Market Watch with Austin Schroeder
November 17, 2023
Rocks
As we embark on the week leading up to Thanksgiving, we remember who, what, and why we are thankful. Dating back to the first Thanksgiving in 1621, the Pilgrams had a lot to be thankful for. First that they made the journey in 1620, and secondly if they had any sea legs, that it was dry land! Of course, we all know the place that they landed was supposedly Plymouth Rock (some revisionist history says otherwise). That brings us to the markets this week. Wheat is experiencing a different kind of rock, trying to find rock bottom. Of course, rocks also make a solid foundation, so whoever coined that term had a good sense of humor. Corn and cattle spent the week seeking that solid foundation, though for the former (as well as beans) there seems to be a little bit of shifting going on.
Corn futures saw some early week buying, but losses on Friday left the December contract up just 3 cents (0.65%) vs. last Friday. The US corn harvest was at 88% complete as of 11/12, now 2% faster than the 5-year average pace as it begins to wrap up. With the weekly EIA report back on schedule, we saw 1.047 million barrels per day of ethanol production in the week that ended on 11/10. That was up 5,000 bpd from the week prior. Stocks have now tightened to the smallest since December 2021 at 20.954 million barrels. Export Sales data from Thursday showed a solid 1.8 MMT of corn booked in the week ending on November 9. That was the second largest weekly set of sales this marketing year. Export commitments are now 21.098 MMT, 33% larger than the same point last year. The low prices are doing something at least! That is also 40% of the USDA forecast, which still lags the average pace of 46% for this time of year. Commitment of Traders data showed specs in corn futures and options trimming 5,102 contracts from their net long position as of November 14 to a net sort 163,486 contracts. Commercials increased their net short position by 5,664 contracts to 34,173, indicating light farmer selling.
Wheat bulls still haven’t gotten it together, as the complex was smacked with another week of losses. Chicago futures led the bear charge this time, as December was down 24 ½ cents (4.26%). KC wheat slipped another 22 cents and hit new contract lows. MPLS was 2.05% lower for a 15 cent loss on the week. Weekly Crop Progress data indicated 93% of the US winter wheat crop planted as of last Sunday, even with the normal pace. The crop is now 81% emerged. Condition ratings were back down 3% from last week at 47% gd/ex, or a 331 score (-4) on the Brugler500 index. The correlation between Fall ratings and final yield is very weak. Weekly FAS Export Sales data suggested just 176,296 MT of wheat was sold in the week that ended on November 9, the lowest weekly total since mid-July. Total export commitments are now at 11.941 MMT, which is 63% of the USDA full year export projection, vs. the 66% average pace. It is catching up, but not as fast as we were a few weeks ago. Money managers in CBT wheat (futures+options) trimmed their net short position by another 2,991 contracts to 89,271 contracts as of Tuesday. In KC wheat, they added 3,370 contracts to 37,449 contracts as of 11/14. As for the MGE specs, they did pull off their new record net short position by 3,272 contracts to -27,726.
Soybeans had an up and down week, buying the rumor of the Xi/Biden summit and strong Export Sales, and then selling the fact. The net change for Jan beans was a 7 ¼ cent loss (0.54%). Meal posted a gain of $3.90 for the week, despite a weaker last half. Bean oil was surprisingly the strongest, up 81 points (1.58%) since last Friday. NOPA’s monthly release on Wednesday showed the results of crush expansion, as October crush among members was an all-time high for any month at 189.774 mbu. The oil is also being consumed, as soy oil stocks were the lowest since December 2014 at 1.099 billion lbs. Soybean harvest has all but wrapped up across the US, with NASS tallying 95% of the crop out of the field as of last Sunday. USDA’s Export Sales report showed a booming total of 3.92 MMT of soybeans booked in the week that ended on November 9. That was an all-time record in the data set, excluding the several week data dumps. Much of it was previously known about and the market quickly sold the fact. That pushed the total of shipped and unshipped sales to 28.159 MMT, or 59% (an 8% jump on the week) of USDA’s forecast total and now just 4% behind the 5-year average pace. Managed money spec funds in soybeans futures and options added another 19,315 contracts to their net long position of 87,913 contracts by Tuesday November 14.
Live cattle futures scratched some back this week, as December was up $1.57 (0.90%). Cash trade was softer again this week, as cattle exchanged hands across the country at $178, down $2-3.50. Feeders also saw some slight strength, with Jan up $2.07 this week. Nearby Nov was down 35 cents as it is staying close to the CME Feeder Cattle Index, which was down $6.66 to 228.76 this week. Wholesale boxed beef prices were mixed this week. Choice boxes fell another $6.59 (-2.2%) to $293.87, while Select was $3.28 lower (1.2%) to $270.70. Weekly beef production was back up 2.9% vs. last week but 5.8% lower vs. last year. Year to date production now trails last year by 5.3%, as slaughter remains 4.7% behind 2022’s pace. Cattle on Feed data from Friday tallied 11.931 million head in fed cattle inventory on November 1, a 1.6 % increase over a year ago. Placements during October totaled 2.164 million head, 3.79% larger than a year ago. Marketings were down 2.55% at 1.758 million head. Weekly Export Sales data showed just 8,891 MT of beef sold in the week that ended on 11/9, a 4-week low. Shipments were a 9-week low of just 13,539 MT. CFTC data from Friday showed spec funds in live cattle futures and options slashing 15,385 contracts from their once large net long to 41,554 contracts, the smallest since October 2022. For feeders, they added 1,394 contracts to the long side to flip back to a net long of 1,359 contracts.
Hogs continued their broad sideways move, but closed with a 92 cent loss (1.29%) this week. The CME Lean Hog Index slipped $1.21 lower this week to $75.68. USDA’s Pork Carcass Cutout was down $1.26 (-1.4%) this week to $88.16. The ham (6.4%) and loin (-4.9%) were the drivers of that with the rest of the primal higher. Weekly pork production was up 3.2% from the week prior and 0.6% larger than last year. YTD Slaughter has been 1.5% higher, with actual pork production up just 0.4% yr/yr. Pork export sales totaled 24,296 MT in the week that ended on November 16, a 5-week low. Export shipments were tallied at 30,862 MT. Spec funds in lean hogs trimmed their net long by 178 contracts as of 11/14 to 13,209 contracts.
Cotton clawed some of the recent weakness back, as December was up 160 points (2.07%) this week. Weekly Crop Progress data showed 67% of the cotton crop harvested by last Sunday, 4% above the average pace. Thursday’s Export Sales report showed bookings backing off from last week’s total to 328,347 RB in the week of 11/9, with another decent chunk to China. Shipments were back up from last week’s multi-year low to 112,891 RB. Cotton export sales commitments for 23/24 are now 7.262 million RB, 63% of USDA’s forecast and trailing the 68% average pace for this point in the MY. The FSA trimmed the Average World Price for cotton by another 39 points on Thursday, to 64.23 cents/lb. Friday’s Commitment of Traders report showed spec funds flipping by 14,564 contracts to a new net short position of 5,899 contracts.
Market Watch
The trade will start off the Thanksgiving week reacting to the Cattle on Feed report. On Monday morning, Export Inspections data will be released, with the weekly NASS Crop Progress report out in the afternoon. EIA will publish their weekly production and stocks report for ethanol on Wednesday. We will also get the monthly NASS Cold Storage report on Wednesday afternoon, with the twice per month Cotton Ginnings report released that morning. The market and government will be closed on Thursday in observation of Thanksgiving. The ag markets will have a hard open on Friday morning, and a short trading session. Weekly Export Sales data will be pushed back to a Friday morning release. December grain options will also expire on Friday.
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