MARKET SUMMARY 7-11-2022
Beef export sales remained on a strong pace through the month of May. In recently released data, May beef exports reached 135,006 metric tons, up 1% from the previous high posted in May 2021. The value of those beef products climbed 20% to $1.09 billion, breaking the March 2022 record. This is the fourth consecutive month with beef export values reaching over the $1 billion level. For January through May, beef exports increased 4% from a year ago to 613,266 mt, valued at $5.14 billion, which is up 34%. This pace is strong. Given the strength in the U.S. dollar, the challenge in logistics and global economic uncertainty, it is extremely encouraging seeing the global demand for U.S. beef products. The strength is still coming as total beef exports to Japan and South Korea are down compared to last year. The value of products is elevated due to higher costs of products and the strong export activity by China. Trade is expected to remain strong well into 2022 and even show the potential for more gains as a result of recent trade agreements that have been put into place.
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CORN HIGHLIGHTS: Corn futures started with a bang and ended on a soft note. September futures reached an overnight high of 6.67 (up 30 cents) on forecasts for mostly warm and dry, especially for the end of the month. However, a sharp reversal lower in the wheat market and some forecasters adding rain chances was enough to pressure gains from earlier in the session. September gained 3-3/4 to close at 6.37 and December added 5-1/2 to close at 6.29. Another new contract high for the U.S. dollar was also noted. Tomorrow the market will have new data to work when the USDA updates is supply and demand projections.
Estimates for tomorrow’s WASDE Supply and Demand report have carryout at 1.491 bb for the 2021/2022 season and 1.433 for the 2022/2023 marketing year. Yield is expected to read 177 bpa, the same as last month. Covid lockdowns in China are looking more likely, a negative to demand. The U.S. dollar continues to surge as well, up again today now trading over 108. In March the dollar was under 97. By mid-morning, crude oil prices had declined 2.00 adding pressure. Europe and Argentina remain on the dry side which is supportive. With the export pace slowing, we would not be surprised to see the USDA lower exports and lower feed usage. Cow slaughter is up over 5% year-to-date also suggesting longer term feed usage might be in question. Export inspections at 36.8 mb were termed neutral.
SOYBEAN HIGHLIGHTS: Soybean futures closed higher today but were significantly higher early this morning before fading into the close as weather forecasts show the next two weeks as increasingly hot and dry. Aug soybeans gained 8-3/4 cents, closing at 15.22 and Nov gained 8-1/2 cents at 14.05.
Soybeans continued their recovery today along with the rest of the soy complex as the two-week forecast shows above normal temperatures and dryness. If these conditions continue into August, the soybean crop could be in some trouble, and lower yields would tighten the already tight carryout. The June WASDE report was projecting a 22/23 carryout of 280 mb, which would only get smaller if yield drops below the current 51.5 bpa average. The USDA Supply and Demand report will be released at 11 central tomorrow. The only other thing that could soften the tight carryout would be the poor export business seen recently with back-to-back net cancellations. Export data showed biodiesel exports for May up 21% from a year ago. Both meal and soybean oil were higher today despite crude oil staying relatively unchanged. Friday’s CFTC report showed funds as sellers again last week, selling 12,567 contracts to put them net long just 33,564 contracts, the smallest net long position since December 2021. The very small, long position held by the funds could put them in a position to begin buying again especially if weather concerns persist. November soybeans gapped open and are moving out of oversold territory with the next price target higher at the 50-day moving average.
WHEAT HIGHLIGHTS: Wheat futures took a turn for the worse after a strong overnight session. Reports of new China covid lockdowns are impacting most commodity markets. Sep Chi lost 35-1/2 cents, closing at 8.43-3/4 and Dec down 34 at 8.72-1/2. Sep KC lost 30-1/2 cents, closing at 9.15-1/4 and Dec down 30-1/4 at 9.23-1/4.
