TFM Daily Market Summary 4-18-2022

MARKET SUMMARY 4-18-2022

Weekly soybean export inspections are beginning to break out of seasonal trends. USDA release weekly export inspections on Monday morning, and inspections last week totaled 972,509 mt (35.7 mb), up from 819,000 MT last week. Most importantly, the weekly totals are trending atypically with the seasonal pattern for soybean shipments. Under the influence of the fresh South American supplies, U.S. soybean shipments typically decline in this time window, but the last couple of weeks has that pattern changing. The impact of dry weather conditions in South American has limited the soybean crop this spring, and the export window is likely tighter than usual for the new supplies. In addition, end users are staying active in purchasing soybean supplies due to food security concerns. Total export inspections for the marketing year are still running down 17% below last year, while the USDA is predicting a 6% total decline for the marketing year. With the uptick in recent shipment, the gap than need to be filled with additional shipments is quickly shrinking.

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CORN HIGHLIGHTS: Corn futures left off where they ended last week with continued strength. History is in the making as the market comes to grip with major supply loss issues expected out of Ukraine, higher energy prices and a general tone that inflation is out of hand. Strength in wheat and soybean prices as well as other commodities underpinned today’s push through 8.00 in both the May and July contracts. July futures closed at 8.07, a gain of 23-1/4 cents, and December added 14-1/2 to finish the session at 7.49-3/4.

While overbought, market momentum continues to drive prices higher as traders who are long are finding it somewhat easy to add to positions. The stock market has stalled, and with headline news continuing to show issues in Ukraine, drought in the southern Plains and high energy prices, the market continues to increase in price. We are not of the mindset that either Brazil’s second crop corn nor U.S. weather is far enough along to make an argument for lower yields. Yet, some dry pockets in Brazil and a continued forecast for above normal precipitation in the 6-to-10-day outlook suggested conditions are not ideal either. Today’s close above 8.00 look impressive with July now in a position to test 8.25 and the all-time high of 8.49-3/4.

SOYBEAN HIGHLIGHTS: Soybean futures continued their upward momentum, gaining 19 to 32-1/2 cents today on strength in completing grains, announced export sales, short covering, inflation, and higher energy prices. May soybeans added 32-1/2 to close at 17.14-3/4, its highest close since late March. November added 19-1/2 cents to end the session at 15.21, a very solid close above the 15.00 mark and a new contract high finish. Thoughts of higher corn prices pulling acres from soybean have kept traders on the offense buying new crop soybean.

Export inspections at 35.7 mb and today’s announced sales of 278,000 mmt for 2021/2022 delivery and additional sales of 540,000 mmt for next year were great numbers. Soybean futures are gaining momentum. Strength in edible oils had soybean oil gaining more than 100 points, while gains in Malaysian palm oil and canola were noted. Bottom line, it was a good day of inspections, announced sales, and technical trade activity. We would not be surprised to see additional gains tomorrow. Adverse weather is suggesting an early start in the planting season is less likely. Temperature remains cool in the immediate outlook with rainfall expected to be above normal for many in the latest 6-to-10-day outlook. Firmer energy prices are viewed as favorable.

WHEAT HIGHLIGHTS: Wheat futures rallied today, not due to one factor or headline, but rather several issues that are setting a bullish tone in the marketplace. May Chi gained 24 cents, closing at 11.20-1/2 and July up 24-1/4 at 11.28-3/4. May KC gained 31 cents, closing at 11.85 and July up 31-3/4 at 11.89.

Corn, soybeans, and wheat all traded higher today as the market took a risk on posture. There was no singular headline to point to as a cause for higher trade, but rather a culmination of several factors. As for wheat, the number one issue remains the war in Ukraine; reports of new shelling attacks on western and northern cities over the weekend do not provide much hope of an end any time soon. Each day that passes results in more concern about agriculture production and exports out of that region. Number two is the worry about dryness in the US southern Plains. While there is some moisture forecast this week, it looks like it will be less than previously thought and mostly in eastern HRW wheat areas. Western areas have been compared to dust bowl conditions and parts of Texas are expected to be in the 90s this week. Number three is the poor winter wheat crop ratings (mainly due to plains drought). This afternoon’s Crop Progress report is expected to show lower ratings. In addition to the aforementioned issues, spring wheat planting could be hindered. Though they need the moisture, there is a lot of snow in the northern plains and Canada which is delaying things there.

