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Closing Comments

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Closing Comments

Corn

Follow-through selling pressures corn, although prices firm late on bargain buying.

Exporters shipped 28.9 million bushels of corn in the week ending March 12, down from 46.5 million the previous week and down from the five-year average for the week of 31.3 million bushels. Marketing year shipments total 807 million bushels, up 23 million or 3% from the previous year.

Exporters typically ship 50% of final corn shipments by this point in the year, whereas they had shipped 41% by this point last year. However, this year they have shipped 45% of USDA’s target. As such, shipments to date fall short of the seasonal pace needed to hit USDA’s target by 93 million bushels, versus falling short by 87 million the previous week.

Exporters shipped 13.9 million bushels of grain sorghum in the week ending March 12, up from 2.1 million the previous week and up from the five-year average of 3.0 million bushels. Shipments to Chinese end users accounted for 13.5 million bushels of the past week’s total.

Marketing year shipments to all destinations total 204 million bushels, up 123 million or 154% from the previous year. Exporters typically ship 53% of final grain sorghum shipments by this point in the year, whereas they had shipped 38% by this point last year. However, this year they have already shipped 68% of USDA’s target. As such, shipments to date exceed the seasonal pace needed to reach USDA’s target by August 31 by 45 million bushels, up from 37 million the previous week.

Sellers returned to pressure corn prices overnight and again in this morning’s trading session following a break down in the market on a strong dollar Friday. The dollar was correcting lower today, but bearish chart signals continued to encourage selling of corn to start this week. Losses accelerated for the lead May contract below the February low of $3.795, but bargain hunters emerged to support the market above the January low of $3.7375.

December gained a penny on the May contract today, with traders wary of losing too many acres for the 2015 crop. In fact, the contract recovered to settle within 2 cents of its session high after coming within ¼-cent of testing support at $4.00.

Soybeans

Soybeans continue to feel the pressure of new-crop South American supplies.

The National Oilseed Processors Association reports that its members crushed 146.97 million bushels of soybeans in February, down from 162.7 million the previous month, but up from 141.6 million the previous year. The trade was looking for a total of 148.537 million bushels, while my submitted estimate was 149.735 million bushels. Seasonally, the NOPA crush rate tends to rise again by about 9 million bushels in March due to more work days on the calendar.

Marketing year NOPA crush totals 894 million bushels, up 4 million from the previous year. NOPA crush to date exceeds the seasonal pace needed to hit USDA’s target by August 31 by 3 million bushels, versus trailing the seasonal pace by 4 million the previous month. Marketing year NOPA soymeal exports exceed year ago levels by 331K metric tons. NOPA membership accounts for roughly 95% of all soybean crush activity.

Exporters shipped 21.5 million bushels of soybeans in the week ending March 12, down from 23.0 million the previous week and down from the five-year average for the week of 27.1 million. Shipments to China accounted for 9.4 million bushels of the past week’s total. Marketing year shipments total 1.585 billion bushels, up 155 million or 11% from the previous year.

Exporters typically ship 76% of final soybean shipments by this point, whereas they had shipped 87% by this point last year. However, this year they have already shipped 88% of USDA’s target. As such, shipments to date exceed the seasonal pace needed to reach USDA’s target by August 31 by 222 million bushels, but that is down from 239 million the previous week.

Demand remains strong for soybeans, but it is declining seasonally as end users look south of the equator for cheaper new-crop supplies. As a result, the lead May soybean contract broke below and settled below trend line support off the October and January lows. Meanwhile, the new-crop November contract uncovered buying interest just above that same trend line support, which is currently at $9.44. That support needs to hold as we move through the week to avoid another leg lower.

Wheat

Short-covering resumes in the wheat markets as speculative hedge fund managers fret over potential risks to the crops.

Exporters shipped 19.1 million bushels of wheat in the week ending March 12, up from 13.8 million the previous week, but down from the five-year average for the week of 22.7 million. Marketing year shipments total 658 million bushels, down 255 million or 28% from the previous year. Shipments to date fall short of the seasonal pace needed to hit USDA’s target by May 31 by 28 million bushels, but that compares to be short by 30 million the previous week.

Areas of significant winterkill are being reported from west-central, northwest and north-central Kansas, as well as southcentral Nebraska. Thus far it does not appear to be a large enough portion of the crop to get the market excited as long as the dollar is strong, but it does begin to be a factor if dryness issues expand in the Southern Plains and the dollar continues to correct lower.

Broad areas of the dry Southern Plains are expected to see beneficial moisture over the next 10 days, but rainfall totals are not expected to be significant. Readings in the Plains are in the 80s well into Nebraska with considerable wind today, pulling valuable moisture from the crop while stimulating growth. Many of the Plains’ states are scheduled to release weekly crop ratings later this afternoon; most of which will reflect crop conditions as of the end of last week.

The charts are looking much better with a bit more room to ride to the upside, but all of this could quickly evaporate if rains exceed expectations mid-week and/or the dollar resume its upward trek. My bias is still that prices build/maintain risk premium deeper into the spring, but the greatest risk to that presumption near-term would be if the dollar surged higher once again.

