Market Watch with Austin Schroeder
December 8, 2023
System Failure
Have you ever had one of those days? We all have, whether it’s combining a field of downed corn, one breakdown after another, or trying to work with an animal that has the disposition of the devil himself. Well, this Friday has been one to forget for myself. The last half of the day has seen few things go right and my computer has nearly been sent across the room a half a dozen. I’m sure the market can relate, with cattle seemingly heading to $0 in an attempt to find a bottom and hogs trying to look for their seasonal low. Corn keeps acting like it wants to head higher but is stuck sideways. And then there’s the poor ole MPLS wheat market who couldn’t manage to sneak out a weekly gain even though the other exchanges saw a double-digit rally. For all that it’s worth, the bright side to all our troubles is there is always tomorrow. For me, that means I don’t have to deal with any spreadsheets, and as for the market? Well, it’s closed, so at least that means it can’t head lower!
Corn managed to eke out just a ¾ cent gain on the up and down week. Wednesday’s EIA report saw booming ethanol production in the week of 12/1 at 1.07 million barrels per day, a 65,000 bpd increase. Stocks were back up by just 60,000 barrels to 21.439 million barrels. Thursday’s Export Sales report showed bookings backing off from a MY high to 1.29 MMT for the week of 11/30, still good for this time of year during the week ending on November 23. That was good enough for USDA to raise the export projection by 25 mbu in Friday’s WASDE, with export commitments of 25.747 MMT at 48.3% of the new forecast, compared to the average pace of 53% for this time of year. That export increase caused the WAOB to trim their US carryout projection by nearly the same amount to 2.13 mbu. The other major players in South America saw their production estimates left alone this go ‘round. CFTC data indicated spec traders in corn futures and options slashing their net short position as of Tuesday by 45,945 contracts to net short 160,533 contracts. Commercials saw their net position back to short, at 39,754 contracts, as there was some long liquidation.
The wheat market was on a tear, at least in the winter wheat exchanges. MPLS was down just 3/4 of a cent from last Friday. Chicago rallied another 4.81% (29 cents) over the course of the week. Kansas City futures were up 14 ¼ cents, or 2.2% in the March contract. The big story was the massive book of sales to China, as USDA reported several private sale announcements totaling 1.12 MMT to the country this week. Assuming there are no major reductions in sales, that would be the first week of 1+ MMT sales since at least July 2022. Weekly Export Sales data indicated all wheat bookings slipping to 356,412 MT in the week that ended on November 30. Total export commitments are now at 13.092 MMT, which is 66.4% of the USDA full year export projection, compared to the 72% average pace. If you throw in this week’s daily announcements, the total jumps to over 14 MMT and is now above a year ago for the same week. That gave the USDA enough confidence to raise the US export projection by 25 to 725 mbu on Friday, tightening the US stocks estimate by the same to 659 mbu. Spec traders in CBT wheat futures and options were in the process of covering shorts in the week of 12/5, reducing that net position by 23,764 contracts to -96,222. In KC wheat, they parred back 10,891 contracts from their net short position to -38,858 contracts.
Soybeans slipped lower on the week, as Jan was down 21 cents or 1.58%. The products piled on the pressure, with January meal another $8 lower, and bean oil 125 points in the red. Export Sales data showed soybean bookings back down vs. last week, but still a solid 1.52 MMT in the week ending on 11/30. The total of shipped and unshipped sales is now 32.40 MMT, down 16% from last year and gaining. That is also 68% of USDA’s forecast total and now just 1% behind the 5-year average pace at 69%. USDA left the US balance sheet unchanged in Friday’s WASDE. However, they made a few adjustments to the world side, with 23/24 Brazilian production down 2 MMT to 161, though the year prior was revised 2 MMT higher to 160. Commitment of Traders data from CFTC on Friday showed money managers in soybean futures and options at a net long position of 36,633 contracts on 12/5, a drop of nearly half, or 30,929 contracts from the previous week.
Live cattle continued the slide this week with nearby December down $3.82, or 2.26%. Cash trade was softer again this week, as cattle exchanged hands across the country at mostly $170-171, down $4. Feeders took the week in stride, even as corn was higher and fats were weaker, as Jan was up 87 cents. The CME Feeder Cattle Index was down $5.85 this week to $220.04. Wholesale boxed beef prices fell out of bed this week, at least the bottom bunk. Choice boxes were down $9.45 (-3.2%) to $288.01, the lowest since early April, while Select was $7.59 lower (-2.9%) to $257.90. Weekly beef production was back up 0.5% vs. last week but was down 1.8% vs. last year. Year to date production now trails 2022 by 5.2%, as slaughter remains 4.7% behind last year’s pace. Export Sales data (FAS) showed just 154 MT of beef booked for export in the week that ended on November 30, a calendar year low. Shipments were up vs. last week at 13,730 MT. The large spec funds in live cattle futures and options trimmed their net long position by another 8,747 contracts as of 12/5 to 27,723 contracts. That was the smallest net long position since July 2022.
Hogs slipped a little with week, as Feb was down $1.125 since last Friday, for a 1.6% move lower. The CME Lean Hog Index was down another $2.23 this week to $69.12. USDA’s Pork Carcass Cutout was back up $2.12 this week (+2.5%) this week to $85.67. The belly (-1.2%) was the only primal reported lower, with the picnic (6.3%) and rib (6.5%) the largest upside movers this week. Weekly pork production was steady vs. the week prior and up 3.1% compared to the same week last year. YTD Slaughter is 1.6% higher, with actual pork production up just 0.5% yr/yr. Pork export sales totaled 25,944 MT in the week that ended on November 30, back up compared to the week prior. Export shipments were at a 4-week high of 32,314. Managed money in lean hog futures and options held a net short position of 17,963 contracts as of Tuesday, a 3,420 contract increase during the week.
Cotton bulls went home in a better mood this week, despite some Friday weakness, as March was up 2.54%, or 202 points. USDA trimmed US cotton yield in Fridays Crop Production report by 18 lbs to 765 lbs/ac. That dropped production 310,000 bales to 12.78 million. The WAOB trimmed the export projection by 150,000 bales to 14.25, which coupled with the production cut took the ending stocks total down to 3.1 million bales. The weekly Export Sales report showed upland cotton bookings backing off to a 7-week low of 116,429 RB in the week of 11/30. Shipments were at a 9-week high at 139,156 RB. Exports are typically slow this time and begin to pick up after the first of the year. Cotton export sales commitments for 23/24 are now 7.918 million RB, which is 70% of USDA’s new forecast and trailing the 73% average pace for this point in the MY. The FSA cut the Average World Price for cotton by 55 points on Thursday, to 63.63 cents/lb. Commitment of Traders data showed spec funds at a net long position of 2,229 contracts on 12/5, an increase of 1,534 contracts during the week.
Market Watch
Next week begins per normal with the weekly Export Inspections report from USDA. The government will be out with CPI data on Tuesday, with PPI data released on Wednesday. The Fed will have their 2 day meeting both of those days, with an interest rate announcement on Wednesday afternoon expected to see rates unchanged. Weekly EIA data covering production and stocks for ethanol will be out on Wednesday. December grain futures expire on Thursday with lean hog futures and options expiring as well. Export Sales data will be published on Thursday morning. NOPA will be out with their monthly crush data on Friday.
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