Market Watch with Austin Schroeder
May 26, 2023
Nightmares
Just this morning I woke up only to find my son had made his way into our bedroom last night and was snuggled in between the sheets. When I asked him why he was in mommy and daddy’s bed, he replied, ‘I had a nightmare, daddy’. Anymore, I don’t have many nightmares, but when I do, boy are they memorable. The most recent one I can remember was last year, though I was awake for this one. Heading into the July 4th holiday (three-day) weekend, the market had been keeping a close eye on the weather forecast. Well, over the long weekend the forecast shifted towards a little wetter pattern, and we ended up gapping lower at the Tuesday open. Weather markets, aren’t they fun! They can be, but only if you’re on the right side of it! I guess it’s an occupational hazard. Well, I am not going to say we are in a repeat of last year, but we did see the market put in some weather premium over the last few trade sessions. The next couple weeks are trending drier for much of the Corn Belt east of Central Nebraska. Now it is still early, but it did give the market some reason to cover some short ahead of this long weekend. We’ll have to wait and see if they get reason to pile them back on come Monday night.
Corn put its rally pants on this week and covered some shorts, as July was up 49 ½ cents (8.93%). New Crop December also joined the bull party, with a 34 ¾ cent climb (6.95%). Crop Progress data from Monday showed the US corn crop was 81% planted as of last Sunday, 6% above the 5-year average. Emergence was pegged at 52%, 7% above the normal pace. With more than half of the crop above ground level, USDA will release initial condition ratings beginning on Tuesday. The weekly EIA report showed ethanol production throttling back by 4,000 barrels per day in the week ending on May 19, totaling 983,000 barrels per day that week. Stocks slipped a massive 1.15 million barrels lower to 22.041 million. That was the largest weekly draw in 27 months, with a bulk via the Gulf and implying a large export total. Export Sales data showed the third net reduction in the last 4 weeks, as exporters cancelled a net 75,153 MT. The main reason for the reduction has been cancellations by China, which has totaled 1.16 MMT in those 4 weeks. New crop sales totaled just 52,099 MT. We are now just 84% of the new USDA forecast. The normal 5-year average pace is to be 97% sold by this date. CFTC’s Commitment of Traders report indicated spec traders adding 6,042 contracts to their net short position in corn futures and options during the week ending May 23. That put them at a net short of 98,027 contracts.
The wheat complex was mixed across the three exchanges this week, as Kansas City futures were the weak spot, down a nickel. MPLS was up 14 cents on the week for a 1.74% improvement. Chicago was back up 11 cents since last Friday after holding at round number support of $6. Monday’s Crop Progress report showed the winter wheat crop at 61% headed, even with the pace. Condition ratings were up 2% at 31% gd/ex, with the Brugler500 index rising another 4 to 278 points. Spring wheat crop planting pace picked up a little in the week that ended on May 21, now just 9% below the average pace at 64% planted by last Sunday. Emergence is 32%, behind the 40% average. Weekly Export Sales data indicated old crop bookings at a MY low net reduction of 45,083 MT. New crop sales backed off of last week’s MY high to 245,136 MT. Old crop export commitments are now @ 18.985 MMT as of 5/11. That is still 4% below a year ago and 90% of the USDA full year export projection, vs. the 106% average pace. Actual Census data is running ahead of the FAS total, so things are likely a little closer than that. The weekly Commitment of Traders report showed managed money piling 6,019 contracts back on to their net short position in Chicago wheat to -118,788 contracts as of May 23. That’s 594 million bushels net short for an SRW crop that will be a little over 400 million bushels! In KC wheat, they added just 28 contracts to their net long position by Tuesday, now at 16,621 contracts.
