TFM Daily Market Summary 2-10-2023


Brazilian exports maintained their hot streak in January, as export shipments reached nearly 6.2 mmt or 243 million bushels. This was a record volume for January from the South American country. Breaking it down, China was the top destination at 16% of that total, followed by Japan and Vietnam. This was the first time China has been the top export destination for Brazilian corn, but those high shipment numbers are the product of the export agreement reached between the two countries this fall. The large number of bushels headed to China keeps the corn exports a concern in the U.S. Currently, U.S. exports are well behind target pace and the market was counting on seeing improved Chinese business. This may be missing this year with China sourcing more bushels from Brazil.

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CORN HIGHLIGHTS: Corn futures continued their back-and-forth trade recovering yesterday’s losses with futures closing higher. Support comes from a drier forecast for Argentina and less than ideal forecast for Brazil soybean harvest. Strength in wheat was noted as well with both fundamental and technical buying noted. Soybeans also moved higher helping corn’s friendly cause today. For the week, March futures gained 3 cents and December was unchanged.

As forecasts go, the most recent was a potential double boost for corn prices with mostly drier in the forecast for Argentina and rain in parts of Brazil keeping harvest in check and consequently double crop corn planting. Market talk that China was buying U.S. soybeans and Canadian feed wheat was also noted in today’s market. By many accounts, prices are at a pivot point. Bulls will argue despite economic slowdowns and reduced livestock herds, demand is still strong, and prices have weathered a period where a lack of positive news couldn’t drive prices lower. They may have a point; however, expectations for Argentina’s crop to be reduced (perhaps significantly) and an escalation in the war are both variables that have existed for many weeks. The key is likely Brazil second crop prospects where planting is said to be delayed in areas and if end-users become more aggressive. Export sales the last two weeks were over 100 mb, a pace that suggests buyers are stepping up. The question now, is this short lived? On an interesting note, the USDA on the WASDE report this week did not lower exports.

SOYBEAN HIGHLIGHTS: Soybean futures closed sharply higher today returning to the top of their range following the move higher in bean oil as crude moved higher. Bean meal moved higher as well after Argentina’s estimated soybean production was lowered again by the Rosario Grain Exchange. Mar soybeans gained 23-1/4 cents to end the session at 15.42-1/2, and Nov gained 13-1/2 cents at 13.78-3/4. For the week, March beans gained 10-1/2 cents.

The soy complex moved higher today due to a combination of higher crude oil as Russia announced they would cut production as well as another decline in Argentina’s estimated soybean production. Earlier, Russia fired missiles over Moldova which violated NATO airspace and shortly after, the Moldovan prime minister announced the governments resignation. Russia also announced that they would cut their oil production by 500,000 barrels per day or about 5% next month which brought crude futures back to nearly 80 dollars per barrel. After the USDA reduced Argentinian production on this week’s WASDE to 41 mmt, the Rosario Grain Exchange lowered expectations even more to just 34.5 mmt. This revision was bullish for bean meal while the Russia news was bullish for bean oil. The Buenos Aires Grain exchange increased their good to excellent rating for the bean crop by 1% to 13% with help from the recent rains. The bigger picture may end up being Brazil’s bean production which could potentially end up higher than the record estimates of 5.62 billion bushels. Export sales were slow last week with the USDA reporting an increase of just 16.9 mb for 22/23 and an increase of 6.8 mb for 23/24 with shipments at 67.2 mb. March beans returned to the top of their range with resistance at 15.50.

WHEAT HIGHLIGHTS: Wheat futures closed sharply higher as war concerns added premium to the marketplace. Mar Chi gained 28-3/4 cents, closing at 7.86 and Jul up 25-3/4 at 7.99. Mar KC gained 30 cents, closing at 9.09 and Jul up 26-1/2 at 8.82-1/4.