Beef

Friday’s poor close sees follow-through selling today amid lighter demand for fat cattle.

Traders were unimpressed by Friday’s light volume of cash cattle trade at basically steady money. As such, they focused on bearish signals from Friday’s poor close to add to sales with buyers content to remain on the sideline. Kill rates in three of the past four weeks have been the lowest of the year, suggesting soft demand for beef at current price levels relative to alternative meat supplies, with the strong dollar supporting large imports as well.

The past week’s slaughter was pegged at 524,000 head, down 13,000 on the week and down 50,000 from the same week last year. The slower chain speed should provide support for boxed beef prices, but the real question may be whether beef can compete with cheaper pork and poultry at those higher prices. Year-to-date slaughter is listed at 5.572 million head of cattle, down 6.6% from the previous year.

Today’s slaughter is estimated at 110,000 head, matching year ago levels, but down 6,000 from the same day last year.

The past week’s average carcass weight came in at 819 pounds, down 1 pound on the week, but up 24 pounds from the same week last year. As a result, the past week’s overall beef production was estimated at 428.2 million pounds, down from 439.1 million the previous week and down 26.8 million or 5.9% from the previous year.

Cash trade emerged late on Friday in Kansas at $161 per cwt on a live basis, which is essentially unchanged from the previous week. More significantly, it’s the price that packers had been offering for several days, but that feeders had been rejecting. A few more cattle moved in Iowa at $162.

Product movement rose to 704 loads in the past week, up from 615 loads the previous week and up from 561 loads in the same week last year. The past week’s total was a three-week high. Choice cuts finished the week at $244.12 per cwt, down $4.36 on the week. Select cuts finished the week at $244.07, down $0.32 on the week.

That put the Choice/Select spread at just $0.05 per cwt, down $4.04 on the week. The Choice/Select spread is expected to turn seasonally higher over the next week or so. Movement at mid-morning today was a meager 61 loads, but Choice cuts bounced $0.42, while Select cuts rose $1.01 per cwt, pushing the Choice/Select spread to negative $0.54 per cwt.

Feeder cattle futures were weaker again today as well, with the fat cattle outlook less optimistic. The latest cash index came in at $213.80 per cwt, up $0.18 on the day and up $3.55 over the past week.

Pork

Lean hog futures shows signs of a near-term lows.

April lean hogs traded both sides of unchanged, but with a weaker bias today. The contract fell to a new contract low of $60.70 per cwt early in the session, before firming into the close to settle near its session high. The cash market continues to erode, along with the product market, but some traders believe that much of the bearish news has been factored into the market for now.

Today’s cash market was mostly $1 lower, although the closely followed Iowa/Southern Minnesota market was mostly $0.50 lower. The latest CME 2-day lean hog index was down another $0.39 to $65.98 per cwt. The index is down $2.11 per cwt over the past 6 trading days.

The past week’s estimated slaughter totaled 2.227 million head, up 5,000 from the previous week and up 203,000 from the same week last year. That brings estimated slaughter for the year to date to 23.165 million head, up 682,000 or 3% from the previous year. Today’s kill is estimated at 418,000 head, down 14,000 from the previous week, but up 30,000 from the same day last year.

The latest SPMF average carcass weight was reported at 214.29 pounds, up 0.75 pound from the previous day and up 0.77 pound from the previous year. Carcass weights continue to trend lower, losing three to four pounds, depending on the day, since the first of the year.

Product movement over the past week totaled 1,662 loads, down from 1,831 loads the previous week and a three week low. Product movement in the same week last year totaled 1,452 loads. The composite pork product price finished the week at $67.48 per cwt, down $1.02 on the day and down $1.34 on the week. It was the seventh consecutive week with lower product prices, with losses over the period totaling $16.90 per cwt. Movement at midday today was slow at 172 loads, but the composite pork product price bounced $1.71 to $69.19 per cwt.

Closing Market Snapshot

 

All opinions expressed in this commentary are solely those of Water Street Advisory. This data and these comments are provided for information purposes only and are not intended to be used for specific trading strategies. Although all information is believed to be reliable, we cannot guarantee its accuracy or completeness. There is significant risk of loss involved in commodity futures and options trading and may not be suitable for all investors.

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Arlan Suderman | Senior Market Analyst
WATER STREET ADVISORY® | www.waterstreet.org
(316) 729-4599 | asuderman@waterstreet.org

Past performance is not indicative of future results. The information contained in this report is intended for informational purposes only and is the opinion of the writer and may change at any time. This information was compiled from sources believed to be reliable but accuracy cannot be and is not guaranteed. There is no warranty, expressed or implied, in regards to this information for any particular purpose. There is SIGNIFICANT RISK involved in trading futures and or options on futures and may not be suitable for all investors. Investors should consider these RISKS and evaluate their suitability based on their financial conditions. No one should ever consider trading futures or options on futures with anything other than RISK CAPITAL. This information is provided freely and is NOT in the capacity of a trading advisor. NO LIABILITY on the part of the author exists for any trading loss you may incur in the use of this information. Information provided is not to be construed as an offer to sell or solicitation to buy any commodity or security named herein.

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