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Market Watch with Alan Brugler and Austin Schroeder with November Soybean Tech Talk. Surprises 09/30/2022
Surprises come in all shapes in sizes. They can be in the form of a gift, a thought/gesture, or via USDA reports. In this case we are talking about the latter. The thing about surprises is they can be a good thing, like a new car for your 16th birthday, or a not so good thing, such as a few teenagers leaving your yard a mess on Halloween. When talking about this week, it was full of a few USDA surprises. We started off with a smaller surprise from the Hogs and Pigs report showing fewer hogs than though the trade had thought. That got a modest bounce on Friday as the market didn’t seem too shocked. Then we received the Grain Stocks and Small Grain report from NASS. Corn and wheat bulls got some pleasant surprises via smaller production and stocks. Soybean bulls, on the other hand, were left on their porch, putting out what they thought just a brown paper bag on fire… Turns out that surprise wasn’t so grand. Overall, price moves seemed appropriate to the news. The thing is, the market moves on quickly.
Corn futures ended the week, milking out just a ¾ of a cent gain for December, making a two week move of 1 ¼ cents. That is despite a 37-cent range in that time frame. Buying came in on Friday via the USDA Grain Stocks report, as 1.377 bbu of corn was in stockpiles at the beginning of September. That was down 135 mbu from estimates and 148 mbu below the WASDE’s balance sheet in September. Monday’s Crop Progress report tallied 58% of the nation’s corn crop as mature, still 3% behind the average pace. Harvest was 12% complete, 2% below normal. EIA data on Wednesday showed ethanol production dropping another 49,000 barrels per day to 855,000 bpd, the smallest implied corn use for that purpose since February 2021. Stocks were up 190,000 barrels to 22.691 million barrels. Thursday’s Export Sales report showed an increase on the week, as bookings totaled 512,000 MT. Sales for the 22/23 marketing year have gotten off to a slow start, with shipped and unshipped sales just 22% of the current USDA forecast vs. the 32% average pace for this date. Outstanding sales are down 49% from the same period last year. Friday’s CFTC Commitment of Traders report showed managed money spec funds trimming 10,055 contracts from their net long in the week ending September 27 to 237,854 contracts.
The Wheat markets were again the bright spot for the bulls this week. Chicago futures were in a dead heat with KC futures this week, both up 41 cents, or 4.66% and 4.31% respectively. MPLS gained 3.45% since last Friday, good for 32 ¾ cents. The big driver this week was the Small Grains Summary, as wheat production was slashed 133 mbu to 1.65 bbu, with NASS citing lower acreage. That was split between classes, as winter wheat was down 94 mbu and spring was cut 30 mbu. That helped to tighten first quarter stocks to 1.776 bbu, or just up 2 mbu from last year and 17 mbu below estimates. On Monday NASS reported 31% of the winter wheat crop was seeded, 1% faster than the normal pace, with 9% emerged. Export Sales data from Thursday showed another weak round of data, with 279,800 MT of wheat was sold for export in the week ending 9/22. Total wheat committed for export is now 48% of USDA’s current forecast, 6% behind the normal pace. Commitment of Traders data had SRW spec traders peeling back 1,306 contracts from their net short position to 14,397 contracts as of Tuesday evening. For KC wheat, managed money was 23,905 contracts net long, a build of another 4,846 contracts on the week.
Soybeans felt pressure for much of the week, as November fell 61 cents since last Friday. The product values were less than supportive for the bulls, as meal was down 8.34% for the week and soy oil down 2.46%. The bears came out of the woodwork in a big way on Friday following the Grain Stocks report as NASS pegged September 1 stocks at 274 mbu, a 34 mbu increase from the WASDE report on the 12th and 32 mbu above the trade average estimate. The weekly NASS Crop Progress update had 63% of the soybean crop dropping leaves as of 9/25 vs. to 65% for the average pace. Harvest was 5% behind the average early pace, with 13% complete. Weekly Export Sales data showed bean bookings jumping to 1.003 MMT in the week that ended on 9/22. Forward sales in leading up to the fresh MY treated beans good, with 47% of the USDA forecast already met, 4% faster than the average pace. Managed money soybean traders cut back their net long exposure in beans by another 9,860 contracts this week. They were net long 94,831 contracts as of September 27.