This morning’s breaking news sparked a fire under the wheat market. In Moldova, a country that shares a border with Ukraine, the government has reportedly “collapsed”. The prime minister said her government was resigning after a tumultuous time in office and a war at the border. Perhaps more importantly, Russian missiles are said to have crossed into Romanian and Moldovan airspace. If true, this is a NATO violation and could lead to escalation of the war. These events added some war premium back to the wheat market where, until now, the Ukraine war has largely become old news. It is currently unclear as to whether this will blow over or lead to something more significant but the most recent information this afternoon suggests that the Russian missiles were actually just outside of NATO airspace. Russia is said to be intensifying their attacks on Ukraine as well and this could fan the flames that were ignited today. On the other side of the coin, US exports of wheat remain poor and Russia continues to undercut the US in that regard with a recent sale of 400,000 mt of wheat to Algeria. In other news, the market will again miss out on the Commitment of Traders report; it was postponed another week due to technical problems.

CATTLE HIGHLIGHTS: Live cattle futures finished the week trading slightly higher on the development of cash trade into the end of the week. In feeders, a strong move higher in grain markets pressured prices on the day. February cattle were 0.375 higher to 161.200, and April cattle added 0.325 to 163.950. In feeders, March feeders lost 0.425 to 186.400. For the week, Feb live cattle traded 0.925 higher, while April cattle slipped 0.175. In feeders, March feeder futures where 0.300 higher on the week.

The live cattle market has been waiting for cash trade to get rolling this week, and the market finally saw some light movement at the end of Thursday into Friday. Northern dress deals were posted at $254, which was $4 higher than last week’s total. Southern trade was still at a standstill, but bids were ranging from $157-158 against $161-162 asking prices. More trade will still likely develop going into the end of the day. It is possible packers are short-bought on the week and may need to step up to the asking prices. This helped support the futures going into the close. Retail values were slightly higher at midday. Choice carcasses gained 0.62 to 269.91 and Select added 0.08 to 254.09. The load count was light at 62 loads. Grain markets saw strong price moves on Friday, fueled by a short covering rally in wheat futures, this limited feeder futures on the day. The Feeder cash index was up 0.61 to 183.14 and trended higher during the week. The cattle market was looking at a possible pullback, but that could still be on the sidelines if the cash market finishes its early strength for the week. Overall, the cattle market is well supported by the lack of cattle supplies. Even if the market were to see some pullback, the longer-term story is still friendly.

LEAN HOG HIGHLIGHTS: Lean hog futures were mixed in a quiet session as the premium to the cash market keeps the hog market in check and limits rallies with Feb nearing expiration next week. Feb hogs gained 0.050 to 75.875, and April hogs were unchanged at 83.325. For the week, Feb hogs traded 0.850 higher and April lost 3.150.

April hogs struggled on the week due to the premium over the cash market. April hogs are trading 3.150 lower on the week and are still in search of buyer support. February hog halt trading on 2/14 and hold a large discount to the April futures. That spread and relationship to the cash market limits April futures upside at this time. The cash hog market is trying to help support the market. The lean hog index gained 0.05 to 73.80, continuing its slow climb higher. For the week, the index added 0.95, reflecting an improving cash market. Direct cash hog trade at midday was 0.62 lower to 76.12. Despite the weakness on the end of the week, the direct cash market has worked steadily higher overall this week, but at $76.00 area, is still at a discount to the April market. Retail values were .61 higher to 81.00 with movement of 121 loads. Retail values seemed tied to the $80 area and can’t break away from this point. The pork cutout index traded 0.25 lower to 79.75, and was down .30 on the week, reflecting the sideways trend in the retail market. It will still take the fundamentals to sustain any rally; at least cash is starting to try and help. The retail market is stuck in a sideways range. It may take expiration of the Feb futures on the 14th for the market to look ahead to the spring and to where prices could trend.

DAIRY HIGHLIGHTS: Milk prices for 2023 were solidly in the green this week. The 2023 average for Class III rebounded after three down week with 26 gains and the Class IV average climbed for the second straight week with 41 cent gains added to last weeks 40 cent gains. Much of those gains can be attributed to gains in the second month contracts where Class III rose 24 cents on the week while Class IV second month rose 33 cents. Besides cheese, the spot markets found gains with whey, powder, and butter all continuing to climb after hitting recent lows. Cheese, conversely, continues to work lower as waning exports and building inventories loom over the market.

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John Heinberg

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