The ag markets this week provided somewhat of an uplifting mood for most. Of the major commodities we cover, all but soybean meal were higher on the week. Which if you are a feed user wanting to buy some is ideal. Looking at several commodities, some contracts are a week or so removed from contract highs, with exception to the wheat, meal, or cotton markets. However, most of those were on the rise again this week as they have been for the good part of the last 9 months. It reminds me of a movie (or franchise) my son is obsessed with at the moment, Toy Story©. At the beginning Buzz thinks he can fly, and thus comes the famous phrase “to infinity and beyond.” That seems to be what the markets (not exclusive to just ag) have been doing recently. Though if you’ve seen the movie, you’d know Buzz (i.e. the market in this case) realizes he can’t get to infinity. Now, when will the market realize it? That is left up to the market to decide. It could be a week, month, or all summer! Of course, a good advisor will put you in position so you’re ready for when that time comes.
Corn futures posted contract highs in several contract months this week, adding another 3.13% to the rally in nearby May. New crop December had another round of gains, up 12 cents from last week. Planting progress is beginning across the country, with 2% planted as of last Sunday, though widespread rains across the Corn Belt likely slow pace this week. Most of the trade action this week was focused on the Friday WASDE report, with USDA cutting projected US corn ending stocks to 1.352 bbu. They did that by adding a combined 150 mbu to each of the three use categories. On the world side, USDA cut World ending stocks by 3.85 MMT to 283.85 MMT. Thursday’s weekly Export Sales report showed corn bookings at 757,039 MT old crop and 50,000 MT for 2021/22 crop delivery. That took the 20/21 shipped and unshipped sale total to 98% of newly updated USDA forecast vs. the 82% average. Exports are 53% complete of the WASDE projection, with the normal pace at 50%. Census data showed a record 6.31 MMT (248.4 mbu) shipped during February. The large money spec funds trimmed back their net long position in corn futures and options by 8,965 contracts during the week of 4/6. That position stood at 386,619 contracts on that date.
Someone lit the fuse under the Wheat market this week, as MPLS led the way with a 9.09% gain. Chicago SRW was up 4.54% on the week, with KC HRW 3.81% higher on the week. After being a brief discount to corn at Thursday’s close, May KC futures are back to a 9 ¼ cent premium vs. May corn. Depending on local basis and availability that is likely still cheap enough to compete for feed. Friday’s WASDE saw USDA raise the US wheat carryout projection by 16 mbu to 852 mbu, mainly on a reduction to the feed and residual number thanks to higher March 1 stocks. That was not the case for the world, however, as WAOB cut a total of 5.6 MMT from the global carryout to 295.52 MMT. Most of that was via an increase to Chinese feed use. Thursday’s weekly Export Sales report showed a MY low 81,969 MT in sales for the week of 4/1. New crop sales, though, totaled a MY high 529,850 MT. Total wheat export commitments for old crop are now to 25.185 MMT, totaling 95% of the USDA projection, vs. the average pace of 101%. Managed money parred back their new net short position in CBT wheat futures and options during the week that ended on Tuesday by 7,128 contracts to a net short 7,583 contracts. In KC wheat, they cut 7,212 contracts from their net long position to 14,510 contracts.
Soybean futures have been stagnant recently, with this week showing a Friday/Friday gain of a penny. That brought the two-week move to a whole 2 cents. New crop contracts were down ½ cent, though their two week move was a lot bigger due to last week’s gains. Soy Meal was the ball and chain this week, down 2.19%, with bean oil up 1.38%. In the April WASDE update, USDA made very few changes to the end line of the US balance sheet, as ending stocks were unch at 120 mbu. They did adjust the individual categories, with crush down 10 mbu, exports up 30 mbu and seed and residual down 20 mbu. Disappointing weekly export sales data showed soybean bookings at a net reduction of 92,461 MT, with 338,552 MT in sales reported for new crop delivery. Total old crop export commitments for the MY now total 60.749 MMT. That is 97.9% of the revised USDA full year forecast, compared to the 5-year average pace of 90% for this date. Shipments have progressed to 89% of that projection vs. the 75% average. February exports totaled 4.56 MMT (167.5 mbu) according to Census, the fifth largest on record for the month. Spec funds in soybean futures and options added 12,425 contracts to their net long position as of Tuesday, taking it to 154,305 contracts.