CATTLE HIGHLIGHTS: Cattle futures had a difficult day, led by strong selling Feeder cattle market, fueled by the strong move higher in grain markets. Cattle futures closed lower on poor price action, despite the prospects of higher cash trade this week. Apr live cattle lost 0.200 to 140.475, but Jun was 0.625 lower to 135.800. For feeders, May dropped 2.625 to 159.150.

Difficult price action to start the week as June cattle had a strong start to the day, but faded, posting a daily chart bearish reversal on the charts. Prices challenged the strong resistance barrier will be at the 50-day and 100-day moving averages near $137.500. The failure at this level led to profit taking. The technical picture looks weak, and some additional selling pressure is likely going into Tuesday. Cash trade may still be the key for price stability this week. Typical Monday, bids and offers were undeveloped. Expectations will be for the cash market to stay firm going into next week as well. Monday’s slaughter totaled 118,000 head, 6,000 less than last week, and 1,000 below a year ago. Slaughter trends being tighter could start the signal of an overall tighter cattle supply. Beef cutouts were mixed at midday (Choice 271.77 -2.01; Select 259.79 +0.29), with light box movement of 38 loads. The trend in Choice boxes last week’s finish the week mostly steady from the Monday close, but slightly firmer on the week. The cattle market is expecting to see improved retail demand as stores prepare for May and the Memorial Day holiday. The feeder market saw strong triple-digit losses. Apr feeders are likely tied to the index, which lost 1.33 to 154.62 but is running at a discount to front-month futures and could be a limiting factor. With corn prices pushing through the $8.00 a bushel price level, feeders became the automatic sell. Cattle on Feed report is Friday this week, and the market is expecting to see feeder placement decline year-over-year, which could support Feeder prices. Cattle prices looked like they were turning last week, but that feeling dissipated on Monday. Charts turned more negative, as prices failed at key levels of resistance. The near-term trend looks softer, unless the cash market can help build some support.

LEAN HOG HIGHLIGHTS: Hog futures bull spread and strongly higher in the front month contracts, as the market may be anticipating hogs supplies to begin to tighten seasonally. May hogs are the new lead month, gained 3.775 to 116.525, and the more actively traded June contract added 3.925 to 122.400.

Hog futures used the momentum for the strong close last week to trigger additional buying support to start this week. June hog futures crossed the 20-day moving average and rallied through the price gap on the charts. The strong close at the top of the range on Monday will likely keep additional buying support into the market to start Tuesday, as price may look to challenge the most recent high. The cash market has been a concern. National Direct midday values were unreported versus Friday trade, but the weight average price was 94.05 but the 5-day average worked lower to 965.95, reflecting the overall trend. The Lean Hog Index was firmer, gaining 0.79 to 99.98. The deferred futures premium over the index is concerning and could be a limiting factor, as May takes over the new front month and is trading at a 16.545 premium to the index. Pork carcasses showed strong midday trade, helping support buying strength. Pork carcasses were 6.05 higher to 116.26 on a load count of 150 loads. Daily hog slaughter is estimated at 353,000 head, down sharply from last week, and is likely tied to the Easter weekend. The hog market numbers are still expected to tighten, and the rate of slaughter may be our first indicator of supplies tightening. Strong price move, and technical strength to start the week. Strong retail values should support the market, cash markets will still be the key. Prices do seem poised to re-challenge the recent highs if follow through buying can trigger additional money flow.

DAIRY HIGHLIGHTS: Class III milk futures had a setback on Monday as the market took a pause to start the week. The fact that there was offering in the cheese barrel market 2.50c lower than Friday’s settlement as 5 loads traded kept pressure on futures. On the other hand, the block cheese market was actually bid 2.50c higher on 5 loads traded, but a 5 lot offer at $2.3975/lb left on the board may cause some pessimism going into tomorrow. Today could be a sign that cheese sellers may be starting to get more aggressive with prices up at their highest level in about a year and a half. The class IV market was quiet today with no price change in the first seven contracts. Spot butter fell 1.50c while spot powder was unchanged in the spot session.

Total Farm Marketing and TFM refer to Stewart-Peterson Group Inc., Stewart-Peterson Inc., and SP Risk Services LLC. Stewart-Peterson Group Inc. is registered with the Commodity Futures Trading Commission (CFTC) as an introducing broker and is a member of the National Futures Association. Stewart-Peterson Inc. is a publishing company. SP Risk Services LLC is an insurance agency. A customer may have relationships with all three companies. TFM Market Updates is a service of Stewart-Peterson Inc. Futures and options trading involve significant risk of loss and may not be suitable for everyone. Therefore, carefully consider whether such trading is suitable for you in light of your financial condition.

Author

Bryan Doherty

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