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Market Watch with Alan Brugler with December Corn Tech Talk. Number 1000 04/14/2023
Way back in 2003, I paid a visit to the NBC TV affiliate in South Bend Indiana, including the Farm Journal media office and visits with on air personality Al Pell and Brian Conrady. I began appearing on their AgDay and Weekend Update (now US Farm Report) TV shows and writing a weekly ag market review column called Market Watch for the Agweb platform. Corn traded from $2.04-2.62 per bushel that year, soybeans from $5.32-8.02 and live cattle from $69-104 (due to the infamous BSE outbreak). Now I find myself in April 2023, soybeans around $15, and this is Market Watch column #1000. In addition to the BSE situation, we’ve seen major disease outbreaks in hogs and poultry over the years, the growth and maturation of the ethanol industry, a major drought in 2012, the trade wars, a push for renewable diesel, and the Russian invasion of Ukraine. Besides our coverage of those events, our thousands of loyal readers have also been subjected to numerous references to rock or country song lyrics, Mark Twain jokes and even “Waiting for Godot”. I will continue to be active within Brugler Marketing and in speaking engagements but think it might be time for others to share their ideas on this platform. It’s getting hard to come up with new headlines! Effective next week, Brugler Marketing livestock analyst Austin Schroeder will be bringing you the weekly Brugler Market Watch. He’s been ghost writing parts of it for a while, but we’re taking off the training wheels. Thanks to all of you who have read my comments over the years and told me you found it a valuable perspective. Here’s to the next 500 columns!
Corn futures gained 4 cents more than they had given back 1 week ago, up 3.5% for the week in nearby May. July and the new crop contracts weren’t as strong, with December up 4 ¼ cents for the week and all of that coming on Friday. Corn planting was 3% complete by last Sunday, slightly ahead of the 2% average pace. USDA made offsetting changes to corn imports and industrial use in the WASDE report, leaving ending stocks UNCH from March and the average cash price at $6.60 for the year. They did reduce projected world corn ending stocks to 295.35 MMT and world less China availability to only 88.03 MMT. Thursday’s Export Sales report showed old crop corn bookings of 527,719 MT during the week that ended on April 6. Old crop corn export commitments are now 80% of the current USDA forecast, compared to the 90% average pace for this date. Friday’s Commitment of Traders report showed the large managed money spec firms were adding to their modest net long position, up 5,565 contracts for the week to 27,112 net long. They added more longs than shorts. Commercial short hedges declined 12,419 contracts for the week, suggesting they are still struggling to buy corn from the producers. That position is still roughly 30 thousand contracts larger than it was in early March.
All three US wheat markets finished with plus signs for the week, thanks to double digit gains on Friday. Chicago was up 1% (7 cents). Kansas City rose 14 ¼ cents, for a 1.65% gain and a 1 cent net gain for the fortnight. MPLS spring wheat was under pressure most of the week from rapid snow melt (and thus future planting progress) but netted a 4.25 cent gain for the week on a Friday rally. Russia continued to strongly suggest that the Grain Corridor agreement would not be extended, even as Russia is on track for record annual exports. The weekly Crop Progress report pegged the winter wheat crop at 7% headed, vs. the 4% average pace. Crop conditions were tallied at 27% gd/ex, down 5% vs. last year. The Brugler500 index readings are the worst for this date since 1996. USDA hiked projected old crop wheat ending stocks by 30 million bushels on Tuesday, boosting imports and cutting feed use. The market reacted bearishly, but countered with the buying on Friday. Weekly Export Sales data showed bookings of 135,680 MT. That put total wheat export commitments @ 18.371 MMT as of April 7. That is still 6% below a year ago and 87% of the USDA full year export projection, vs. the 102% average pace. CFTC showed the large spec funds expanding their already sizeable net short position in Chicago wheat another 17,164 contracts, to -104,247 as of April 11. They maintained a net long of 9,229 contracts in KC wheat on that date.
Soybeans were mixed this week, with old crop May up 5 ½ cents but new crop November down 8 ¼ cents. Nearby May meal was stronger by $5.40/ton, but soy oil dropped 87 points or 1.6% for the week. USDA made zero changes to the US soybeans balance sheet in the Tuesday WASDE report. They did cut projected Argentine soybean production and exports but left projected world ending stocks above 100 MMT. Thursday morning’s Export Sales report indicated old crop soybean bookings were 364,539 MT in the week ending April 6. Commitments are now 92% of USDA’s forecast total vs. the 5 year average of 95% for this date. The CFTC report on Friday showed the managed money spec funds reducing their net long in soybeans by 20,942 contracts in the week ending 4/11. It was still 125,022 contracts net long as of that date.
