Market Watch with Austin Schroeder
September 15, 2023
Fruits of the Labor
The wait is over. As harvest begins across the Midwest and combines begin to roll, crops are heading from the field to a grain bin (or feedlot, barge, mill, crusher, etc.). It is time to reap the benefits of a long, sometimes challenging or stressful growing season. We will soon have a better idea of what is out there in terms of crop size. Is the 165bpa/48bpa crowd right? What about the 180bpa/52 bpa crowd? Or is the USDA the middleman? Just as fall sports have begun across the country and athletes from all levels are finding out if their hard work has paid off, so are many producers. Of course, just as we get to see which off-season projections were a whiff, so will we see where the actual yield comes in!
Corn bulls couldn’t manage to win back to back games, with futures ending the week down 7 ½ cents (1.55%). The main story out of the monthly USDA reports on Tuesday was an FSA data driven increase of 800,000 acres to acreage offsetting the 1.3 bpa drop to yield. Production was up 23 mbu, with the 23/24 US stocks total rising 19 mbu to 2.221 bbu. Crop Progress data from Monday showed condition ratings slipping another 1% to 52% gd/ex, which is normal for this time of year. That put the Brugler500 index down 1 point to 337. Demand via ethanol production improved during the week of 9/8 with EIA data showing a 27,000 barrel per day increase to 1.039 million bpd. Stocks were down a sharp 450,000 barrels to 21.171 million. Thursday’s Export Sales report indicated sales for the 23/24 crop slowed vs. the previous week to 753,298 MT during the week that ended on September 7. Export commitments are now 11.16 MMT, or 21% of the USDA forecast, which lag the average pace of 31% for this time of year. Weekly Commitment of Traders data showed money managers with a net short of 134,909 contracts as of Tuesday, a 40,996 increase on the week and their largest bearish position since August 2020. Commercials trimmed their net short to the smallest since June 2020 at just 54,565 contracts.
The wheat complex extended their bull run now to two weeks, as all three exchanges posted gains. MPLS spring wheat was the leader, with December up 18 ¼, or 2.37%. Kansas City was close behind, up 14 ½ cents, or 1.98%. Chicago brought up the rear, with the December contracts 8 ½ cents higher, or 1.43%. USDA left the US balance sheet alone on Tuesday, sticking with the 615 mbu carryout. That is normal for the September report as they wait for the Small Grains Summary and Grain Socks report at the end of the month. The world balance sheet saw quite a few changes, ending up with a 7 MMT cut to the ending stocks total. Monday’s Crop Progress report showed the spring wheat harvest at 87% complete, now even with the average pace. Winter wheat planting progress also matched the average at 7%. Export Sales data from Thursday indicated all wheat bookings for the week of 9/7 at 437,850 MT, a 5-week high. Total export commitments are 8.36MMT, 44% of the USDA full year export projection, vs. the 50% average pace. The Friday Commitment of Traders report showed spec funds increasing their net short position by 5,458 contracts in the week ending on Tuesday to -84,139 contracts. In KC wheat, they pushed their new net short another 3,310 contracts to 13,148, the largest net short in over 3 years.
Soybeans had an up and down week but ended with losses of 22 ¾ cents in the nearby November contract, a 1.67% drop. Much of that came on Friday after a bearish NOPA crush report. Meal put pressure on the market, with October down $9.10, or 2.26%. Bean oil saw some strength, with a 192 point rally (3.12%). Tuesday’s monthly USDA reports showed bean yield down 0.8 bpa to 50.1, with planted acreage rising 100,000 acres to offset some of the smaller crop. Total production was cut by 59 mbu, but a reduction to both crush and exports only took US ending stocks 25 mbu lower to 220 mbu. Crop Progress data showed condition ratings down 1% at 52% gd/ex. The Brugler 500 index was 3 points lower to 337. Thursday’s Export Sales report showed 23/24 bookings at just 703,862 MT during the week of 9/7, the lowest total for the MY in 7 weeks. The total of shipped and unshipped sales for the first week of the MY are now 16.645MMT, or 34% of USDA’s forecast total, 7% behind the 5-year average pace. Money managers in soybean futures and options trimmed their net long by another 8,995 contracts in the week that ended on 9/12, taking it to 73,815 contracts according to Commitment of Traders data.
