TFM Daily Market Summary 2-9-2023


The soybean crop conditions in Argentina have been the story in the soybean market this winter as historic drought conditions and hot weather have impacted the crop. The USDA WASDE report on Wednesday finally addressed the impact of this weather on the Argentina soybean yield, dropping the expected crop to 41 MMT. This was a 10% drop from the January projections and 20% for the original targets for soybean production in Argentina. The drought has reduced projected harvested area by 2.5% and yield by 7.6% from last month. The reductions to this crop may still have additional room to fall. The Rosario Grain Exchange in Argentina also lowered its forecast to 34.5 MMT, another 6.5 MMT below the USDA. The tight Argentina supply has support soybean meal prices, which is Argentina’s main soybean product export. This has provided front-end strength to the U.S. soybean futures market as end users are looking for supplies.

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CORN HIGHLIGHTS: Corn futures gave up yesterday’s gains and then some with March dropping 7-3/4 cents to close at 6.70-3/4, the lowest close since January 23. December closed at 5.90-1/2 ending session at down 5 cents. Weaker wheat and soybean prices likely weighed on corn futures and did likely farmer selling after yesterday’s report failed to give bulls any type of supportive news. The old saying is you need to feed the bull, but bears can go without for a long, meaning prices can drop without much cause but usually traders or buyers need reason to act. Export sales were good at 45.7 mb but below last week’s 62 million.

Cumulative sales to date for the 2022/2023 marketing year are 1.054 bb as compared to 1.799.6 a year ago. Bulls will argue the form of buying has changed with end user buying practicing just-in-time purchases rather than buy ahead. There is merit to this argument as high prices and prospects for more supply “down the road” suggest buying ahead could be costly. Yet, it still leaves a nagging doubt – when exports are so far behind schedule, that leaves the trade suspicious if sales can indeed catch up. Argentina’s likely smaller crop due to drought could suggest end user buying will increase and perhaps is reflective in total sales of over 100 million the last two weeks. With a wet pattern delaying some of the Brazilian soybean harvest and consequently corn planting, the market may find support, however it appeared today there isn’t much concern. U.S. exports forecasted at 19% lower than a year ago suggests some wiggle room for a smaller Argentine crop.

SOYBEAN HIGHLIGHTS: Soybean futures closed lower today led by a sharp decline in bean oil that fell by around 2.50% with a decline in crude oil. Bean meal was bull spread with March gaining over 2.80% and around 1% in the deferred months. There hasn’t been much recent news to move prices one way or the other resulting in rangebound movement. Mar soybeans lost 1/2 cent to end the session at 15.19-1/4, and Nov lost 5-1/2 cents at 13.65-1/4.

Soybeans have been relatively rangebound with a slight downturn over the past two weeks but have been essentially gridlocked with meal and bean oil trending in opposite directions. Bean meal has been trending sharply higher on Argentinian production concerns due to drought while bean oil has been slipping lower. Yesterday’s WASDE report was uneventful, and prices are currently right about where they were pre-report. While bean meal futures are elevated, this price action may be short lived due to far cheaper South American offerings that are anywhere from 20 to 30 per ton cheaper than in the US as well as meal sales that are far below last year’s. Argentina is forecast to receive some rains this week and into the weekend, which may improve crop ratings further. Brazil’s production estimates were unchanged on the WASDE but have potential to move higher if the better-than-expected yields in central Brazil are wider reaching. March beans have been rangebound for the past month and are sitting right at their 21-day moving average, while Nov beans have trended lower and are just above their 200-day moving average.

WHEAT HIGHLIGHTS: Wheat futures, at one point today, looked like they may continue to march higher. However, those small gains were given up by the close, as poor export sales weighed on the market and it looks like the southern plains may have a chance for moisture soon. Mar Chi lost 7-1/2 cents, closing at 7.57-1/4 and Jul down 6-1/2 at 7.73-1/4. Mar KC lost 17 cents, closing at 8.79 and Jul down 14-1/4 at 8.55-3/4.

