Home Market Market Watch Closing Comments

Closing Comments

SHARE

https://www.hoosieragtoday.com//wp-content/uploads//2015/04/image00948.jpg

Closing Comments

Corn

Traders remain unimpressed by strong corn export shipments amid fears of softening demand and over-production.

Exporters shipped a one-year high 50.9 million bushels of corn in the week ending April 23, up from 42.2 million the previous week and up from the five-year average for the week of 31.3 million bushels. The total included a cargo of 2.7 million bushels destined for China.

Marketing year shipments total 1.045 billion bushels, down 57 million or 5% from the previous year. Exporters typically ship 62% of final corn shipments by this point in the marketing year, whereas they had shipped 58% by this point last year, which matches the portion of USDA’s target that have been shipped to this point. As such, shipments to date fall short of the seasonal pace needed to reach USDA’s target by August 31 by 63 million bushels, versus being short by 80 million the previous week.

Exporters shipped 4.3 million bushels of grain sorghum in the week ending April 23, down from 8.6 million the previous week, but up from the five-year average for the week of 2.6 million bushels. Virtually all of the shipments went to Chinese end users during the week.

Marketing year shipments total 254 million bushels, up 138 million or 120% from the previous year. Exporters typically ship 65% of final grain sorghum shipments by this point in the marketing year, whereas they had shipped 54% by this point last year. However, this year they have already shipped 72% of USDA’s target. As such, shipments to date exceed the seasonal pace needed to hit USDA’s target by August 31 by 26 million bushels, although that is down from 28 million the previous week.

USDA is scheduled to release its weekly crop progress report at 3 p.m. CDT this afternoon. The trade expects the agency to peg corn planting at 19% as of Sunday, up from 10% the previous week. I submitted an estimate on behalf of Water Street of 18% planted. Regardless, the trade expects rapid planting progress in the week ahead as temperatures warm and soils dry out.

Corn futures slipped to fresh six-month lows today, settling near session lows. The charts would suggest that the longer-term target would be a test of $3.40, but I would be surprised to see us go straight there. This market is becoming oversold at a time of year when it traditionally is worried about risk premium. Fundamentally, it’s difficult to find a reason for a significant bounce at this point, but it’s pretty early to be taking prices down this far this fast.

Soybeans

Soybeans find support from tight cash supplies as farmers hold tight.

Exporters shipped 11.4 million bushels of soybeans in the week ending April 23, up from 5.4 million the previous week and up from the five-year average for the week of 11.2 million bushels. It did so with just 0.005 million bushels going to our biggest customer of China.

Marketing year shipments total 1.683 billion bushels, up 163 million or 11% from the previous year. Exporters typically ship 85% of final soybean shipments by this point in the marketing year, whereas they had shipped 92% by this point last year. This year they have already shipped 94% of USDA’s target. As such, shipments to date exceed the seasonal pace needed to reach USDA’s target by August 31 by 165 million bushels, but that is down from 171 million the previous year.

There’s never been any doubt about this year’s demand. However, supply has been much larger, with a huge crop in South America following a big U.S. harvest and farmers here expanding acreage for the growing season ahead. However, farmers aren’t selling soybeans on hand. One can legitimately debate whether USDA over-estimated the size of last year’s crop, but I doubt they over-estimated it by 300 million bushels. Yet, farmer selling remains so tight that processors are running out of supplies, with some planning extended down time next month for maintenance.

The deferred contracts were much weaker as they focused on the expectation that those bushels will eventually come to town. Furthermore, global supplies are expected to continue growing if there is not a significant weather problem this year. The new-crop soybean/corn price ratio finished the day at 2.48 to 1; effectively working to buy more soybean acres. Chinese demand could also slow over the coming year as its hog numbers decline following an extended period of sow liquidation. As such, soybean prices may be firming now, but their longer-term trend continues to be lower.

Wheat

Wheat posts double-digit losses as chart support gives way.

Exporters shipped 20 million bushels of wheat in the week ending April 23, down from 22.4 million the previous week and down from the five-year average for the week of 24 million bushels. However, it was interesting to note that the past week’s shipments included no shipments to Brazil, but it did include a cargo of 2.2 million bushels of U.S. wheat.

Marketing year shipments total 763 million bushels, down 282 million or 27% from the previous year. Shipments to date fall short of the seasonal pace needed to reach USDA’s target by May 31 by 10 million bushels, but that is better than the 14-million bushel deficit seen the previous week.

The trade expects USDA this afternoon to show that the winter wheat crop rates 43% Good to Excellent, up one point from the previous week. I concur with that estimate, with expectations that we will see some wheat move up from the Fair category. However, much of the wheat in the Poor to Very Poor category is expected to stay there as many of the rains came too late to significantly boost yield prospects.

The problem is that wheat is too expensive into many of our markets, except where we have a freight advantage or quality advantage. As such, the trade has thus far been unimpressed by winterkill, drought damage or the stripe rust outbreak in the Central Plains. I wouldn’t be surprised by a short-covering rally as we approach next week’s Wheat Quality Council tour of the region or the following week’s USDA crop report, but sentiment remains bearish overall.

Selling accelerated in Chicago as contract lows gave way. Problems in the Plains limited losses, but they were still at double-digit levels. Chicago and Kansas City are now both below $5, with Minneapolis rapidly approaching that level.

Beef

USDA report throws cold water on bullish embers, but chart support holds.

