Market Watch with Austin Schroeder
August 25, 2023
Hot Seat, Cool Throne
I realize this may not be in the generational wheelhouse of some readers but allow me to explain. Hot seat, cool throne is often a segment on the popular Pardon My Take podcast. Hot seat is used to describe things that may be in trouble (or bearish in the markets case), with the cool throne being something that is in good shape (or bullish). Take the ag markets for example. On your hot seat this week could have been corn. We were getting yields out of the ProFarmer crop tour that were not overly bearish and a final yield at 172. We were also facing extreme heat and drier weather that is likely taking some yield away via grain fill. And yet, the front month and new crop were down on the week and at the lowest weekly close in more than 2 1/2 years. On the opposite side, for the cool throne, we have oats for example, which were up more than 9% and at the highest close in more than a year. What does oats know?! Soybeans were also up 1.34% and nearing that $14 mark, as the weather was taking a toll this week.
Corn had an up and down week, but ended on a weaker note, with September down 8 ¾ cents. New crop December lost a nickel. Dryness and heat this week did little to help futures gain much traction. Monday’s Crop Progress report showed 35% of the US corn crop was dented, which up 2% from the average pace. Conditions slipped 1% to 58% gd/ex, with the Brugler500 index back down 4 points to 349. Following the week long Crop Tour, ProFarmer pegged the US corn yield at 172 bpa. The Brugler Virtual Corn Tour results were released earlier in the week at 174.9 bpa. Demand vis ethanol slumped off during the week of 8/25 with the weekly EIA report showing a 21,000 barrel per day reduction in production to 1.048 million bpd during the week of August 18. Stocks were slashed by 645,000 barrels to 22.79 million. Thursday’s Export Sales report showed 22,726 MT in net reductions for old crop in the week of 8/17. New crop sales slipped to 673,499 MT. Old crop export commitments are 98% of the USDA forecast, compared to the 5-year average of 103%. Actual shipments are 93% of the projection, lagging the 5-year average by 4%. The weekly Commitment of Traders report indicated money managers adding another 33,555 contracts to their net short position as of August 22. That took their net short position to 106,135 contracts. Commercials were reported at a net short of 80,858 contracts, a reduction of 30,855 contracts, to the smallest net short position since June 2020.
The wheat complex continues to slip lower. Kansas City was the exception with September up ½ cent. MPLS led the bear charge this week with the front month 27 cents, or 3.36% lower. Chicago ended the week with September 20 cents lower, or 3.26%. Crop Progress data from the USDA showed the winter wheat at 96% harvested by August 20, vs. even with average pace. Spring wheat was shown at 39% complete, behind the 46% average pace. Conditions were back down 4% to 38% gd/ex, taking the Brugler500 index 7 points lower to 314. The Thursday morning Export Sales report pegged all wheat bookings improving to 405,986 MT during the week of August 17. Total export commitments are 7.221 MMT, 38% of the USDA full year export projection, vs. the 44% average pace. Weekly Commitment of Traders data showed spec traders in CBT wheat futures and options adding to their net short position by 5,331 contracts as of August 22, to 70,921 contracts. In KC wheat, they flipped to net short 5,965 contracts as of Tuesday, a 6,552 contract move to the short side.
Soybeans continued their climb this week, as September was up 18 ¼ cents. New Crop November extended last week’s rally, with futures up 2.55% or 34 ½ cents. Triple digit temps and dryness across the Corn Belt this week helped. The product values flipped spots this week, as Sep soymeal was 4.68% higher (+$18.90) and bean oil was 156 points lower (-2.28%). Crop Progress data from Monday indicated 86% of the US crop setting pods, 2% ahead of normal. Ratings were unch at 59% gd/ex, with the Brugler 500 index 3 points lower to 352. ProFarmer estimates the US soybean national yield at 49.7 bpa following this week’s crop tour. This week’s Export Sales report showed old crop bean sales at 365,948 MT during the week of August 17. New crop sales slipped from the previous week to 1.22 MMT. Export commitments for old crop are 99% of the USDA forecast, compared to the 5-year average pace at 104%. Commitment of Traders data from Friday afternoon tallied money managers trimming their net long position in soybean futures and options by 7,100 contracts as of Tuesday. That took their net long to 84,533 contracts on 8/22.
