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Closing Comments

Corn

Corn prices slide as the dollar recovers and export sales disappoint.

Exporters sold 22.3 million bushels of corn in the week ending March 12, including 19.8 million old-crop bushels. The total was near expectations, but soft nonetheless. The past week’s old-crop sales were up from 16.5 million bushels sold the previous week, but were down from the five-year average for the week of 27.4 million bushels.

Marketing year export sales to date total 1.439 billion bushels, down 93 million or 6% from the previous year. Exporters typically sell 74% of final corn shipments by this point in the year ending August 31, whereas they sold 80% by this point last year. This year exporters have sold 80% of USDA’s current export target. As such, sales to date exceed the seasonal pace needed to hit USDA’s target by 105 million bushels, but that is down from 113 million the previous week.

Exporters sold 13.7 million bushels of grain sorghum in the week ending March 12, including 7.2 million old-crop bushels. The old-crop sales were down from 8.6 million bushels sold the previous week, but were up from the five-year average for the week of 2.0 million bushels.

Chinese end users bought 11.7 million old-crop and 4.2 million new-crop bushels in the week ending March 12, while “unknown destinations” reduced previous purchases by 4.9 million old-crop bushels and bought 2.3 million new-crop bushels.

Marketing year sales to all destinations total 316 million bushels, up 180 million or 132% from the previous year. Exporters typically sell 63% of final grain sorghum shipments by this point, whereas they had sold 64% last year at this point. However, this year they have already sold 105% of USDA’s target for the year ending August 31. As such, sales to date exceed the seasonal pace needed to reach USDA’s target by 127 million bushels, up from 124 million the previous year.

Grain and oilseed prices rallied quickly in the final 15 minutes of trade Wednesday as the dollar plummeted following the 1 p.m. CDT release of the revised Fed statement on monetary policy. Prices added to their gains as the dollar continued to slip early in the overnight session. However, the dollar surged back again and was actually trading above levels seen just ahead of the Fed statement’s release on Wednesday when grain trading closed today. As a result, money began to flow back out of the broader commodity complex, including the grain and oilseed markets.

December corn dropped back below the psychological $4 level and remains vulnerable to additional weakness. First support sits at $3.96, followed by Wednesday’s low of $3.925.

Soybeans

Soybean prices slide as the dollar recovers and export demand shifts south of the equator.

Exporters sold 12.8 million bushels of soybeans in the week ending March 12, including 12.6 million old-crop bushels. The old-crop sales were up from just 6.2 million bushels sold the previous week and up from the five-year average for the week of 7.6 million bushels. No new sales to China were seen during the week. In fact, China reduced previous purchases by 1.4 million bushels.

Marketing year sales to all destinations total 1.767 billion bushels, up 134 million or 8% from the previous year. Exporters typically sell 89% of final soybean shipments by this point of the year, whereas last year they had sold 99%. Ironically, export sales to date this year are also at 99% of USDA’s current target for the year that ends August 31. As such, sales to date exceed the seasonal pace needed to hit USDA’s target by 180 million bushels, down from 186 million the previous week.

Soybean demand is seasonally shifting to South America, but demand for soymeal remains strong. Exporters sold 204K metric tons of soymeal in the week ending March 12, up from 101.4K the previous week and up from the five-year average for the week of 120.9K tons. Actual shipments during the week were 220.1K tons, down from 280.2K tons the previous week, but up from the five-year average for the week of 172.3K tons.

The lead May soybean contract has first significant support at the double-bottom of $9.535, with November seeing key support at $9.39. Ironically, it’s soybeans that have the weaker fundamentals but soybeans are more reluctant to go down, although still vulnerable. As such, the new-crop soybean/corn price ration remains at 2.37, which continues to support expansion of soybeans at the expense of corn even though it should be going the other direction. One of my “10 undeniable truths of marketing” is that the markets don’t always do what you think they need to do.

Wheat

Wheat export sales continue to disappoint amid a strong U.S. dollar.

Exporters sold 19.6 million bushels of wheat in the week ending March 12, including 14.4 million old-crop bushels. The old-crop sales were down from 16.4 million bushels sold the previous week and down from the five-year average for the week of 19.0 million bushels. Marketing year sales total 832 million bushels, down 252 million or 23% from the previous year.

Exporters typically sell 89% of final wheat shipments by this point in the marketing year, whereas they had sold 92% at this point last year. The latter matches this year’s sales pace relative to USDA’s current export target for the year ending May 31. Sales to date exceed the seasonal pace needed to reach USDA’s target by 32 million bushels, up from 29 million the previous week.

