The CME and Total Farm Marketing offices will be closed Monday, June 20, 2022, in observance of Juneteenth Day
MARKET SUMMARY 06-16-2022
Weekly export sales were very lackluster this week, and this recent trend has shown up in sales of bushels for the 2022/23 marketing year. Despite the quieter tone in sales overall, only 138,900 MT on this week’s export sales report, new crop sales on the books still remain very strong, only the 2020/21 marketing year had a better start, due to the Chinese stepping into the market aggressively in the spring of that year. The total volume sold for the new year is above average at 5.9 MMT. Within those sales, 46% of the bushels are sold to China. At 5.9 MMT, that covers 10% of the current USDA export forecast for that marketing year. The strong start in export sales has been supportive of prices, and if the sales pace begins to pick up, as the market historically sees in the summer months, the strong demand tone should help keep prices supported well into the summer and fall.
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CORN HIGHLIGHTS: Corn futures rallied, as did soybeans and wheat, on growing weather concerns and technical short covering. Strong basis levels are reflective of tight supplies, slow farmer selling, or both. Jul corn ended the session adding 14-1/4 cents to 7.88-1/4 and Dec closed 14.0 higher at 7.35. Crude oil prices firmed, also contributing to strong gains. A very solid close above both the 40 and 50-day moving averages and a potential right shoulder forming on an inverted head and shoulder formation all look supportive for prices today.
Today was the strongest finish in corn futures in over three weeks. What perhaps makes today’s trade impressive is not only a solid close but in face of another harsh sell-off in the stock market. The Federal Reserve raised interest rates 0.75% and an increase is already expected for next month. Is inflation friendly or negative for corn prices? On the one hand, higher input costs pinch margins which can make farmers stingy sellers. On the other hand, consumers and end-users are paying more for everything and may likely think less about paying more for high-priced corn, as it is just part of the overall mix of higher-priced inputs. Our bias lies more on the side of farmers being reluctant sellers as sticker shock for inputs from fertilizer to parts is creating a very uneasy feeling among producers. A longer-range forecast from NOAA is suggesting warmer and drier into early July.
SOYBEAN HIGHLIGHTS: Soybean futures had a nice close higher with good export sales numbers, despite bearish outside influence from equity markets. Getting the Federal Reserve’s rate hike out of the way yesterday allowed grain markets to rebound a bit today. Jul soybeans gained 15-3/4 cents, closing at 17.09-1/2, and Nov gained 19-3/4 cents at 15.43-1/4.
Net export sales for the 21/22 marketing year were 11.7 mb, down 26% from the previous week and down 16% from the prior 4-week average. Net export sales for the 22/23 marketing year were 15 mb were sent primarily to unknown destinations, China, and Japan. Shipments of 26 mb are above the weekly average of 23.8 mb needed to reach the USDA’s estimate of 2.170 bb. At this point, soybeans have lost a competitive advantage on the export front with Brazilian soybeans now being cheaper for Jun through Aug. Yesterday’s cancellation of a 3.7 mb sale to unknown was likely China cancelling in order to buy cheaper beans from Brazil, and it is possible that China could continue to cancel or roll more U.S. sales and replace with the cheaper Brazilian beans. The balance sheet for old crop U.S. beans remains very tight, but soybeans in the ground are in good shape with an average rating of 70% good-to-excellent. Increased heat and dryness over the next couple of weeks may put some strain on the crop. Crude oil was higher today, but soybean oil refused to follow it up, while soybean meal had a good close with Jul closing above its 50-day moving average for the first time since late April.
WHEAT HIGHLIGHTS: Wheat futures showed a nice recovery today with double-digit gains in both Chi and KC. Concerns about Ukraine’s harvest are again leading the charge higher. Jul Chi gained 28-1/4 cents, closing at 10.78-1/4 and Dec up 24-1/2 at 11.03. Jul KC gained 15-1/4 cents, closing at 11.48-1/2 and Dec up 16 at 11.64-1/4.
