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Closing Comments

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Closing Comments

Corn

Corn futures rally early, but traders still see rallies as meant to be sold amid cheaper competing supplies on the global market.

Exporters sold 34.4 million bushels of corn in the week ending April 16, including a 9-week high of 34.2 million bushels of old-crop corn. The old-crop sales were up from 23.2 million bushels sold the previous week and above the five-year average for the week of 28.9 million bushels. No new sales to China were included in the weekly total, but “unknown destinations” reduced previous purchases by 4.7 million bushels.

Marketing year sales to all destinations total 1.554 billion bushels, down 141 million or 8% from the previous year. Exporters typically sell 83% of final corn shipments by this point in the marketing year, whereas they had sold 88% by this point last year. Thus far they have sold 86% of USDA’s target for the current year. As such, sales to date exceed the seasonal pace needed to reach USDA’s target by August 31 by 60 million bushels, up from 58 million the previous week.

Exporters sold 5.6 million bushels of grain sorghum in the week ending April 16, including 3.3 million bushels of old-crop grain sorghum. The old-crop sales were up from 2.6 million bushels sold the previous week, but down from the five-year average for the week of 4.4 million bushels.

Chinese end users bought 7.4 million bushels of old-crop grain sorghum during the week, while “unknown destinations” reduced previous purchases by 4.1 million bushels. Chinese buyers reduced previous purchases of new-crop grain sorghum by 2 million bushels, while “unknown destinations” bought 4.3 million bushels.

Marketing year sales to all destinations total 318 million bushels of grain sorghum, up 173 million or 120% from the previous year. Exporters typically sell 69% of final grain sorghum by this point in the marketing year, whereas they had sold 68% by this point last year. However, they have already sold 91% of USDA’s target for the current year. As such, sales to date exceed the seasonal pace needed to reach USDA’s target by August 31 by 78 million bushels, but that is down from 81 million the previous week.

The expiration of May options should support a push to the $3.90 to $4.00 strike price levels, but today’s price action demonstrates the difficulty this market has sustaining rallies amid cheaper alternative supplies around the world. The lead May contract rallied to $3.78 and December rallied to $4.0175, but late-day selling quickly took the shine off this market. This leaves the two contracts vulnerable to retesting key support at $3.70 and $3.95 once again, with the Midwest planting window opening up again next week.

Soybeans

The Brazilian truckers strike combined with a surging vegetable oil market to lift soybeans, but the rally was again sold.

Exporters sold just 4.0 million bushels of soybeans in the week ending April 16, including 3.8 million old-crop bushels. The old-crop sales were down from 11.5 million bushels the previous week and down from the five-year average for the week of 10.1 million bushels. China bought just 1.2 million bushels of U.S. soybeans during the week.

Marketing year sales to all destinations total 1.787 billion bushels, up 148 million or 9% from the previous year. Exporters typically sell 93% of final soybean shipments by this point in the marketing year, whereas they had sold 99.5% by this point last year. Thus far this year they have sold 99.8% of USDA’s target. As such, sales to date exceed the seasonal pace needed to reach USDA’s target by August 31 by 122 million bushels, but that is down from 134 million the previous week.

Demand for soymeal continues to wane as well as buyers shift their business south of the equator. Soymeal sales totaled 107.4K metric tons in the latest weekly report, down from 130.5K the previous week and down from the five-year average for the week of 133K metric tons. Actual shipments fell to 171.4K metric tons, down from 250.3K tons the previous weeks, although still above the five-year average for the week of 155.8K metric tons. Even so, we’ve sold 1.1 million metric tons more soymeal this year than last by this point, but have shipped roughly 300K metric tons less thus far.

A truckers strike began in Brazil at midnight last night. The strike is not expected to have the broad impact on Brazilian commerce that it did in February. Nonetheless, scattered blockages are being reported, including three roads in Mato Grosso.

Soyoil prices exploded higher in Argentina today, helping to light a fire beneath the U.S. market as well. Additional support came from a Stats Canada report showing a shift of acreage from canola to wheat, leaving a tight Canadian canola oil balance sheet. Planting intentions for canola are pegged at 19.416 million acres, down from 20.325 million the previous year. Soybean area is expected to fall to 5.4 million acres, down 200,000 or 3.4% from last year’s record level.

The global vegetable oil market provided strength for soybeans today, along with talk of road blockages by the Brazilian truckers strike, but neither are likely to overcome bearishness from rising world supplies of soybeans and soymeal. Even so, today’s gains were encouraging for market bulls in the soybean market.

Prices rallied to their highest level since April 7, adding to modestly positive chart signals. However, the lead May contract turned lower at chart resistance stacked between $9.83 and $9.84. November soybeans turned lower at the 50-day moving average of $9.6475. The new-crop soybean/corn price ratio rose to 2.43 to 1, effectively trying to buy more soybean acres.

Wheat

Kansas City wheat gains on Chicago on improving demand and spread unwinding.