Soybeans clawed back some of their losses from the week prior, as July was up 30 cents, or 2.29%. New crop also had a nice rebound, moving 14 cents higher. The products were mixed this week, with meal losing $6.90/ton. Bean oil was back up 155 points. The US soybean crop was tallied at 66% planted by 5/21 compared to the 52% average. The crop was also 36% emerged, above the 24% 5-year average. The weekly Export Sales report indicated bean sales creeping back higher to 115,042 MT in the week that ended on May 18. New crop bookings were light, at just 1,100 MT. Commitments for old crop are 93% of USDA’s forecast total, compared to the 5-year average pace at 99%. Friday’s Commitment of Traders report showed spec funds in soybeans futures and options cutting another 19,795 contracts from their net long in the week ending 5/23. That took the position to just 4,147 contracts, a 3-year low.
Live cattle saw some slight strength this week, as June was up $1.62. Cash cattle strength helped the market to get a boost, as the South was mostly $1 higher to $171. The North changed hands at $182-183, up $4-5. Feeder futures were weakened by the strength in corn, as August was down $1.17. The CME Feeder Cattle Index was $209.86, up a sharp $6.50 this week. Wholesale boxed beef prices bounced this week. Choice boxes rallied $2.83/cwt (0.9%), with Select boxes 0.3% higher ($0.98/cwt). Weekly beef production was down 2.6% from last week and 1.7% lower vs. a year ago. Year to date production is down 4.6% on 3.2% smaller slaughter runs. Monthly Cold Storage data showed beef stocks at the end of April at 447.98 million lbs, a 4-year low for the month. Thursday morning’s Export Sales report tallied beef booking improving to 18,256 MT during the week of May 18. Shipments backed off from last week’s large total to 16,518 MT. According to Friday’s Commitment of Traders spec funds in live cattle futures and options extended their net long by 1,718 contracts during the week of May 23 to 101,990 contracts. In Feeder cattle, they added another 2,153 contracts to the net long of 16,771 contracts as of Tuesday.
Hogs continue to be the weak spot in commodities, as June was down another 8.37% or $6.95 this week. The CME Lean Hog Index saw some strength this week, gaining another $2.38 to $80.80. The pork carcass cutout fell back $2.18. The butt was the only primal to see strength (up $2.43). Weekly pork production was down 1.4% vs. last week, but up 0.8% vs. the same week a year ago. YTD Pork production is up 0.7% on 1.5% larger slaughter. Cold Storage data from Wednesday indicated 565.48 million lbs of pork stocks at the end of April, a 3-year high, and the largest total for any month since April 2020. Thursday’s Export Sales report showed 29,239 MT of pork sold during the week that ended on 5/18, a 6-week low. Shipments were the second largest for any week this year at 38,495 MT. Weekly Commitment of Traders data showed spec funds piling on another 4,731 contracts to their record net short position in the week ending on May 23. That took them to a new record net short of 24,129 contracts of futures and options by Tuesday.
Cotton futures saw a little retreat this week, eased by a strong Friday rally, as the weekly loss was 337 points. Monday’s Crop Progress report showed 45% of the US cotton crop was planted by May 21, now 5% behind the 50% average pace. The weekly Export Sales report indicated bookings for old crop cotton at a 5-week low of 131,245 RB during the week that ended on May 18. New crop was shown at 84,304 RB, the second largest forward book of the MY. Weekly Shipments backed off by 19.22% from the week prior to 268,748 running bales (RB). Cotton export sales commitments are now 14% smaller than a year ago. Compared to the USDA projection, they are still within range of the average pace (111%), at 100% of USDA’s new WASDE forecast. The FSA raised the Adjusted World Price for cotton by 98 points on Thursday, to 69.08 cents/lb. Commitment of Traders data showed money managers in cotton futures and options ending their modest 13-week net short position as of Tuesday. They flipped 20,744 contracts to a now net long of 7,980 contracts in the week that ended on May 23.
Market Watch
The markets will be closed on Monday in observation of Memorial Day. The grain markets will open back up Monday night for the Tuesday session. Due to the holiday the USDA Export Inspections and Crop Progress reports will be pushed back to Tuesday. June begins on Thursday, with EIA releasing their weekly production and stocks report including ethanol. That afternoon will show the monthly domestic use reports via the Grain Crushings, Fats & Oils, and Cotton Systems reports. Export Sales data will be published on Friday morning. June live cattle options also expire on Friday.
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