MARKET SUMMARY 4-12-2023

Live cattle futures prices pushed to new all-time highs on Tuesday and saw additional buying support on Wednesday. The live cattle market has been fueled by tight cattle supplies and strong consumer demand, which has driven the cash market to its highest levels in years. With that, the April futures passed through the 2014 all-time high on the continuous spot month contract chart. In October of 2014, live cattle futures topped out at 171.975, but yesterday April futures closed at 172.300. The April contract gained an additional 1.975 on Wednesday, extending the new high. With Choice carcasses pushing to the $300.00 level and a cash market short on cattle, the trend is still higher at this time as live cattle prices chase the strong cash market.

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CORN HIGHLIGHTS: 

• May corn futures added 5-0 cents to close at 6.56, while December lost 3-3/4 as bull spreading is reflective of tight old crop inventory and good planting progress expectations this week for new crop.
• Ethanol grind was lower last week at 96 mb. Keep in mind last week was also a holiday week, so we would not read too much into the figure. The key will be if the grind increases in the next two weeks. Higher energy prices should boost margins and keep demand steady to strong. Ethanol stocks held steady at 25.1 million barrels reflecting good driving demand.
• Crude oil reached a 5-month high price today due to recent OPEC announced cuts and expectations for increased summer driving. Today’s CPI inflation data was lower than expected at 5% versus a year ago. U.S. climbed 0.1% last month after advancing 0.4% in February suggesting inflation is moderating.
• Warm temperatures and windy conditions are noted in western corn-belt states suggesting a good start to planting. It is also concerning how fast this might turn into a net drying situation.
• Weather in Brazil is being closely watched. So far, no expected stress to the crop.
• Resistance on May futures is 6.68-1/2 (high from last week) and 6.65, the upper Bollinger band.

SOYBEAN HIGHLIGHTS:

• Soybeans were bull spread today with a higher close in the May and July contracts but lower in the deferred months. Bean meal moved higher and bean oil lower despite higher crude.
• Despite the USDA not lowering soybean ending stocks yesterday, the current 210 mb is extremely tight and may get smaller if domestic demand keeps up a tight pace.
• Crude moved higher on positive inflation news, and the Energy Department released a report that showed supplies of ultra-low sulfur diesel down by 1.3 million barrels, but bean oil followed palm oil in which the June contract lost 3% today.
• The USDA’s cut yesterday to estimated Argentinian production to 27 mmt would be the smallest crop in 23 years and has provided support to the market despite Brazil’s production being raised by 1 mmt.

WHEAT HIGHLIGHTS:

• May Chicago gained 5-1/2 cents, closing at 6.79-1/2, and July was up 3 at 6.87.
• May KC lost 4-3/4 cents, closing at 8.63-1/2, and July was down 3-3/4 at 8.46-1/4.
• The lower US Dollar Index today may have helped Chi wheat to rally.
• The continued downtrend of Paris milling wheat futures may limit upside movement for US markets.
• Yesterday’s WASDE report showed US wheat carryout up 30 mb from last month. A decline in feed usage accounts for 25 mb, while the other 5 mb is due to an increase in imports.
• Continued cheap Russian wheat prices are cutting into US exports.
• There is still concern over the Black Sea export corridor and a question as to whether it will be extended in May.
• Winter wheat conditions in Kansas are rated only 19% good to excellent.
• Managed funds remain net short Chi wheat.
• Some areas in the Dakotas still show heavy snow cover that will delay spring wheat planting.

CATTLE HIGHLIGHTS: 

• Cattle markets see more new highs as buyers stayed active both live cattle and feeder cattle markets on the prospects of strong cash trade this week supported by good retail demand pushed prices higher. Apr live cattle gained 1.975 to 174.275, and Jun added 0.900 to 164.850. Feeders followed suit supported by weaker cereal grains, posted triple digit gains, as Apr gained 0.125 to 202.225, and June added 0.750 to 208.575.
• Cash cattle trade was still undeveloped, but southern early bids were at $175. Dressed trade was at $280, but those were passed on at this point.  The stronger retail market and tight supplies bring optimism that cash strength 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 stayed on their climb as Choice carcasses were 3.33 higher to 298.43 and Select gained 1.04 to 283.08 at midday. The load count was light at 69 loads. The Choice/Select spread is trading at 15.35 but has a tendency to widen in this time window, which should help support packer margins. The higher retail value should help support cash bids.
• Today’s cattle slaughter was estimated at 125,000 head, up 2,000 over last week.
• Feeders followed live cattle higher as corn and wheat markets were pressured after the USDA WASDE report. The Feeder Cash Index was 0.23 lower to 193.24. Countryside cash markets remain strong, supporting the discounted futures prices for feeders, as feeder futures contracts closed at new contract highs.
• April Feeders expire at the end of the month, and gains may be limited by the premium of the futures to the cash index.

LEAN HOG HIGHLIGHTS: 

• Lean hog futures still struggle to hold early session games as the base fundamentals in the market stay weak, limiting price gains. The Apr contract stays tied to the cash market and cash index. Apr hogs lost 0.750 to 72.300, and Jun futures traded 0.300 lower to 87.550.
• June futures rechallenged the most recent low from last week, and price helped support, but overall price action was weak and the premium of the June to the cash market is concerning.
• Pork retail values were soft at midday today, pork carcass values lost 1.61 to 75.85. The load count was light at 170 loads. The weak retail tone keeps the cash market bids limited.
• The cash market remains disappointing. At midday direct trade was down 0.14 to 70.00. The Lean Hog Cash Index lost another 0.12 to 72.52.
• Estimated slaughter for Monday was 476,000 head. This was 1,000 less than last week and steady with last year as slaughter pace stays heavy, limiting the cash market.
• The hog market is still under technical selling pressure as prices are looking to still find a bottom, and the premium of the futures to the cash keeps the market on the defensive.

DAIRY HIGHLIGHTS: 

• Buyers returned to the dairy trade on Wednesday and pushed second month Class III 33c higher to $18.24, while second month Class IV added 16c to $17.85.
• The market had been leaning oversold heading into this week, so it’s not surprising to see buyers support the market after the strong sell-off over the past two weeks.
• The cheese market continues to be under duress, though. The block/barrel average has closed unchanged or lower in 11 out of the last 12 sessions.
• Spot butter added 2.50c to $2.3750/lb while powder caught a bid as well.
• The whey trade continues to have a lot of inventory changing hands. On Wednesday, the price came up a penny to $0.3750/lb on another 12 loads traded.
• A dairy farm explosion in Texas reportedly killed upwards of 18,000 cattle this week.

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Author

John Heinberg