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Closing Comments

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Closing Comments

Corn

Corn futures pull back on disappointing export sales.

Exporters sold 18.3 million bushels of corn in the week ending March 19, including 17.1 million old-crop bushels. The old-crop bushels surprisingly included 2.4 million bushels sold to China, the largest sale to China since April. However, that was over-shadowed by “unknown destinations” cancelling previous purchases totaling 13.2 million bushels.

Marketing year sales to all destinations total 1.456 billion bushels, down 130 million or 8% from the previous year. Exporters typically sell 76% of final corn shipments by this point in the year, whereas they had sold 83% by this point last year. This year they have sold 81% of USDA’s target for the year ending August 31. As such, sales to date still exceed the seasonal pace needed to reach USDA’s target by 92 million bushels, but that is down from 104 million the previous week.

Exporters sold 11.3 million bushels of grain sorghum in the week ending March 19, including 2.3 million bushels of old-crop. The old-crop sales went entirely to Chinese end users, while the new-crop sales were entirely credited to “unknown destinations,” also likely Chinese end users.

Marketing year sales to all destinations total 318 million bushels, up 182 million or 134% from the previous year. Exporters typically sell 64% of final grain sorghum shipments by this point in the year, whereas they had sold that same 64% by this point last year as well. However,  this year they have already sold 106% of USDA’s target for the year ending August 31. As such, sales to date exceed the seasonal pace needed to reach USDA’s target by August 31 by 126 million bushels, although that is down slightly from 127 million the previous week.

Profit taking pressured prices on the weak export sales data today, but the market was well-supported on expectations of declining global production, including lower Midwest acres this year.

Soybeans

Soybeans give way to profit taking amid selling in the other markets, but prices were well-supported by fresh export demand.

Exporters sold 26.7 million bushels of soybeans in the week ending March 19, including an unexpectedly good 18.6 million bushels of old-crop bushels. The old-crop sales were up from 12.6 million bushels sold the previous week and up from the five-year average for the week of 8.0 million. Sales to China accounted for 4.7 million bushels of the old-crop sales, but were not in the market for new-crop U.S. soybeans during the week.

Marketing year sales to all destinations total 1.781 billion bushels, up 148 million or 9% from the previous year. Exporters typically sell 90% 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 99.5% of USDA’s target for the year ending August 31. As such, sales to date exceed the seasonal pace needed to reach USDA’s target by 179 million bushels, down from 180 million the previous week.

However, the bigger story continues to be in the soymeal market, where global buyers still appear to lack confidence in South American supplies. Soymeal sales for the week ending March 19 included 224.3K metric tons of old-crop soymeal and 3.9K metric tons of new-crop soymeal.

The old-crop sales were up from 204K tons sold the previous week and above the five-year average for the week of 143K tons. Actual shipments during the week totaled 304K metric tons, up from 220.1K the previous week and above the five-year average for the week of 190.2K tons. The demand continues to support domestic crush margins, helping to underpin soybean values.

USDA’s daily export reporting service today confirmed another big sale of new-crop soybeans. The agency reports that China bought 10.3 million new-crop soybean bushels in the past 24 hours.

About 5% of the Argentine soybean crop has been harvested to this point, according to the Argentine government. Yields thus far have been quite impressive, more than offsetting losses from flooding last month. The government expects total production to come in between 58 and 60 million metric tons, which would be up roughly 10% from last year record crop.

The soybean market was lower today, but thus far it has refused to break. Traders are reluctant to push prices too far in either direction until they see next week’s USDA reports.

Wheat

Poor exports submarine wheat prices.

Exporters sold just 6.7 million bushels of wheat in the week ending March 19, including just 3.8 million old-crop bushels. The old-crop sales were down from 14.4 million bushels sold the previous week and were down from the five-year average for the week of 18.0 million bushels. The total included 0.6 million bushels of hard red winter and 0.3 million bushels of soft red winter wheat sold to Brazil, while China bought 1.3 million bushels of hard red spring wheat.

Marketing year sales to all destinations total 836 million bushels, down 263 million or 24% from the previous year. Sales to date still exceed the seasonal pace needed to reach USDA’s target by May 31 by 21 million bushels, but that is down from 32 million bushels the previous week.

Traders were disappointed by the poor weekly export sales, with the sluggish demand highlighted by strong demand going to alternative sources. The European Union approved export sales of 26.5 million bushels of soft wheat, displacing demand for U.S. wheat. Furthermore, trade sources report that Algeria bought 16.5 million bushels of optional origin wheat this morning, which is expected to be sourced from European sources.

Wheat prices simply fell out of bed this morning when the trade saw the poor export sales data and as the dollar recovered from overnight losses, threatening any hopes for recovery in that demand. Losses accelerated as prices fell through areas of chart support, tripping preset sell stops as they did so.

Beef

Live cattle futures consolidate lower ahead of this week’s cash trade.

