MARKET SUMMARY 3-2-2023
The window for Brazil corn exports is starting to close. Preliminary export data out of Brazil showed that corn exports from the South American country slipped quickly. Even with the decline, the totals seen for February saw corn exports trend well above the most recent years, Only in the 2015-2016 marketing year did Brazil ship more corn to the export market. The corn export program from Brazil drops quickly as the soybean harvest ramps up and ports are used to export the newly harvest soybean crop. The declining exports out of Brazil also line up with timing of the U.S. export program kicking in at full strength. With both exports and sales for U.S. corn behind pace and expectations, the U.S. program has a lot of work to do to get caught up, or the corn market faces further demand adjustments, increasing the carryout totals.
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CORN HIGHLIGHTS: Corn futures traded mixed throughout the session, finally deciding to end the session mixed. May lost 2-0 cents to close at 6.33-3/4, trading up to 6.41-1/2 and down to 6.30-3/4. December added 1-1/4 to close at 5.70-1/2. Slow export sales and a lack of confirmation that China was a buyer of U.S. corn had prices giving up gains early in session. Long liquidation was probably a factor in today’s trade as it has been since last Thursday. Early support, however, came from growing concern that dry weather will continue for Argentina and southern Brazil.
Export sales at 23.5 mb were the slowest in five weeks. Year-to-date sales are now 1.151 bb, which compares to 1.892 a year ago. The USDA is currently forecasting export sales to reach 1.925 bb, which suggests the sales will need to average near 30 mb per week, a doable number but not seemingly likely at the current pace. Rumors that China may be a buyer yesterday failed to be proven correct on today’s daily export sales announcements, yet some believe there could be news tomorrow. Farmer selling is said to have slowed. The technical picture continues to look challenged if you are bullish. The inability to hold positive gains in the front months after sharp losses is discouraging. Next week Wednesday the USDA WASDE report is due for release.
SOYBEAN HIGHLIGHTS: Soybean futures closed higher today as technical buying off the 100-day moving average kicks in, but last week’s export sales were unsupportive fundamentally. Both meal and bean oil closed higher as well with bean oil leading on higher crude. May soybeans gained 15 cents to end the session at 15.09-1/4, and Nov gained 8-1/2 cents at 13.67-1/2.
Soybeans moved higher again today attempting to recover losses over the 5 day sell-off. The demand for bean oil and the expansion of processing facilities could be driving prices as export demand slows. Yesterday afternoon, the USDA’s NASS reported that 191.3 mb of soybeans were crushed in January which has crush pace down by 1%. In addition, the US Energy Department said that renewable diesel plant capacity increased to 2.85 billion gallons per year in December which is a 158% increase from December 2022. The US is ramping up fast for the use of bean oil as biofuel which is bullish in the long term. In the near term, Brazil’s harvest is underway and US exports are beginning to suffer as expected. Last week’s export sales showed an increase of 13.3 mv for 22/23 and 4.9 mb for 23/24, down from the previous week. Shipments were okay at 32.4 mb and were above the 15.8 mb needed each week to meet the USDA’s expectations. While Brazil continues harvest under wet conditions, Argentina’s drought has driven crop ratings even poorer with the good to excellent rating now at just 2% for the crop. May soybeans have climbed back to their 50-day moving average and closed right on the line while Nov beans closed back above their 200-day average.
WHEAT HIGHLIGHTS: Wheat had a positive close led higher by KC wheat, as French wheat gained 1.1% and offered some support. Wheat exports were soft per usual as Russia dominates exports. May Chi gained 2-3/4 cents, closing at 7.12-3/4 and Jul up 1-3/4 at 7.19-3/4. May KC gained 9-3/4 cents, closing at 8.26 and Jul up 8 at 8.17-1/4.
