TFM Daily Market Summary 12-21-2022


The USDA will release the December Cattle on Feed report on Friday after the market closes. Expectations are to show a continued reduction in cattle numbers going into 2023. Expectations are for total cattle on feed to be down 2.9% from last year at 11.637 million head. If realized, this will be the first month-over-month decline in December since 2016. Front-end inventory, or cattle on feed more than 120, is expected to be down 2% from last and the lowest December inventory since 2018. The trend in lower numbers will likely continue into 2023 as the placement forecast is expected to be down 4.2% from last year and has the potential to be the smallest total since 2016. The cattle market saw buying strength on Wednesday, anticipating these numbers as the majority of live cattle futures contracts traded to new contract highs for the day.


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CORN HIGHLIGHTS: Corn futures firmed on the heels of strong gains in wheat, short covering as prices broke a downward trend line and firmer energy prices. A 500-plus point gain in the stock market may have traders taking on more of a risk-on attitude as a long holiday weekend nears. Mar gained 10-1/4 cents to close at 6.62-1/4 and Dec added 6 to end the session at 6.02-1/4. A winter storm system and very cold temperatures forecasted will limit movement of corn.

Today’s ethanol statistics showed weekly use of corn at 103 mb. Marketing year-to-date usage of corn for ethanol is 14.7 mb per day, above the current estimate of 14.2 mb. While slightly stronger than forecasted, it is still a long year in front of the market. At the current pace, should it continue, total usage would reach 5.322 bb or near 50 mb than the current estimate. So, while the pace is supportive, the net change, if realized, would be minor. The export market is an issue running near 50% below last year’s pace and below a pace needed to meet current USDA projections. Recent dryness in Argentina and southern Brazil could expedite additional sales. End users, due to high prices, have been purchasing on an as-needed basis anticipating additional supplies in the months ahead. That is unless weather conditions in South America warrant more aggressive buying. Strong basis in parts of the Midwest continue to suggest snug supplies and pockets of strong demand or both. New crop futures are back above 6.00 for the first time since December 1.

SOYBEAN HIGHLIGHTS: Soybean futures closed mildly higher today with a day of quiet trade in the soy complex. Bean meal showed the most gains, but bean oil closed higher as well with a 2-dollar jump in crude oil bringing it to over 78 dollars a barrel. Prices started the day higher but faded after meeting resistance at the 14.90 mark. Jan soybeans gained 2-1/2 cents to end the session at 14.81, and Mar gained 4-3/4 cents at 14.84-1/2.

Soybeans started the day strong, along with the other two soy products, but met early resistance at the 14.90 level and faded into the close for only minor gains. Contracts will have a lot of trouble breaking through the daunting 15-dollar price range and it seems more likely that resistance will hold there rather than a breakthrough. Bean oil was bull spread today with gains in the front months as crude gained over 2 dollars a barrel to trade at over 78 dollars a barrel. Crude oil supplies fell by 5.9 million barrels last week and expectations were only for a 1.7 mb drop adding the bullish momentum. Crude oil supply is down 22% from a year ago and this comes as we head into winter. Domestic demand should remain firm with profitable crush margins and the expansion of bean oil as biofuel, but the continued strength of export demand is worrisome. China is well stocked with soybeans and as soon as they are able to get by without U.S. imports they are likely to quit buying and hold out for cheaper Brazilian beans. If exports start to fall, prices could fall sharply as well. In the first 11 months of the year, China has already imported 51.8 mmt of beans from Brazil compared to just 23 mmt from the U.S. This is down a combined 7.7 mmt, but those bushels are likely being offset by Argentinian beans. Winter storms are moving across the U.S. but these blizzard conditions aren’t affecting the bean market like it is wheat, and in South America, Brazilian weather remains nearly perfect, while Argentina suffers from drought. Jan beans remain in their upward channel but are nearing overbought territory and face heavy resistance at 15 dollars.

WHEAT HIGHLIGHTS: Wheat futures rallied sharply as cold winter temperatures threaten the winter wheat crops. Mar Chi gained 17-1/4 cents, closing at 7.67-3/4 and Jul up 17-1/2 at 7.79-1/2. Mar KC gained 17 cents, closing at 8.64 and Jul up 15-1/4 at 8.49-1/4.

Wheat had a strong day as traders take notice of the extreme temperatures that may bring winterkill to a broad area of the southern plains. Along with U.S. futures, Paris milling wheat futures had a sharp rally. The big headline today surrounds Ukraine, but not directly regarding the war. Rather, Ukraine’s President Zelensky met with President Biden today in Washington DC and a joint press conference will be held this afternoon at 4:30 PM ET. This is Zelensky’s first trip abroad since the war broke out and he spoke before congress today regarding aid for Ukraine. With continued attacks on their infrastructure, he suggested that the war will continue to get worse. There is not much other news to go on today but there is talk that India may have to import wheat after a drought this summer and their prices reached new contract highs. Here in the U.S., exports continue to be undercut by Russia. Their main competition right now is with Australia, who was said to have sold 150,000 mt of wheat this week to Iraq.

