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Closing Comments

Corn

Corn futures slip on disappointing export news.

Exporters sold 20.2 million bushels of corn in the week ending March 5, including just 16.5 million old-crop bushels. The old-crop sales were down from 32.6 million the previous week and down from the five-year average for the week of 20.6 million bushels. The past week’s net total included reductions of previous sales to “unknown destinations” by 13.5 million bushels.

Marketing year sales to all destinations total 1.419 billion bushels, down 84 million or 6% from the previous year. Exporters typically sell 73% of final corn shipments by this point in the year, whereas they had sold 78% by this point last year. This year they have already sold 79% of USDA’s target. As such, sales to date exceed the seasonal pace needed to hit USDA’s target by August 31 by 113 million bushels, but that is down from 126 million bushels the previous week.

Exporters sold a whopping 17.0 million bushels of grain sorghum in the week ending March 5, including 8.6 million old-crop bushels. The old-crop sales were up from 7.2 million bushels sold the previous week and up from the five-year average for the week of 1.0 million bushels. Sales to Chinese end users during the week totaled 6.1 million old-crop and 2.1 million new-crop bushels, while “unknown destinations,” likely Chinese end users, bought 2.1 million old-crop and 6.4 million new-crop bushels of grain sorghum.

Marketing year sales to all destinations total 309 million bushels, up 173 million or 127% from the previous year and above USDA’s target for the year ending August 31 of 300 million bushels. Exporters typically sell 62% of final grain sorghum shipments by this point of the year, whereas they had sold 64% by this point last year. However, this year they have already sold 103% of USDA’s target. As such, sales to date exceed the seasonal pace needed to hit USDA’s target by August 31 by 124 million bushels, up from 120 million the previous week.

The above corn export numbers were disappointing enough, but trade rumors also continue to haunt the market. Some chatter focuses on the math suggesting that we are close to working European corn into the Southeast, while another unconfirmed rumor suggests that a cargo of Brazilian corn may have been booked into the Southeast for December delivery.

December corn continues to find buying interest below $4.10, but selling interest increases near $4.20.

Soybeans

Export data suggests that demand is shifting south of the equator.

Exporters sold just 7.3 million bushels of soybeans in the week ending March 5, including 6.2 million old-crop bushels. The old-crop sales were down from 18.4 million bushels sold the previous week and down from the five-year average for the week of 12.3 million bushels. Sales to China accounted for 5.8 million bushels of the total, while “unknown destinations” reduced previous purchases by 9.7 million bushels.

Marketing year sales to all destinations total 1.756 billion bushels, up 131 million or 8% from the previous year. Exporters typically sell 88% of final soybean shipments by this point in the year, whereas they had sold 99% by this point last year. Thus far this year exporters have sold 98% of USDA’s target for the year ending August 31. As such, sales to date exceed the seasonal pace needed to hit USDA’s target by August 31 by 186 million bushels, but that is down from 204 million the previous week.

New sales of soymeal are starting to wane again, with weekly sales at 101.4K metric tons, down from 130.2K the previous week and down from the five-year average for the week of 121.7K tons. However, actual shipments remain quite strong at 280.2K metric tons, up from 259.8K the previous week and above the five-year average for the week of 185.6K tons.

Even so, the soymeal market came under mild pressure on trade chatter that a cargo of soymeal purchased by European sources may have had its origin shifted to Brazilian supplies. Additional pressure came from fears that the latest bird flu find in Arkansas may end up having a detrimental impact on soymeal demand as meat prices fall.

Regardless, it’s difficult to sustain rallies when the most visible source of demand, export sales, are dropping dramatically. The lead May contract remains well above key trend line support at $9.725, while November has next significant support at $9.575, followed by $951.5. From a fundamental standpoint, soybean prices are vulnerable as demand shifts to South America and the market needs to discourage expansion of acreage, but the charts to not yet indicate that these factors are prepared to take prices the next leg lower.

Wheat

Wheat exports impresses despite the strong dollar, with follow-through short-covering on drought concerns in the Plains.

Exporters old 18.1 million bushels of wheat in the week ending March 5, including 16.4 million old-crop bushels. The old-crop sales were down from 17.3 million bushels sold the previous week and were down from the five-year average for the week of 18.6 million bushels. The past week’s total included 4.2 million bushels of U.S. hard red spring wheat bought by China.

Marketing year sales of all wheat to all destinations total 818 million bushels, down 252 million or 24% from the previous year. Sales to date exceed the seasonal pace needed to hit USDA’s target by May 31 by 29 million bushels, up from 26 million the previous week.

