“I was a lousy hitter in May doing the same things that made me a great hitter in June.” Carl Yastrzemski
Sometimes your actions change things, and sometimes the environment changes, with different results arising from similar actions on your part. It can be difficult to understand which is happening. The stock market kept doing what it has been doing, dropping 11 of the past 12 weeks. Why did we do that? Traders believe the Fed is trying to engineer a recession or something close in order to bring down inflation. The Fed changed things, with the largest single interest rate hike in decades, but the overall trend didn’t change for equities. The dollar did a “buy the rumor, sell the fact” move after the Fed rate hike. Why did we do that? Higher rates made the dollar a more attractive place to park money, but some countries indicated that they would also raise rates. Crude oil was down all week, posting the lowest close since May 25. Corn (via ethanol) and soybeans (via soy oil) had been following crude closely over the past 180 days, but that relationship has broken down over the past 30 days. Corn gained ground this week, but soybeans were hurt badly by an 8% drop in soy oil. Why did corn dodge the energy bullet? That outside environment shifted. It is more vulnerable to a hot and dry weather forecast in early July than are soybeans (yield typically more influenced by August).
Corn futures added to last week’s rally with July up another 11 ¼ cents from Friday. New crop Dec was 10 ½ cents higher. Bulls were keeping an eye on US weather forecast the Corn Belt seen as warm and dry through the end of the month. Most are watching for any material changes over the long weekend what would put us to the 4th of July. Monday’s Crop Progress report indicated planting progress practically complete at 97%. Ratings were down 1% to 72% gd/ex or 2 points lower on the Brugler500 Index at 378. The weekly Export Sales report showed old crop corn bookings at a MY low 140,900 MT. New crop bookings were not much better, with just 138,900 MT sold. US old crop corn export commitments (shipped plus outstanding sales) are now at 59.663 MMT, 14% below last year at this time. Friday ‘s Commitment of Traders report indicated spec funds adding 13,858 contracts to their net long position as of June 14. That too their net long to 278,185 contracts by Tuesday.
Wheat futures were lower this week, with most of the drop on Friday. KC led the way to the downside, 4.95% (57 ½ cents) lower, with MPLS down 4.26% (52 cents) and CBT 3.41% in the red (36 ½ cents). Crop Progress data from Monday showed 94% of the spring wheat planted vs. the 5 year average of 99%. Winter wheat harvest had reached 10%, vs. 12% average. The Brugler500 index (includes all 5 condition categories) was back down 1 point @ 270. The initial spring wheat rating was 348 on the Brugler500. Export Sales data showed 236,900 MT of wheat sold for export in the week of 6/9. Commitments for the new marketing year are currently 4.841 MMT, down 17% from last year at the same point. CFTC showed the managed money spec funds removing another 5,736 contracts from their CBT net long in the week ending 6/14, taking it to 6,939 contracts. Spec longs in KC trimmed 1,112 contracts from their position that week, bringing it down to 36,386 contracts as of Tuesday night.
Soybeans gave back most of last week’s rally, with July down 43 ½ cents, a 2.49% drop. Product values were mixed, with meal up 2.1% while soy oil collapsed 8.69%. Malaysian palm oil was the main culprit. Crop Progress data showed 88% of the US bean crop planted as of last Sunday, now even with the normal pace. Initial crop ratings showed 70% of the crop rated in good/excellent condition, with a Brugler500 ratings of 375. Thursday’s Export Sales report indicated old crop bean bookings in the week that ended on June 9 at 317,200 MT, with new crop booking at 407,600 MT. US soybean exporters have either sold or shipped 60.278 MMT of the 21/22 crop, now 2% below last year’s record pace. That is 102% of the USDA forecast, vs the 100% average. The weekly CFTC report showed the managed money spec funds adding back 4,218 contracts to their net long position in soybeans for the week ending June 14, putting them net long 163,146 at that point.
Led by the cash market, live cattle rallied another1.34% this week, a $1.82 jump. Cash trade was higher on the week, with the south up to $140 and the north mostly $145-146. Feeder cattle were pressured by the gains in corn, with August down $1.52 or 0.87%. The CME Feeder Cattle Index was $162.17, up 30 cents from the week prior. Wholesale beef prices were lower this week, closing the Chc/Sel spread to $19.73. Choice boxes were down $5.06 (-1.9%) per 100 pounds, with Select $2.36/cwt lower (-0.9%) from Friday to Friday. Weekly beef production was down 1.3% from the previous week, but 0.3% larger than the same week in 2021. Beef production YTD is up 1% on 1% larger slaughter. Export Sales data showed 17,400 MT of beef bookings in the week that ended on 6/9. The Commitment of Traders report on Friday showed spec funds adding to their net long position as of Tuesday by 10,576 contracts. They took it to 31,926 contracts as of June 14.
Lean hog bulls took back all of last week’s loses plus some, with futures up $5.52, or 5.24%. The CME Lean Hog index was $108.75, up $1.44 from last week. The pork carcass cutout value was up $5.45 (+5%) this week. All primals were higher on the week. US weekly pork production was unch from the previous week and down 0.2% vs. the same week in 2021. YTD production is down 3.8%, which is one reason stocks are tight. USDA’s Export Sales report showed bookings at 27,600 MT of pork for the week ending June 9, up 65% from the previous week. The Commitment of Traders report indicated a cut in the spec fund net long of 3,641 in the week of 6/14 at 18,832 contracts.
July Cotton futures slipped 161 points this week, or 1.11%. Planting progress is still ahead of the average pace at 90% as of Sunday, vs. the average pace of 88%. Condition ratings were down 2% to 46% gd/ex or 7 points lower on the Brugler500 index to 329. USDA tallied export sales of cotton in the week ending 6/9 at 26,500 RB for old crop upland. New crop bookings were reported at 380,200 RB, with 363,700 RB sold to China. Outstanding cotton sales are 71% larger than year ago at 4.764 million RB. Total commitments are 112% of the full year WASDE projection, 2% ahead of the average pace. Catch up is still needed on shipments with 78% of the expected full year number shipped, vs. the 85% average pace. The marketing year ends on July 31. The Commitment of Traders report showed managed money spec funds were net long 66,250 cotton futures and options contracts as of June 14, up 845 from the previous week.
Next week starts a little later than most with the market and government off on Monday in observance of Juneteenth. That pushes the weekly USDA Export Inspections report to Tuesday morning, with the Crop Progress report out that afternoon. Skip ahead to Thursday and we will have the weekly EIA report showing ethanol production and stocks. The monthly Cold Storage report will be out Thursday afternoon. Friday will mark the expiration of July grain options, as well as the monthly Cattle on Feed report from NASS.
Visit our Brugler web site at https://www.bruglermarketing.com or call 402-697-3623 for more information on our consulting and advisory services for farm family enterprises and agribusinesses.
See Tech Talk on Page 4
Tech Talk: December Corn
The low in late May was a spike below the 38.2% Fib retracement support (not shown), but also got the market very oversold. We argue it was a battering ram trade, trying to force out weak longs and then rising as the original shorts buy back their positions. Stochastics cooperated, with a double hump buy signal albeit just barely into oversold territory. You will note that in extended rallies like this, the oscillators are frequently overbought, but fail to reach oversold before somebody buys the dip. With the weather forecasts getting warmer and drier, the market rallied through the Bollinger midline and 40-day average but found selling at the upper Bollinger Band ahead of the 3-day weekend. Resistance is $7.42, followed by the LOC high at $7.62 ¼. Support is likely the lower Bollinger Band at $6.89, followed by the 100-day moving average at $6.765 and the 2/3 speedline at $6.68.
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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