Wheat moved higher again today in what feels to be a technical move with Chicago finding support earlier in the week at the 7.00, level while KC found support at the 8.00 level. Wheat futures are largely dominated by fund positions, and it is possible that they are easing up on their giant short position with world supplies so tight. Exports were light again last week, which has come to be the norm, and the USDA reported increases of 10.4 mb for 22/23 and 0.6 mb for 23/24. Shipments were 22.4 mb and were above the 15.8 mb needed each week to mee the USDA’s estimates. The US drought monitor showed signs of marginal drought reduction in the central and western Plains while the southwestern Plains are still expected to see extreme drought. With Kansas typically producing almost half of the HRW wheat crop and 25% of the winter wheat crop, production is expected to take a significant ding. Like in the US, European ending wheat stocks are the lowest in 24 years, but the continuous sales of cheaper Russian wheat are making it difficult to match their export pace. May KC wheat has posted a buy signal crossover in the stochastics and May Chicago wheat has done the same.
CATTLE HIGHLIGHTS: Live cattle futures fell under selling pressure as the market is looking at a seasonal top despite firm cash market and retail values. Feeders used weakness in grain market to finish mixed to higher on the day. Apr cattle fell 1.025 to 164.100, and June live cattle lost 1.150 to 159.450. Mar feeders gained 0.275 to 188.575.
The live cattle and feeder cattle markets look tired, and charts are showing some signs of weakness. April cattle closed under key supports on the day, and with the weak price action look to have further room to the downside in front of the market. The last couple corrections in April live cattle tested the 100-day moving average, which is near 160.350 on the close today. Any push lower would likely be technical in nature because the fundamentals are still supportive of the market in the longer term. Cash trade is slowly developing again this week. Scattered bids are out there, and they are being passed on. Trade will likely develop during the day tomorrow, which has been the pattern of late. Expectations are for the cash trade to be firmer than last week. Retail values were higher at midday with Choice gaining 1.07 to 288.90 and Select adding 0.21 to 276.64. The load count was still light at 41 midday loads. Weekly exports sales were released this morning and last week, the USDA reported new sales of 8,100 MT for 2023 were down 48% from the previous week and 62% from the prior 4-week average. Japan, Taiwan and China were the top buyer of beef last week. The feeder cattle market also looks on the defensive in the charts. Prices posted topping technical signals, but prices help firm on the day. The cash feeder index up 1.00 at 184.03. The index is still at a discount to the front-end futures. The cattle market looks a little tired again, failing to build of the most recent highs. The cash market will still be the driver as trade comes together later in the week. Prices may be due for some pullback, but the supply picture will limit any longer-term weakness.
LEAN HOG HIGHLIGHTS: Lean hog futures remain pressured by the premium to the cash market, despite support from the retail market. Apr hogs dropped 1.100 to 83.850, and Jun was down 0.225 at 100.575.
April hogs slid through support at the $84.50 level and the technical selling pushed prices lower, removing more premium to the cash market. The hog market is trying to trend higher, but the break today has the market concerned of a test of the recent lows could be in the works. The spread between April and June hogs is extremely wide at a $16.720 gap of June over April. That spread may need to narrow, the question is in which direction. The lean hog index gained 0.07 to 78.58, and the gap between the futures and index is 5.270. The market still needs the daily cash strength. The direct cash hog trade was .56 lower to 78.07. In the retail sector, midday trade was firmer, gaining .02 to 85.56. The load count was light at 158 loads. Hogs slaughter was 486,000 head on Thursday, up strongly from last week, which was impacted by a midwestern snowstorm. Slaughter was trending 9,000 over last year. Weekly exports sales were softer than last week’s large total with new sales last week at 31,000 MT for 2023 were down 40% from the previous week and 21% from the prior 4-week average. Mexico, South Korea, and Canada were the top buyers of US pork last week. The fundamentals have improved, and it feels like the hog market wants to work higher overall, but the strong price move lower in April is concerning. It looks like prices may need to go lower than higher in the short-term.
DAIRY HIGHLIGHTS: Milk futures were mostly lower in the Class III market today as April takes over as the second month contract. That chart is still testing a long-term trendline as the the rolling second months are looking at five straight weeks of holding weekly lows near $17.40. Spot cheese was down slightly but the spread worsened to 38 cents as barrel prices continue to anchor the overall average. Class IV action was mostly unchanged but saw some selling in the summer contracts, but hung in alright considering a 3.50 cent drop in butter today and just a quarter cent gain for the helpless spot powder. The USDA will release an updated Dairy Products Production report tomorrow afternoon.
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Author
John Heinberg