Home Market Market Watch Closing Comments

Closing Comments

SHARE

https://www.hoosieragtoday.com//wp-content/uploads//2015/06/image00911.jpg

Closing Comments

Corn

Corn futures erase previous day’s losses on technical bounce despite increased cash sales.

Exporters sold a net 16.1 million bushels of corn in the week ending May 28, including 18.3 million old-crop bushels. That accurately suggests that new-crop sales were net negative, with reductions in previous purchases of 2.2 million bushels. The old-crop sales were down from 25.8 million bushels sold the previous week, but were still well above the five-year average for the week of 12.4 million bushels. The data showed that China bought 2.2 million bushels of U.S. old-crop corn during the week, while “unknown destinations” reduced previous purchases of old-crop by 6.4 million, while buying 1.0 million new-crop bushels of corn.

Marketing year corn sales to all destinations total 1.711 billion bushels, down 106 million or 6% from the previous year. Exporters typically sell 92% of final corn shipments by this point in the year, whereas they had sold 95% by this point last year. However, this year’s sales currently come to 94% of USDA’s target. As such, sales to date exceed the seasonal pace needed to reach USDA’s target by August 31 by 41 million bushels, which is essentially unchanged from the previous week.

Exporters sold a net 1.0 million bushels of grain sorghum in the week ending May 28; all of it old-crop amid chatter than the Chinese government is seeking a way to block these imports. The sales were down from 2.9 million bushels the previous week and down from the five-year average for the week of 1.5 million bushels. China bought 3 million bushels of old-crop grain sorghum during the week, but that was partially offset by reductions of previous sales to “unknown destinations” of 2.1 million bushels.

Marketing year sales to all destinations total 327 million bushels, up 165 million or 101% from the previous year. Exporters typically sell 77% of final grain sorghum shipments by this point in the year, whereas they had sold 77% by this point last year. Thus far this year they have sold 94% 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 57 million bushels, but that is down from 61 million the previous week.

Basis offers are softening in the Midwest, particularly in western areas of the belt, as producers take advantage of the current bounce to dump old-crop supplies. Yet, corn traders ignored a strengthening dollar during the session in which money moved out of the broader commodity sector to reverse higher, with prices largely erasing the previous session’s losses. The key on Friday will be the ability, or lack thereof, of contracts to move decidedly above resistance at the past two session’s highs.

Soybeans

Early-summer rally resumes in soybeans after prices fell too far too fast in the month of May.

Exporters sold 17.5 million bushels of soybeans in the week ending May 28, including just 4.8 million old-crop bushels. The old-crop sales were down from 11.8 million bushels sold the previous week, but were actually above the five-year average for the week of 3.9 million. China was largely absent from the soybean market during the week, while “unknown destinations” reduced previous purchases of old-crop soybeans to the tune of 1.8 million bushels, while purchasing 12.2 million new-crop bushels.

Marketing year sales to all destinations total 1.841 billion bushels, up 188 million or 11% from the previous year. Exporters typically sell 97% of final soybean shipments by this point in the year, whereas they had sold 100% by this point last year. This year they have already sold 102% of USDA’s target for the year. As such, sales to date exceed the seasonal pace needed to reach USDA’s target by August 31 by 90 million bushels, but that is down from 95 million the previous week.

One of the areas we’ve been watching is the sale of soymeal, in light of problems Argentina has had in making deliveries. Actual shipments of U.S. soymeal were strong during the week at 262K metric tons, up from 213.1K the previous week and up from the five-year average for the week of 133.2K tons.

However, these are shipments of sales already on the books. There doesn’t appear to be any panic on the world market, with new sales of U.S. soymeal during the week at just 53.2K metric tons, down from 123.7K the previous week and down from the five-year average for the week of 111.2K tons.

Soyoil sales did spike to 32.7K metric tons, up from 9.2K the previous week and up from the five-year average for the week of 12.5K tons. However, actual shipments during the week saw just a modest bump to 9.6K tons, up from 7.6K the previous week and up from the five-year average for the week of 7.8K metric tons.

Fundamentally, it’s difficult to find a good reason for soybean prices to rally, other than they had fallen too far too fast this early in the growing season. Significant planting delays continue in southwestern areas of the belt focused primarily on Kansas and Missouri, but the market historically doesn’t worry about such delays in this region in early June.

Yet, this week’s rally has provided a good opportunity for traders to take profits on their massive short positions as the growing season gets started. At this point however it would appear that a move of November above $9.45 would likely take a significant change in market fundamentals.

Wheat

Wheat ignores strengthening dollar and weak exports to resume early-harvest rally.

Exporters sold a net 12.6 million bushels of wheat in the week ending May 28, including a net reduction in previous old-crop purchases of 0.8 million bushels. It’s not unusual to see net reductions in old-crop sales just days before the marketing year ends on May 31, and this year’s cancellations are in line with that typical activity as buyers begin to shift previous purchases to the new marketing year.

Marketing year sales on the books totaled 856 million bushels with three days left in the marketing year, down just 4 million bushels from USDA’s target for the year. However, sales don’t matter so much at this point, but rather actual shipments as time begins to run out to get the grain shipped before the end of the marketing year.

This week’s rally resumed today, although prices generally failed to reach Wednesday’s highs, leaving them as resistance hanging over the market. Speculative hedge fund managers continue to hold large short positions and may be seeing enough headlines about Southern Plains problems, as well as dryness in Europe, the Black Sea and North China Plains to make them nervous. They ignored a strengthening dollar that saw money flow out of the broader commodities today, but that money flow may have helped keep gains in check. Tomorrow should prove interesting, with Greece possibly dominating headlines.