Live cattle futures continued their cattle cycle driven march to new contract highs, up 2.15% this week in nearby April. Cash cattle were sharply higher again this week. USDA confirmed come moderate cash trade on Thursday, with NE sales from $182-$186. Southern trade was from $175-$177 on the day, up $5 for the week. Feeders were up 1.22%, held back by the April premium to the CME Index and the higher corn prices. The CME Feeder Cattle Index was $201.31, up a sharp $8.09 on the week. Wholesale boxed beef prices were ON FIRE this week. Choice boxes were up 4.0% ($11.64/cwt) and Select boxes were 2.9% higher ($8.09/cwt). Weekly beef production was up 1.6% from last week, but down 5% vs. year ago. Year to date production is down 4.6% on 2.9% smaller slaughter runs. Weekly beef Export Sales through April 6 were down 36% at 8,700 MT. CFTC shows the spec funds still expanding their net long in live cattle futures, adding another 7,020 contracts last week to put it at 92,021 contracts of futures and options on April 11.
Hogs continued to leak lower, despite wholesale pork being extremely cheap vs. beef. April expires on Monday, and June was down 1.5% for the week. June hogs still have a premium to cash but are not currently anticipating that the usual $10-20 spring to summer rally (due to seasonally reduced slaughter) will happen. The CME Lean Hog Index was down $1.96 from the previous week, to $71.95. The pork carcass cutout was up $0.35 this week, with bellies, ribs and picnic primals lower. Hams provided a lot of support, up $3.01/cwt or 4.1%. Weekly pork production was 2.9% larger than last week, and up 3.5% vs. the same week a year ago. Pork production is up 0.9% on 1.6% larger slaughter. This week’s Export Sales report showed a little slack, at 27,100 MT, after the previous week featured the largest sales since March 2021 at 53,200 MT. The Commitment of Traders report showed spec funds net short 24,550 contracts on April 11, 1,960 more short than the previous week.
Cotton futures drifted 0.4% lower for the week but were only a few ticks from where they settled two weeks earlier. Monday’s Crop Progress report showed 6% of the US cotton crop planted as of April 9, behind the 7% average pace. The weekly Export Sales report showed sales slowing again this last week to 143,200 RB of upland old crop in the week that ended on April 6. Another 11,100 running bales were sold for new crop delivery. Weekly cotton Shipments expanded to 334,600 running bales (RB). Cotton export sales commitments are now 18% smaller than a year ago. Compared to the USDA projection, they are still on pace, at 102% of USDA’s upwardly revised April WASDE forecast. In the Tuesday WASDE report, USDA bumped up projected US exports by 200,000 bales vs. the previous month, cutting ending stocks by the same quantity. The average cash price dropped a penny to 82.0. The FSA increased the Adjusted World Price for cotton 17 points on Thursday, to 70.05 cents/lb. Friday afternoon’s Commitment of Traders report showed managed money spec firms trimming their net short in cotton by 2,501 contracts in the week ending 4/11, taking it to -14,773 contracts.
Next week begins with the Monday morning Export Inspections report, monthly NOPA soybean crush report and the afternoon release of the weekly Crop Progress report. Monday is also contract expiration for April Lean Hogs. Skip ahead to Wednesday and EIA will publish their weekly ethanol production and stocks report. On Thursday morning we will get the weekly Export Sales report. May grain options expire on Friday. USDA will also release their monthly Cattle on Feed report on Friday afternoon.
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See Tech Talk on Page 4!
Tech Talk: December Corn
Old crop May corn has all kinds of technical goodies for the bulls, including a rising regression channel and a Head & Shoulders count up at $6.71. The weekly chart resistance is a downtrend at $6.73 and the upper Bollinger Band at $6.93. The fundamental story is well known (Aggressive Chinese old crop buying and little commercial cash corn ownership). New crop December has not such pattern, resembling a waterfall or a set of rapids coming out of the October mountains, that may or may not have found a place to pool. The negative fundamental inputs for new crop are the projected record large Brazilian inverno (winter) corn crop and the 92 million acres of Planting Intentions USDA reported on March 31. As long as those narratives are intact, December futures are free to follow the “short crop, long tail” pattern we’ve been warning you about since last fall. Stochastics had a nice bullish divergence in March, and rallied to the 50% retracement resistance at $5.73 ¼. The 40-day moving average was also there at the time, but is now resistance at $5.66 ¼. The upper Bollinger Band is at $5.73 ¼. Lateral support is $5.47, with the lower Bollinger Band at $5.49. The July low at $5.42 ¾ would be the next pool down the mountain. The bullish beavers need to get to work right here on a dam!
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