Market Watch with Austin Schroeder
June 16, 2023
Rally Cap
In sports, there are many traditions that are unique that fans/teams have created over the years. Specifically for baseball, there is a rally cap. Anytime a team is down late in the game and within reaching distance, both players and fans alike will don their caps in a distinctive and unconventional manner. Especially during postseason games, it becomes quite common. While it may have no effect other than razzing the opponent, many do it for fun and some do it based on superstitions. Sometimes it appears to work, other times it doesn’t. With my Royals hitting a magnificent (sarcasm) 0.141 in ‘high leverage’ situations and at a record of 18-50, it most certainly has now. Well, when the grain bulls showed up to work this week, I would bet there were a few wearing their hats in a very odd manner.
Corn bulls took matters into their own hands this week as July rallied 36 cents or 5.96% from last Friday. New crop led the way as things across the Corn Belt are drying down, with December rallying 64 cents or a large 12.63%. The weekly Crop Progress report tallied condition ratings weakening as of last Sunday to 61% gd/ex, down 3% from last week. That pegged the Brugler500 index at 361, another 7-point drop. Wednesday’s EIA release showed ethanol production slipping 18,000 barrels per day lower in the week ending on June 9, to 1.018 million bpd. Stocks dropped a large 722,000 barrels to 22.226 million. That drop was split between both coasts and the Midwest. Export Sales data indicated bookings for old crop picking up to just 273,255 MT. That was a 7-week high but below the pace needed to meet the USDA target, with commitments now at just 88% complete vs, the 5-year average of 99%. Sales are the problem, with shipments at 75% of the forecast vs. the 78% normal pace. New crop sales improved over last week’s net reduction to a positive 21,055 MT. Friday’s Commitment of Traders report showed spec traders in corn (futures + options) flipping back to net long after a 7-week short, to 2,145 contracts as of June 13. That was a 46,637 contract move during that week. Producers were active sellers, with commercials adding 42,159 short and extending their net short by 50,355 contracts.
The wheat complex joined the bulls’ party, with strong gains across the complex. Chicago led the charge, with a 57 ¾ cent move (+9.16%). Kansas City futures tagged along with a 44 ¼ cent gain (+5.55%). MPLS was up 5.14% on the week for a 41 ¾ cent gain. Crop Progress data indicated the winter wheat crop at 8% harvested, lagging the 9% average pace. Condition ratings improved another 2% at 38% gd/ex, with the Brugler500 index rising another 8 to 301 points. Spring wheat conditions were down 4% to 60% gd/ex, equating to a 12% decline in the Brugler500 index to 356. Thursday’s Export Sales report showed 23/24 wheat bookings slipping to just 164,978 MT during the week that ended on June 8. New crop export commitments are @ 3.95 MMT. That is 18% below a year ago and 19% of the USDA full year export projection, vs. the 25% average pace. Weekly Commitment of Traders data showed managed money covering some shorts, with a reduction of 6,044 contracts to their net short position in Chicago wheat as of June 13. That took them to 113,430 contracts as of 6/13. In KC wheat, they trimmed 3,490 contracts from their net long position to 3,616 contracts.
Soybeans blew past $14, as nearby July rallied 80 cents or 5.77% over the course of the week. New crop November ignored all laws of gravity, with a $1.38 move higher since last Friday. The products helped along the way as July meal was up $19.20/ton or 4.83%. Bean oil was up another 510 points (+9.34%), as the 2-week move pushed things more than a dime higher. NASS reported the US soybean crop at 96% planted as of June 11, 10% ahead of the average pace. Condition ratings were tallied at 59% gd/ex (-3%) or 356 on the Brugler 500 index, a 6-point decline in the index. Monthly NOPA data showed 177.92 mbu of soybeans crushed by members during May. That was 4% above last year’s record for the month and 2.7% larger than the April crush. Soy oil stocks slipped to 1.87 billion lbs. Thursday morning’s Export Sales release indicated a large old crop book at 478,368 MT, with much of that known via daily announcements. That was the largest weekly total for old crop since March 9. New crop bookings were reported at just 48,544 MT. Commitments for old crop are now 95% of the USDA forecast, compared to the 5-year average pace at 101%. The weekly CFTC Commitment of Traders report pegged managed money spec funds in soybeans futures and options adding 33,901 contracts to their net long as of Tuesday. That took their net long to 47,883 contracts by 6/13.
