Catching The Whirlwind
It’s tornado season in the Midwest. One came within less than a mile of our Elkhorn, NE office on Friday afternoon, resulting in a little delay for this column. Taking the hint, we’re closing that physical office and moving it to the cloud (Internet), admittedly a process that was already well underway before the storm hit. Wheat is in a similar situation. Low prices cure low prices, and wheat was in a low to even lower mode for most of the past year. Since the beginning of April wheat prices have caught an updraft, which is also one of the elements in a tornado. Like that natural whirlwind, wheat prices soared higher and dragged a lot of other stuff with them.
Despite peaking on Wednesday, May corn held on for a 6 ¾ cent or 1.5% gain this week. New crop December was up 7 ¼ cents on mild concerns about planting delays if the predicted heavy rainfall in the Midwest all materializes. Crop Progress data showed planting progressing to 12% completed as of 4/21, 2% faster than the 5-year average pace and matching last year. EIA reported ethanol production also dropped, allowing stockpiles to shrink. Export Sales data from Thursday saw a bounce in corn bookings from the week prior to more than 1.3 MMT during the week that ended on April 18. The Buenos Aires Grain Exchange dropped their Argentina corn condition rating by 3% to 17% good/ex. Poor/VPoor ratings were up 4% this week to 40%. Harvest was pegged at 20% complete. The CFTC Commitment of Traders report showed specs in corn futures and options adding 8,638 long 16,016 contracts to their position in the week that ended on April 23, but also exiting 32,385 shorts (short covering). They held a net short of 238,546 contracts by Tuesday evening.
The wheat market was sharply higher this week, breaking out out above channel, speedline and other technical resistance. Kansas City HRW shot up 11.13% for the week amid crop weather concerns for the southern Plains and declining crop condition ratings. with Chicago was up 9.63%, and MPLS also continued to advance, by another 7.8% for the week. NASS reported that the US winter wheat crop 17% headed, 4% above the normal pace. Condition ratings for the crop were at 50% gd/ex, a 5% drop on the week. That took the Brugler500 index down 10 points to 336. The spring wheat crop was 15% planted, 5% faster than average and also well above last year’s pace. All wheat export sales for old crop were tallied at 82,035 MT during the week of April 18. That was a 4-week high and well above the previous week’s total. Of that 72,200 MT was to China, with most switched from unknown. New crop bookings totaled 371,853 MT in that week, on the high end of the trade estimates.
Crop conditions in France were also getting worse, with FranceAgriMer pegging the durum wheat crop at 67% gd/ex, down 3%, and the soft wheat crop at 63% a 1% drop on the week. Eastern Ukraine and Russian wheat areas are also seeing some crop stress. Indian farmers have been slow to sell to the government, expecting to see higher private market prices later. Government stocks are at a 16 year low. The weekly CFTC Commitment of Traders report showed spec funds in CBT wheat bailing out of 17,525 short positions and adding 2,693 longs during the week. That dropped their net short position as of 4/23 to 76,184 contracts. The net short had been the largest since last November just a week earlier.
Soybeans settled 9 cents higher for the week (0.78%), with about 1/3 of that on Friday. Meal was down $3.70 cents on the week, while bean oil erased part of the previous week sell off and picked up 0.55 cents per pound for the week. Soybean planting was off to a decent start, with NASS reporting 8% of the US crop in the ground as of April 21. That matches last year’s pace and is double the 4% 5-year average. The Export Sales report from Thursday showed just 210,899 MT of soybeans booked in the week that ended on April 18, a 3-week low and below the trade estimates. China was the top buyer of 167,500 MT, as unknown had 136,800 MT in net reductions as they were switched to a destination. New crop sales were on the low side of the trade range at 120,060 MT, less than half of the previous week’s total.
Soybean conditions in Argentina were steady this week at 30% good according to the Buenos Aires Grain Exchange, as poor ratings were up 1% this week to 24%. The crop is 25% harvested. Chinese soybean futures were up about 1.5% for the week. They are shipping some beans from the US, but Brazilian offers are still more than 35 cents per bushel below New Orleans (FOB Gulf) quotes. Spec funds in soybean futures and options were also short covering in the week ending April 23. They exited 16,705 shorts and added 2,156 longs. That took them back down to a 149,014 contract net short.
Live cattle had some concern about H5N1 when USDA announced a new requirement to test dairy cattle before they could move in interstate commerce. Some virus fragments were found in pasteurized milk. Futures overreacted given the lack of threat to humans and rallied to post gains of $2.90 or 1.65% for the week. Cash trade kicked off on Thursday with a steady/higher note this week, as the South was at $182 in TX and $182-184 in KS on Friday, even to $2 above a week ago. Northern trade was reported at $184-185, $1-2 higher on the week. The CME Feeder Cattle Index was up $3.80 this week to $245.53. Wholesale boxed beef quotes were mixed for the week. Choice boxes were up $1.47 or 0.5% for the full week, while Select was $2.11 lower (-0.7%) to $2788.72. Weekly beef production was down 1.1% from last week but up 1.6% vs. the same week in 2023. The YTD beef production is down 2.6% from the same time a year ago, with cattle slaughter down 4.7%. This week’s Commitment of Traders report showed managed money adding 3,212 contracts to their net long in cattle futures and options and exiting 141 shorts. That put their net long at 35,654 contracts as of April 23.
Hogs were lower this week, with active June down 2.24% for the week after a Monday-Tuesday rally burned out. The CME Lean Hog Index was down a mere 3 cents net for the week at $91.43. USDA’s Pork Carcass Cutout was down $2.46 this week (2.5%) to $97.639. The ham and belly primals took the biggest hits. Weekly pork production was down 4.2% from last week at 513.3 million lbs, as well as 0.3% larger vs. last year. YTD hog slaughter has run 0.6% above last year, with production just 0.2% higher, implying lighter carcass weights. Managed money was adding to their large net long in the hog market, at least thru the Tuesday reporting period. They added 3,325 contracts to their longs and covered 2,418 shorts during the week that ended on April 23. They held a still large net long of 92,387 contracts on Tuesday.
Cotton prices stabilized this week after an extended run of death spiral liquidation in the May contract. Net loss for the week was only 12 points. The US cotton crop was 11% planted as of April 21 according to the NASS Crop Progress report. That matches both the 5-year average and last year’s pace. There were 198 contracts delivered against May cotton, all by BNP Paribas Securities. ICE certified cotton stocks were up another 3,283 bales on April 25 at 181,430 bales. The Cotlook A Index was down another 45 points to 87.80 cents/lb on April 25. The AWP dropped another 85 points to 61.33 in Thursday afternoon’s release and is in effect through next Thursday. Commitment of Traders data confirmed a continuing exodus of the managed money spec longs in cotton futures and options during the week that ended on 4/23. The exited 10,779 longs during the week, while their compatriots added 15,862 new shorts. The spec fund net long on Tuesday night had declined to 9.501 contracts.
Market Watch
Grain traders will begin the week reacting to any surprise positions inherited via the May options expiration on Friday. Newswise, Monday begins with the Export Inspections report, with the weekly Crop Progress report following in the afternoon. Tuesday is the first notice day for May grain futures deliveries. On Wednesday we will get updated EIA ethanol stocks and production data. It will also be the first of the month, so USDA will release Fats & Oils, Grain Crushing and Cotton Consumption reports. The weekly Export Sales data will be out on Thursday morning.
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.