Friday’s USDA cattle-on-feed report took the air out of the market, throwing cold water on bullish embers that had ignited the previous two sessions. More cattle were placed into feedlots in March that expected by the trade; particularly heavy-weight cattle that had been on lush spring pasture. That increases the supply that will soon be available to the market.

The data was certainly not bearish, considering that supplies of cattle available to the market remain quite tight, but it was definitely not as supportive as expected. Losses were also limited by the fact that futures contracts beyond the expiring April contract were already at huge discounts to the cash and just above levels that had frequently provided support over the past year. In fact, trade reports indicate that at least two packers continued to search for more cattle in Nebraska through the weekend.

USDA’s data showed that 40% of March placements were cattle over 800 pounds. Producers are taking advantage of lush pasture this spring to put as much weight on these cattle as possible before going to the feedlot to help break-evens. This strategy will likely continue as long as these dynamics are present.

Last week’s product movement on the spot daily market totaled 831 loads over the past week, up from 807 loads the previous week, up from 631 loads in the same week last year and the largest total since late January. Choice cuts finished the week at $256.99 per cwt, down $3.02 on the day as the market collapsed late in the day bringing us down $0.80 on the week. Select cuts finished the week at $247.62 per cwt, down $3.42 on the day and down $3.35 on the week. However, the Choice/Select spread firmed to $9.37 per cwt, up $2.55 on the week and up $9.32 over the past six weeks as it rises seasonally.

Movement at mid-morning today was again strong for a Monday at 102 loads. Choice cuts were down $0.26 to $256.73, while Select cuts were down $0.21 to $247.41 per cwt. That narrowed the Choice/Select spread slightly to $9.31 per cwt.

Last week’s slaughter was pegged at 544,000 head, up 11,000 on the week, but still down 46,000 from the previous year. That would bring calendar year slaughter to 8.740 million head, down 709,000 or 7.5% from the previous year. Carcass weights are slowly easing lower, off 10 pounds from January. As such, beef production for the year to date is running about 4.5% below the previous year’s level. Today’s kill is estimated at 105,000 head, down 5,000 from the previous week and down 9,000 head from the previous year.

Today’s feeder cattle market turned lower on USDA’s cattle-on-feed data, although it quickly came off its initial lows. The market has been trading at a discount to the cash market, although the cash market has been trending lower. However, the latest CME cash index bounced, suggesting new-found strength. The index came in at $21.435 per cwt, up $1.38 on the day, but down $3.31 over the past week.

Pork

Lean hog futures continue to find support from strong demand.

Lean hog futures had firm undertones today, pushing the June contract to its highest level since early March. However, it struggled to sustain those gains amid a lingering lack of understanding among traders of how the avian flu problem may impact pork prices. June lean hogs face an area of resistance at $80, with the next objective being in the $84 to $85 area. I don’t expect the market to go straight there, but rather to chop around a broad trading range that eventually moves us in that direction.

USDA cold storage and export data last week supported ideas that demand is strong, but the supply is big as well. These higher prices are likely encouraging expansion beyond what was shown in the March 27 USDA quarterly hogs and pigs report, but demand is expected to exceed expectations as well. Eventually, the avian flu problem should prove supportive for demand, with our analysis showing that China could see a significant uptick in demand as well. Yet, the industry has a tendency to over-produce, which means that this is a fine balancing act.

Today’s Midwest cash market was mostly steady to $1 higher, with the greatest strength being in eastern areas. The latest CME cash index was posted at $65.39 per cwt, up $0.21 on the day, up $1.66 on the week and up $5.81 over the past 15 consecutive trading sessions.

Product movement last week slipped to 1,669 loads, down from 1,860 loads the previous week, but up from 1,495 loads in the same week last year. The composite pork product price finished the week at $69.94 per cwt, up $0.27 on the day, up $1.95 on the week and up $4.59 per cwt over the past four weeks. The comparable composite price from the previous year was $116.13 per cwt. Movement at midday today was routine at 168 loads, with the composite price up another $0.36 to $70.30 per cwt.

The past week’s kill at 2.184 million head, down 59,000 from the previous week, but up 193,000 head from the same period last year. That brings calendar year slaughter to 36.464 million head, up 1.89 million or 5.5% from the previous year. Carcass weights started the year above year ago levels, but have now slipped below. As such, pork production for 2015 is currently running 5.6% above year ago levels. Today’s kill is estimated at 429,000 head, down 1,000 from the previous week, but up 85,000 head from the previous 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.

https://www.hoosieragtoday.com//wp-content/uploads//2015/04/image01047.jpg

https://www.hoosieragtoday.com//wp-content/uploads//2015/04/image01147.jpg

https://www.hoosieragtoday.com//wp-content/uploads//2015/04/image01246.png

www.waterstreet.org 
or 1-866-249-2528

 

 

https://www.waterstreet.org/s/ws-80x70.png

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.

The information contained in this e-mail message is intended only for the personal and confidential use of the recipient(s) named above. This message may be an attorney-client communication and/or work product and as such is privileged and confidential. If the reader of this message is not the intended recipient or an agent responsible for delivering it to the intended recipient, you are hereby notified that you have received this document in error and that any review, dissemination, distribution, or copying of this message is strictly prohibited. If you have received this communication in error, please notify us immediately by e-mail, and delete the original message. Water Street Solutions is an equal opportunity provider. Water Street Solutions is an equal opportunity employer.