Wheat took off today following estimates out of Ukraine that about 5.9 million acres of winter crops would not be harvested due to the war. World leaders, including those from France, Germany, and Canada are also in Ukraine and still trying to come up with a plan to open up exports of food. As we mentioned yesterday, the Biden administration is talking about building storage silos on the border of Ukraine and Poland in an attempt to help move grain to the west. Some are estimating, however, that if they started now it would take anywhere from 3-8 months to complete this project. Romania has reportedly promised to help move and store Ukrainian grain as well. Today there were also rumors that Indonesia purchased some cargoes of SRW wheat which may have contributed to the bounce in the market. Weatherwise, Italy, France, and Germany could see temperatures as high as 108°F in the next week which could impact their wheat crops. With today’s data, the USDA reported an increase of 8.7 mb of wheat export sales for 22/23 and the total export estimate remains at 775 mb. On a final note, the U.S. dollar took a large hit today, which may have helped wheat to rally.
CATTLE HIGHLIGHTS: Live cattle futures finished mixed on the day as the strong cash market tone supported the market in the face of strong selling pressure in the outside markets. Cattle futures finishing mixed on the day could be considered a win for the day as equity markets traded sharply lower. Jun cattle gained 0.200 to 137.750, and Aug cattle were 0.500 lower to 137.750. Feeders finished the day under selling pressure as Aug feeders were 1.975 lower to 171.300.
The most actively traded Aug contract failed to push higher but held on to most of Wednesday’s gains. Prices did fade back under the 100-day moving average, which has acted as a swing point on the Aug chart. Patience has paid off this week in the cash market as more Southern trade was completed at $140 and Northern trade at $145-148 on Thursday, which was $1-4 higher than trade earlier in the week. Most likely trade is complete for the week except for some light cleanup trade to end the week. The cash market has been supported by the forecasts for hot weather, and the drop in carcass weights. Packers have been forced to bid up to secure supplies. The retail demand will stay clearly in focus after the Father’s Day retail buying is complete. At midday, cutout values were softer with Choice values slipping 1.02 to 267.20 and Select was 0.63 lower to 245.05. The load count was moderate at 65 loads. Weekly export sales on Thursday reported new net sales of 17,400 MT for 2022 were down 2% from the previous week and 12% from the prior 4-week average. Japan, China, and South Korea were top buyers of U.S. beef last week. Feeder cattle struggled with the strong move higher in the grain markets triggering some profit-taking. Cattle numbers are still trending lower, and the Feeder Cash Index was firmer, gaining 0.48 to 160.56. The cattle market is juggling different influences, and the overall mixed tone on Thursday could be considered a positive. Strong selling pressure in equity markets and demand concerns were counter-acted by weather forecasts and strong cash.
LEAN HOG HIGHLIGHTS: Hog futures closed higher today after yesterday’s jump in cash was held with another small gain today. Good pork export sales were supportive and show strong demand. Jul hogs gained 1.300 to 109.575, and Aug hogs gained 1.700 to 106.025.
Pork net sales for 2022 were 26,700 mt, up 65% from last week, and up 1% from the prior 4-week average. The three largest buyers were Mexico, China, and Japan. The cutout was up 4.04 this morning which provided support, and cash was 0.61 higher, improving on the gains from yesterday. Overall demand seems strong, and the low slaughter numbers combined with rising cash may be showing that there is a tighter hog supply in the country than previously thought. Jul remains at a discount to cash but has rebounded above the levels where Jun went off the board. Jul futures closed above their 40-day moving average for the first time since the beginning of the month and should continue in an upward trend given the continued support of a higher cutout and cash. The fact that hog futures have been trending higher in the face of bearish outside influence is a bullish sign.
DAIRY HIGHLIGHTS: Today’s spot trade saw cheddar blocks fall 14.50 cents and barrels give back 7.50 cents to an average close of $2.1075/lb, solidifying a downtrend after prices looked like they had found some footing midweek. The move is likely tied to the disparaging regional cheese reports that came out yesterday, which pointed to an increase in general inventories, the abundance of spot milk, and an easing of demand (with the exception of export demand along the west coast). Class III futures followed as the July contract fell 49 cents to $23.77, but some silver lining could be found in the fact that was 20 cents off the low from earlier in the day.
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Author
Bryan Doherty