Live cattle futures failed to move higher in recent sessions, so traders chose to take some profits while they wait for this week’s cash action to emerge. The cash market has largely been quiet to this point. Feeders were said to be asking up to $167 per cwt on a live basis in the Plains, with packers relatively quiet to this point. There was talk that packers were offering $160 per cwt on a live basis in Nebraska and $258 on a dressed basis. Last week’s trade took place at mostly $163 to $165 on a live basis and at up to $261 on a dressed basis.

This week’s kill has been running well below last week’s sluggish pace, but there was an expectation that we would finish the week strong to bring this week’s total up to 524,000 head slaughtered, up from 518,000 the previous week. Packers are pushing product prices higher to cut their losses, and it appears to be working as retailers stock up for barbecue demand for the approaching Easter holiday weekend.

Product movement rose to 152 loads Wednesday, up from 126 loads the previous day, but down from 183 loads the previous week. Yet, Choice cuts rose $3.68 to $250.51 per cwt, while Select cuts rose $2.36 to $247.14 per cwt. That strengthened the Choice/Select spread to $3.37 per cwt, up from $1.55 the previous day and up from $2.33 the previous week. Movement at mid-morning today was a routine 90 loads, with Choice cuts rising another $0.45 and Select cuts up another $0.12 per cwt.

Export demand rose slightly in the latest data, as the dollar pulls back from its recent 12-year highs. Beef sales totaled 13.1K metric tons in the week ending March 19, up from 11.6K the previous week, but down from 13.3K tons in the same week last year. This brings estimated sales for the calendar year to date to 188.7K tons, down roughly 48K tons or 20% from the previous year. Actual shipments in the week totaled 12.5K tons, up from 12.2K the previous week and up from 11.6K in the same week last year. Calendar year shipments are estimated at 128K metric tons, down 10K tons or 7% from the previous year.

April live cattle remained largely within Tuesday’s trading range today as traders await cash action. Prices firmed again when it became apparent that the market lacked interest in testing Tuesday’s lows. Feeder cattle followed a similar pattern, waiting for this week’s cash cattle trade. The latest CME cash index came in at $217.63 per cwt, up $0.73 on the day and up $5.02 over the past week.

Today’s kill is estimated at 108,000 head, up 5,000 from the previous week, but down 8,000 from the previous year. Week-to-date kill is estimated at 419,000 head, down 11,000 from the previous week and down 51,000 from the same week last year.

Pork

Lean hog futures rise on short-covering ahead of Friday’s USDA quarterly hogs and pigs report.

Lean hog futures pushed higher to more than one-week highs today as traders covered short (sold) positions ahead of Friday’s USDA quarterly hogs and pigs report. The trade knows of USDA’s tendency to put surprises in those reports. Average trade guesses ahead of the report are as follows:

March 27 Quarterly Hogs & Pigs

USDA

Trade Est.

Range

percent of previous year

All hogs March 1

106.8

105.0-108.5

Kept for Breeding

103.6

102.4-104.6

Kept for Market

107.2

105.0-109.0

Pig Crop

December to February

109.0

104.7-111.2

Weight Groups

Under 50 lbs.

108.6

104.2-110.3

50 to 119 lbs.

106.6

104.0-109.1

120 to 179 lbs.

106.0

103.0-108.4

Over 180 lbs.

107.3

105.0-108.2

Farrowings

December to February

103.7

103.0-104.0

Farrowing Intentions

March to May

103.2

102.9-103.8

June to August

102.9

102.0-103.8

Pigs per Litter

December to February

105.1

101.1-107.0

 

Today’s cash market was mostly steady across the Midwest, although Illinois was mostly steady to 50 cents weaker. The latest CME 2-day lean hog index came in at $61.31 per cwt, down $0.50 on the day, down $2.78 over the past week and down $6.78 over the past 14 consecutive trading days.

Product movement on Wednesday jumped to 478 loads, up from 397 loads the previous day and up from 430 loads the previous week. The composite pork product price dropped $0.99 to $66.82 per cwt and down $1.74 over the past week. Movement at midday today was slow at 160 loads, but the composite price was up $1.51 to $68.33 per cwt.

Export demand for pork remains relatively good, with sales in the week ending March 19 totaling 19.5K metric tons, down from 21.1K the previous week, but well above the 6.6K tons sold in the same week last year. That brings estimated calendar year sales to 254K tons, up 85K tons or 50% from the previous year. Actual shipments during the week totaled 21.2K tons, up from 19.8K the previous week and up from 10.6K tons shipped in the same week last year. Shipments for the calendar year to date are estimated at 204K tons, up 76K tons or 60% from the previous year.

Today’s kill is estimated at 432,000 head, down 2,000 from the previous week, but up 24,000 head from the previous year. Week-to-date kill is estimated at 1.733 million head, up 11,000 from the previous week and up 85,000 from the same period last 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.

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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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