Live cattle pulled up their rally pants this week with the help from cash, as October was up 2.02% or $3.70. Cash trade was solid this week, with the South up $2-3 to $182-183, as the North exchanged hands at $184-185, up $1. Feeders rallied step for step with the fats, up another $5.32, or 2.05%. The CME Feeder Cattle Index was up $4.27 this week to $253.39. Wholesale boxed beef prices reverted lower this week, with Choice boxes down $7.19 (-2.3%) to $305.71 and Select down $2.93 (-1%) to $283.12. Weekly beef production up sharply from last week due to the holiday but were 7% below a year ago. Slaughter ready cattle are still tight, as year to date production is now down 5% on 4.3% smaller slaughter runs. Thursday’s Export Sales report showed an abysmal 2023 bookings total at just 6,220 for the week that ended on 9/7, a MY low. Shipments also backed off to 13,183 MT. Commitment of Traders data from Friday indicated managed spec funds adding back another 4,871 contracts to their net long position as of September 12, taking it to 98,417 contracts. In feeders, they increased their net long by 2,680 contracts to 16,173 contracts by Tuesday.
Hogs were helped by early week strength, as the last half they slacked off but still managed a $1.60 gain or 1.96%. The CME Lean Hog Index was back up 75 cents on the week to $86.94. The pork carcass cutout was up again this week, $1.03 higher to $98.83. That was led by the belly, up $9.72, with the loin and butt the only other primals higher. Weekly pork production was up 13.1% from last week due to the holiday but slipped 1.2% lower vs. the same week last year. YTD Pork production is now up 0.2% on 1.3% increased slaughter. Weekly Export Sales data saw pork bookings dropping from last week to 23,052 MT in the week ending on September 7. Export shipments also dropped to a 9-week low of 20,720 MT in that week. Commitment of Traders data tallied managed money spec funds adding another 6,164 contracts to their net long in the week that ended on 9/12. That took their net long to 38,186 contracts, the largest since January.
Cotton bulls regained a little bit of traction this week, as December was up 53 points. Tuesday’s Crop Production report showed another cut to the US crop, this time on lower acreage. Production was down 860,000 bales to 13.13 million. Some revisions to old crop and a 550,000 bale increase to the 22/23 stocks meant new crop stocks were trimmed by just 100,000 bales to 3 million. Crop Progress data from Tuesday indicated 8% of the cotton crop was harvested, 1% above the average pace. Condition ratings were down 2% at 29% gd/ex, as the Brugler500 was cut by just 1 point to 275. Weekly Export Sales data tallied 23/24 bookings at just 67,429 RB during the week of 9/7, minimal for this time of year. Shipments during that week dropped to 117,175 RB. Cotton export sales commitments for 23/24 are 5.379 million RB, 46% of USDA’s forecast and trailing the 58% average pace for early in the MY. The FSA trimmed the Adjusted World Price for cotton by 160 points on Thursday, to 73.55 cents/lb. Friday’s Commitment of Traders report showed spec traders in cotton futures and options trimming 5,217contracts from their net long during the week that ended on September 12. That took the position to 46,954 contracts.
Market Watch
We start out next week with Monday morning Export Inspections report from USDA and the NASS Crop Progress report out that afternoon. The Fed will meet on Tuesday and Wednesday, with an interest rate decision on Wednesday afternoon. Most are expecting the rate hikes to be put on pause this month. EIA will update ethanol stocks and production data for this last week on Wednesday. USDA’s weekly Export Sales report will be published on Thursday morning. Friday is the last trade day for October grain options. USDA will also publish the monthly Cattle on Feed report on Friday afternoon to round out the week.
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