MARKET SUMMARY 4-21-2022
The December corn futures have experienced a 2.00 rally since the invasion of Ukraine by Russia. A hook reversal was posted Tuesday after prices reached a new contract high of 7.55. (A hook reversal is when a contract takes out the previous session high price but closes lower than the previous session). Couple that with futures up against the Bollinger Band (area of resistance) and in overbought territory on stochastics, and prices could be signaling they are about to change direction. Stochastics also indicated a sell signal when the K line crossed below the D line.
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CORN HIGHLIGHTS: Corn futures were just as unimpressive today as they were impressive yesterday. Futures softened into the morning session and continued to grind lower all the way into the close. May futures gave up 16-1/2 cents (last trading day for May options is tomorrow), July lost 14-3/4 to close at 7.95-1/2, and December dropped 9-3/4 to end the day at 7.38-3/4. A drier 6-to-10-day forecast was likely responsible for today’s weakness. Export sales were solid at 34.6 mb old and 15.3 mb new crop.
Year-to-date has sales at 2.230 bb. While behind lasty year’s 2.645 bb at this same time, sales have been steady and on track to meet the USDA’s forecast for 2.5 bb. To date, 89.2% of the USDA’s forecast has been sold. All attention will focus on Brazil weather where a dry region is developing. Additionally, planting progress here is the U.S. becomes more critical. There was no planting reported this past week in Iowa, Illinois, and Indiana. If the 6-to-10 day holds, expect farmers to make swift progress. Snug inventory and expectations for strong demand provide support, yet the market is suddenly, potentially, losing steam.
SOYBEAN HIGHLIGHTS: Soybean futures edged higher continuing their winning ways adding 1-1/2 cents in May to close at 17.48-1/4 and November picking up 2-1/4 cents to close at 15.31-3/4. Both scored new contract high closes. Export sales were solid at 16.9 mb old and 45.6 mb new crop. Meal was down 1.00 to 2.00 but soybean oil gained 60 to 89 points on tight world vegetable supplies, higher palm oil futures, and firmer canola futures. Expected shortfalls due to lack of Ukraine supplies is friendly to price.
Total export sales are 2.098 bb or 99.2% of projected sales of 2.115 bb. It would take 17 mb to reach the USDA current forecast. Rumors continue to circulate that China is in the market to buy more. The ratio November soybean futures divided by December corn futures is in favor of corn. However, when prices are high, we are not necessarily convinced that ratio has as much impact as does input costs and dollars per acre generated. Bottom line, we still expect some acres of soybeans to move back to corn yet probably not as much as some are anticipating. Fertilizer cost remain sky high and availability in question. Soybeans still appear to be a strong choice. Because of this we stay with a mindset that prices are moving higher on tight near-term supply, however, supplies in the year ahead could be on the increase due to more acres here at home as well as more acres planted by Brazil next fall.
WHEAT HIGHLIGHTS: Wheat futures suffered another round of selling pressure today. A mix of profit taking, poor export sales data, and a general lack of fresh news are likely to blame. May Chi lost 20 cents, closing at 10.68 and July down 21 at 10.76-1/2. May KC lost 25-1/2 cents, closing at 11.37-3/4 and July down 26 at 11.43-1/2.
Long liquidation was the theme today in the wheat market with double digit losses in all three classes. The market may have been experiencing a new round of profit taking at some key resistance levels. Additionally, poor export sales data likely added to selling pressure. Old crop export sales were pegged at only 1.0 mb and the USDA reported 8.8 mb for 22/23. Total wheat commitments are down 24% vs last year. The anticipated shift in demand for wheat from the Black Sea to the US has not yet occurred and US prices are at a premium to European and other origins. Even some Russian wheat is still being exported at a discount to the US. Sov Econ reported that Russia’s wheat crop will be record large at 87.4 mmt. On a bullish note, southern Plains weather remains supportive. Drought in that region has been increasingly concerning and only looks to get worse over the next two weeks. Heavy winds are also a concern in the HRW wheat belt with many areas being compared to the dustbowl. Parts of North Dakota and Montana have the opposite problem – a winter storm watch is in effect, which could delay spring wheat plantings.
CATTLE HIGHLIGHTS: Live and Feeder cattle futures firmed again today with sharp gains noted in both. August led the live complex higher gaining 1.42 and August Feeders surged 2.97 higher to end the session at 176.45. Weaker corn prices propelled feeders firmer as did likely long-term buying interest as supplies will be smaller into summer and fall. The live market was the recipient of short covering at a gain of 94 cents for choice cuts this morning. Firmer cash prices by 1.00 to 4.00 in both the south and north provided the backdrop for higher futures.
Estimated slaughter was 122,000, which is 1000 more than last week at this same time. Expectations for a stronger start to the grilling season in the weeks ahead is providing underlying support as retailers stock up on inventory. We continue to argue that the supply of feeders will gradually decline into the summer and fall months as end users continue to tell us their buyers are warning them that supplies could be tight through the end of the year. High corn prices suggest feedlots will be reluctant to add any extra poundage. This will likely show up in the weeks ahead as well. The market has had heavier cattle to work through which should be winding down soon.
LEAN HOG HIGHLIGHTS: Hog futures suffered another day of selling pressure and long liquidation. May is still at a premium to the index, but the difference is starting to narrow. May hogs lost 1.625, closing at 110.850 and June was down 1.575 at 117.175.
Weekly pork export sales of 12,900 mt were not supportive – a marketing year low – down 46% from last week and down 55% from the previous four-week average. Mexico was listed as the largest buyer. Lower cutouts early this week could also be a contributing factor to the selloff, as stops were triggered, and momentum pulled the market lower. Additionally, the May contract is at a large premium to the index and will likely limit upside potential. The roughly 10-dollar premium is starting to converge however, and as it does, traders may be more willing to buy back into the market. The recent dip in prices may also give the bulls the push they need to reestablish their long positions. On a supportive note, the prices of poultry and eggs are increasing alongside the rise in cases of avian flu (which appears to be spreading rapidly). This could lead to consumers shifting demand to pork and beef products.
DAIRY HIGHLIGHTS: The class IV market is starting to reverse to the downside after months and months of steadily higher price action. It appears that the surge in global and domestic demand for butter and powder is starting to get back to more normal levels, which is pushing down the price of each commodity. Spot powder has closed lower three days in a row and finished Thursday at $1.7775/lb – its lowest price since January 27th. Spot butter has closed lower in four out of the past five sessions and is back down to $2.69/lb, a new low for the month. Today’s butter trade had the market down 3c on 3 loads traded. With these two spot products dropping, it is giving resistance to class IV. Second month class IV fell 21c to $24.66 on Thursday. There was steady offering across the first five months.
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Author
Bryan Doherty