Market Watch with Alan Brugler and Austin Schroeder
April 1, 2021
A Bull in the Hand
If you paid attention to the grain market this week, it sure was a wild ride. The market was selling heading into the report, but received bullish data on Wednesday that led to limit gains in corn and beans. Skip to the last trade day of the week (Thursday) and the market sold off a bit, from those limit rallies. With a long weekend ahead, and nice gains from the rally on the 31st the winners decided to take a little money off the table at week-end. Remember that phrase a bird in the hand is worth 2 in the bush? Well, in this case the market was given a nice bull from USDA, and some of those traders decided a bull in the hand was worth 2 in the bush (or pen/corral, whatever analogy you would like to use). That was not necessarily the case for the new crop contracts, as they are working on closing the spread below the nearbys. But with chart resistance on the continuation charts at $5.72 for corn and $14.07 for beans, they didn’t want to take their chances.
Corn futures clawed back 1.3% this week, despite only one day closing higher for May. New crop December saw better action, up 18 cents from last Friday. The big story this week was the USDA reports on Wednesday. As you can tell from the price action, they were fairly bullish for corn. The Prospective Plantings report showed a total of 91.14 million acres intended to be planted this spring, slightly higher than last year but shy of the 93.1 million acre estimate heading into the report. Sorghum acres are expected at 6.94 million acres, above estimates and 1.06 million larger yr/yr. March 1 stocks of corn were tallied at 7.7 bbu, which was below most estimates and 250 mbu below last year. The weekly Export Sales report put corn sales at 797,278 MT old crop and 60,000 MT for 2021/22 crop delivery. Those 20/21 sales brough the shipped and unshipped sale total to 100% of USDA’s forecast. Normally we would be 80% of that number at the beginning of April. Exports are 51% complete of the WASDE projection, with the normal pace at 48%. Thursday’s Grain Crushing report showed 332.79 mbu of corn used for ethanol in February. That was down 23.3% from last year, mainly due to the shutdowns during the cold spell later in the month.
Wheat futures were all lower again this week. Chicago SRW slipped another 0.37% on the week, and KC HRW was down 0.57%. MPLS spring wheat fell the sharpest, losing 2.36% on the week. May KC futures continue to cheapen vs. corn with now only a 5 ¼ cent premium. Depending on local basis and availability wheat may get a chance to hop into feed rations. The Wednesday reports were less bullish for wheat, though the market was held up by corn. Producers are intending to plant (or already have) a total of 46.358 million acres, which was 1.4 million above estimates. Most of that increase came via winter wheat, as NASS found a few more acres not in the Winter Wheat Seedings report in January, ~1.1 million more. Spring wheat acres are seen at 11.74 million acres, in line with estimates. Wheat stocks at the end of quarter 3 were seen at 1.315 bbu, nearly 43 mbu above estimates but down 101 mbu from last year. Thursday’s Export Sales report tallied 250,091 MT in old crop wheat bookings for the week of 3/25. There was also 81,000 MT in new crop sales. That brought the total wheat export commitments to 25.333 MMT, totaling 94% of the USDA projection, vs. the average pace of 100%.
Soybean futures managed to squeeze out only a 1 ½ cent gain on the week, even with 70 cent gains on Wednesday. Action on Thursday gave half of that back. New crop contracts, understandably, saw more promise with a gain of 56 ½ cents. That was mainly due to the fact that March Intentions data showed 2021 soybean acreage expected at 87.6 million acres, 2.5 million short of estimates. Soybean stocks on hand as of March 1 were tallied at 1.564 bbu, slightly below estimates and 690 mbu below last year. The product values held their own this week with meal 1.53% higher and soy oil up 3.7%. Weekly export sales data showed soybean bookings at 105,761 MT, with 131,000 MT reported for new crop delivery. Total soybean export commitments for the MY now total 60.842 MMT. That is still 99% of the USDA full year forecast, compared to the 5-year average pace of 89% for this date. Shipments have progressed to 90% of that projection vs. the 74% average. Monthly crush data from USDA indicated that 164.33 mbu of soybeans were crushed during February, a drop foreshadowed by the earlier NOPA number.
Cotton futures fell another 3% on the week, taking the three week slide to 11%. NASS data from Wednesday also included cotton acreage intentions, with producers intending to plant 12.03 million acres of cotton. That was just shy of the average trade estimate coming in, and on par with last year. USDA Export Sales data showed 78,377 RB of cotton sold in the week ending 3/25, a MY low. New crop sales totaled 41,380 RB. Export commitments are now 14.577 million RB, which is 102% of the USDA forecast vs. the 97% average pace for this date. Accumulated shipments are 9.472 million RB, which is 66% of the projected 20/21 total, compared to the average pace at 55%. The USDA AWP for cotton is now 65.59 cents, down another 2.94 from the previous week.
Live cattle futures slipped 7.5 cents this week in the active April contract. That was despite strength n the cash market, up $1-2 with trade of $117-118 across the country. Feeder futures were back down 0.86%, playing the ping pong ball between live cattle and corn movements. The CME feeder cattle index is $140.35, up $3.60 from the previous week. Wholesale beef prices were sharply higher again this week, and are now the highest since the fall from the COVID high. Choice boxes rose $13.52/cwt (5.72%), with select carcasses up 8.15% or $18.45 per hundred. Weekly beef export sales through 3/25 were up 29.24% from the same week last year at 18,741 MT. Shipments were 18,551 MT, the second highest this MY. Japan, South Korea and China were again the largest buyers and destinations.
Lean hog futures were up just 0.97% this week, following sharp gains the last few weeks. The CME Lean Hog index was up $3.91 this week to $98.50 per hundred pounds. April futures have narrowed to a $3+ premium to cash. The pork carcass cutout value was up $1.33 from Thursday to Thursday, a 1.2% increase after sharp gains since early February. At $108.97 on Friday, it was the highest since May 2020. USDA reported net pork export sales for the week ending 3/25 at a 2021 high of 61,009 MT. Of that total, 29,700 MT were for China and another 15,800 MT to Mexico. Shipments totaled 40,404 MT, the third largest this calendar year.
Market Watch
Next Monday traders will come back after a 3-day weekend following a crazy week of price movement. The week starts off with the Export Inspections report on Monday, with NASS releasing the initial Crop Progress report of 2021. The holiday delayed weekly Commitment of Traders report is expected on Monday. Monday is also first notice day for April Live Cattle futures deliveries. Skip ahead to Wednesday, and EIA will release another round of ethanol production and stocks data. We will also receive monthly trade data from Census at mid-week. Thursday morning will show the weekly Export Sales report. To round out the week on Friday, USDA will release the monthly WASDE update, taking into account the changes from Wednesday’s Grain Stocks report.
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