corn remains robust. Export sales this morning came in at 1.948 MMT, which was a marketing year high, led by the large purchase from Mexico last week. While thankful for the large export sales, the reality is that these numbers are momentarily just keeping us on track with USDA projections. However, an area of demand that is ahead of current USDA projections is corn use for ethanol. Ethanol production for the week ending December 10, 2021, averaged 1.087 million barrels per day. This is down 0.28% vs. last week and up 13.58% vs. last year. Total ethanol production for the week was 7.609 million barrels. Corn used in last week’s production is estimated at 110.35 million bushels. Many in the industry suggest that the USDA needs to increase the corn use for ethanol demand category on the January 12 USDA WASDE report. We encourage producers to keep an eye on local basis levels from now into year end. While basis levels overall remain firm compared to historic levels, there may be corn sold at year end or into the New Year, which could potentially weaken basis levels.

SOYBEAN HIGHLIGHTS: Soybean futures traded the overnight session with slight declines; however, a warmer and dryer South American forecast perked up buyer interest, allowing soybean futures to close with solid gains. January soybeans settled at $12.77-1/4, up 14-3/4 with the March contract closing 13 cents higher at $12.78-1/4. The November 2022 contract closed with slight gains of 5-1/2 cents to settle at $12.46-1/4.

Soybean futures had small doses of friendly news today between a lower U.S. Dollar, a return to a warmer and dryer weather forecast in South America, decent weekly soybean export sales of 1.306 MMT, and a fresh export sale of 10,000 pounds of soyoil to India. While the combination of this news was enough to push soybean futures higher, this news was not friendly enough to allow soybean futures to trade out of the current trading range. The market still battles the notion that South America has the potential to grow another record crop. Weather watching continues to be paramount. The reality is that it will take a combination of a continued lower U.S. Dollar, and poor weather in South America to move the soybean market higher. Now, should Argentina have poor weather, that might prove to be beneficial to the United States. Argentina is the world’s largest exporter of soybean meal and soybean oil. Historically, if Argentina runs into production issues, the United States has become the beneficiary of increased export business of both soybean meal and soybean oil.

WHEAT HIGHLIGHTS: Wheat futures bounced back after Wednesday’s strong selling pressure, as the market recovered with double digit gains. Chi March gained 14-1/2, closing at 7.70-1/2, and July added 11-1/2 to 7.68-1/2. Mar KC was 18-1/4 cents higher, closing at 8.03-1/4, and Jul gained 14-3/4 cents at 7.96-1/2. Spring wheat futures also trade 14-17 cents higher.

The strength of the wheat market was in the KC wheat after weather concerns and recent storms may have impacted the crop. A large portion of the region remain dry, and dust storms kick up yesterday in some regions, damaging potential crops. Most likely, these crops can recover with the proper weather, but it did aid in some profit taking on Thursday. A weaker U.S. dollar index did provide some support across the entire complex, and the dollar index broke lower on the talk of a tighter monetary policy by the Fed after their meeting yesterday. The demand tone has been a concern, but U.S. wheat is more available after this price break off recent highs. Weekly export sales hit a marketing year high last week at 650,600 MT. Global export demand stays active with multiple tenders working as end users are trying to book supplies.

Total Farm Marketing and TFM refer to Stewart-Peterson Group Inc., Stewart-Peterson Inc., and SP Risk Services LLC. Stewart-Peterson Group Inc. is registered with the Commodity Futures Trading Commission (CFTC) as an introducing broker and is a member of the National Futures Association. Stewart-Peterson Inc. is a publishing company. SP Risk Services LLC is an insurance agency. A customer may have relationships with all three companies. TFM Market Updates is a service of Stewart-Peterson Inc. Futures and options trading involve significant risk of loss and may not be suitable for everyone. Therefore, carefully consider whether such trading is suitable for you in light of your financial condition.


John Heinberg

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