Market Watch with Alan Brugler & Austin Schroeder
Mar 4, 2022
The Bears Pay Dearly
It was a bad week for the grain bears. There are a couple of sayings that ring true this week. “Wheat takes no prisoners”, and “trade wheat, sleep in the street.” For the wheat bears, this week found them sleeping in the street, if they were lucky enough to make it out alive. Whether it was locked limit gains on futures or options bid/ask spreads so wide you could fit a B-52 through them, there was not much hope for getting out with much skin still attached. Bears in corn didn’t fare much better, with sharp gains leaving grain traders experiencing extreme volatility. The only bears that may be happy at the end of the week are in livestock, which collapsed due to weaker outside markets and pressure from feed costs. Overall volatility there was not as painful. For the grain bears though, they paid dearly.
May Corn futures busted out of their shell this week, with a 98 ½ cent rally (a 15.02% move). New crop December posted a 49 ¾ cent gain. Volatility is stemming from uncertainty over the Russian invasion of Ukraine and its impact on global corn exports. Weekly EIA data showed ethanol producers cutting back 27,000 barrels per day on production to 997,000 bpd as of 2/25. Stocks were a sharp 574,000 barrels lower to 24.993 million. Thursday’s Export Sales report indicated 485,100 MT of old crop corn sales in the week that ended 2/24. New crop totaled 222,800 MT in bookings. The US old crop corn marketing year export commitments (shipped plus outstanding sales) are now at 48.058 MMT. That is down 19% vs. last year at this time. They are 78% of the full year WASDE forecast, still ahead of the average paces of 76% by late-February. Accumulated exports are 42% of the USDA projection, 2% faster than the average shipping pace. The weekly Commitment of Traders report tallied specs in corn futures and options at a net long 349,222 contracts as of 3/1. That was a drop of 5,214 contracts from the week prior.
Wheat futures took no prisoners on their way to a historical week full of expanded limits. Chicago was the leader of the bear slaughter rallying 40.62%, or $3.49 ½. KC was not too far behind, with a $3.23 ½ jump (+36.31%). MPLS tagged along for the ride, posting a 19.45% gain, or $1.86 ¾ move. World wheat (exportable) supplies are getting tighter for at least the short term, with Russia/Ukrainian conflict shutting down Ukraine shipments and limiting Russia’s via sanctions. Weekly Export Sales data indicated 2/24 old crop wheat bookings of 300,000 MT, down from the week prior. That helped to push export commitments to 18.515 MMT, or 84% of USDA’s full year forecast, still lagging the average pace by 10%. USDA may be hesitant to move that target much next week due to the possibility of picking up business. Shipments to date are still 19% smaller than a year ago, at 14.325 MMT. That is 64% of the USDA projection vs the average of 70% by now. Friday’s CFTC Commitment of Traders report showed spec funds in CBT wheat futures and options slashing 11,017 contracts from their net short position during the week of March 1. That took the net short to 7,036 contracts. In KC wheat, they added another 4,701 contracts to their net long position as of Tuesday to 45,481 contracts.
Soybeans bulls regained their footing this week with May posting a 76 cent gain (+4.8). Soybean meal was up $17.70/ton (+4%), with bean oil helped by palm and crude oils, rallying 5.61% (387 points). Daily export sales announcements continue to be a story for beans, with 921,860 MT of old crop and 600,000 MT sold for new crop this week. USDA’s Export Sales report showed 857,000 MT of old crop soybeans booked during the week of 2/24, with 1.386 MMT for new crop. US soybean exporters have either sold or shipped 50.166 MMT of the 21/22 crop, 16% slower than last year’s record buying pace. However, total export commitments are 90% of the USDA full year estimate, outpacing the 87% average for this date. Shipments have hit 73% of the full year WASDE forecast, running ahead of the 71% average pace. CFTC’s weekly Commitment of Traders report indicated spec traders in soybean futures and options trimming 4,613 contracts from their net long as of Tuesday. That took the net position to long 175,721 contracts.
Live cattle futures saw weakness for a good part of the week, with April sinking $6.15 (4.33%). Cash trade lost some footing with the weaker futures and boxed beef, dropping $2-3 to $140. Feeder cattle futures fell on the lower fats and stronger corn, down $6.90 (4.31%) in the March contract. The CME Feeder Cattle Index was $156.19, down $4.39 from the prior week. Wholesale beef prices were down again this week. Choice boxes shed $3.94 (-1.5%) per 100 pounds, with Select falling $7.00/cwt (-2.7%). Weekly beef production was up 1.5% for the week and 0.3% larger vs. the same week last year. YTD beef production is now down just 0.2% vs. a year ago on 0.3% lower slaughter. Export Sales data indicated beef bookings of 23,800 MT, a 2022 high. South Korea was the lead buyer at 9,800 MT, with China in for 4,100 MT. Commitment of Traders data showed spec funds making their largest bear move in a Tuesday/Tuesday time period (since 2006), slashing 25,281 contracts from their net long position in live cattle futures and options as of 3/1. That took the net long to 60,152 contracts by Tuesday.
Lean hog futures continued their pullback off contract highs, as April was down 3.11% ($3.22). The CME Lean Hog index was slightly higher this week, up $1.66 to $98.04. The pork carcass cutout value was down $9.33 this week, an 8.2% slide. Prices staged a comeback on Friday, but bellies were down 10.6% for the week and hams dropped 11%. Weekly pork production was back down 2.9% from last week and 4.6% below the same week in 2021. YTD that number is down 7.8% vs last year on 7.8% fewer hogs slaughtered. Weekly Export Sales data showed 42,200 MT of pork sold for the week ending 2/24. Sales to Mexico were 17,000 MT, with China jumping in to buy 16,600 MT. CFTC data via the Commitment of Traders report on Friday showed money managers in lean hog futures and options trimming 2,455 contracts from their net long position as of Tuesday. They took that position to 74,506 contracts by March 1.
Cotton futures bounced this week, coming back 117 points, or 0.99% in May. Thursday morning’s Export Sales report tallied bookings at 348,600 RBs for old crop sales and 105,200 RB for new crop delivery during the week of 2/24. Shipments were down 6% from last week to 354,100 RB, which brought the market year total to 5.203 million. That is 36% behind last season’s pace. Adding unshipped sales takes commitments to just 5% under 2020/21 at 12.930m RB. That is 93% of the USDA export projection, 3% above the average pace for this week. The FAS updated the adjusted world price (AWP) for cotton to 112.71 cents. That was down 1.03 cents from the previous week. Commitment of Traders data had managed money spec funds in cotton net long 74,489 contracts as of March 1. They trimmed just 168 contracts from the net long from the week prior.
Market Watch
Next Monday will start things off with the market reacting to any new developments from over the weekend. USDA will release weekly export inspections data on Monday morning. On Tuesday, Census will put out trade data from January. EIA will give their weekly update on Wednesday. The market will also be updated on the US and World balance sheet via the WASDE reports. Wednesday is also the last trading day for March cotton futures. Fast forward to Thursday morning and FAS will release the Export Sales report. The Commodity Classic in New Orleans will be held Thursday through Saturday. Come see the Brugler Marketing team in Booth 5514 and let’s talk about the latest developments in the ag markets!
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.
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.
Copyright 2022 Brugler Marketing & Management, LLC. All rights reserved.
