Market Watch with Austin Schroeder
July 26, 2024
Bear In Bull’s Clothing?
Trade this week was moderately higher across the corn and bean markets, with wheat struggling to maintain any upward momentum (excluding Minneapolis). That was until heavy selling on Friday caused gains to be limited or negative. Over the last couple of weeks, the market has been in the process of covering some shorts, as CFTC data suggests, but that was halted on Friday. Several of the corn and soybean charts were paused at technical resistance with rejected breaks above it. That is not uncommon, but it begs the question of if there have been any bulls joining the crowd in the recent weeks to help push the shorts out. Or if the old idiom, wolf in sheep’s clothing (or bear in bull’s clothing), rings true. In other words, the bears take a short covering break and draw a few longs in with evil intentions, or are the bulls trying to get a run at this thing? The action on Friday would suggest the latter isn’t as likely. Though that doesn’t mean the short covering is over!
Corn futures reverted from their recent weakness over the course of the week. However, they only held a weekly gain of 4 cents for September and 5 ¼ cents for December as a weaker Friday action pared back earlier gains. Monday’s Crop Progress report pegged 61% of the US corn crop silking by July 21, now 5% ahead of normal. NASS also showed 17% of the corn acreage in the dough stages, vs. the average 11% pace. Condition ratings slipped back 1% to 67% gd/ex, with the Brugler500 index trimming back 2 points to 370. Ethanol production, and thus corn use, backed off 11,000 barrels per day in the week that ended on July 19 to 1.095 million bpd according to the EIA. Stocks saw a build of 563,000 barrels to 23.7 million barrels as exports slipped back. Thursday’s Export Sales report indicated old crop corn bookings at 331,380 MT in the week ending on July 18. New crop sales totaled 745,193 MT in that week. Spec shorts in the corn market were busy covering during the week that ended on July 23, as Commitment of Traders data showed managed money trimming their net short by 24,847 contracts. That left them with a still large net short of 318,549 contracts by that Tuesday.
Wheat bulls slipped up this week as all three exchanges were on the lower side of unchanged for the week. Minneapolis spring wheat was by far the firmest with a 6 cent (0.98%) loss. Chicago was down 19 ¼ cents for September since last Friday, with September KC wheat down 24 ½ cents. The Wheat Quality Council did confirm the large crop up north, their North Dakota spring wheat tour averaging 54.5 bushel per acre, a record for the tour and well above the 5-year average of 42 bpa. Crop Progress data from Monday indicated that the winter wheat harvest was 76% complete by July 21, 4% above the average pace. The spring wheat crop was 89% headed, now 1% behind the average pace. The spring wheat conditions were unchanged at 77% and 1 point lower to 383 on the Brugler500 index. Export Sales data showed 24/25 sales slipping back after the post-holiday spike, with just 309,319 MT sold in the week that ended on July 18. CFTC data pegged CBT wheat spec traders slicing 702 contracts from their net short to 75,184 contracts as of July 23. In KC wheat, they covered 3,030 contracts of their net short to 40,866 contracts as of Tuesday.
Soybeans pulled back again this week, for old crop at least. August was down 18 ¾ cents, as November was back up 12 ½ cents. Weakness in bean oil spurred the losses, as nearby August BO was down 290 points (6.23%). Meal was a strong point as the August contract was up $16.50/ton. NASS Crop Progress data tallied 65% of the US soybean acreage blooming and 29% already setting pods, both 5% faster progressing than the 5-year average. Condition ratings were untouched from the week prior at 68% gd/ex, as the Brugler500 index was left at 370. This week’s Export Sales report dropped off for beans to 88,649 MT in the week that ended on July 18, that is not uncommon in the last month and a half of the year. New crop business took the offset, with a total of 829,675 MT. Commitment of Traders data tallied managed money spec funds cutting back 22,091 contracts from their previous record net short as of July 23 to 163,659 contracts.
Some cash strength spurred buying in the nearby cattle as futures were up $5.47 (2.99%). Cash trade was also stronger this week with sales of $190 in the south, and northern trade at $197-198, both up $1-2 from last week. Feeders were $4.10 higher (1.60%) over the course of the week. The CME Feeder Cattle Index was down just 32 cents week/week to $258.84. Wholesale boxed beef prices were lower this week, as choice boxes fell back 6 cents to $313.77, while Select was $1.34 lower to $297.46. Weekly beef production was up 2.7% from last week and 0.7% higher vs. the same week last year at 504.9 million lbs. That left the YTD beef production down 1.6% from the same time a year ago, with cattle slaughter down 4.5%. The monthly Cold Storage report from NASS showed 410.3 million lb of beef stocks at the end of June. That was just 0.11% below the same month in 2023 and a 2.68% decline vs. May 31. Export Sales data from this morning totaled 13,400 MT during the week that ended on July 18 a 13% decline from last week. Actual sales totaled 16,300 MT, a 5% increase on the week. Commitment of Traders data showed specs adding back 3,636 contracts to their net long as of July 23 at 61,876 contracts in live cattle futures and options.
Hogs are getting close to putting together a *weekly* winning streak, as August was up another $1.90 this week, as they have strung together 2 in a row. The CME Lean Hog Index was back up $2.12 at $91.39 as of July 24. USDA’s Pork Carcass Cutout found some continued strength this week, rallying a total of $3.01 (+2.9%) to $105.17. The loin, butt, and rib primals were lower this week, with the belly up $12.02 and ham rising $10.56. Weekly pork production was back up 2.5% from last week, and 3.2% larger than the same week last year at 515.4 million lbs. YTD hog slaughter has run 1.1% above last year, with pork production 1.3% higher. Pork stocks at the end of June totaled 470.9 million lbs. That was a 3.26% decline from the same month last year and 2.39% below the end of May. Thursday’s Export Sales update showed 30,200 MT of pork sold in the week that ended on 7/18, a 28% increase from last week. Shipments totaled 32,900 MT a 3% jump from the week prior. Lean hog spec traders were busy covering shorts in the week ending on July 23, taking 7,174 contracts of futures and options from their net short by last Tuesday to a net short 4,430 contracts.
Cotton couldn’t hold the recent gains and even failed at 70 cents this week, as December was down another 271 points. Crop Progress data pegged 81% of the US cotton crop squared with 42% setting bolls, both ahead of normal. Cotton condition ratings were shot 8% higher 53% gd/ex, with the Brugler500 index at 339, a 20 point jump. Weekly Export Sales data showed old crop bookings at a net reduction of 74,207 RB in the week that ended on 7/18. New crop sales picked up to 285,874 RB, a marketing year high. Export shipments were tallied at 131,310 RB during that week, back up from the previous week’s multi-month low. The FSA cut the Adjusted World Price for cotton by 140 points on Thursday, to 55.02 cents/lb. Weekly data from CFTC showed managed money spec funds in cotton futures and options adding back 4,357 contracts to their large net short as of July 23. By that Tuesday they were net short 44,583 contracts.
Market Watch
We start next week with the Monday morning Export Inspections report, and the weekly Crop Progress report will be out that afternoon. Fast forward to Wednesday, and EIA will release their Weekly Petroleum Status Report, including an ethanol update. The two-day Fed meeting will also conclude on Wednesday, with most expecting them to hold rates steady until the September meeting. Wednesday is also first notice day for August soybean complex futures. Export Sales data will be released on Thursday morning, with the NASS domestic demand data via Grain Crushing, Fats & Oils, and Cotton Systems reports also out that day. Friday will round things out with August Live cattle options expiration.
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