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Closing Comments



Closing Comments


Traders ignore strong export shipments in the face of a strong dollar and double-digit losses in soybeans and wheat.

Exporters shipped a 10-month high of 50.4 million bushels of corn in the week ending February 26, with once again none of it going to China. The total was up from 35.8 million bushels shipped the previous week and above the five-year average for the week of 31.4 million bushels.

Marketing year shipments total 732 million bushels, up 22.5 million or 3% from the previous year. Exporters typically ship 46% of final corn shipments by this point in the year, whereas they had shipped 37% by this point last year, using the majority of our shipping capacity for soybeans. This year they have shipped 42% of USDA’s target thus far. Shipments to date exceed the seasonal pace needed to reach USDA’s target by August 31 by 74 million bushels, after being short by 90 million bushels the previous week.

Exporters shipped 8.1 million bushels of grain sorghum in the week ending February 26, down from 10.6 million the previous week, but up from the five-year average for the week of 2.0 million bushels. Shipments to Chinese end users accounted for virtually all of the past week’s total.

Marketing year shipments total 188 million bushels, up 123 million or 189% from the previous year. Exporters typically ship 49% of final grain sorghum shipments by this point in the year, whereas they had shipped 31% by this point last year. However, exporters have already shipped 62% of USDA’s target for the year. As such, shipments to date exceed the seasonal pace needed to hit USDA’s target by August 31 by 40 million bushels, versus 38 million the previous week.

Most of this week is expected to be wet across northwestern areas of Brazil, slowing late safrinha corn planting. However, next week isn’t quite as wet as it was previously in the forecast models. That will allow for more late planting to occur. Regardless, traders simply aren’t focused on the delays at this point, and that’s not necessarily a surprise. Any reduced production as a result of the delays isn’t necessarily bullish until/unless we have a weather problem in the U.S. Midwest this summer. Thus far, the odds are against such a threat.

Typically we would expect to see December corn take the lead to buy acres in March and April. December continues to gain ground against the nearby contracts, but not while forging new paths to higher prices. That’s tough to accomplish when soybeans and wheat both post double-digit losses. The new-crop soybean/corn price ratio finished the day at 2.38, with the unofficial revenue insurance guarantee at $4.15 per bushel. December corn comes under increasing pressure below $4.10, $4.05 and $4.00, but would be expected to garner more upside momentum above $4.20.


Soybean prices tumble as truck blockades clear and export business shifts south of the equator.

Exporters shipped 23.3 million bushels of soybeans in the week ending February 26, down from 35.9 million the previous week, down from the five-year average for the week of 40.4 million bushels and the lowest weekly total since the third week of September. Shipments to China accounted for 15.8 million of the past week’s total.

Marketing year shipments to all destinations total 1.540 billion bushels, up 184 million or 14% from the previous year. Exporters typically ship 72% of final soybean shipments by this point in the year, whereas they had shipped 82% by this point last year. However, they have already shipped 86% of USDA’s target for the current year. As such, shipments to date exceed the seasonal pace needed to hit USDA’s target by 257 million bushels, although that is down from 280 million the previous week.

One of the more intriguing developments this week comes from Argentina, whose massive social programs live and die on tax revenues collected from exports of grain and oilseeds. Soybean and soymeal exports are particularly important to Argentine tax revenues.

Farmers quit selling soybeans last year when the peso began falling faster than the price of soybeans, providing a disincentive to sell. That began to dry up revenues for supporting Argentina’s social programs, as well as tightening supplies of U.S. dollars needed to pay its international creditors. Argentina used its national bank to attempt to stimulate sales by limiting credit to farmers not selling soybeans. However, that had limited success, because just 40% of farmers got their credit from the national bank.

Now Argentina is looking at a new route to encourage sales as the 2015 harvest approaches. Argentine farmers store their soybeans in bags. The government is requiring that sales of silo bags be reported to tax authorities to identify farmers hoarding soybeans. This could end up pushing more corn and soybeans onto the export market if it is successful in building fear in farm country.

The new-crop soybean/corn price ratio suggests that soybeans need to lose more ground to corn in order to slow the anticipated growth in acres. The ideal scenario would be to see corn rally to reduce the ratio, rather than see both fall. The unofficial revenue insurance guarantee is $9.73 per bushel.