Exporters sold 19.3 million bushels of wheat in the week ending April 16, including 14.6 million old-crop bushels. The old-crop sales were up from a mere 1.8 million bushels sold the previous week and above the five-year average for the week of 11.4 million bushels. Marketing year sales total 870 million bushels, down 270 million or 24% from the previous year. Sales to date exceed the seasonal pace needed to reach USDA’s target by May 31 by 36 million bushels, up from 29 million the previous week.

Stats Canada reports that farmers intend to plant 24.765 million acres of wheat this year, up from 23.835 million the previous year. Durum acres are pegged at 5.5 million, up from 4.75 million the previous year.

Unwinding of intermarket spreads lifted Kansas City over Chicago after the spread approached single-digit levels in recent days. We need to see Kansas City sustain this strength if the wheat complex as a whole is going to be able to maintain upward momentum. That may be possible as we move closer to the Wheat Quality Council tour of Kansas and surrounding states the week of May 4, but the underlying sentiment remains bearish, with U.S. wheat seen as the expensive option on the global market.

Beef

Live cattle futures push higher on signs that demand is improving and has exceeded production levels.

Additional cash trade emerged in the Plains today, with a few additional cattle moving at $158 per cwt on a live basis in Kansas and more moving in Nebraska and Colorado at $160. Yet, live cattle futures surged the $3 daily limit higher, with many feeder cattle futures contracts touching the $4.50 daily limit higher. Both had been trading at a substantial discount to the cash market and both seemed interested in trying to close the gap amid data showing improving demand.

Wednesday’s cold storage report showed beef supplies in the freezer March 31 up 18% from the previous year, reflecting this winter’s build in supplies. However, the number came in below trade expectations and down 2% from the previous month. That suggests that the tide may be turning, with demand starting to exceed production at this point. Additional support came from strong export sales.

Exporters sold 20.0K metric tons of beef in the week ending April 16, which was nearly a six-month high. The total was up from 11.2K metric tons sold the previous week and up from 18.0K metric tons sold in the same week last year. This brings estimated sales for the calendar year to 236.6K metric tons, down 72.4K metric tons or 23% from the previous year. Actual shipments during the week totaled 11.6K metric tons, down from 12.7K tons the previous week and down from 11.9K tons in the same week last year. Estimated shipments for the calendar year totaled 175.5K metric tons, down 11.3K tons or 6% from the previous year.

Boxed beef movement on the spot daily market rose to a five-week high of 165 loads Wednesday, up from 137 loads the previous day and up from 144 loads the previous week. Choice cuts rose $0.24 to $260.06 per cwt, which is just below the January record high of $263.81. Select cuts were down $0.03 to $249.52, pushing the Choice/Select spread to $10.54 per cwt, its highest level since January 7. Movement at mid-morning today slowed to just 68 loads, but Choice cuts were up another $0.21, while Select cuts were up $1.67 per cwt.

Feeder cattle futures are receiving support from chatter that supplies of light-weight cattle are tightening as heifer retention increases, but the cash index continues to trend lower overall. Today’s index came in at $215.57 per cwt, down $0.96 on the day, down $3.90 over the past four consecutive days and down $2.83 on the week.

Today’s kill is estimated at 105,000 head, up 3,000 from the previous week, but down 12,000 from the previous year. Week-to-date slaughter is estimated at 435,000 head, up 6,000 on the week, but down 18,000 from the same period last year.

Pork

Lean hog futures rally on higher cash and product prices amid evidence that demand is exceeding production.

Wednesday’s cold storage report showed that pork in the freezer March 31 was up 16% from the previous year, but below trade expectations and down 2.6% from the previous month. That suggests that demand is beginning to exceed production, with solid domestic and export demand.

Exporters sold 22.5K metric tons of pork in the week ending April 16, up from 16.1K the previous week and up from 15.2K tons sold in the same week last year. This brings estimated calendar year sales to 339.3K tons, up 127.8K tons or 60% from the previous year. Actual shipments in the week totaled 20.4K metric tons, down from 20.8K the previous week, but up from 13.4K tons shipped in the same week last year. This brings estimated calendar year shipments to 286.6K metric tons, up 115.4K tons or 67% from the previous year.

Product movement totaled 393 loads Wednesday, which was down slightly from 398 loads the previous day, but down more significantly from a robust 538 loads the previous week. The composite pork product price slipped to $67.48 per cwt, down $1.13 on the day, but still up $0.19 on the week. Movement at midday today was routine at best at 187 loads, but the composite price surged $3.68 to $71.16 per cwt on strong demand for picnics and hams.

Today’s cash market was also supportive, with hogs moving at steady to 50 cents better in the closely watched Iowa/Southern Minnesota market and steady to $1 higher in Illinois, although mostly steady elsewhere. Today’s CME 2-day lean hog index was $65.10 per cwt, up $0.34 on the day, up $2.94 on the week and up $5.52 over the past 13 consecutive trading sessions.

Today’s slaughter is estimated at 428,000 head, down 3,000 on the week, but up 11,000 from the previous year. Week-to-date kill is pegged at 1.718 million head, down 23,000 on the week, but up 201,000 from the same period last year.

June lean hogs rallied to their highest level since April 15. The next objective would be a move above the April high of $79.75 per cwt. This market remains vulnerable to continued influence from avian flu headlines, but for today momentum suggests higher prices.

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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