Cotton futures bounced back nicely this week, with nearby May up 5.71% since last Friday. Apparently, the market didn’t like the looks of cotton down in the 70s. April’s WASDE report did give us an updated look at the balance sheet as well. Production was left unch, but exports were raised by a total of 250,000 bales to 15.75 million. That helped to drop the 20/21 carryout projection by 300,000 bales to 3.9 million, though the average cash price was dropped a penny to 68 cents. On the world side, WAOB cut ending stocks by 1.13 million bales to 93.46 million. Weekly USDA Export Sales data indicated 269,932 RB of cotton sold in the week ending 4/1, a rebound from the prior week. New crop sales totaled 48,974 RB. Export commitments are now 14.846 million RB, which is 102.5% of the new USDA forecast vs. the 98% average pace for this date. Accumulated shipments are 9.843 million RB, which is 68% of the projected 20/21 total, compared to the average pace at 59%. The USDA AWP for cotton is now 64.92 cents, down another 67 points from the previous week. CFTC data on Friday showed money managers in cotton futures and options trimming their net long position by 2,153 contracts as of Tuesday. That position stood at a net long 51,982 contracts.
Live cattle futures were up a total of $3.40 this week despite late week pressure. Cash trade had a wide range this week, with sales ranging from $120 to $125. Most Southern trade centered around $121, with the North ~$123. Feeder futures were up just 0.61% this week, held back by gains in corn. The CME feeder cattle index is $141.79, up $1.44 from the previous week. Strength in cash was helped by stronger wholesale beef prices. Choice boxes rose a sharp $19.32/cwt (7.6%), with select carcasses up 6.9% or $17.10 per hundred. The 2-week move is 14.52% and 15.94% respectively. That would be a record high level for boxed beef values if you remove the COVID rally from last year. YTD beef production is now 0.7% below last year on 2% lower slaughter. Weekly beef export sales for the week of 4/1 were 18,213 MT, with shipments the second largest in 2021 at 18,807 MT. Monthly data from Census showed 250.35 million lbs exported in February. That was 2.6% below last years record but up 1.8% from January. Commitment of Traders data showed specs in live cattle futures and options at a net long 91,884 contracts as of Tuesday, up 8,647 contracts from the week prior.
Lean hog futures continue to see strength, with April up another 1.67% on the week to $103.47 on Friday. The CME Lean Hog index was up $2.44 this week to $100.94 per hundred pounds. April futures have narrowed to a $2.50+ premium to cash. They expire next week. The pork carcass cutout value was up another $3.66 from Friday to Friday, a 3.3% increase after sharp gains since early February. At $113.17 on Friday, it was the highest since May 2020. Weekly pork production was up 1% from the previous week and 5.3% from the same week last year at 540.5 million lbs. YTD, pork production is down 2.7% from last year on 4.1% fewer hogs slaughtered. USDA reported pork export sales backing off from the previous week to 33,360 MT for the week ending 4/1. On the monthly scale, Census pegged February exports at 591.94 million lbs. That was down 10.1% from last year’s record and 2.3% lower than January’s total. Spec funds in lean hog futures and options cut a total of 1,179 contracts from the net long position of 76,933 contracts as of Tuesday.
Next week starts off with trade activity putting more focus on the US crop picture as planting is beginning. USDA will release the weekly Export Inspections report on Monday morning, with the Crop Progress report that afternoon. Skip ahead to Wednesday, and EIA will release their weekly report, including data on ethanol stocks and production. Thursday is slated to have the Export Sales report in the morning and the NOPA crush report at 11:00 AM CDT. April Lean Hog futures and options also expire on Thursday.
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Tech Talk: December Corn
December corn rallied sharply after the March 31 planting intentions report, then gapped higher the next morning after options traded synthetically 4-5 higher. That gap @ $4.775 is still open, a downside target for the bears, and a potential upside measuring gap if we keep it open. You will note that December is still in a rising regression channel, with resistance on Monday at $5.065. The 1.618 Fibonacci expansion count off of the March sell off is $5.07. MACD (not shown) turned bullish on April 5.
There are some concerns. The 7-day RSI is in overbought territory, but not our primary indicator with the strong ADX at 39. Of bigger concern is the shooting star candlestick left behind on Friday after the crop report. This is a potential end of trend signal, but might also be an artifact of pre-weekend profit taking. Until a lot more of the crop is in the ground, we expect dips to remain within the rising regression channel (currently support at $4.74).
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There is a risk of loss in futures and options trading. Similar risks exist for cash commodity producers. Past performance is not necessarily indicative of future results.
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