People with dogs often compare their age in dog years vs. people years. For some shorter-lived breeds, the ratio is about 7:1. A 7 year old dog is 49 in dog years, etc. For other breeds the ratio might only be 6:1. But what is it for bull markets? Soybeans have posted 11 consecutive higher monthly closes on the continuation chart. This is an old bull. The 2007/08 rally only put together 7 months in a row, although the overall move lasted 22 months. It also had a stomach churning 21% decline in March 2008 before marching on to the ultimate high. The 2012 all-time highs occurred in the 10th month of the move. It also experienced a big corrective sell off in May 2012 before peaking in September. This bean bull is getting old, and that string of months is in danger without a 50 cent rally the last week of May. However, the lesson of those other two bulls is that the vet sometimes might be able to cure his initial ailments and keep him around a few more months.
Corn futures rallied 15 ¾ cents this week (+2.45%) after being pounded (-12%) the previous week. Weekly export sales commitments for new crop were record large at 4.06 MMT (160 million bushels!). Total old crop commitments are now 96.5% of the full year WASDE estimate, vs. 92% average for this date. Unshipped old crop sales commitments are both an opportunity and a liability, and 67% larger than last year at this time. Please note that USDA’s Export Performance Indicator is using the wrong divisor since the WASDE report added the 2021/22 column. Rumors of additional Chinese new crop buying proved correct, with daily announcements for this week adding up to 5.644 MMT from China alone. The next Export Sales report will show a new weekly forward sale record, barring cancellations. Dryness in Brazil hasn’t changed much, with private estimates of the crop (and export potential) still shrinking.
In Friday’s CFTC commitment of Traders report, spec funds in corn futures and options trimmed their net long position by 25,311 contracts as of 5/18 to 291,025. That is not many bulls getting out of the way of a $1.01 Tuesday to Tuesday price decline! The net short commercial position stood at 627,938 contracts, a drop of another 46,025 on the week. The process of emptying the bins and picking up the piles before harvest is underway.
Wheat dropped sharply in all three markets again this week. Chicago SRW was down 4.7%, with KC HRW down 5.1%. Minneapolis spring wheat sank 5.4% as rain covered key HRS areas from MT to MN. A big chunk of ND will still be in drought next week, but the rain has helped crop potential overall. Thursday’s Export Sales report showed old crop wheat bookings of 120,991 MT, with 317,713 MT sold for shipment after June 1. Export commitments are 98.6% of the full year forecast, matching the average pace after USDA lowered expectations. Shipments are 90.5% of the full year forecast as of May 13. The marketing year ends May 31. The large spec traders in CBT wheat futures and options added 1,007 to their CFTC net long position as of Tuesday, bumping it to 14,040 contracts. In KC wheat, they cut another 5,899 contracts from their net long in the week ending 5/18 to bring it down to 26,100 contracts. After being net short for more than two years in MPLS wheat, the managed money spec funds have now been net long that market since October, by 16,415 contracts as of May 18.
Soybean futures plunged 60 cents per bushel in nearby July this week, a 3.8% loss. Soy Meal was down 4.7% for the week. Bean oil was down 3.1%. Export sales during the week of 5/6 were only 84,193 MT for old crop soybeans. New crop sales were also weak at 96,000 MT. Total old crop export commitments for the MY are now 99% of the USDA full-year forecast, compared to the 5-year average pace of 96% for this date. Shipments have progressed to 91.8% of that projection vs. the 80% average pace. Friday’s Commitment of Traders report showed managed money spec funds in soybean futures and options shrinking their net long position by 25,238 contracts in the week ending May 18. They were still net long 152,584 contracts at that time (~763 million bushels).
Live cattle futures had a nice 2.1% gain this week, with more than half of it on Friday ahead of the monthly USDA Cattle on Feed report. Cash trade was steady to up $1, with mostly $119-120 reported, and $191-193 in the north. Feeder futures drifted 0.24% lower despite triple digit gains on Friday. The CME feeder cattle index is $135.20, up $3.47 from the previous week. Wholesale beef prices were sharply higher again this week. Choice boxes rose $8.23 (2.6%), with Select up $9.12 per hundred pounds (+3.1%). YTD beef production is now 7.4% above year ago on 6.2% larger slaughter. The widening over 2020 can be attributed to the packer shutdowns from COVID last year. Estimated weekly FI slaughter was 669,000 head, up 29,000 from the previous week and 17% larger than a year ago. Commitment of Traders data showed specs in live cattle futures and options at a net long 58,281 contracts as of Tuesday, adding 3,336 contracts to the long side from the week prior. The USDA COF report on Friday afternoon was fundamentally bearish, showing smaller marketings and larger placements during April than the average trade estimates. The net of that calculation is numbers on feed May 1 were 104.69% of year ago.
Lean hog futures lost $4.12/cwt in the June contract a week ago but rose $5.50/cwt this week to more than offset the correction. The CME Lean Hog index was up 50 cents this week @ $111.44. The pork carcass cutout value surged $5.16 for the week, a 4.5% gain, setting a new all time high for this particular week. Pork ribs set new all time highs at an average $2.89 per pound for the primal. Weekly pork production was down 0.4% from the previous week. It was up 8.8% from the same week last year, when some plants were still shut down or limited runs due to COVID-19. Pork production is now 3.0% higher YTD vs. last year, with 2.1% more hogs slaughtered. The weekly Export Sales report saw pork bookings of 18,970 MT, low by 2021 standards but better than the previous week. Shipments slowed to 34,584 MT. Managed money spec funds in lean hog futures and options added 2,609 contracts to their net long during the dip, putting their CFTC net long at 73,961 contracts as of May 18.
Cotton futures were up 0.5% this week, a bit of a dead cat bounce after they dropped 8.1% the previous week. Weekly USDA Export Sales data showed old crop bookings almost double the previous week at 108,000 running bales. Friday’s CFTC data showed money managers in cotton futures and options trimming 9,408 contracts from their net long position during the week of 5/18. That took the net position down to 46,515 contracts. That was their least bullish position since September 2020.
The weekly Export Inspections and Crop Progress reports from USDA will be out on Monday, as will the monthly Cold Storage report. On Wednesday, EIA will show weekly ethanol production and stocks data. Fast forward to Thursday and we get the weekly Export Sales report. Traders may very well take it easy on Friday, with the markets closed for Memorial Day the following Monday.
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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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