MARKET SUMMARY 04-20-2023

Beef cow inventory has been working steadily lower over the last handful of years. Beef cow inventory has related phases in the cattle cycle, the expansion of numbers and the contraction of numbers over time. The current cattle cycle, which began in 2014, is now in a contraction phase, with inventory contracting at an increasing rate each year since 2020. On January 1, 2023, U.S. beef cow inventory was 28.9 million head, 3.6 percent less than the previous year. Drought is a significant factor in the recent declines in beef cow inventory. Drought has severely damaged pasture conditions in many key areas in cattle country. At the start of 2023, nearly 93 percent of U.S. beef cows were in states where most of the pasture and range were rated in “very poor” to “fair” condition, making it extremely difficult to support the beef cow herd. Weather patterns may look to be changing going into the later spring and summer, and there could be some potential for pasture conditions to improve. It may take time, but the next expansion phases in the beef cow herd may be around the corner.

CORN HIGHLIGHTS: 

• May futures lost 8-1/2 to close at 6.63-3/4 and Dec gave up 5-1/2 cents to end the session at 5.57-1/2, as prices moved to the bottom of the trading range.
• Strong selling pressure in the wheat market and technical selling pressure triggered by weak outside markets moved corn futures to challenge the bottom of the most recent trading range. 
• May options expire on 4/21, and that may have added volatility as prices moved to the strike level with the most open interest at the 660 May call and put level. 
• Exports sales were a combined 29.1 mb for 2022/2023 and 2023/2024 marketing years. However, 12.3 mb for 2022/2023 was below expectations and considered a disappointment. This is a low number for the second week in a row. 
• At 12.3 mb bushels for export sales last week, this is the lowest total for that week of the marketing on record going back nearly 25 years. 
• Planting progress will likely fall behind schedule with the most recent 6 to 10-day forecast, indicating the entire Midwest to be below normal in temperatures and above normal in rainfall.

SOYBEAN HIGHLIGHTS:

• Soybeans ended the day lower pulled down by a decline in both soybean meal and soybean oil, but the losses in soybean oil were greater due to falling crude oil prices.
• Export sales were disappointing today with sales for the 22/23 marketing year at 100,100 mt when expectations were between 100,000 and 300,000 mt.
• The poor export sales should not come as a massive surprise with Brazil over 86% complete with their soybean harvest and selling soybeans for a cheaper price than offered from the US.
• Most commodities and equity markets had a bearish feel today as recession fears deepen, and the President of New York’s Federal Reserve Bank commented that he believed that credit conditions would deteriorate, spooking traders.

WHEAT HIGHLIGHTS:

• Wheat was the biggest percentage loser today out of corn and beans, with KC wheat leading the way lower after Paris milling wheat gapped lower nearing its lows.
• With tight US and global wheat supplies and poor weather and drought in the US, the fundamental picture should have prices higher than they are, but as long as grain continues to leave the Black Sea in large numbers at cheaper prices, it will be difficult for wheat to gain much ground.
• Wheat net sales for the week were nothing to get excited about but were better than the 4-week average with sales for the 22/23 marketing year at 9.5 mb, up 91% from the prior week and 93% above the 4-week average, but shipments were just 7.5 mb and well below the 18.9 mb needed each week the meet USDA expectations.
• Snow is forecast in the Dakotas, Montana, and Minnesota which will be followed by cold weather, and flood watches are in effect for North Dakota and northern Minnesota which will only delay spring wheat plantings further.

CATTLE HIGHLIGHTS: 

• Cattle futures saw mixed trade, as a steady to softer cash tone limited the Apr contract, but deferred futures look a value compared to the cash market and saw buying before the April Cattle on Feed report on Friday. Feeders posted triple-digit gains as a weak grain market supported the feeder futures as some contracts pushed to new contract highs.
• Apri live cattle lost 1.325 to 174.100, but Jun gained 0.750 to 164.350. Feeders finished higher with strong gains. Apr feeders 0.350 higher to 205.025, and May was 1.875 higher to 212.350.
• USDA will release the April Cattle on Feed report on Friday at 2:00 CST.  The report is expected to show continuing tight overall cattle supplies. Expectations for the report are: Total Cattle on Feed at 94.8%, Placements at 94.9%, and Marketings at 98.8% of last year’s levels.
• Cash trade started to build for the week. Yesterday late, southern live trade was being marked at $175, steady to $1 lower than last week. In the north, $180 was seen in Colorado and Nebraska, down 42 from last week. Northern dress trade was at $288, again trading $2 under last week.  More trade will build through the day into the end of the week.
• Boxed beef was mixed as choice carcass was 1.52 higher to 307.44 while select lost 2.94 to 288.52 at midday. The load count was light at 47 loads.
• The Feeder Cash Index but has turned softer in the past couple session.  The index was down 2.31 to 203.92 on Thursday.  The weakness limited the April feeder futures.
• Weekly export sales saw new net beef sales of 19,100 mts for 2023 with shipments of 16,000 mts. South Korea, Japan, and Mexico were the top buyers of U.S. beef last week.

LEAN HOG HIGHLIGHTS: 

• Hog futures finished lower as the premium of the futures market, heavy hog supplies and lack-luster cash still pressure the market.  May futures lost 1.950 to 76.825, and the June futures lost 1.350 to 85.075, testing yesterday’s contract lows.
• After a disappointing afternoon close on Wednesday, Midday retail values were firmer, gaining 1.28 to 78.09 today.  The load count was light at 128 loads.
• Weekly pork export sales report new net pork sales of 36,100 mts for 2023 with shipments of 34,100 mts.  Mexico, Japan, and Australia were the top buyers of U.S. pork last week.
• Estimated hog slaughter on Thursday was 483,000 head, relatively steady with last week and last year.
• Managed funds are still holding a record short position.

DAIRY HIGHLIGHTS: 

• The Class III market held double digit gains for most nearby futures, likely thanks to the smaller-than-expected increase in YoY milk production from yesterday afternoon’s report.
• The spot cheese market was unchanged with a 1.50 cent drop in blocks and an equivalent gain in barrels on massive volume once again.
• The premium in blocks over barrels has fallen 6.25 cents so far this week, closing at 20 cents today.
• Class IV action was unchanged expect for an 8 cent gain in May futures; no trades took place in any months.
• Spot powder enters Friday up 3 cents on the week at $1.16/lb, hoping to garner more optimism after a nice jump in the GDT powder price on Tuesday.

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Author

Bryan Doherty