After gapping higher and a strong overnight session, wheat prices slipped throughout the day to give up a decent amount of ground by the close. Corn and soybeans also set back but managed to close with small gains. The market seems to have the bulls and the bears pitted against each other right now on a couple opposing ideas. First is the two-week forecast which is drier than normal across much of the Midwest and hot temperatures in the southern Plains and southwestern corn belt (supportive to the grain prices overall). Second would be news that China sounds like they will again be locking down certain areas of the country due to rising covid cases (weighing on the markets). The bears seem to have won the day though with the weather forecast having less of an impact on wheat prices, and Sep Chi closing again below the 200-day moving average. Adding to the bearishness in wheat today were fresh highs in the US Dollar, breaching the 108 level, and the fact that recession is still a major concern. Overall, technical momentum still points to the upside however, indicating that the correction from being oversold is still intact. In other market news, data today pegged wheat inspections at 11.4 mb with total 22/23 inspections now at 71 mb. This is down 18% from last year. As a reminder, tomorrow will feature the monthly WASDE report, due for release at 11AM central. No major changes are expected.
CATTLE HIGHLIGHTS: Technical buying in cattle futures kicked in, as support held under the live and feeder market and the strength in cash likely pulled futures prices higher. Aug Live cattle closed 2.200 higher to 136.150 and Oct gained 1.475 to 140.425. Feeders shook off early session weakness as Aug Feeders gained 3.150 to 174.875.
Strong price action was the key to the day as cattle market posted a trading range outside of Friday’s range and closed at the top end of the daily range. This will likely lead to additional buying support on Tuesday. These reversal type moves saw strong money flow, as the futures market could be a value to speculators. Weekly Commitment of Trader’s report shows live cattle spec traders holding 14,000 long contracts, near the lowest point for the year. That alone could trigger some value buying. The key to today will be the follow through for the rest of the week. The cash market was typically quiet for a Monday afternoon. Bids and asking prices are not established yet. Significant trade volume will likely be delayed until later in the week. Front-end cattle supplies keep the market cautious. Estimated slaughter for Monday was 125,000 head, up 6,000 from last year. Those supplies, especially in southern cattle, keep a lid on the cash market. Retail values were firmer at midday with Choice gaining 1.00 to 268.89 and Select 2.34 higher to 244.19 The load count was light at 57 midday loads. The strong start to grain market pressured the feeder complex to start the day, but as grain prices soften, and the cash market remain strong, feeders pushed to strong gains. The Feeder Cash Index was 3.82 higher to 172.21, this followed a strong move higher on Friday. The ongoing talk of strong cash feeder prices in the countryside helps support this market overall. A big round of speculative buying and short covering pushed cattle market strong higher to start the week. The key will be the follow through, but good money flow can really help push prices higher despite the fundamentals.
LEAN HOG HIGHLIGHTS: Hog futures were mixed to mostly lower to start the week as pending July expiration and flattening cash market limited futures gains. Jul hogs gained 0.300 to 113.150, Aug lost 0.800 to 108.375, and Oct led the market lower losing 1.550 to 92.450.
The hog market looked like some potential breakout higher, but prices failed to make that move on Monday. August hogs tested and held support at the 50-day moving average under the marker, and finished lower, but middle of the range. Price will likely consolidate here as well as on Tuesday’s session open. With the expiration of the Jul contract on July 15, it is tied to the cash index. The cash hog index gained 0.81 to 110.97 but is still trading at a discount to the July futures. Cash markets were softer on morning direct trade on Monday. The weighted average price move lost 4.51 to 114.07 in the morning. The 5-day rolling average is currently 118.54. The cash market has turned choppier and may be finding a top. Pork carcass values were softer at midday pressuring the market. Carcasses slipped 1.78 to 112.89, on a load count that was moderate at 189.97 loads. The hog market is at a point to break out higher or correct back to the bottom of the range. Monday tested support to the downside and held. The market started pricing in a possible peak to the cash market last week, as prices have moved into range-bound trade. The deferred contract may be ready to surge higher on a possible breakout over resistance.
DAIRY HIGHLIGHTS: The dairy trade was quiet on Monday with no new news and a rather uneventful day in the spot trade aside from butter. The butter trade saw some aggression from buyers as a total of 19 loads were traded. In the process, the buyers bid the butter market up 3c to $3.00/lb. This will be the third time this year that butter retests the $3.00/lb level. Sellers defended the level the previous two times as there just wasn’t quite enough demand to get the price through that level. Despite the move up to $3.00/lb today, Class III and IV milk futures were lackluster. Offering in cheese and powder may have kept a lid on prices. The US powder price fell 1.75c to $1.73/lb, its lowest close since mid-May.
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Author
Brandon Doherty