Market Watch with Austin Schroeder
May 17, 2024
Beware
This week presented several challenges for the grain market bulls. Not only have corn, beans, and wheat taken a break from their rally, there were some pretty significant losses on the grain side of things. Depending on when you looked at the market, there may have been some excitement of potentially turning around higher, but those thoughts quickly faded. What I am speaking of is the overnight or early morning trade. For much of the Wednesday, Thursday, and Friday sessions, we saw stronger overnight action which preceded to lead us to losses once the market re-opened up for the day session. Now, this does not spell doom for the grain markets, but it’s not necessarily a good thing when you fail to hold an overnight rally. Now, this brings us to the overnight trade session, and the title for this week’s column. Beware. Overnight action is thin and at times can seem manipulative. As the old saying goes, amateurs open markets, professionals close them. So, as we get into a more volatile time in the grain markets (i.e, the growing season) beware of any sharp overnight trade in either direction, sometimes things may not be what they seem to be at first.
Corn gave back all of the gains from the week prior plus some this week, as July was down 17 ¼ cents (3.67%) from last Friday’s close. New crop December was down 15 ½ cents (3.15%). Crop Progress data showed 49% of the US corn crop planted as of 5/12, behind the 54% average. EIA data showed a 35,000 barrel per day increase in ethanol production during the week that ended on 5/10 to 1 million bpd. Stocks were building 289,000 barrels to 24.489 million. Weekly Export Sales data saw corn bookings slipping from the week prior to 742,177 MT in the week ending on May 9. Commitments for old crop sales this marketing year are 89% of the USDA forecast, compared to the 97% average pace. Commitment of Traders data showed spec funds in corn futures and options trimming another 31,342 contracts from their net short position in the week that ended on May 14. They held a net short of just 71,171 contracts on Tuesday, the smallest since last August. Commercials added to their net short position by 17,982 contracts to 180,617 contracts.
The wheat market pulled back some this week. Chicago was down 12 ¼ cents in the July contract (1.85%), as Kansas City futures were right behind with a 11 ½ cent loss (1.85%). MPLS spring wheat was down 8 ½ cents in the July contract (1.18%). Crop Progress data from Monday showed condition ratings steady this week at 50% gd/ex, with the Brugler500 index down 1 to 334. The spring wheat crop was 61% planted, 13% above the average pace. The Kansas Wheat Quality Tour this week showed an average yield at 46.5 bpa, well above the 30 bpa from last year and the 5-year average of 42.4 bpa. Total production for KS was pegged at 290.4 mbu, above the 267.9 mbu USDA from the May report. Export Sales data indicated net sales of 78,489 MT of wheat sales in the week of 5/9. New crop sales were down again this week at 304,321 MT. CFTC Commitment of Traders data showed spec traders in Chicago wheat cutting 14,109 contracts from their net short position to 28,251 contracts by May 14th, the smallest since October 2022. In Kansas City futures, they trimmed back 6,746 contracts to a net short position of 17,267 contracts as of Tuesday.
Soybeans held their own this week, as July was up 9 cents (0.74%). New crop November wasn’t as lucky, with a loss of 2 ½ cents. Meal was a weak spot in the complex this week as July was down $3.10. Bean oil was up another 83 points on the week. The NASS Crop Progress report showed 35% of the US soybean crop planted by May 12, still above the average planting pace of 34%. NOPA data showed unimpressive crush for April, with just 166.03 mbu crushed among members. That was well below the 183 mbu estimate and 4.16% below Aril 2023. USDA Export Sales data were down from the previous week at 265,733 MT of beans sold in the week ending on May 9. Export commitments are now 92% of the USDA forecast, 6% behind the average pace. Weekly Commitment of Traders data showed the managed money spec funds in soybean futures and option adding back just 1,212 contracts their net short position in the week of 5/14 to 42,665 contracts as of Tuesday. Commercials saw a reduction to their net short of 1,472 contracts to -45,417 contracts as of Tuesday.
Live cattle rode the wave of a stronger boxed beef market this week, as June was up $4.90 (2.78%) on the week. Cash trade picked up this week, with the South improving to $186 and the North at $190. Feeders were helped by the higher fats and cheaper corn inputs, as May was up $7.92 since last Friday. The CME Feeder Cattle Index was back down $2.43 this week to $243.04. Wholesale boxed beef quotes shot higher this week ahead of the Memorial Day Holiday. Choice boxes were $18.88 higher (+6.4%) at $313.45, while Select was up $13.23 (+4.7%) to $297.40. The Chc/Sel spread was up to $16.05. Weekly beef production was down 3.7% from last week on a light Friday/Saturday kill and 2.6% lower than the same week last year. That took the YTD beef production to down now just 2.1% from the same time a year ago, with cattle slaughter down 4.5%. Managed money spec funds were adding 321 contracts to their net long in live cattle futures and options as of May 14 to 37,250 contracts.
Hogs bounced around this week, but closed with a weaker Friday and losses of $1.875 in the June contract on the week. The CME Lean Hog Index was another up 85 cents this week at $92.13. USDA’s Pork Carcass Cutout was up another $1.08 this week (1.1%) to $100.85. The ham and loin were the only primals reported lower this week, with the belly leading the way to the upside, $10.65 higher. Weekly pork production was up 0.9% from last week at 517.5 million lbs and 0.1% higher vs. the same week last year. YTD hog slaughter has run just 0.1% above last year, with production just 0.5% higher, implying lighter carcass weights. Weekly Commitment of Traders data showed specs bailing on another 9,043 contracts from their net long position to 46,128 contracts as of 5/14.
Cotton continued the decline into Friday this week, as July was down another 142 points on the week. New crop December was down 16 points (0.21%). Monday’s Crop Progress report showed 33% of the US cotton crop planted as of 5/12, 2% ahead of the average pace. USDA’s Export Sales report showed a 38.32% wk/wk drop in old crop sales to 156,450 RB in the week that ended on May 9. New crop sales totaled 140,603 RB, a slight decline from last week. Export shipments were tallied at 238,755 RB, 4.36% lower than the week prior. The FSA cut the Adjusted World Price for cotton by another 18 points on Thursday, to 59.46 cents/lb. The large managed money speculators in cotton futures and options added 1,615 contracts to their net long position as of 5/14. As the Tuesday reporting period, their were net short 15,314 contracts, the largest in nearly 11 months.
Market Watch
We start out next week with the Monday morning Export Inspections report and the weekly Crop Progress report that in the afternoon. On Wednesday, we will get updated EIA ethanol stocks and production data. Export Sales data will be out on Thursday morning, with May Feeder Cattle futures and options expire as well. On Friday, USDA will release the monthly Cattle on Feed and Cold Storage reports. Friday is also the expiration of the serial June grain options.
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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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