MARKET SUMMARY 4-21-2023

It was a difficult week in the soybean market as prices closed nearly 50 cents off the highs from earlier in the week. The July soybean futures finished the week trading 18-1/4 cents lower, but the price action during the end of the week was very negative. Weekly charts closed the week with an outside reversal lower, taking out the high and low trade from last week. This technical picture could lead to additional selling pressure next week. Even though the cash market is supportive due to a tight U.S. supply picture, the impact of the record Brazilian harvest weighed on the market. Brazilian soybean premiums are trading significantly under the prices of U.S. soybeans, as harvest has backed up ports in Brazil. The cheaper soybean prices have triggered some U.S. business buying Brazilian soybeans for import, which could only add to our supply picture and lessen those supply concerns. The combination of fundamental factors and technical chart weakness set up the possibility of soybean prices to fall even farther going into next week’s trade.

CORN HIGHLIGHTS: 

• May futures lost 0-1/2 to end the session at 6.63-1/4. December gave up 9-1/2 cents to close at 5.48, its lowest close since July 2022.
• Heavy fund selling was noted again today pressing row crops. After hitting resistance at the upper Bollinger band Tuesday prices have been on the defensive. December futures closed at its lowest price since late July of 2022.
• Weakening prices in Brazil and a lack of exports are weighing on U.S. futures. Another session of double-digit losses in soybeans and weaker wheat prices weighed on corn futures.
• Planting is likely to fall behind schedule, yet todays and this week’s trade activity didn’t seem to be worried about crop size reductions. That could change as many, especially in the north, have saturated soil conditions and a cool forecast through the end of April.
• End users are being rewarded buying only as needed. Historically prices are high so this type of buying will continue in the near-term unless there is a more aggressive argument for secure inventory.
• While weather in Brazil is expected to turn drier (especially in the north) conditions overall suggest the crop is on schedule to be as expected or better.

SOYBEAN HIGHLIGHTS:

• Soybeans closed lower for the third day in a row, pressured by declines in soybean meal and oil, poor export sales numbers, and the record Brazilian crop that is nearly harvested. For the week, May soybeans lost 17 cents.
• If wet weather continues and delays corn planting significantly, new crop soybeans may be limited on the upside as producers turn to planting soybeans rather than corn.
• US soybean prices are falling, along with prices in both Brazil and China as Brazilian soybeans enter the market, and today May soybeans on the Dalian exchange lost 1.1% at the equivalent of $16.14. Spot prices in China have fallen by over two dollars since February.
• While Brazilian yields and production seem to continue to grow, those in Argentina continue to slip, and now the Buenos Aires Grain Exchange has lowered production to just 22.5 mmt from 25 mmt last week, a decline of 827 mb and the lowest production in 24 years.

WHEAT HIGHLIGHTS:

• May Chicago lost 6 cents, closing at 6.61-3/4, and July was down 7 at 6.73.
• May KC gained 1/2 cent, closing at 8.40-3/4, and July was down 1-1/4 at 8.25-1/2.
• It was another risk off session. Other than the May KC contract, all three US futures classes closed lower alongside Paris milling wheat futures.
• Better chances for rain in the arid US southern Plains led to some defensive posturing in the wheat market. While the moisture is welcomed, it will not be a drought buster.
• Russian and UN officials are said to be meeting next week to discuss the future of the Black Sea export corridor (which remains uncertain at this time).
• Spring wheat planting in the US northern plains will see more delays as snow, rain, and cold weather continue to hit many areas.
• The US Dollar Index is on the lower end of the recent range, but that did not offer much support to wheat (or the grain pit) today.
• India’s wheat harvest is moving along though they may be facing weather issues in some areas.

CATTLE HIGHLIGHTS: 

• Cattle futures saw mixed trade, as the market squared positions before the April Cattle on Feed report released Friday afternoon. Feeders were mixed as the cash index limited the April contract, but the weak grain market supported the deferred contracts and pushed to new contract highs.
• April live cattle lost 0.125 to 173.975, but Jun gained 0.175 to 164.525. April feeders lost 1.250 to 203.775, but May feeders were 0.050 higher to 212.400. For the week, June Live cattle traded 0.800 higher, and May feeders gained 4.500.
• USDA released the April Cattle on Feed report after the market closed on Friday. The report’s numbers were slightly negative according to expectations. Total Cattle on Feed was at 96% of last year versus a 94.8% expectation, Placements were at 99% of last year versus expectations of 94.9%, and Marketings were at 99% of last year’s levels versus expectations of 98.8%.
• Total cattle on feed at 11.612 million head and placements at 1.992 million head were above expectations and could help pressure the market open on Monday.
• Cash trade was basically completed for the week. Most cash trade was trending steady to slightly lower than last week, which pressured the April Live cattle futures. Southern cash was mostly complete at $175, and northern dress trade was around $288.
• Boxed beef was mixed as choice carcasses were 0.22 lower to 306.77, while select added 0.42 to 289.16 at midday on a very quiet trading day. The load count was light at 78 loads.
• The Feeder Cash Index has turned softer in the past couple session. The index was down 0.56 to 203.35 on Friday. The weakness limited the April feeder futures.

LEAN HOG HIGHLIGHTS: 

• Hog futures finished the week with moderate gains as prices saw some short covering and profit taking going into the end of the week. May hogs gained 0.200 to 77.025, and June hogs were 1.00 higher to 86.075. For the week, the May contract traded 3.425 lower and June fell 0.800 as the selling pressure still controls the hog market.
• Thursday afternoon retail values finished stronger, and midday prices on Friday followed those gains higher as pork carcasses added 2.65 to 80.80. The load count was light at 160 loads. The stronger retail tone to end the week helped support the short covering during Friday’s trade.
• Midday direct cash hog prices were unreported due to “confidentiality”. The lean hog index traded 0.16 lower to 71.41, reflecting the soft cash market tone. For the week, the Cash Index traded 0.54 lower.
• Estimated hog slaughter on Friday was 469,000 head; this was 3,000 head above last week and 9,000 over last year. Heavy slaughter numbers have been the main limiting factor in the hog market.
• Managed funds are still holding a record short position, which grew again this week with the overall lower trade.

DAIRY HIGHLIGHTS: 

• Despite the second month and Q2 Class III contracts lowering this week, Q3 and Q4 for Class III and Q2 through Q4 for Class IV were higher.
• Heavy trading in the spot markets seem to have supported milk prices and raised spot prices, cheese, butter, and powder were all gained value, while whey traded sideways.
• Another positive fundamental on the markets this week was a higher Global Dairy Trade Index, ending a recent slide of negative events.
• Active culling of the dairy herd also seems supportive of keeping gains in milk production stable, where March milk production only grew 0.50%.

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Author

John Heinberg