CATTLE HIGHLIGHTS: Cattle futures saw strong buying on Wednesday as money flowed into the cattle markets in anticipation of the strong winter storm, a potential friendly cash market, and possibly a bullish Cattle on Feed report on Friday. The buying strength sent most cattle futures to new contract highs. Dec cattle gained 1.075 to 156.125, and Feb cattle added 2.125 to 157.700.

The strong buying lifted the markets to multi-year highs as those contract highs were established. Feb closed today at its highest levels since February 2015. The market is anticipating a friendly Cattle on Feed report on Friday and is likely pricing in those potential numbers. It is anticipated that total cattle on feed as of December 1 will be down 2.9% from last year, and possibly the lowest December total number since 2016. Placements are also expected to be lower than last year at a 4.2% decline, the lowest November placement since 2016 as well. The low placement numbers should support the market well into 2023. The forecasted winter storm has also kept the buyers active and helped push cattle movement. Cash trade was undeveloped to start the week. Early bids in the south were $153, but those were passed on. The expectations are for steady trade again this week and trade will likely start developing over the next day or so before the holiday weekend. Retail values have firmed recently, and that has moved packer margins back into the black, which should support cash bids. At midday, carcass values were mixed with choice carcasses slipping 0.12 to 264.93 but select gained 2.21 to 236.11. The load count was light at 69 loads. Weekly export sales will be published on Thursday morning, and that could add to the price direction for the day. Feeder cattle were higher as value buying stepped back into the market supported by the strong live cattle market. The Feeder Cash Index was 0.13 higher to 178.14. The index is still at a discount to the Jan board, which was likely a limiting factor. The strong corn and wheat market also limited the upside in feeder cattle on the day. The direction overall in the cattle markets is higher and the market looks well supported. Cash trade will likely give the market its end-of-week direction before the Cattle on Feed report, which is expected to show ongoing tightening in cattle supplies. Prices are rallying strongly and may be pricing in the potentially bullish cattle on feed numbers.

LEAN HOG HIGHLIGHTS: Lean hog futures saw buyers pour into the market on “risk on” trade and active buying in the livestock markets. The market is still watching end-of-year fundamentals, the forecasted winter storm, and focusing on the Quarterly Hogs and Pigs report at the end of the week. Feb surged 4.150 higher to 88.400 and Apr hogs gained 3.100 to 95.275.

Hog futures broke out of their consolidation pattern as short covering and strong technical buying pushed the market higher. Feb hogs closed at the 200-day moving average, which could be a key swing price on the charts. Follow-through buying could likely support the market if prices can trend through this level, which is 88.400 on the Feb chart.  The winter weather forecast for a strong winter storm toward the end of the week could likely bring some impact on animal movement and the market may be looking to price in some restrictions. Some of the storm’s impact may already be priced into the market. The USDA Quarterly Hogs and Pigs report is on Friday, and expectations are for the hog herd to continue to tighten, and that has been reflected in summer hog prices. The market fundamentals still need to improve in order to build some support in the market. Retail pork values were lower at midday losing 0.63 to 82.83. Product movement was moderate at 163 loads. The cash market stays disappointing. Midday direct trade was softer on the day, losing 0.50 to 79.48. The 5-day rolling average is 80.10. The Lean Hog Cash Index traded 0.86 lower to 80.86 and is a large discount to the futures, which could be a limiting factor. The market will be expecting a tighter hog supply going into 2023, and that supports the longer-term market, which should be reflected in the Quarterly Hogs and Pigs report on Friday. The key will still be the fundamentals, which for the most part are still struggling to support the market and may limit longer trend rallies.

DAIRY HIGHLIGHTS: The short-term trend in the market is currently down as futures and spot markets all have seen a recent push lower. Both the calendar year averages for Class III and IV have broken below the $20 threshold, however, the USDA just recently adjusted their forecast higher for milk and dairy products for 2023. The spot trade continues to see decent volume on trades as prices have eased from recent level. Spot cheese was a winner today with a near 4 cent gain per pound on 3 loads traded and settling a tick above $1.86 per pound. Whey, powder, and specifically butter, were active, but lower today. Butter was again under heavy pressure with a daily loss over 12 cents and 38 cents lower on the week already. The Cold Storage report tomorrow has a chance to stop the bleeding but cheese reports from both Europe and domestic regions have painted a picture of lower overall cheese demand.

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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