Today’s bearish reversal leaves the lead May contract still within its ascending channel, but at the bottom of said channel. November soybeans are testing the bottom of that channel. Fundamentally, it was becoming difficult to defend soybean prices, but the charts were positive coming into March. The charts suddenly lost a lot of their luster with today’s sell-off and leave us vulnerable if we see follow-through selling.


Strong dollar pressures wheat ahead of monthly crop ratings.

Exporters shipped 16.5 million bushels of wheat in the week ending February 26, down from 19.4 million the previous week and down from the five-year average for the week of 19.4 million bushels. The past week’s total included 0.8 million bushels of wheat shipped out of the Gulf to Brazil.

Marketing year shipments to all destinations total 623 million bushels, down 256 million or 29% from the previous year. Shipments to date fall short of the seasonal pace needed to hit USDA’s target by May 31 by 30 million bushels, versus fall short by 31 million the previous week.

Key production states are expected to release monthly crop ratings for the winter wheat crop later this afternoon. Many of those states will then continue to update ratings on a weekly basis, ahead of national weekly ratings that begin in April.

The dollar index probed to a new 11-year high today, but failed to show any convincing momentum to give confidence to its near-term direction. My bias is to the upside long-term, but we still cannot rule out a short-term correction lower as European fears ease over the next several months. Now it comes down to this afternoon’s ratings and the dollar to determine whether we make new lows, or build off these levels to add risk premium in the weeks ahead.


Live cattle futures seek to close the gap with the cash market.

Last week’s cash trade waited until late on Friday to develop. Trade opened up in Nebraska at $158 per cwt on a live basis and $254 per cwt on a dressed basis. However, prices firmed as trade expanded, with movement at $159 in Kansas and up to $160 per cwt in Nebraska and Colorado.

The week’s kill was estimated at 523,000 head, up 2,000 from the previous week, but down 47,000 or 8.2% from the previous year. Calendar year slaughter is estimated at 4.507 million head, down 7% from the previous year. Carcass weights this past week were estimated at 818 pounds, up 20 pounds or 2.5% from the previous year. That puts total beef production for the past week at 427 million head, up from 424.7 million the previous week, but down 5.9% from the previous year. Beef production for the year to date totals 3.931 billion pounds, down 3.4% from year ago levels.

Packers have wiped out more than $100 losses per head by pushing product prices higher over the past week. However, product movement dropped dramatically as prices rose, with retailers focused on cheaper pork and product prices.

Product movement slowed 590 loads over the past week as prices rose, down from 793 loads the previous week and down from 700 loads in the same week last year. The past week’s load count was the lowest in eight weeks.

Product movement at mid-morning today was very slow, even for a Monday, at just 40 loads. Choice cuts rose $0.79 to $248.37, while Select cuts were down $0.10 to $245.47 per cwt.

Stronger product prices pushed today’s estimated packer margins to $6.60 per head, the first time they have been positive in four weeks. Stronger futures give momentum to feeders, even though the cash market remains at a premium to the futures market. However, gains should be limited by soft demand for product at these prices amid cheap pork and poultry prices.


Lean hog futures push higher, but lack momentum to push through overhead resistance.

The past week’s slaughter is estimated at 2.262 million head of hogs, down from 2.280 million the previous week, but up 5.6% from the 2.142 million killed in the same week last year. That brings calendar year slaughter to 18.726 million head, up 1.8% from the previous year. Pork production during the week totaled 491.9 million pounds, up from 479.1 million the previous week. Calendar year production totals 3.548 billion pounds, up 2.5% from the previous year.

Product movement surged over the past week, reaching 1,999 loads. The total was up from 1,652 loads the previous week and up from 1,672 loads in the same week last year. In fact, the past week’s load movement was the largest in seven weeks. The composite pork product price finished the week at $70.51 per cwt, off its multi-year low of $68.13 set on Thursday, but still down $0.99 on the week. It was the fifth week of lower prices, with losses over that period totaling $13.87 per cwt.

Product movement was routine at best at midday at 199 loads. The composite pork product prices gained $0.07 to $70.58 per cwt. Estimated packer margins were positive $3.75 per head, up from just $0.05 on Friday.

April lean hogs posted impressive gains early today, but buying dried up near overhead resistance around $69 per cwt. The contract is currently trading a range of $66 to $69 per cwt. The latest cash index came in at $64.49 per cwt, up $1.11 on the day and up $4.22 over the past week. Today’s cash market was mostly steady in the Midwest, although the closely watched Iowa/Southern Minnesota market was steady to 50 cents weaker.

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

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