MARKET SUMMARY 4-14-2023

Class III milk price broke to new lows this week as the slide in the value in this market that started in the fall continues. On September 12, the May milk futures peaked at $21.00/cwt but since then has been on a downward slide, closing today at $17.69, a new low for the move. Only a short-term spike in March brought some relief as the market jumped higher supported by the weather issues and flooding in California. Despite that condition, the milk market has been hampered by ample supplies of milk and heavier milk cow numbers. In the April WASDE report, the USDA raised their milk production forecast for the year on larger than expected cow inventory numbers. The ample milk supplies have impacted cheese prices as barrel supplies are growing, pushing that price down 20 cents on the week. The combination of factors keeps the path in the milk market lower in the short term.

CORN HIGHLIGHTS: 

• May corn futures added 14 cents to close at 6.66-1/4, its highest close since February 22. December new crop added 6-1/4, ending the session at 5.60. For the week, May gained 22-3/4 cents and December 3-1/4.
• An announced sale to China for the second consecutive session was viewed as supportive. The total was 382,000 mt, with 246,000 mt (9.7 mb) for the current marketing year.
• Double digit gains in the wheat market provided spill-over support. Talk that Russia is not excited to renew its Black Sea export deal, along with a poor hard red winter wheat crop in the U.S. were noted adding strength to corn futures.
• Crude oil (near 82.00 per barrel) is trading near 18.00 higher than less than a month ago suggesting improving ethanol margins as the summer driving season approaches.
• A cooler/wetter forecast will slow field work and planting after this weekend. Some forecasters are suggesting very cold temperatures could be in store for the end of next week reaching into the southern corn producing states.
• May futures are testing over-head resistance at the high from last week, 6.68-1/2 and the upper Bollinger band at 6.68. December support is at the calendar year low of 6.47-1/2, and resistance at the recent high of 5.76-1/4.

SOYBEAN HIGHLIGHTS:

• Soybeans closed lower today with the majority of losses in the deferred contracts as tight on hand supplies give some level of support to the front months.
• New crop soybeans have struggled to move higher as the US expects a large crop this fall and as Brazil harvests their record crop estimated at 154 mmt even though Argentina’s production has been severely lowered due to drought.
• Chinese soybeans on the Dalian exchange fell 9% in March as Brazilian beans make their way to China and the spread of ASF in northern China has reduced their feed demand.
• With exports dropping off as Brazil gets the majority of export business, the expansion of biofuel plants should be supportive to bean oil, but it will be a few years before those plants are operational.

WHEAT HIGHLIGHTS:

• May Chicago gained 15-1/2 cents, closing at 6.82-1/2, and July was up 16-1/2 at 6.92-1/2.
• May KC gained 33-1/2 cents, closing at 8.78-3/4, and July was up 32 at 8.63-1/4.
• KC wheat led the way higher today due to weather concerns.
• Talk that the Black Sea export corridor deal may not be extended again is supportive to futures.
• Paris milling wheat futures also closed in the green today, with the front month May contract gaining 2.75 to close at 250 Euros per metric ton.
• Wheat showed strength despite the US Dollar also rallying today – these two tend to share an inverse relationship.
• Ukraine’s wheat production is estimated to fall to only 14 mmt (vs 27 mmt previously).
• Southwestern Plains soil moisture levels are said to be 80% short to very short.
• Cold temperatures this weekend could potentially affect the winter wheat crop as far south as Kansas.

CATTLE HIGHLIGHTS: 

• Cattle markets posted technical reversals during the session on Thursday and saw some follow-through selling to end the week. Some profit taking and long liquidation entered the live and feeder cattle markets and traded mostly lower despite a strong cash trade developing this week and record Choice carcass values developing.
• Apr live cattle lost 0.750 to 174.750, and Jun lost 0.775 to 163.725. Feeders were mixed to mostly lower, with front-end strength due to a jump in the cash index. Apr traded higher gaining 0.725 to 203.400, but May added 0.100 to 207.900. Remaining deferred feeder futures traded lower on the session.
• Cash cattle trade was mostly done for the week. On the week, northern live deals ranged from $283 to $290, mostly $290, which was $11 higher than last week’s trade. In the South, live deals have had a range of $170 to $180, mostly $175, $5 higher than the previous week. Expectations are for cash trade to hold firm into next week as well.
• Retail values stayed on their climb as Choice carcasses were 1.51 higher to 301.93 and Select gained 1.03 to 284.41 at midday. The load count was light at 53 loads. The Choice/Select spread is trading at 17.52 but tends to widen in this time window, which should help support packer margins.
• Feeders were supported on the front-end by a nearly $8.00 jump in the cash index to end the week. On Friday, the Feeder Cash Index jumped 1.54 higher at 201.31, supporting the April futures.
• 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 saw some end of week profit taking and short covering to allow prices to finish mostly higher. The Apr contract stays tied to the cash market and gained 0.150 to 71.750. Jun futures traded 1.225 higher to 86.875.
• Despite the strength on Friday, June hogs consolidated on the day, trading within the range on Thursday and finished the week losing 1.300 overall as the chart still look defensive.
• The premium of the futures to the current cash market limits most upside potential as the cash market stayed soft.
• Pork retail values were firmer at midday as pork carcass values gained 2.02 to 79.58. The load count was light at 160 loads. The overall weak retail tone keeps the cash market bids limited, but prices tried to find some stability this week.
• The cash market remains disappointing. At midday direct trade was down 0.70 to 68.63. The Lean Hog Cash Index lost another 0.30 to 71.95 and was 1.96 lower on the 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: 

• Following through on yesterday’s losses, Class III and IV futures were again under selling pressure, with many Class III contracts giving up midweek gains.
• CME cash barrels were extremely active with 70 loads traded, the most active week of trading since 6/30/2018.
• CME cash whey followed barrels with heavy selling throughout the week, 47 loads traded during the most active week of trade since 1/11/2020.
• US weekly dairy cow culling for the week ending 4/1 was up 9.5% YoY as cattle and beef supplies continue to be tight and prices great.

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Author

John Heinberg