Market Watch with Austin Schroeder
September 22, 2023
Sea of Red
When you reference the sea of red, you should have an inclination of who you are talking to. If it is anyone from Nebraska, they may be thinking Memorial Stadium on a home college football Saturday (or volleyball Wednesday with 92,003 in attendance). Yes, they still sell it out with a less than mediocre football team over the last decade. If it’s someone from Africa, they may be thinking it’s your translation of the Red Sea. However, if you’re talking to a commodity market participant this week, they are likely thinking you’re talking about this week’s moves. After leaving rates unchanged but the Fed hinting at another hike this year and signaling interest rates higher for longer, the stock market slid nearly 3% this week. The dollar index rose. The broad macro pressure helped to push commodities lower as corn (up a penny) and live cattle (up 15 cents) were the only ags to post any sort of a gain. For the most part, it was a sea of red.
Corn eked out a gain of just a penny over the course of the 5-day week, but the bulls will call it a win after holding at support. Monday’s Crop Progress report indicated harvest progress moving along at a decent pace, 2% points above normal at 9%. That may be slowed with some rain across the Midwest this week. Condition ratings slipped another 1% to 51% gd/ex, which pushed the Brugler500 index down 5 points to 332. Ethanol production slid 59,000 barrels per day during the week of 9/15, with EIA data showing output at 980,000 million bpd. Stocks rose a sharp 510,000 barrels to 21.681 million. Export Sales data showed bookings for the 23/24 crop slowed again compared to the previous week at 566,900 MT during the week that ended on September 14. Export commitments are now 11.727 MMT, or 23% of the USDA forecast, which lags the average pace of 33% for this time of year. Commitment of Traders data from Friday indicated money managers increasing their net short by 9,906 contracts in a week to 144,815 contracts as of Tuesday. Commercials trimmed their net short to the smallest since June 2020 at just 31,877 contracts. They own little cash corn!
The wheat bulls threw in the towel this week, as all three exchanges posted double digit losses. MPLS spring wheat took it the best, with an 18 ½ cent loss (2.34%). Kansas City took it the worst, as December was down 35 ¼ cents (4.72%). Chicago ended the week with a 24 ¾ cent drop, or 4.10%. Monday’s Crop Progress report showed the spring wheat harvest at 93% complete, even with the average pace. Winter wheat planting progress was now 1% behind average at 15%. The Thursday morning Export Sales report indicated all wheat sales for the week of 9/14 totaling 307,700 MT, an 8-week low. Total export commitments of 8.667 MMT are still starting at an extremely slow pace and are 45% of the USDA full year export projection, vs. the 52% average pace. Weekly Commitment of Traders data tallied spec funds at a net short position of 96,805 contracts, an increase of 12,666 contracts in the week ending on September 19. In KC wheat, they covered some short, trimming 818 contracts from their net short position, now at 12,330 contracts.
Soybeans felt pressure for much of the week, as November dropped a total of 44 cents since last Friday, a 3.28% drop. The product values put pressure on the market, with October meal down another $5.40 (1.37%) and bean oil 253 points lower (3.99%). USDA’s Crop Progress report showed soybean condition ratings unchanged at 52% gd/ex, a shift ex to good trimmed the Brugler 500 index 1 point lower to 336. Harvest is beginning with the initial tally at 5% complete, vs. the 4% average. Export Sales data from Thursday showed soybean bookings totaling the lowest since the first week of July at 434,100 MT during the week of 9/14. The total of shipped and unshipped sales are now 17.079 MMT, or 35% of USDA’s forecast total. That is 8% behind the 5-year average pace of 43%. CFTC data from Friday’s Commitment of Traders report showed spec funds in soybean futures and options cutting 27,983 contracts from their net long in the week that ended on 9/19, taking it to just 45,832.
Live cattle had a back and forth week that ended with a 15 cent increase from last Friday’s close. Cash trade was steady this week, with the South firm to $1 higher at $183, as the North exchanged hands at $184-185, steady. Feeder bulls were not as lucky, as October was down $5.32 on the week, or -2.01%. The CME Feeder Cattle Index was down just 17 cents this week to $253.22. Wholesale boxed beef prices continued lower this week. Choice boxes were down $2.38 (-0.8%) to $303.33, eased by Friday strength and Select down $2.69 (-1%) to $280.43. Weekly beef production was down 0.9% from last week and 7.2% below a year ago. Slaughter ready cattle are still tight, as year to date production is now down 5.2% on 4.3% smaller slaughter runs. Thursday’s Export Sales report indicated beef bookings bouncing from last week’s abysmal total to 13,700 MT for the week that ended on 9/14, a 3-week high. Shipments were also a 3-week high at 15,200 MT. Commitment of Traders data showed managed money spec funds adding another 4,584 contracts to their net long position as of September 19, taking it to 103,001 contracts. In feeders, they increased their net long by just 70 contracts to 16,243 by Tuesday.
Hogs erased the early week strength, as October ended the week with a loss of $1.60 or 1.92%. The CME Lean Hog Index was back up 23 cents on the week to $87.17. The pork carcass cutout was back down this week by $1.57 to $97.26. That was led by the ham, down $4.60, with the butt and belly the only other primals reported lower. Weekly pork production was up just 0.3% from last week but slipped 3.5% lower vs. the same week last year. YTD Pork production is now up 0.1% on 1.3% increased slaughter, indicating lighter carcasses. Export Sales data from Thursday showed pork bookings in the week ending on September 14 at 30,200 MT, a 3-week high. Export shipments recovered from a 9-week low to 25,600 MT in that week. Weekly CFTC Commitment of Traders data indicated managed money adding another 2,799 contracts to their net long in the week that ended on 9/19, taking their net long to 40,985 contracts.
Cotton slipped lower on Friday, as December was down a net 53 points (0.61%) on the week. The weekly Crop Progress report from Monday indicated 9% of the cotton crop was harvested, now 1% below the average pace. Condition ratings were unch at 29% gd/ex, as the Brugler500 dropped 5 points to 271 on a 2% increase to the poor/very poor ratings (43%). Thursday’s Export Sales report tallied 23/24 bookings at 105,800 RB during the week of 9/14, an increase from the week prior. Shipments during that week rose to 150,700 RB. Cotton export sales commitments for 23/24 are 5.485 million RB, 47% of USDA’s forecast and trailing the 59% average pace for early in the MY. The FSA trimmed the Adjusted World Price for cotton by 126 points on Thursday, to 72.29 cents/lb. Commitment of Traders data from Friday showed spec traders in cotton futures and options trimming 245 contracts from their net long. As of the week that ended on September 19, the held a net long position of 46,709 contracts.
Market Watch
Next week we will begin with cattle traders reacting to Friday afternoon’s Cattle on Feed report. Monday morning starts with the weekly Export Inspections report from USDA and the NASS Crop Progress report out that afternoon. Cold Storage data from August will also be released by NASS on Monday afternoon. We will also get first notice data for October cotton futures to start next week. EIA will release their updated ethanol stocks and production data for this last week on Wednesday. The weekly Export Sales report from FAS will be published on Thursday morning. Thursday afternoon will also see the release of the quarterly NASS Hogs & Pigs report. September feeder cattle futures and options also expire on Thursday. Friday is week, month, and for some data quarter end, and will likely see some volatile action with the NASS quarterly Grain Stocks and annual Small Grains Summary published in the morning.
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