Market Watch with Austin Schroeder
December 22, 2023
Stocking Full of Coal
Christmas will be here on Monday, but Santa decided enough was enough this week and came early. As we go into the holiday weekend, there are some ugly losses for the ag commodities this week, as several had larger than a 2% loss. The jolly old man was less than happy and after last week’s headline wondered if the markets would be Naughty or Nice, it appears the answer is mostly naughty, except for feeder cattle. That is why corn, beans, wheat, live cattle, hogs, and cotton, will wake up with their stockings full of coal come Monday morning. To all of those reading this, we hope your Christmas morning is better. Merry Christmas!
Corn explored new contract lows to close out the pre-holiday week with 10 cent losses (-2.07%). Weekly EIA data showed ethanol production dropping 3,000 barrels per day in the week ending on 12/15 at 1.071 million bpd. Stocks had another week of building, with a 806,000 barrel jump to 22.906 million barrels. Logistics continue to play a role in export market, with the Panama Canal still restricting traffic and hindering US shipments out of the Gulf. There were also 2 major border rail crossings closed between the US and Mexico on Monday due to US Customs and Border Patrol shifting manpower to process an influx of migrants at the southern border. They were reportedly back open by Friday. Thursday’s Export Sales data indicated a 7-week low in corn bookings at 1.013 MMT for the week that ended on 12/14. That was still the 7th consecutive week above the 1 MMT mark. Export commitments for corn are now at 28.179 MT, a 37% jump from last year. That is also 53% of the USDA forecast, compared to the average pace of 58% for this time of year. Actual shipments are 20% of that forecast, now 2% below the 5-year average. The Friday afternoon Commitment of Traders report tallied managed money in corn futures and options adding 29,154 contracts to their net short position as of December 19 to 180,724 contracts. Commercials saw their net short position back to just 18,643 contracts, as the number of outright shorts dropped to 446,781 contracts, which is the smallest since October 2013.
The wheat market had some sharp losses this week, with several sizable moves. Chicago was down 13 cents (-2.07%), with Kansas City losing 19 ¾ cents in the March contract (-3.07%). MPLS slipped 2.26% lower from last week, for a 16 ½ cent drop. This week’s Export Sales report was a 4-week low, as Chinese buying dried up. Bookings totaled 322,702 MT in the week of 12/14, which is still decent for the time of year. Total export commitments are now at 14.905 MMT, which is 76% of the USDA full year export projection, compared to the 77% average pace. Actual shipments are still slow, with 44% of the USDA projection shipped, vs. the 53% average pace over the last 5 years. A couple large tenders by Egypt (480,000 MT) and Saudi Arabia (1.35 MMT) were likely filled by Russian wheat as they continue to be major players in the export market. Weekly CFTC data showed spec funds in CBT wheat futures and options holding a net short position of 65,032 contracts on 12/19, a 4,497 contract reduction on the week. In KC wheat, managed money cut 1,462 contracts from their net short position to 29,242 contracts.
Soybeans experienced some weakness this week, as front month January was down 16 cents, with pressure from the producers. Bean meal was $6 in the red on the week, with soy oil 146 points lower. That was despite rumors that Argentina is attempting to raise their export taxes on the products to 33% to match soybeans. Brazil weather continues to be some background noise for the market, with rains across some of the drier regions this week. This week’s Export Sales report saw 1.989 MMT of soybeans booked during the week that ended on 12/14. That was a 5-week high, but saw little reaction from the market, as there was 1.312 MMT in previously announced sales via daily export sale announcements. New crop sales totaled 144,000 MT during that week. The total of shipped and unshipped sales is now 35.36 MMT, down 16% from last year. That is also 74% of USDA’s forecast total and now matching the 5-year average pace at 71%. Weekly Commitment of Traders data showed spec funds in soybean futures and options reducing their net long position for the week that ended on December 19 by 20,583 contracts, taking it to just 10,266 contracts.
