Market Watch
with Alan Brugler and Austin Schroeder
June 24, 2022
Screeching Halt
Whatever feel good stories you had in commodities last week were squashed this week. Any price movement resembling a rally came to a screeching halt, just like a speeding driver when the light suddenly turns red. There was a lot of red on our tracking sheet this week, in fact all of the markets were down. Most blamed a cooler long range weather forecast that was still short on precip but would take some stress off of growing crops. Crude oil prices were down less than 1%, but did influence the biofuels. Concern about the Fed perhaps driving a recession hurt cotton, but the stock market appeared to have reconciled itself to something milder or less immediate. Now, when will that light turn green?
Corn futures collapsed this week amid an extended forecast calling for rains in portions of the Corn Belt during the first week of July. Nearby July was down 34 ¼ cents (-4.37%), with new crop Dec 57 cents lower (-7.8%). Monday’s Crop Progress report indicated corn emergence at 95%, matching the average pace. Ratings were down 2% to 70% gd/ex or 3 points lower on the Brugler500 Index at 375. Friday’s Export Sales report showed old crop corn sales rebounding from last week’s MY low to 671,900 MT. New crop bookings tallied at 358,400 MT, also bouncing from the previous week. US old crop corn export commitments (shipped plus outstanding sales) are now at 60.335 MMT, 13% below last year at this time. That takes up 97% of the USDA projection vs. the 100% average, which is skewed higher buy last year’s fast pace. Friday ‘s Commitment of Traders report indicated spec funds pared 12,921 contracts from their net long position in the week ending June 21. That took their net long to 265,264 contracts by Tuesday.
Wheat futures led the grain complex lower this week, as contracts took a sharp turn south in their best effort to head towards a harvest low. Chicago SRW was down 10.68%, or $1.10 ½. KC lumped $1.12 ½ per bushel off nearby July, a 10.18% drop. Minneapolis HRS bulls held themselves together a shade better, but July was still 98 ¾ cents lower, or down 8.44%. Crop Progress data from Monday showed 89% of the spring wheat emerged vs. the 5 year average of 97%. Winter wheat harvest had reached 25%, vs. 22% average. The Brugler500 index (includes all 5 condition categories) was back down 1 point @ 269. Spring wheat ratings were up 11 points on the Brugler500 to 359. Export Sales data showed a jump on last week to 477,800 MT of wheat sold for export in the week of 6/16. Commitments for the new marketing year are currently 5.322 MMT, down 15% from last year at the same point. That is also 25% of the early USDA forecast, 3% behind the normal pace. CFTC showed the managed money spec funds removing another 3,004 contracts from their CBT net long in the week ending 6/21, taking it to 3,935 contracts. Spec longs in KC trimmed 3,792 contracts from their position that week, bringing it down to 32,594 contracts as of Tuesday night.
Soybeans joined the bear parade, as contracts fell 5.36% (91 ¼ cents) in nearby July and 7.37% for November ($1.13 ¼). Product values also headed lower, with meal down 1.26%, while soy oil dropped another 5.47%. Malaysian palm oil again was a culprit. Crop Progress data showed 83% of the US bean crop emerged as of last Sunday, now 1% below the normal pace. Crop ratings showed 68% of the crop rated in good/excellent condition, down 2%. That dropped the Brugler500 rating by 4 points to 371. Friday’s Export Sales report indicated old crop bean bookings in the week of June 16 at a MY low of 29,300 MT, with new crop booking at 265,600 MT. US soybean exporters have either sold or shipped 60.239 MMT of the 21/22 crop, now 2% below last year’s record pace. That is 102% of the USDA forecast, vs the 101% average. The weekly CFTC report showed the managed money spec funds reducing their net long by 8,733 contracts in the week ending June 14, putting them net long 154,413 and saving those who did it a ton of money on Wednesday and Thursday.
Live cattle fell 2.3% this week, more than erasing the gain from the previous week. Cash trade was mixed this week, with the south only $137 and the north $145-150. Feeder cattle were down $0.45 or 0.3%, getting some help from the corn weakness. The CME Feeder Cattle Index was $163.71, up $1.54 from the week prior. Wholesale beef prices were lower this week. Choice boxes were down $1.28 (-0.5%) per 100 pounds, with Select $1.51/cwt lower (-0.6%) from Friday to Friday. Weekly beef production was down 0.4% from the previous week, but 0.4% larger than the same week in 2021. Beef production YTD is up 1% on 1% larger slaughter. Weekly beef Export Sales were underwhelming at 11,200 MT. The Commitment of Traders report on Friday showed spec funds adding 7,216 contracts to their net long position in the week ending June 21, bumping it up to 39,142 contracts net long. The Friday night Cattle on Feed report showed fewer May placements than expected (97.85% of year ago) and large Other Disappearance in Nebraska that also shrank the On Feed total. On Feed June 1 was 101.21% of year ago.
Lean hog bulls consolidated the gains of the previous week, with futures down 7 cents or 0.07% for the week despite a nasty sell off on Thursday. The CME Lean Hog index was $110.69, up $1.94 from last week. The pork carcass cutout value was down $2.41 (-2.1%) this week. Bellies were the weakest primal, due mostly to May 31 belly stocks being up 55% year over year. US weekly pork production was down 3.0% from the previous week but up 1.0% vs. the same week in 2021. YTD production is down 3.7%. The Cold Storage report, however, showed large pork inventories in the cooler, with May 31 stocks up 17.4% from year ago. USDA’s Export Sales report showed weekly pork sales of 25,400 MT for the week ending June 16. The Commitment of Traders report indicated a rise in the spec fund net long of 9,992 in the week of 6/21, putting it at 28,814 contracts.
Cotton futures saw some sharp losses this week. December was down a whopping 17.11% on the week, closing below a dollar for the first time since January. July just plain imploded on Thursday and Friday, dropping more than 23% for the week. Crop Progress data showed the cotton crop at 22% squared as of Sunday, slightly behind the 23% pace. Condition ratings were down 6% to 40% gd/ex or 19 points lower on the Brugler500 index to 310. USDA tallied export sales of cotton in the week ending 6/16 at 16,200 RB for old crop upland, a MY low. New crop bookings were reported at 277,300 RB, with 238,100 RB sold to China. Outstanding old crop cotton sales are 66% larger than year ago at 4.408 million RB. Total commitments are 112% of the full year WASDE projection, 2% ahead of the average pace. Catch up is still needed on shipments with 80% of the expected full year number shipped, vs. the 87% average pace. The marketing year ends on July 31. The Commitment of Traders report showed managed money spec funds were net long 61,110 cotton futures and options contracts as of June 21, down 2,140 from the previous week but still likely feeling some pain in the wallet from this week’s price action.
Market Watch
Next week starts with cattle traders reacting to Friday’s Cattle on Feed report and grain traders reacting to surprise futures positions arising out of the Friday expiration “pins” for July options. On Monday, USDA will release the weekly Export Inspections report in the morning and the Crop Progress report in the afternoon. Skip ahead to Wednesday, EIA will release their weekly ethanol production and stocks report. NASS will also put out the quarterly Hogs & Pigs report that afternoon. Skip ahead to Thursday and traders will start an active day reacting to the weekly Export Sales report. Later that morning, NASS will release the quarterly Grain Stocks and the annual June Planted acreage reports. It is also first notice day for July grain options and last trade day for June live cattle. Finally on Friday, USDA will release the monthly consumption reports via the Grain Crushing, Fats & Oils, and Cotton Systems reports.
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