Chicago led the complex higher again today, despite boasting nearly a six-month surplus of old-crop stocks, with U.S. soft wheat prices 57 cents above French wheat on the global market today. It leads because that’s where the bulk of the speculative short (sold) positions are at. It’s lead of Kansas City, support by freeze damage and drought concerns, suggests that this is more about short-covering than it is genuine concern about a short crop. Minneapolis was supported by the Chinese sales, but gains were limited by the cheap Canadian dollar.

Beef

Futures prices firmed on ideas of stronger cash trade this week, but gains were limited by weaker pork prices amid fears that bird flu will result in poultry flooding the meat market.

April live cattle futures found support this morning from ideas that this week’s negotiated trade could go for higher money than the previous week’s trade of $161 to $162 per cwt on a live basis and $258 to $259 on a dressed basis. Packer bids in the Plains are at $161, while feeders are asking for $163 to $164 per cwt, but not enough head have moved yet to really test the market.

Meanwhile, the deferred contracts came under pressure that eventually pulled April lower as well by fears that cheaper meat alternative supplies would end up pulling the beef complex lower. The industry expects significant poultry export restrictions to be imposed by our customers after confirmation of bird flu in Arkansas this week. That’s expected to back up poultry supplies here in the United States, pressuring prices at the retail level. Pork will be most directly impacted, but that could then pressure prices which further impact beef demand.

Live cattle futures recovered off their lows late-morning, with most contracts pushing back into positive territory. The renewed strength on a refocus on this week’s expected cash action came as fears eased in the pork market, allowing lean hog futures to come off their daily limit lows. The bird flu impact on meat prices has to be respected, but I continue to otherwise expect the spot contract to eventually make its way back up to the $158 to $160 area ahead of expiration.

Even so, boxed beef movement rose to 165 loads Wednesday, up from 142 loads the previous day and up from 148 loads the previous week. Choice cuts were down $0.32 to $247.47 per cwt, while Select cuts were down $0.24 to $244.88. This narrowed the Choice/Select spread to $2.59 per cwt, down from $2.67 the previous day, but up from $1.35 the previous week. Movement at mid-morning today was routine at 89 loads, with Choice cuts down $1.20, while Select cuts were up $1.47 per cwt, dropping the Choice/Select spread to minus $0.08 per cwt.

Export demand for U.S. beef ticked upward in early March. Exporters sold 17.2K metric tons of beef in the week ending March 5, up from 8.6K tons the previous week, but down from 17.8K tons in the same week last year. Actual shipments totaled 12.6K tons, up from 11.8K the previous week, but down from 13.2K tons shipped in the same week last year. Calendar year estimated sales to date are down 21% from the previous year, while actual shipments to date are down 8%.

Feeder cattle continue to see good demand at the sale barn, supporting strength in the cash index. The latest cash index came in at $213.93 per cwt, up $1.35 on the day, up $7.27 over the past week and up $7.69 per cwt over the past 8 consecutive days. The rising cash index continues to support sustained gains in the futures market, although the lead March contract has resistance at the 100-day moving average, currently at $216.44 per cwt.

Pork

Bird flu pressures hog complex on fears that poultry export restrictions will flood retail shelves here with cheap poultry.

Today’s cash market was mostly steady, but many markets east of the Mississippi were steady to 50 cents weaker as producers try to get current with getting hogs to market. The latest CME cash index came in at $66.80 per cwt, down $0.42 on the day, down $1.29 over the past four days and down $0.93 over the past week.

Yet, April lean hog futures dropped sharply this morning, trading the $3 daily limit lower at one point. Traders fretted over avian flu in Arkansas, which is expected to result in sharply lower poultry exports that put downward pressure on both poultry and pork prices at the retail level in the weeks ahead. That pushed the lead April contract to $61.125, but the contract recovered late morning to cut its losses roughly in half at this writing.

Product movement Wednesday rose to 432 loads, up from 393 loads the previous day and down from 473 loads the previous week. The composite pork product price dropped another $0.42 to $68.21 per cwt, down $1.77 on the week. Movement at midday today was slow at 154 loads, with the composite price down another $0.31 to $67.90 per cwt.

Export demand for pork remained solid in the first week of March. Export sales for the week ending March 5 totaled 18.7K metric tons of pork, down a bit from 19.0K tons sold the previous week, but up from the five-year average for the week of 7.1K tons. Actual shipments during the week totaled 20.6K tons, up from 17.9K the previous week and up from 12.0K tons shipped in the same week last year. Estimated calendar year sales to date are up 36% from the previous year, while actual shipments are up 53%.

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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