Live cattle traded sideways for much of the week but ended with Feb down 82 cents from last week’s close. Cash trade was steady to a $1 higher on the week to $170-171 across most regions, with a little $172 creeping in late. Feeders were the leaders to the upside, with January $1.85 higher (0.84%). The CME Feeder Cattle Index was back up 77 cents this week to $219.81. Wholesale boxed beef prices were slightly higher this week. Choice boxes were up $1.28 (0.4%) to $292.92, while Select was 33 cents higher (+0.1%) to $261.15. The monthly Cattle on Feed report showed December 1 fed cattle inventory at 12.06 million head, a 2.68% increase from last year. That came from a sharp drop in marketings, down 7.4% at 1.751 million head. Placements during November were down just 1.94% at 1.868 million head. Cold Storage data showed 454.7 million head of beef in stocks at the end of November, a 13.11% drop vs. as year ago but seasonally 2.02% above October. Weekly beef production was down 4.1% vs. last week, from slow Saturday kill, but was 14.7% larger vs. last year due to the holiday falling on this week. Year to date production now trails 2022 by 4.6%, as slaughter remains 4.3% behind last year’s pace. Export Sales data from FAS showed 9,715 MT of beef booked for 2023 export in the week that ended on December 14, with 6,429 MT for 2024. Shipments via export were at a 16-week high 16,900 MT. Large spec funds in live cattle futures and options continue to liquidate their net long position by another 5,882 contracts as of 12/19 to 22,706 contracts. That was the smallest net long position since July 2022.
Hogs gave back some of last week’s strength, as new front month Feb was 55 cents lower from last Friday. The CME Lean Hog Index was down another $1.06 this week to $66.69. USDA’s Pork Carcass Cutout was down another $2.12 this week (-2.5%) this week to $82.21. The picnic (+13.7%) was the only primals reported higher, with the belly leading things lower, down 13%. Hogs and Pigs data from NASS showed 74.971 million head of hogs in the US on December 1, a 0.02% increase from last year. Market hogs were the entirety of the increase, up 0.32% at 68.973 million head, with hogs kept for breeding down 3.3% at 5.999 million head. Pork stocks were tallied at 416.1 million lbs on November 30, a 7.86% drop from last year and 4.98% below the end of October. Weekly pork production was 9.2% lower vs. the week prior as Saturday kill is slowed this week for the holiday. Production was 36.8% larger compared to last year due to the Holiday. YTD Slaughter is now 2.1% higher, with actual pork production up 1.1% yr/yr. Pork export sales for 2023 totaled 37,543 MT in the week that ended on December 14, with an additional 25,508 MT for 2024 shipment. Actual export shipments via the FAS report were a MY high of 40,458 MT. Managed money in lean hog futures and options slashed their net short position by 9,921 contracts as of December 19, taking it to 8,306 contracts.
Cotton had a back and forth week, as March closed out the week with 17 point losses. Cotton Ginnings data from Friday showed US gins have processed 10.21 million RB of cotton as of December 15. That was the lowest for this period since 2015. That was an increase of 1.73 million RB in that 2-week period, the slowest first half December pace since 2011. Export Sales data from Thursday showed upland cotton bookings at a 10-week high of 146,671 RB during the week of 12/14. Shipments were at a 23-week high at 222,322 RB as the seasonal pickup in exports continues. Cotton export sales commitments for 23/24 are now 8.123 million RB, which is 71% of USDA’s current cotton export forecast. That trail the 76% average pace for this point in the MY. The FSA cut the Average World Price for cotton by 187 points on Thursday, to 63.80 cents/lb. The weekly Commitment of Traders report showed spec funds cutting 7,757 contracts from their net long in cotton for the week ending on December 19. That took the position to 1,252 contracts.
Market Watch
We start off next week with the government and markets closed for the Christmas holiday. The ag markets will have a hard open on Tuesday morning. Export Inspections data will be out on Tuesday morning. Skip ahead to Thursday and the EIA will be delayed in its release showing US ethanol production and stocks. The weekly Export Sales report will be pushed back to Friday due to the Monday holiday. December Live Cattle futures will expire on Friday, as well as first notice day for the January soybean complex.
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