MARKET SUMMARY 9-23-2021
The USDA Cold Storage report showed beef stockpiles running well below 5-year averages. The monthly Cold Storage report showed a small increase in supplies month over month as total pounds of beef in freezers were up 4% from the previous month at 414.9 million pounds. However, this total was 7.7% below last year and 12.6% below the 5-year average. Typically, we begin to see beef inventories build, but high retail prices have slowed the buildup of supplies. In August, beef inventories grew by 3.5% versus 4.5% on the 5-year average. The tighter supply picture can be attributed to a couple factors. Slaughter has been running near a consistent 120,000 head/day total, and labor concerns has slowed the chain speed in processing cattle. Secondly, the demand for beef has been friendly, whether for export demand, or used domestically. The demand for good quality beef can be measured in the choice/select cut spread, trading just over $30, which is wide, reflecting the demand for high quality beef. As long as the demand stays consistently strong, the buildup of beef supplies should stay well under the 5-year averages.
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CORN HIGHLIGHTS: Corn futures finished higher for the second consecutive session, gaining 3-3/4 cents in December to close at 5.29-1/2 and 4-1/2 higher in December 2022 to end the session at 5.05-1/2. Today was impressive as weather is near ideal for most of the Midwest to advance harvest. In addition, it was another week of less than stellar export sales. Today’s figure was 14.7 mb, well below the average weekly pace of 47.5 mb needed to meet the total expected sales figure of 2.475 bb. Year-to-date sales are currently at 982.1 million, above this same time a year ago when sales were 889.5. Keep in mind, many bushels were sold in late spring as end users were likely lining up inventory for fall in order to make sure they had contracts before summer weather. Support holds near 5.00 December while resistance remains at 5.50. It is likely the market will trade in this pattern at least through the stocks report due out at the end of next week or until more harvest results are available. If behind on sales use rallies to get current. At the beginning of this week the market looked somewhat heavy anticipating harvest as well as uncertain news coming out of China regarding their economy. Harvest results could impact price movement. So far, we would argue mixed as some yield is outstanding and some disappointing.
SOYBEAN HIGHLIGHTS: Soybean futures had a solid export sales figure at 33.2 million bushels to sink their teeth into yet floundered throughout the day, unable to hold onto double digit gains. November futures closed 1-1/2 cents higher and January 2-1/4 cents firmer. A sharp rebound in the stock market, strong gains in the wheat, modest gains in corn and higher energy prices seemed to have little impact on price. Soybean meal was again weaker with most contracts near 1.00 lower. Stronger soybean oil added near 70 points on most futures contracts. Palm oil continues to hover near contract highs. Harvest pressure is likely exerting itself, yet we are surprised that soybean futures can’t seem to gather and hold strength. The 200-day moving average is holding as support. Bullish traders would argue the recent price pullback is providing an opportunity for end users to secure inventory. The big picture continues to suggest tight inventory and consequently it’s just a matter of time before prices rally. Bearish traders will take the stance that prices have had favorable news and can’t move on it.
WHEAT HIGHLIGHTS: Dec Chicago wheat gained 12 cents today, closing at 7.17-3/4 and March gained 12-1/2 cents, closing at 7.28-1/2. Dec KC wheat gained 14 cents, closing at 7.20 and March gained 13-3/4 cents, closing at 7.28-1/2. There was talk yesterday that January 1, Russia might start rationing their wheat exports. In Russia, the scattered rains will miss parts of the winter wheat areas. Looking at Europe, there is quite a bit less milling wheat this year than normal, suggesting that buyers worldwide will be looking for it. In terms of market price, wheat is trying to put in some premium to try to buy acres. Today the USDA reported an increase of 13.1 mb of wheat export sales for 21-22. World wheat supplies for export are at their lowest level in 8 years, which should help keep prices supported. Dry conditions in the Southwest are limiting winter wheat seedings. On September 30, the Grain Stocks report is due for release and will quantify wheat stocks both on and off farm.
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Author
Bryan Doherty