Market Watch with Austin Schroeder
September 1, 2023
Hit the Reset Button
Three-day weekends are made to be relaxing. Taking a break from the day-to-day grind is meant to reset our minds and bodies. While most in the ag industry get very few three-day weekends, if any weekends at all, I think most can agree that some of our markets need a long weekend to hit the reset button! Yes, I’m talking about corn and wheat from a bull’s perspective. Obviously, it’s likely not that easy, as demand is seemingly hard to find, even at these levels. Getting a boost to the markets might take more than a reset button to get the shorts to cover.
Corn saw losses of 6 cents in the nearby contract this week, a 1.27% drop. New crop December was down another 6 ½ cents, or 1.33%. With much of the US corn crop entering the final legs of the growing season, weather is having less of an impact on the market. Crop Progress data showed 51% of the US corn crop was dented, which is up 2% from the average pace. Conditions slipped another 2% to 55% gd/ex, normal for this time of year. The Brugler500 index was back down 7 points to 342. Demand via ethanol was dragging again during the week of 8/25 with the weekly EIA report showing a 41,000 barrel per day drop in production to 1.007 million bpd. Stocks were slashed again by 1.181 million barrels to 21.609 million, the smallest since mid-November. Monthly Grain Crushing data showed 454 mbu of corn used for ethanol production in July, the largest July total in 5 years and largest for any month since January 2022. The weekly Export Sales report tallied 71,700 MT in sales for old crop in the week of 8/24, up from the previous week’s net reduction. New crop sales pushed to a MY high of 991,800 MT as we near the final reporting week for the marketing year. Old crop export commitments are 98% of the USDA forecast, compared to the 5-year average of 103%. Commitment of Traders data indicated money managers covering some of their net short position as of August 29, by 18,787 contracts. That took their net short position to 87,348 contracts.
The wheat complex continues to slip lower, with all three exchanges down sharply. Kansas City slipped 4.44% or 33 ½ cents this week, with Chicago down 4.34%, or 25 ¾ cents. MPLS again led the bear charge with the front month 41 3/4 cents lower, or 5.38% lower. Weekly Crop Progress data from NASS tallied the spring wheat harvest at 54% complete, behind the 63% average pace. The final condition rating was down 1% to 37% gd/ex, taking the Brugler500 index 2 points lower to 312. Thursday morning’s Export Sales report showed a miserable total for all wheat bookings, slipping to 329,100 MT during the week of August 24. The market did not react positively to that, as the poor performance is indicative of prices not being cheap enough on the world market to get more business (even after posting fresh multi-year and in some cases contract lows). Total export commitments are 7.55 MMT, 40% of the USDA full year export projection, vs. the 47% average pace. Friday’s Commitment of Traders report showed spec traders in CBT wheat futures and options adding another 8,960 contracts to their net short position as of August 29, to 79,881 contracts. In KC wheat, they trimmed 333 contracts from their new net short as of Tuesday, to -5,632 contracts.
Soybeans couldn’t extend the early week strength, as September was down 24 ¾ cents since last Friday. New Crop November spent the first part of the week fighting with $14, but gave up the fight, losing 18 ½ cents on the week. The early week forecast for triple digit temps and dryness for this weekend was quickly faded with the help of stronger than expected condition ratings and month end profit taking. The product values were weak this go ‘round, with soymeal 2.39% lower (-$10.10) and bean oil down 180 points (-0.27%). Monday’s Crop Progress report showed 91% of the US crop setting pods, 1% ahead of normal, with 6% dropping leaves, 1% below average. Ratings were down 1% at 58% gd/ex, with the Brugler 500 index 2 points lower to 350. Export Sales data indicated old crop bean net reductions of 50,700 MT during the week of August 24, normal for late in the marketing year. New crop sales slipped from the previous week to 1.12 MMT. USDA did have daily announcements every day this week including new crop beans, totaling 1.138 MT. Friday’s Fats & Oils report from USDA showed a July record 184.8 mbu of beans crush during the month. Commitment of Traders data from Friday showed money managers adding 32,779 contracts to their net long position in soybean futures and options as of Tuesday. That took their net long to 90,985 contracts on 8/29.
Live cattle were the weak spot for the livestock this week, as October was down $1.02, or 0.57%. Cash trade was steady in the south this week at $178-179, with the North exchanging hands around $182-185, steady to $3 lower. Feeders were supported by the weaker corn, as September was up 65 cents, or 0.26%, for a slight gain. The CME Feeder Cattle Index was up $3.34 this week to $248.93. Wholesale boxed beef prices were down on the week, with Choice boxes $3.41 (-1.1%) lower to $314.49 and Select down $2.38 (-0.8%) to $290.29. Weekly beef production was up 0.8% from last week but still 2.5% below a year ago. Slaughter ready cattle are tightening, as year to date production is now down 4.9% on 4.1% smaller slaughter runs. Export Sales data showed 2023 bookings at 18,200 MT, a multi-week high. Shipments went from a MY low last week to a MY high this week of 19,900 MT. Commitment of Traders data from Friday showed managed spec funds adding back 4,282 contracts to their net long position as of August 29, taking it to 94,024 contracts.
Hogs took back the previous week’s losses and were up $3.22 this week or a 4.04% move. The CME Lean Hog Index was down another $7.14 on this week’s move to $89.26. The pork carcass cutout was up 28 cents this week, or 0.3% this week to $93.70. The belly was down another $9.76 on the week, with the rib primal the only other that was lower, down 79 cents. Weekly pork production was down 4.5% from last week and 0.7% vs. the same week last year. YTD Pork production is now up 0.4% on 1.4% increased slaughter. Weekly Export Sales data indicated pork bookings extending their 17-week high to 36,900 MT in the week ending on August 24. Export shipments were up 24% on the week to 31,300 MT. Weekly Commitment of Traders data indicated managed money adding 5,253 contracts to their net long in the week that ended on 8/29. That took their net long to 26,662 contracts.
Cotton rallied to the highest weekly close in 11 months this week, as December was up 264 points or 3.02%. Crop Progress data from Monday indicated 90% of the cotton crop setting bolls, with 25% of the crop with bolls open, both even with the average. Condition ratings were unch at 33% gd/ex, as the Brugler500 was left alone at 271. Thursday’s Export Sales report tallied 23/24 bookings picking up the pace slightly in the week of 8/24 to 61,400 RB, as China bowed out this week. Shipments during that week of August 24 improved to 214,100 RB. Cotton export sales commitments for 23/24 are 5.227 million RB, 44% of USDA’s forecast and trailing the 55% average pace for early in the MY. The FSA raised the Adjusted World Price for cotton by 250 points on Thursday, to 71.56 cents/lb. Friday’s Commitment of Traders data showed spec traders in cotton futures and options adding back another 11,185 contracts to their net long during the week that ended on August 29. That took the position to 38,403 contracts as of Tuesday.
Market Watch
We start off next week with the markets and government closed for Labor Day on Monday. The markets will open back up on Monday night for the Tuesday session. USDA will release their weekly Export Inspections report on Tuesday morning, with the Crop Progress release that afternoon. Census trade data for July will be released on Wednesday morning, with the weekly EIA report for ethanol stocks and production pushed back until Thursday morning. USDA’s weekly Export Sales report will be released a day late due to the holiday, on Friday 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.
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