Live cattle slipped 97 cents or 0.68% for the week, which included reaction to the Cattle on Feed report. USDA reported the bulk of cash trades for the week were $144-145 in the North and $143 in the South, steady with last week on lighter activity. Feeder futures were down 2.34% for the week. The CME Feeder Cattle Index was down $4.69 this week, to $175.46. Wholesale beef prices were mixed this week. Select found a temporary bottom, with an 82 cent gain. Choice was a net $4.88 (-2%) lower as the Chc/Sel spread narrowed to $23.62. Weekly beef production was slightly higher on the week and 3.5% above last year. YTD production is up 1.4% on 1.5% more head. Export Sales data showed 21,500 MT in beef bookings for the week ending 9/22, with 7,300 MT destined for South Korea and 6,000 MT for China. Weekly CFTC Commitment of Traders data showed managed money firms cutting 11,148 contracts from their net long during the week that ended 9/27. That left the group net long at 62,075 contracts.
Lean hog futures were pressured by early week losses, as October was down 3.67%. December took think a little more personal, as it collapsed 7.94% on the week. The CME Lean Hog index was weaker this week at $95.14, down $2.87 cents from the previous week. The pork carcass cutout value was also lower, as it dropped $3.34 (3.3%) for the week. Bellies were the drag, down 10.4%, as the ham and butt primals were also lower. Weekly pork production was down 0.1% from a week ago, but up 0.1% from the same week last year. For the YTD, production is down 2.5% on 3.1% fewer hogs killed. USDA’s weekly export Sales report tallied 34,300 MT of pork sold for export during the week of 9/22. Mexico took most of it, with 23,700 MT in purchases. CFTC reported managed money firms bailing on their net long position, slashing 23,535 contracts by adding 14,985 shorts and cutting 8,550 longs. That is the largest bear bet in a single week going back to 2006. That took the net long position to 41,129 contracts in the week that ended on 9/27.
Cotton futures continue their selloff, as December was down 7.78% this week, getting to within nearly a penny of the July low. Recession fears continue to plague the market, with the dollar posting fresh 20-year highs before backing off later in the week. Monday’s Crop Progress report indicated 67% of the country’s bolls were open by 9/25, 5% ahead of average. Nationally the crop was 15% harvested, 1% faster than the average pace. As for conditions, NASS data converted to a 278 on the Brugler500 Index. That was down another 3 points from last week. The Export Sales report showed another weak round of data for the week ending 9/22, with just 30,200 RB sold for 22/23 shipment and 41,500 RB for the next MY. Shipments dropped off from last week at 187,900 RB. The slow sales pace is not of huge concern given the large commitments already on the books. Shipped and unshipped sales combine for 68% of the current USDA forecast, 11% ahead of the 5-year average pace. The Commitment of Traders report had cotton spec traders at 41,183 contracts net long as of 9/27. That was just 910 contract smaller vs. the previous week.
The calendar switches to October at midnight, so next week begins a month. Monday will be busy for the USDA, with the weekly Export Inspections data out on Monday morning and the Crop Progress report that afternoon. October meal and bean oil are also in deliveries. We will also get monthly domestic use data via the Grain Crushing and Fats & Oils report that afternoon. Fast forward to Wednesday and the EIA will release their weekly report showing ethanol stocks and production. We will also receive monthly trade data from Census. On Thursday, we will see the weekly FAS Export Sales report in the morning. Friday is the expiration day for October live cattle options, as well as October cotton futures.
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See Tech Talk on Page 4!
Tech Talk: November Soybeans
We would typically talk about corn this week, but Friday’s soybean chart action raised a lot of questions! As you can see, November had bounced off of the 50% retracement support on Wednesday and Thursday, and was holding above an uptrend line from the July low. That ended on Friday, with prices dropping to the 61.8% retracement ($13.72 ¾) and the lower Bollinger Band ($13.635). Stochastics are oversold and not yet crossing. MACD is bearish, but ADX is a modest 24, not a strong trend at this point. The blue crossed lines indicate a short term 13-day trading cycle that has been working since July. It would suggest a low no later than Monday. The 4-day RSI also suggests Friday was a battering ram trade, aggravated by month end fund liquidation. In BR trades, you run out the weak shorts and then reverse part of the move on profit taking. If there are shorts that have to leave, then the 78.6% retracement support would be $13.35 ¾ and an objective. Once the BR bounce begins, the objective is likely in the $1380-13.90 area. Note that the next cycle low would be October 11, right around the WASDE report.
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