Beef

Product prices bound, leaving futures firmer in range-bound trade.

Choice cuts on the spot daily market reached a record high $265.59 per cwt on May 19, but traded $16.31 lower on Wednesday at $249.28 per cwt. That helped drive estimated packer margins to losses of $65.80 per head at a time of year when they generally run in the black. The seasonal drop in product prices was anticipated, although perhaps steeper than expected.

Ironically, the steep decline in product prices comes as packers slow chain speed, although maintenance issues are also at work to curtail slaughter. Trade expectations suggest that this week’s slaughter will slip to 550,000 head, with next week slipping another 10,000. That would put slaughter for the first half of June down more than 10% from the previous year.

The slower slaughter rates makes balancing supply and demand an even greater challenge. Packers are certainly leveraging higher carcass weights to meet the challenge, as well as active beef imports. Carcass weights are generally running roughly 3% above year ago levels, with total beef production actually matching year ago levels last week, although still running 4% below year ago levels year-to-date.

Product movement on the spot daily market has rebounded this week, but it’s taken a fire-sale to stimulate that demand. Boxed beef movement rose to a four-week high of 223 loads Wednesday, up from 196 the previous day and up from 178 loads the previous week. Choice cuts fell another $2.31 to $249.28, while Select cuts fell $1.55 to $239.80. That dropped the Choice/Select spread to $9.48 per cwt, down from $10.24 the previous day and down from $11.23 the previous week.

Movement at mid-morning today was again good at 105 loads, with prices rebounding. Choice cuts were up $1.05 to $250.51, while Select cuts were up $2.20 to $242.00 per cwt.

We’ve seen two weeks of strong beef export sales at times when the dollar was weak, but the dollar was largely rallying in the week ending May 28 – the latest week covered by USDA’s weekly export sales report. The data showed that net sales during the week dropped to just 11.7K metric tons, down from 20.8K the previous week and down from 16.7K tons in the same week last year. Actual shipments during the week totaled 12.2K metric tons, up from 11.4K the previous week and up from 12.0K tons in the same week last year.

USDA also reported monthly export data this week, showing that May shipments of beef and veal totaled 199.6 million pounds during the month. That total was up from 185.3 million pounds exported the previous month, but was down from 207.1 million shipped in the same month last year. The top destination was Japan, followed by South Korea and Mexico.

Meanwhile, beef and veal imports in April totaled 345.9 million pounds, up from 325.2 million the previous month and up dramatically from 271.3 million the previous year. It’s these imports that have been a thorn in the side of cattle feeders, as they help fill domestic demand amid a shortage of cattle.

Today’s kill is estimated at 110,000 head, down 6,000 from the previous week and down 7,000 from the previous year. Week-to-date slaughter is pegged at 445,000 head of cattle, up 95,000 from the previous week, but down 23,000 from the same period last year.

June live cattle rebounded today, but this market continues to largely trade inside the previous week’s trading range, while waiting for direction from the cash market. Packers remain largely silent, while feeders have already softened their asking prices to $162 to $163 per cwt on a live basis. Feeder cattle futures rebounded as well today, with the August contract finding limited selling interest below $222. Today’s CME 7-day cash index came in today at $224.46 per cwt, up $0.85 on the day, up $2.01 over the past week and up $4.68 per cwt over the past 9 consecutive trading days.

Pork

Follow-through selling produces big losses in the hogs, with traders pointing toward the soft cash market.

Today’s Midwest cash market was mostly 50 cents lower in the closely watched Iowa/Southern Minnesota market, while mostly steady to $1 lower in Illinois and mostly steady further east. Today’s CME 2-day lean hog index came in at $82.39 per cwt, up $0.24 from the previous day, up $0.33 over the past two days, but down $0.12 over the past week.

Product movement slipped to 375 loads on Wednesday, down from 423 loads the previous day and down from 442 loads the previous week. It was a slow day for a Wednesday. The composite pork product price dropped to $86.52 per cwt, down $0.85 on the day and down $0.76 over the past week. Movement at midday today was slow at 146 loads, with the composite price up $0.57 to $87.09 per cwt.

Exporters sold 12.4K metric tons of pork in the week ending May 28, down from 15.8K the previous week and down from 13.0K tons in the same week last year. Demand is down dramatically from earlier this year as prices have risen to five-month highs and the dollar has trended higher as well. Actual shipments of previous sales during the week slid to 17.1K metric tons, down from 18.4K the previous week, but still up from 9.3K tons in the same week last year.

USDA reports that April pork exports totaled 483.4 million pounds, up from 440.2 million the previous month and up from 436.0 million pounds in the same month last year. The top destination was Japan, followed by Mexico.

For all the hype about avian flu, broiler exports haven’t been impacted that significantly yet, at least not as of April, as top producers Alabama and Georgia remain clear of the disease. Shipments totaled 573.0 million pounds in April, down roughly 30 million pounds from March, but still above the 572.1 million shipped in April of 2014. Whole hog imports from Canada totaled 479.3K head in April, up from 439.3K the previous month and up 17% from the 409.0K head imported in April 2014.

Lean hog futures saw follow-through chart-related selling today, with weaker cash prices providing the justification for doing so. July lean hogs traded as low as $80.50 per cwt, which was its lowest level since April 27. Next support is seen near $80, but traders will monitor the cash market for direction.

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//2015/06/image01011.jpg

https://www.hoosieragtoday.com//wp-content/uploads//2015/06/image01111.jpg

https://www.hoosieragtoday.com//wp-content/uploads//2015/06/image01211.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.