Market Watch with Austin Schroeder
May 10, 2024
Shocking Surprises
Surprises come in different shapes and forms. Sometimes they’re good, by getting a check in the mail you didn’t know you had coming. Sometimes they’re bad, so touching an electric fence when you’ve been told it’s off (hence the title). Sometimes they’re both, like having engine trouble only to realize it’s just a belt that needs replaced. Sometimes they’re just indifferent. Friday’s USDA reports had a little bit of everything. The market was a little bit shocked from the sizable cut the USDA made to the old crop corn balance sheet, which then affected how the new crop ended up. It also didn’t like a 128.5 MMT soybean carry out number that was printed for new crop. As we get into the growing season, there will likely be a few more surprises in store.
Corn got some friendly news from USDA on Friday, helping to take the weekly move to 2.06% higher (9 ½ cents). The main driver of the price movement this week was the 100 mbu cut to the old crop carryout at 2.022 bbu in the Friday WASDE report. That helped to take the initial projected new crop stocks total to 2.102 bbu, 180 mbu below the trade estimates. USDA also cut 2 MMT off both the Argentine crop (53 MMT) and Brazilian crop (122 MMT) for this year. Crop Progress data showed 36% of the national corn crop planted as of 5/5 now behind the 39% average. A little drier pattern emerged later this week and into the weekend, likely allowing some planting to take place. EIA data showed a 22,000 barrel per day drop in ethanol production in the week that ended on 5/3 to 965,000 bpd. Stocks dropped a large 1.288 million barrels to 22.2 million. Export Sales report data saw a pickup in corn bookings to 889,185 MT in the week ending on May 2. The CFTC Commitment of Traders report saw specs in corn futures and options slashing 115,527 contracts from their net short position in the week that ended on May 7. That cut the position to just 102,513 contracts by Tuesday. Commercial saw an increase of 106,824 new shorts to take their net short position to 162,635 contracts.
The wheat market shot higher this week, led by Chicago, as July was up 41 cents (6.59%). Kansas City futures were right behind with a 23 cent gain (3.54%). MPLS brought up the rear this time, with just a 5 ½ cent gain (0.77%). USDA trimmed the 23/24 carryout number to 688 mbu on Friday. Still, the initial 24/25 stock estimates are seen as building, with the carryout projected at 766 mbu. All wheat production was pegged at 1.858 bbu, with winter wheat coming in 46 mbu below the trade estimates at 1.278 bbu. Crop Progress data from Monday showed condition ratings improving back up 1% this week to 50% gd/ex, or a 335 (+1) rating on the Bruger500 index. The spring wheat crop was 47% planted, 16% above the average pace. The weekly Export Sales report showed net sales of 41,073 MT of wheat sales in the week of 5/2. New crop sales were down slightly on the week at 405,959 MT. Commitment of Traders data from the CFTC showed spec traders in Chicago wheat trimming 5,506 contracts from their net short position to 42,360 contracts by May 7th. In Kansas City futures, they peeled back 5,597 contracts to a net short position of 24,013 contracts as of Tuesday, the smallest net short going back to October of last year.
Soybeans were bailed out on a late Friday assist in the July contract, as the soon to be front month was up 4 cents on the week. Meal was behind this week with a 30 cent loss. Bean oil was higher for a change, with July up 136 points (3.16%). Friday’s WASDE update had WAOB leaving US 23/24 ending stocks alone at 340 mbu. New crop is projected to see an increase in stocks yr/yr by 105 mbu to 445 mbu. The world numbers saw Brazil production trimmed by just 1 MMT to 154 MMT. For the world balance sheet, the USDA saw new crop increase 16.7 MMT yr/yr to 128.5 MMT. Crop Progress data showed the 25% of the US soybean crop planted on May 5, still above the average planting pace of 4%. Export Sales data showed an improvement from the week prior at 428,898 MT of beans sold in the week ending on 5/2. Weekly Commitment of Traders data showed the managed money spec funds in soybean futures and option cutting their net short position in the week of 5/2 by a record 107,783 contracts to just 41,453 contracts as of Tuesday. Commercials flipped to a net short position by a total of 84,464 contracts to -46,889 contracts.