Live cattle futures rounded out the week on a mixed note, as June was up 12 cents and August was down by the same amount. Cash trade was fairly light this week, as the South traded hands at $182 down ~$3. The North saw very limited trade at $185 on the week, down $4-6 from last week. Feeder futures didn’t care for the strength in corn, as August was down 1.71%. The CME Feeder Cattle Index was $223.76, up just $1.56 this week as pressure came late in the week. Wholesale boxed beef prices were firm again this week. Choice boxes were up another $10.16/cwt (3.1%) to $343.09, with Select boxes 1.7% higher ($5.24/cwt) at $310.95. Weekly beef production was up 3% from last week but was still 4.4% lower vs. a year ago. Year to date production is now down 4.8% on 3.7% smaller slaughter runs. Weekly Export Sales data tallied 12,834 MT in beef sales during the week ending on June 9, just 14 MT above last week. Shipments totaled 15,998 MT during that week, a 3-week high. The weekly Commitment of Traders report showed spec funds extending their large net long in live cattle futures and options by 5,284 to 119,921 contracts by 6/13. In feeder cattle, they increased their net long by another 1,416 contracts to 19,486 contracts as of Tuesday.
Hogs saw some continued the rally into this week with a gain of $3.22 to extend the three week move to $18.07 for July. The CME Lean Hog Index was up $3.07 to $86.87 this week. The pork carcass cutout was up another $3.94 this week, or 4.5%. All but the ham primal strengthened this week, with the belly (+13.8%) leading the way. Weekly pork production was back down 1.4% vs. the week prior and 2% lower vs. the same week a year ago. YTD Pork production is now up just 0.3% on 1.1% larger slaughter. The weekly Export Sales report indicated pork bookings rising slightly from the week prior to 26,670 MT. Export shipments bounced from last week’s 2023 low to 35,974 MT. Friday’s CFTC data showed the managed money spec traders covering their net short position by another 11,453 contracts in the week ending on June 13. That took them to a net short of just 4,630 contracts by Tuesday.
Cotton futures slipped again this week, with nearby July down 258 points (3.07%). New crop December joined in, as it was down 2.10%. Monday’s Crop Progress report showed 81% of the US cotton crop planted as of 6/11, now 5% behind the 86% average pace. The crop was also seen at 11% squared, 3% behind normal. Condition ratings slipped lower this week by 2% to 49% gd/ex, or 341 on the Brugler500 index, a 5-point drop on the week. This week’s Export Sales report showed old crop cotton bookings slipping to a 7-week low of 98,918 RB during the week that ended on June 8. New crop improved to 65,736 RB. Weekly Shipments dropped to a 15-week low of 244,792 running bales (RB). Cotton export sales commitments are now 12% smaller than a year ago. They are 111% of USDA’s updated WASDE forecast (normally 114%). The FSA cut the Adjusted World Price for cotton by 238 points on Thursday, to 67.00 cents/lb. CFTC’s Commitment of Traders report indicated managed money cutting 3,513 contracts from their very small net long in cotton futures and options to just 557 contracts by Tuesday.
Market Watch
The markets and government will be closed for business on Monday due to Juneteenth. Grain trading opens back up on Monday night for the Tuesday session. USDA’s Export Inspections and Crop Progress reports will be pushed back to Tuesday. EIA’s weekly release of their production and stocks report including ethanol will be pushed back to Thursday morning. Export Sales data will be out on Friday morning with the delay. Friday is also the expiration of July grain options. NASS will publish their monthly Cattle on Feed and Cold Storage reports on Friday afternoon to round things out.
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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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