The CME and Total Farm Marketing offices will be closed Monday, February 21, 2022 in observance of Presidents Day
MARKET SUMMARY 2-18-2022
Copper futures could be a long-term “green energy” play. Copper futures have been on a steady climb higher since October, as the move to a “greener” society has brought some support into the copper market. The world is looking to move away from fossil fuels and similar energy forms and transfer to electric; copper is the main conductor metal for that transfer. Copper typically has been tied to economic growth and strength in economies, as the uses of the industrial metal step up in construction and development. With the need for the conductor metal in the “green” movement, the additional demand could help pressure available global supplies, which are at historically low levels.
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CORN HIGHLIGHTS: Corn futures ended the session and week with gains. March closed 4-1/4 higher, a new high close and added 3-1/4 cents compared to last Friday’s close. December finished the session gaining 1-1/4, ending the week at 5.96-3/4, adding 3 cents. Next week could see beneficial weather for Argentina and Brazil in dry areas; after that window, warmer and drier is expected. Export sales were termed ok for the week but not stellar.
Money flow has made its way into commodities over the last year, particularly in row crops where tightening supplies due to smaller US crops in recent years and adverse crop weather elsewhere in the world, along with inflation has attracted investment dollars. Energy prices continue to improve from the collapse in April of 2020. Yet the question is, are prices too high? Perhaps from a long-term perspective, however, new contract highs in live cattle, hogs, and dairy would argue these markets have already pushed higher anticipating stronger input costs for producers. Our point, demand for feed probably does not decline even at current prices. With COVID cases slowing, it is likely that consumers will be more inclined to buy services, which likely means travel and more use for petroleum and consequently ethanol. Bottom line, the smaller crops out of Argentina and Brazil (first crop) along with tight supplies of other competing grains keep corn prices viable at current levels until the perceived supply picture changes.
SOYBEAN HIGHLIGHTS: Soybean futures firmed again today, closing with gains of 3 to 9-1/2 cents with March leading the way higher, closing at 16.01-1/2, a new contract high close. November added 3 cents, ending the session at 14.63-3/4, also a new contract high close. Announced export sales of 198,000 metric tons of which 66,000 is for the 2021/2022 marketing year provided support.132,000 tons are for next year, which continues to signal end users are covering longer term needs. Supportive this week was South American weather and continued concern with the Russian/Ukraine uncertainty.
For the week, March futures gained 18-1/2 cents and November added 19-3/4. Potentially weighing on further gains was a weekly drop in crude oil prices by roughly 3.00 per barrel. Export sales remain robust with yesterday’s number well over 100 million bushels between old and new crop. The signal, of course, is that end users are coming to the market to fill a void from a drawdown in both Argentina and Brazil production. Weather is still a major factor but probably has somewhat less impact since areas that have been dry are already in poor shape. Some forecasters are putting additional rain in the forecast for next week, but most agree the longer-range forecast remains on the warm and dry side for southern Brazil and northern Argentina. Soybean oil posted weekly gains, however soybean meal lost ground for the week. Traders are obviously putting the emphasis on soy oil, either because of high energy prices, concern of a slowdown in sunflower oil from Ukraine, or both.
WHEAT HIGHLIGHTS: Wheat futures finished with a mixed close despite showing early strength. Bullish US weather and the Russia situation are keeping the market supported, though there may have been profit taking prior to the close. March Chi lost 1 cent, closing at 7.97 and July up 1/2 cent at 8.00-3/4. March KC gained 12-1/4 cents, closing at 8.35-1/4 and July up 11-3/4 at 8.40-3/4.
As politicians and government officials still work towards a diplomatic solution, conflict between Russia and Ukraine remains at the forefront of the minds of wheat traders. There is still differing information, with Russia saying there is no threat but US officials saying an invasion could happen at any time as a strong military presence remains on the border. President Biden will address the situation this afternoon and will hold a phone conference with NATO members as well (though this is reportedly closed to the press). In other wheat related news, Paris milling futures rallied sharply today. Egypt bought 180,000 mt of wheat from Romania this week, and Algeria is reported to have also made a purchase 720,000 mt of wheat which is likely to come from the Black Sea region; if Russian naval vessels block shipments that could be a problem. Another item of note, NOAA this week released their three-month outlook which suggests dry and warm conditions for the US southern plains – a bullish factor which was supportive to KC futures today. As a reminder, markets are closed on Monday in observance of President’s Day.
CATTLE HIGHLIGHTS: Live cattle futures upward momentum faded and cattle futures finished mostly lower, led by softening retail market and technical selling. February cattle slipped 0.150 to 143.250, and April cattle dropped 0.900 to 145.875. For the week, April cattle traded 0.300 lower.
The April contract has showed signs of losing upward momentum, as prices have slid into a $3.00 trading range, moving today to the bottom of that range and closing below the 10-day moving average. April price has traded within this range for the past 14 days. A potential head and shoulders pattern is forming on the chart, which if a downside break were to occur could have the market testing 142.500 and trend line support. February expires on 2/28 and is directly tied to the cash market. Cash trade has been slow to develop this week and saw light trade at $142, up slightly with last week and keeping trend higher. Retail values are still showing good historical values but have trended softer this week. On Friday, midday carcasses were lower, (Choice: -2.39 to 267.20, Select: -0.58 to 264.27) with demand light at 75 midday loads. The weaker retail tone has helped pressure the live cattle market this week. Feeder cattle finished mixed, as a firmer gain market overall pressured the front-end feeder market. March feeders were 0.775 lower to 165.425 on Friday and 0.800 lower on the week. The feeder cash index traded unchanged at 162.56. Cattle markets overall are still in an uptrend, but momentum has slowed. Prices may be reaching winter highs, and a potential pull back may be in front of the market as charts have turned more negative.
LEAN HOG HIGHLIGHTS: Hog futures rallied aggressively into the weekend, lead by a strong move in retail values and firming cash market providing the strength. April hogs were 1.825 higher to 109.400, and June hogs gained 2.025 to 113.350. For the week, April hogs finished at new contract has gaining 6.950.
Today was another solid day for the hog market. The strong tone stays in the market, keeping buyers active as April looks to be challenging the 110.00 and summer months looking to push to the $120 level. Pork cutout values surged $10.00 on yesterday’s close, helping fuel the rally on Friday. The product market was calmer today with midday trade slightly lower, losing .76 to 115.79. Load count was moderate at 105 midday loads. The strong retail values have carried over into the cash market. Cash was supportive with the National Direct morning trade a weighted average price of 85.81. The Cash Lean Hog index gained 0.90 to 94.24 and was 6.50 higher on the week. Technically, buyers stay active as they anticipate tightening supplies through the year. Prices pushed and closed at new contract highs this afternoon, opening the door for more money flow and a challenge of the $120 level in the summer contracts.
DAIRY HIGHLIGHTS: A quiet week of trade in the dairy market without much new news, along with a noticeable shift in spot market demand, kept futures on the defensive. March through August 2022 Class III futures finished the week down anywhere from 13c to 36c. For Class IV, the market came off of record price levels as the second month contract was down 45c for the week. Spot butter, powder, and whey were all lower while spot cheese recovered 5.25c and made a charge towards $2.00/lb. The Global Dairy Trade auction from Tuesday was supportive to prices as the overall GDT price index added 4.20%. The auction showed steady bidding in butter, cheddar, and both milk powder varieties. The US market ran into steady selling pressure on Wednesday and couldn’t recover by week’s end. Pressure came from overbought markets and products at their highest prices in years.
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Author
Bryan Doherty