Trade sources report that China bought 16.2 million bushels of high-protein wheat in recent days, with 11 million of it coming from Canada and the rest from Australia. This follows a purchase of 4.2 million bushels of U.S. hard red spring wheat the previous week, but the strong dollar likely contributed to China going elsewhere this week. Supplies of high-protein wheat are very tight in China amid rising demand for bread requiring the wheat as consumer incomes rise.

The hard wheat markets slipped lower today amid the lost business, combined with recent moisture in the Plains. However, Chicago soft wheat futures actually consolidated a penny higher today. The wheat charts overall are still relatively healthy, with more short-covering possible. However, wheat traders will be watching the dollar closely in the days ahead.

Beef

Live cattle add to Wednesday’s gains on positive chart signals and cash optimism.

Live cattle futures added to Wednesday’s gains on positive chart signals amid chatter that this week’s cash could better the previous week’s trade, with the lead April contract rising to its highest level since January 13 and well over $3 above last Friday’s close. Open interest continues to grow, adding to the market’s upward momentum, although traders are also keenly aware of cheap pork and poultry prices that threaten market share at the retail level.

Cash trade appears destined once again to wait until late in the week, particularly with USDA expected to release its February cattle-on-feed report Friday afternoon. Trade expectations for the report are for it to show March 1 on-feed numbers at 99.5% of year ago levels, with February placements at 93.3% and marketings at 97% of the previous year’s levels.

Today’s kill is estimated to be 103,000 head, matching the previous week’s level, but down 9,000 from the previous year. Week-to-date kill is estimated at 430,000 head, up 5,000 on the week, but down 34,000 from the same period last year, with packer margins estimated to be in the red by $44.70 per head.

Boxed beef movement jumped to 183 loads Wednesday, up from 139 loads the previous week and up from 165 loads the previous week. Choice cuts were down $0.24 to $246.80 per cwt, while Select cuts were down $0.32 to $244.47. That firmed the Choice/Select spread to $2.33 per cwt, up from $2.25 the previous day, but down from $2.59 per cwt the previous week. Movement at mid-morning today was decent at 99 loads, with Choice cuts up $0.04, while Select cuts were up $0.81 per cwt.

Exporters sold 11.6K metric tons of beef in the week ending March 12, down from 17.2K the previous week and down from 16.4K tons sold in the same week last year. The sales bring estimated calendar-year sales to 175.6K tons, down 61K or 21% from the previous year. Actual shipments during the week totaled 12.2K metric tons, down from 12.6K the previous week and down from 14.6K tons shipped in the same week last year. Estimated shipments for the calendar year total 115K tons, down 11K or 9% from the previous year.

Feeder cattle futures followed the fat cattle market higher today, although the lead March contract was down modestly on recent weakness in the cash market. The latest cash index came in at $212.61 per cwt, down $0.01 on the day, down $1.19 over the past 3 days and down $1.32 over the past week.

Pork

Poultry concerns continue to weigh on lean hog futures, driving prices sharply lower once again.

Lean hog futures gapped lower today, continuing to bleed red ink throughout the trading session. The lead April contract was trading near its session lows and near the $3 daily limit lower at this writing on fears that poultry export restrictions will push prices lower for the alternative meat, apply pressure to pork at the retail level as well.

The composite pork product price actually bounced $0.40 Wednesday to $68.56 per cwt. Movement was down to 430 loads, down from 440 loads the previous day, down from 432 loads the previous week and unusually low for a Wednesday. Movement at midday today was good at 251 loads, with the composite price down $0.40 to $68.16 per cwt.

Exporters sold 21.1K metric tons of pork in the week ending March 12, up from 18.7K tons the previous week and up from 5.3K metric tons sold in the same week last year. This brings estimated calendar-year sales to date to 235K metric tons, up 72K or 44% from the previous year. Actual shipments during the week totaled 19.8K metric tons, down from 20.6K the previous week, but up from 10.5K metric tons shipped in the same week last year. Calendar-year shipments to date total 182.4K tons, up 65K or 56% from the previous year.

Today’s cash market was mostly steady, although Illinois and Indiana markets were mostly 50 cents weaker. The latest CME 2-day lean hog index came in at a new low of $64.09 per cwt, down $0.57 on the day, down $2.71 on the week and down $4.00 over the past nine consecutive trading days.

Today’s kill was estimated at 434,000 head, up 1,000 from the previous week and up 21,000 from the previous year. Week-to-date slaughter is estimated at 1.722 million head, down 4,000 from the previous week, but up from 92,000 from the same period last year.

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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