Perhaps a delayed reaction to yesterday’s WASDE report was seen today. The report made few adjustments to excite traders and the grain complex closed lower today. There also continues to be a lack of news to propel wheat higher. It is very possible that the wheat market still has legs under it given the tight supply. But with Russia dominating the world export market, the US is falling behind. Today’s export sales data showed an increase of just 4.8 mb of wheat export sales for 22/23 and an increase of 0.7 mb for 23/24. Yesterday the USDA left their export estimate unchanged at 775 mb. On a bullish note, however, India is reportedly considering a temporary wheat export ban due to low domestic supply. But news like that is being outweighed by things like the fact that Algeria’s tender (estimated to be up to 390,000 mt) is likely to be sourced from Russia – though some could come from France. Egypt is also said to be in the process of trying to purchase 1 mmt of wheat from Serbia. Here in the US, the dry southern plains have been lending support to the market, but chances for rain next week in the HRW areas may have led to the double-digit losses today for KC contracts.

CATTLE HIGHLIGHTS: Mixed to mostly lower trade in live cattle markets was noted on Thursday, and the market is still looking for the development of cash trade this week. Feeders were limited in gains but supported by a weaker grain market overall. February cattle were 0.025 higher to 160.825, and April cattle slipped 0.075 to 163.625. In feeders, March feeders added 0.375 to 186.825.

The April contract slipped off early session gains as the market was waiting for the cash trade to develop this week. Early session optimism turned to disappointment as the cash market remained quiet. Much like yesterday, the countryside cash trade was quiet again and bids are undefined, but asking prices remain firm at $161-162 in the South. Cash trade will most likely build as the market moves through the end of the week, and some bids will hopefully form this afternoon. The market is anticipating steady to higher cash, but without confirmation, prices drifted during the day. Retail carcasses were higher at midday. Choice carcasses added 2.51 to 269.71 and Select was 0.90 higher to 254.06. The load count was light at 56 loads at midday. Weekly export sales were consistent with recent weeks totals as the USDA reported new sales last week of 16,400 MT with South Korea, Japan and Canada the top buyers of US beef last week. Weekly export shipments total 15,600 MT. The feeder market stayed firm despite the turn lower in the live cattle market. A weak trade in the grain markets built some buying support in the feeder complex today. The feeder cash index traded 0.24 higher to 182.53 but is still a discount to the futures. The trend in the cattle market is higher overall, but the price action this week brings some caution as the market has continued to fade off early session highs. The market could be due for some pullback on the technical side due to loss of momentum and the strong money flow over the past couple of weeks. We still like the upside longer term, but the cattle market may be due for a pause. With that, a strong cash trade this week could change the momentum very quickly, but that remains elusive.

LEAN HOG HIGHLIGHTS: Lean hog futures finished lower; the premium to the cash market keeps the hog market in check and limits rallies as Feb nears expiration next week. Feb hogs lost 0.100 to 75.825, and April hogs dropped 0.750 to 83.325.

The hog market still finds ways to disappoint, and the price action to start Thursday fit that description. April hog future pushed strongly lower, but still found some footing to work off those lows by the end of the day. Still the market finished negative and makes price susceptible to additional selling pressure to end the week. The close of Friday and on weekly charts may be very key going forward. Currently, April hogs are trading 3.150 lower on the week and need some price recovery for more stability. The cash hog market is trying to help support the market. The lean hog index gains 0.24 to 73.75, continuing its slow climb higher. Direct cash hog trade at midday was 1.29 higher to 76.74. The trend in those two factors should help build a base in the futures market. Retail values were 3.09 higher to 82.38 with movement of 128 loads. Retail values seemed tied to the $80 area and can’t break away from this point. USDA weekly export sales posted new sales of 28,800 MT last week with Mexico, South Korea, and China the top buyers of U.S. pork last week. Exports reached 30,400 MT on the week. The hog market again is trying to find a bottom. The price action of the past couple days was showing a turn, but today was disappointing. It will still take the fundamentals to sustain any rally; at least cash is starting to try and help.

DAIRY HIGHLIGHTS: March Class III futures are entering Friday up 20 cents on the week and could be putting in a double bottom at $17.35 on the weekly chart. This recovery for Class III has come in lieu of any help from the spot markets as the nearby contracts are trying to jump back over the $18.00 mark. Class IV futures closed green on the day as well with the 2023 average at $19.58 vs. the Class III average of $19.22. The input markets remain mixed with fuel near 12-month lows, soybean meal at 9-year highs, and corn stuck in a sideways range.

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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