Live cattle were up 1.31% or $2.35 this week. Cash trade was steady this week, with the south at $178-179, and the North exchanging hands around $185, steady to $3 lower. Feeders were supported by the weaker corn and higher fat cattle, with gains of 1.08% (+$2.67) The CME Feeder Cattle Index was up $1.55 this week to $245.59. Wholesale boxed beef prices were up on the week, with Choice boxes $1.79 (0.6%) higher to $317.90 and Select up $4.31 (1.5%) to $292.67. Weekly beef production was up 1.9% from last week but still 8% below a year ago. Slaughter ready cattle are tightening, as year to date production is now down 5.0% on 4.2% smaller slaughter runs. The monthly Cold Storage report showed beef stockpiles at 420.1 million lbs at the end of July. That was a 2% seasonal incline from June and 17.92% below the same month last year. Export Sales data showed 2023 bookings at 11,434 MT, a 6-week low. Shipments totaled a MY low 11,804 MT. Weekly Commitment of Traders data showed managed money spec funds reducing their net long position by 7,265 contracts as of August 22, taking it to 89,742 contracts.
Hogs reverted back to weakness this week, as October was down 2.8%. The CME Lean Hog Index was down another $3.92 on this week’s move to $96.40. The pork carcass cutout was down $12.75 this week, or 12% this week to $93.42 on a large Friday drop. The belly was the main reason, down $65.80 on the week, with the loin and ham primals also lower. Weekly pork production was up 3.3% from last week and 2.6% larger vs. the same week last year. YTD Pork production is now up 0.4% on 1.4% increased slaughter. Cold Storage data indicated 473.84 million lbs of pork stocks at the end of July 31. That was a 10% drop from last year and 2.67% lower vs. June. Thursday’s Export Sales report showed a 16-week high of 33,016 MT of pork sold for 2023 shipment in the week ending on August 17. Export shipments backed off of the previous 6-week high to 25,173 MT. Commitment of Traders data indicated managed money spec funds trimming 1,552 contracts from their net long in the week that ended on 8/22, to 21,409 contracts.
Cotton took back most of the previous week’s losses, as December was up 369 points, or 4.41%. The weekly Crop Progress report showed 81% of the cotton crop setting bolls, 3% behind the average pace, with 18% of the crop with bolls open. Condition ratings were down another 3% to 33% gd/ex, as the Brugler500 slipped 9 points to 271 as poor/very poor ratings were up 3% to 46%. Export Sales data 23/24 bookings slipping to 38,893 RB in the week of 8/17. Shipments during that week improved to 204,200 RB. Cotton export sales commitments for 23/24 are 44% of USDA’s forecast, trailing the 54% average pace for early in the MY. The FSA trimmed the Adjusted World Price for cotton by 208 points on Thursday, to 69.06 cents/lb. Friday’s Commitment of Traders data showed spec traders in cotton futures and options cutting 27,128 contracts from their net long during the week that ended on August 22. That took the position to 27,218 contracts as of Tuesday.
Market Watch
We start out next week with the Monday morning Export Inspections report from USDA, with the weekly NASS Crop Progress report released in the afternoon. Fast forward to Wednesday and EIA will release their weekly report covering ethanol production and stocks. Thursday will start out with the weekly Export Sales report in the morning. We also will have first notice day for September grain futures, with August live cattle futures and feeder cattle futures and options expiring. Friday starts out September and rounds out the week with the monthly domestic demand data from USDA via the Grain Crushing, Fats & Oils, and Cotton Systems reports. It is also the expiration of September live cattle serial options.
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