Market Watch with Austin Schroeder
January 5, 2024
Flu Bug
We’ve officially made it through the first week of January. It may be a new year and time for a new beginning, but this is also the time of year that sickness kicked in. Over the last week, each of my kids has spent a day home with some sort of illness. And a LOT of clients indicated they had either COVID or the flu over the past two weeks. It seems like the market has caught a bout of the flu bug as well. The grains especially felt sick this week, with several contracts gapping lower after the New Year’s holiday. Between a stronger US dollar index, weak U.S. export business, and favorable weather out of Brazil, there was not much in terms of bull friendly news items to speak of. The livestock held together pretty well, as it seems like they’ve built up their immune system over the last couple months.
Corn printed new lows for the move in the March contract and finally closed the expiration gap on the daily continuation chart, as it was down 2.23% since last Friday. Weekly EIA data showed ethanol production slumping 58,000 barrels per day in the week ending on 12/29 to 1.049 million bpd. Stocks continue to build, though this time the increase was just 62,000 barrels to 23.579 million barrels. Ethanol grind during December was up 1.6% from last year to 454.9 million bushels. Weekly Export Sales data from the delayed Friday release showed bookings falling to a MY low of 367,484 MT during the holiday week that ended on 12/28. Export commitments for corn are now at 29.789 MMT, a 37% jump from last year. That is also 56% of the USDA forecast, compared to the average pace of 61% for this time of year. Actual shipments are 23% of that forecast, a weak link that is now 3% below the 5-year average. Friday’s Commitment of Traders data showed the large managed money spec funds in corn futures and options adding back 19,700 contracts to their net short position in the week ending January 2. That took their net position to -197,326 contracts as of Tuesday. Commercials saw their net short position flip to net long 2,223 contracts as outright shorts were the fewest since October 2013 at 445,507 contracts.
The wheat market headed back lower over the course of this week. Chicago slipped 12 cents, to give back all of last week’s gains. Kansas City was down 14 cents and neared the close from 2 weeks ago. MPLS spring wheat futures were 11 ½ cents lower, as the sideways trend there continues. Friday’s Export Sales report showed all wheat bookings falling to the lowest since mid-June at 131,601 MT as US prices have become less competitive on the world market. Total export commitments are now at 15.317 MMT, which is 78% of the USDA full year export projection, compared to the 80% average pace. Actual shipments are still slow, with 47% of the USDA projection shipped, vs. the 56% average pace over the last 5 years. We will need a larger second-half shipment total to meet that USDA number, though a large part is spoken for as shown by the larger unshipped sales. The Friday CFTC Commitment of Traders report indicated spec traders in CBT wheat futures and options adding back 718 contracts to their net short position. They took that to 60,277 contracts on 1/2. In KC wheat, they added to that net short by 3,406 contracts as of Tuesday to -34,496 contracts.
Soybeans started the collapse on Tuesday’s open and didn’t let up much this week. March soybeans were down 41 ¾ cents on the week. March bean meal was off $16.60 since last Friday, with soy oil another 67 points lower. Brazil weather turned wetter over the three-day weekend and gave the market reason to gap lower and extend the pullback. USDA’s Fats & Oils report showed a record November crush total of 200.07 million bushel, which was also a record daily crush (6.67 mbu) for any month. Soy Oil stocks were up 9.4% to 1.162 billion lbs as bean oil inclusion rates in biodiesel have slowed recently while BO production increased. This week’s delayed Export Sales report showed a MY low in soybean bookings at just 201,646 MT during the week that ended on 12/28. The total of shipped and unshipped sales is now 36.546 MMT, down 16% from last year. That is also 77% of USDA’s forecast total, matching the 5-year average pace. This week’s Commitment of Traders report indicated spec funds in soybean futures and options flipping to a net short of 11,629 contracts as of Jan 2. That was a 16,396 contract move on the week and the largest net short since March 2020.
Live cattle got some strength back this week, as Feb was up $2.075, for a 1.23% gain. Cash trade lent a helping hand, as cattle exchanged hands at $173-175 this week, a $1-3 improvement. Feeders saw moderate action, as Jan was up just 82 cents (0.37%). The CME Feeder Cattle Index rallied hard this week, up $12.11 to $228.09. Wholesale boxed beef prices were lower this week, with the Chc/Sel spread narrowin to $17.63. Choice boxes collapsed $12.55 (-4.3%) to $277.16, while Select was 80 cents in the red (-0.3%) to $259.53. Weekly beef production was up 9.5% vs. last week. That was also 0.8% above the same holiday week last year. Actual slaughter totals were down 1.5%, but heavier carcass weights have helped increase the production totals. Weekly Export Sales data indicated 9,540 MT of beef booked for 2023 export in the week that ended on December 28, with 7,126 MT for 2024. Shipments exploded to the largest since August at 17,012 MT. Spec funds in live cattle futures and options added a few (513) contracts back to their net long position for the week that ended on Jan 2, taking it to 17,415 contracts.
Hogs were the bull leaders this week, taking back some losses from last week, as Feb was up $2.025 or 2.98%. The CME Lean Hog Index was back up 29 cents this week to $65.86. USDA’s Pork Carcass Cutout was back down 56 cents this week (0.56%) this week to $84.20. The picnic (-12.7%), butt (-5%), and loin (-0.7%) were the drivers to the downside. Weekly pork production was 7.0% higher vs. the week prior but was down 0.3% vs. a year ago. Slaughter for the first week of the year was up 1.5%, with the 0.3% drop in production indicating lighter weights. Pork export sales for 2023 totaled 17,779 MT in the week that ended on December 28, with an additional 9,889 MT for 2024 shipment. That was a 5-week low for the combined sales. Actual export shipments backed off to the lowest since early September at 21,950 MT. Managed money in lean hog futures and options pushed their net short another 11,607 contracts to -17,602 contracts as of last Tuesday.
Cotton futures slipped back in the March contract this week, as it was down 1%, or 81 points. Export Sales data from the delayed Friday release was just 131,063 RB, a 3 week-low for bookings in the week that ended on December 28. China was relatively quiet. Shipments were also a 3-week low of 213,246 RB, as the holiday took effect. Cotton export sales commitments for 23/24 are now 8.623 million RB, which is 75% of USDA’s current cotton export forecast. That trails the 79% average pace for this point in the MY. The FSA raised the Average World Price for cotton by 80 points on Thursday, to 64.96 cents/lb. The weekly Commitment of Traders report showed spec funds adding 541 contracts to their new net short position of 4,388 contracts in cotton as of the week ending on January 2.
Market Watch
Next week will be a full one for the first time since before Christmas. We start with the USDA Export Inspections report on Monday morning. On Tuesday, Census will release trade data for November. Skip ahead to Wednesday and EIA will have a normal release of their weekly petroleum update, showing ethanol stocks and production. On Thursday morning, we will get Export Sales data per the normal, non-holiday interrupted release. CPI data will be out on Thursday, with PPI released on Friday. Speaking of Friday, this one will be a little busier than most, with the release of the January WASDE, annual Crop Production, annual Winter Wheat Seedings, quarterly Grain Stocks, and Cotton Ginnings reports. Friday is also the last trade day for the January soybean complex futures.
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