Live cattle were down just 52 cents since last Friday. Cash trade was steady to $1 lower this week with the North trading at $186-187 and the South exchanging hands at $183-185, down $1. Feeders closed the were pressured by some strength in the corm down $4.50. The CME Feeder Cattle Index was back down $1.78 this week to $240.61. Wholesale boxed beef quotes were mixed this week as the Chc/Sel spread was up to 10.40, the widest since last March. Choice boxes were up 37 cents (+0.1%) at $294.57, while Select was $13.48 lower (-1.2%) to $284.17. Weekly beef production was even from last week at 526.6 million lbs and up 0.3% from the same week last year. That took the YTD beef production to down now just 2.1% from the same time a year ago, with cattle slaughter down 4.4%. On Friday, quarterly beef production was estimated to rise by a total of 140 million lbs from the previous month for the 2024 total to 26.595 billion. USDA added 70 million to Q2, 40 million to Q3, and 35 million lbs to Q4 estimates. Managed money spec funds were adding 3,309 contracts to their net long in live cattle futures and options as of May 7 to 36,929 contracts.
Hogs were down just 57 cents since last Friday, as they spent the week bouncing around. The CME Lean Hog Index was another up 36 cents this week at $91.28. USDA’s Pork Carcass Cutout was $1.65 higher this week (1.7%) to $99.77. The picnic was the only primal reported lower this week, with the rib leading the way to the upside, $7.90 higher. Weekly pork production was down 0.9% from last week at 515.4 million lbs but up 1.5% vs. the same week last year. YTD hog slaughter has run just 0.1% above last year, with production just 0.5% higher, implying lighter carcass weights. USDA’s quarterly production estimates for pork on Friday saw an overall decrease to the 2024 number by 26 million lbs to 28.064 billion. Much of that was in Q1, Q3, and Q4, with Q2 seeing an increase. Pork export sales were tallied at 24,410 MT in the week that ended on 5/2, a 3-week low. Export shipments totaled 35,012 MT during that same week, a 5-week low. Weekly Commitment of Traders data showed specs bailing on 20,208 contracts from their net long position to 65,171 contracts as of 5/7.
Cotton continued the downward trend into Friday, as July was down 75 points on the week, despite a midweek pop. New crop December was down 84 points (1.11%). On Friday, USDA trimmed the old crop carryout total by 100,000 bales to 2.4 million. For new crop, initial production is seen at 16 million bales, with the stocks total building to 3.7 million bales. The world side of the balance sheet saw WAOB taking the 23/24 carryout 2.6 million bales lighter to 80.48 million. The 24/25 ending stocks figure is projected to build by 2.53 million bales to 83.01 million. Crop Progress data showed the US cotton crop at 24% planted as of 5/5, 4% ahead of the average pace. The weekly Export Sales report showed 253,660 RB of upland cotton sold in the week ending on May 2, a 13-week high. New crop sales totaled 158,872 RB, a MY high. Export shipments in that week picked up from the previous week to 249,628 RB. The FSA cut the Adjusted World Price for cotton by another 91 points on Thursday, to 59.64 cents/lb. Commitment of Traders data shows managed money in cotton futures and options adding 11,765 to their new net short position during the week that ended on 5/7 to -13,698 contracts.
Market Watch
Next week starts with the Monday morning Export Inspections report and the weekly Crop Progress report following in the afternoon. On Tuesday, May grain/oilseed futures expire, as well as May hog futures and options. PPI data will also be released that morning, with CPI out on Wednesday morning. Also on Wednesday we will get updated EIA ethanol stocks and production data, as well as NOPA crush data for April. Export Sales data will be out on Thursday morning.
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