MARKET SUMMARY 4-11-2023

The April USDA report brought minimal changes to the U.S. soybean projections for the old crop marketing year, but the report made big adjustments to the Argentina soybean crop. As the country has dealt with drought conditions, the soybean crop and corn crops were severely affected. The USDA lowered its projection for the Argentina soybean crop to 27 MMT, down another 6 MMT from the March projections. This projection was 2.3 MMT below what market analysts were estimating. The USDA’s crop outlook has fallen 45% over the last for months, and today’s projection is the smallest projected crop in Argentina since 2000, and the lowest yield projection since 1989. The 2023 yield is projected at 26.8 bu/acre, which is 36% off the 5-year average. The weak Argentina crop provided some support to the market overall during the session today.

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CORN HIGHLIGHTS: 

• May futures ended the session at 6.51, down 3 cents, and new crop December lost 3-1/2 to close at 5.59-1/4.
• The USDA WASDE report was neutral. There were no changes made to any line items from March. U.S. carryout is forecasted at 1.342 bb. The Argentine crop was lowered to 37 mmt as expected from 40mmt. Brazil’s forecasted total corn production came in at 125 mmt, again the same as last month but below the average pre-report estimate of 126.4 mmt or slightly supportive. World carryout is 295.4 mm, down from 296.5 last month. Focus now turns to weather.
• Planting progress will pick up this week on favorable weather for most of the Midwest. As of Sunday, 3% of the nation’s crop was planted, in line with 2% for the 5-year average. Texas leads all states with corn planted at 61% versus a five-year average of 58%.
• The most recent 6-to-10-day outlook suggests mostly normal conditions. While planting will lag in the North, the Midwest should run at a faster than normal pace, especially in the drier regions of the western Midwest.
• Brazil’s weather the next 30 to 45 days will be critical. For the moment, no challenges yet net drying could occur for central states.
• Support for May futures is 6.40 and resistance at 6.68-1/2.

SOYBEAN HIGHLIGHTS:

• Soybeans closed higher today along with both meal and bean oil following the WASDE report in which virtually nothing was unchanged apart from South American production.
• Trade was expecting the USDA to lower ending stocks to 201 mb from 210 mb, but the number was left unchanged, and it is still the lowest level in seven years.
• The USDA estimated world soybean stocks to be higher at 100.29 mmt thanks to an increase in estimated Brazilian production from 153 mmt to 154 mmt.
• Argentina’s soybean crop has been decimated by drought and their production is now revised down to 27 mmt from 33 mmt, the smallest production in 22 years.
• Argentina’s third round of the soy dollar program is not working as well as it did the previous times as farmers hold onto their beans despite the exchange rate incentive as an inflation hedge.

WHEAT HIGHLIGHTS:

• May Chicago lost 4-1/2 cents, closing at 6.74 and July was down 6-3/4 at 6.84.
• May KC lost 7-3/4 cents, closing at 8.68-1/4 and July was down 8-1/4 at 8.50.
• Today’s WASDE report was relatively neutral overall, but perhaps a little negative to wheat on the carryout number.
• The USDA’s US wheat carryout number was pegged at 598 mb, up from 568 mb in March.
• World ending stocks for wheat were at 265.1 mmt, down from 267.2 mmt in March.
• Paris milling wheat futures are in a downtrend, which may act as an anchor for US futures.
• Conditions in Europe are mostly good, but India is harvesting in a warm and dry environment.
• On yesterday afternoon’s crop progress report, winter wheat was rated 27% good to excellent (down 1% from last week).
• Spring wheat is said to be 1% planted vs 4% average and 6% at this time last year.

CATTLE HIGHLIGHTS: 

• Cattle markets buyers stayed active both live cattle and feeder cattle markets as the prospects of strong cash trade this week supported by good retail demand tone pushed prices higher to finish with new contract highs.  Apr live cattle gained 0.925 to 172.300, and Jun added 0.250 to 163.950. Feeders followed suit supported by weaker cereal grains, posted triple digit gains, as Apr gained 1.175 to 202.100.
• Cash cattle trade was still undeveloped as bids remained quiet. The stronger retail market and tight supplies bring optimism that cash strength will continue again this week. Packer margins are still in the black, and that should support cash bids. Overall business will likely get put together later in the week.
• Retail values stay on their climb as Choice carcasses were 2.06 higher to 294.97 and Select gained 4.09 to 282.49 at midday. The load count was light at 54 loads. The higher retail value should help support cash bids.
• Today’s cattle slaughter was estimated at 126,000 head, steady with last week and last year.
• Feeders followed live cattle higher as corn and wheat markets were pressured after the USDA WASDE report. The Feeder Cash Index was 0.32 lower to 193.01. Countryside cash markets remain strong, supporting the discounted futures prices for feeders, as feeder futures contracts closed at new contract highs.

LEAN HOG HIGHLIGHTS: 

• Lean hog futures saw additional money move into the short side of the market as a disappointing afternoon close in the retail markets brought concern to cash prices. The Apr contract stays tied to the cash market and cash index, Apr hogs lost 0.325 to 73.050, and Jun futures traded 0.475 lower to 87.850. June futures look poised to rechallenge the most recent low from last week.
• Afternoon retail values closed 0.84 lower on Monday, losing all midday gains, helping trigger the selling on the open. At midday today, pork carcass values rallied, gaining 1.15 to 78.21. The load count was light at 172 loads. Like yesterday, the afternoon retail close may trigger the price sentiment for the Wednesday open.
• The cash market remains disappointing. At midday direct trade was down 0.78 to 70.14. The Lean Hog Cash Index lost another 0.24 to 72.64. The drop in the index limited the April contract on the session.
• Estimated slaughter for Monday was 345,000 head, impacted by the Easter holiday. Last week’s slaughter was at 485,000 head, as numbers should pick up later in the week.
• The hog market is still under technical selling pressure as prices are looking to to still find a bottom, and the premium of the futures to the cash keeps the market on the defensive.

DAIRY HIGHLIGHTS: 

• The second month Class III contract broke a 10-day losing streak today as the May contract held near long-term trendline support.
• The move came despite spot cheese falling to a 17-month low at $1.68875/lb, down more than 8.00 cents for the week so far.
• Cheddar barrels saw 16 loads traded today as it fell another 4.25 cents, bringing the recent move to nearly 40 cents off its March 27 close.
• Class IV futures caught a bid today as spot butter was unchanged and powder closed up 1.50 cents. Spot powder remains near a multi-year low.
• In its April WASDE report, the USDA raised its 2023 milk production forecast from 228.5 billion lbs last month to 228.7 billion lbs on higher cow inventory.

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Author

Brandon Doherty