MARKET SUMMARY 4-13-2023

The latest winter wheat crop ratings the USDA released on Monday continued to show the poor condition of the U.S. winter wheat crop. As of April 9, 37% of the U.S. winter wheat crop was rated poor/very poor, with only 27% rated good/excellent. This poor rating was the second worst on record with only the 41% poor/very poor rating in 1996 being worse. Despite those ratings, KC winter wheat futures are trading 15-16 cents lower on the week. The prospects of improved rainfall chance in the next couple weeks are a main reason for the market pressure. Unfortunately, the southern Plains have seen high temperatures and strong winds over the past couple days, which has only stressed the crop even more. Markets move on perception, and despite some of the potential rainfall being too late in some areas, the perception is some drought relief could be the way.

CORN HIGHLIGHTS: 

• May futures close 3-3/4 cents lower at 6.52-3/4, well off the daily high of 6.61-3/4. December futures lost ground as well, ending the session at 5.53-3/4 down 1-3/4.
• Export sales at 20.8 mb were considered a disappointment. This brings the year-to-date total to 1.486 bb or 80.3% of the total expected sales of 1.850 bb. For reference, export sales for the same time last year were 2.196 bb, or 710 mb more than the current figure.
• An announced sale of 327,000 mt (12.88 mb) to China, or which 191,000 mt is for the 2022/2023 marketing year failed to ignite much interest on futures.
• Argentina’s Rosario Exchange lowered their corn estimates yet again to only 32 mmt compared to 35 mmt previously. While not a surprise, today’s adjustment confirms the Argentine crops is shrinking. The market seems content of the idea that Brazil will make up for the shortfall in Argentina.
• The U.S. dollar dropped to its lowest level today since the first week of February. Prior to February, the last time the dollar was lower was April 2022.
• End users are still likely hand to mouth in usage considering there is no urgency to buy aggressively, especially with wheat prices continuing to decline.

SOYBEAN HIGHLIGHTS:

• Soybeans started the day significantly higher due to a decline in Argentinian production estimates but ultimately closed bear spread with small losses in the May contract and gains in deferred months.
• The Rosario Grain Exchange cut Argentina’s soy crop again to just 23 mmt due to the extreme drought, while the USDA still has their production at 27 mmt, so further cuts in the next WASDE are likely.
• Last week’s soybean net sales were good at 364,500 mt for 22/23, which was up 17% from the prior 4-week average.
• Exports were 684,000 mt, which was up from last week but down 9% from the prior 4-week average.
• Although Brazil’s estimated soy production was raised to 154 mmt, the decline in Argentinian production has been a big bullish factor and has been behind the recent bull spreading trend, especially since Argentinian farmers have been unwilling to sell their cash beans.

WHEAT HIGHLIGHTS:

• May Chicago lost 12-1/2 cents, closing at 6.67, and July was down 11 at 6.76.
• May KC lost 18-1/4 cents, closing at 8.45-1/4, and July was down 15 at 8.31-1/4.
• KC wheat led the way lower as the weather forecast is calling for chances of rain in some of the driest areas of the southern Plains.
• Taiwan is said to have purchased 52,850 mt of US milling wheat.
• The USDA reported an increase of 5.0 mb of wheat export sales for 22/23, and an increase of 2.5 mb for 23/24.
• The most recent winter wheat crop rating at 27% good to excellent should provide support to futures.
• The US Dollar continues to fade, but so does Paris milling wheat futures, which may act as a drag on US futures.
• The forecast for more rain in North Dakota may further slow or delay spring fieldwork.

CATTLE HIGHLIGHTS: 

• Cattle markets posted technical reversals during the session on Thursday. Prices finished well off session highs as some profit taking entered the live and feeder cattle markets and traded mostly lower despite a strong cash trade developing this week.
• Apr live cattle, still tied to cash, gained 1.225 to 175.500, but Jun lost 0.350 to 164.500 and traded 1.775 off the session high. Feeders followed suit and saw profit taking overall, but Apr traded higher gaining 0.450 to 202.675, but June lost 0.775 to 207.800.
• Cash cattle trade is still developing, but prices are well over last week’s levels. Nebraska saw dressed deal at $290, up $11 over last week, and live sales from $182-185, trading $7-10 higher than last week. Trade is still developing into the afternoon and tomorrow.
• Weekly exports sales for beef posted new net sales of 8,700 MT for 2023 were down 36% from the previous week and 43% from the prior 4-week average. South Korea, Japan and Mexico were the top buyers of U.S. beef last week.
• Retail values stayed on their climb as Choice carcasses were 1.92 higher to 300.40 and Select gained 1.44 to 283.08 at midday. The load count was light at 49 loads. The Choice/Select spread is trading at 17.15 but tends to widen in this time window, which should help support packer margins.
• Today’s cattle slaughter was estimated at 125,000 head, up 2,000 over last week.
• Feeders followed live cattle lower as prices saw profit taking and technical reversals. This opens the door for additional profit taking with the weak price action. The Feeder Cash Index jumped 6.53 higher at 199.77.
• 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 tumbled to new lows as the market stayed weak, led lower by struggling retail values, cash prices and heavy hog slaughter totals. The Apr contract hogs lost 0.700 to 71.600, and Jun futures traded to new contract lows losing 1.900 to 85.650.
• Deferred hog futures pushed to new lows across the board. The premium of the futures to the current cash market limits most upside potential as the cash market stayed soft.
• Managed funds are growing the short side of their hog position. Last week, funds were net short 22,000 lean hog contracts, and that number has likely grown again this week.
• Pork retail values were firmer at midday as pork carcass values gained 76.61. The load count was light at 160 loads. The overall weak retail tone keeps the cash market bids limited.
• The cash market remains disappointing. At midday direct trade was down 0.67 to 69.33. The Lean Hog Cash Index lost another 0.27to 72.25.
• Weekly export sales for pork posted new net sales of 27,100 MT for 2023; this is down 49% from the previous week and 31% from the prior 4-week average. Japan, Mexico, and China were the top buyers of U.S. pork last week.
• 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: 

• After garnering 47 cents of gains in the last two days, May Class III futures dropped 29 cents today to keep the recent turbulent trend intact.
• The block/barrel average fell for the 11th time in the last 13 trading days today to fall to $1.67/lb, its lowest point since November 2, 2021.
• Cheddar blocks are pushing to an uncomfortable premium over barrels once again, finishing today 24.50 cents higher as barrel demand continues to falter.
• Class IV action was mostly lower today as well with butter down 3 cents in today’s spot trade. Spot butter enters Friday up 2.75 cents for the week.
• While Australian milk production continues to be down vs. the last couple marketing years, New Zealand production is trending higher again and down just 1.5% YoY.

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Author

Bryan Doherty