Written Commentary
SOYBEANS
Although temperatures will rise to above-normal levels in the eastern belt over the next two weeks, cooler temperatures and moisture chances in the Western belt are seen as offsetting, and prices are starting the week favoring the bear camp. Weekend precipitation was heaviest in eastern Nebraska, southern Minnesota, and eastern South Dakota, with complete dryness over the Eastern bean belt. 1 – 5 day precipitation maps show heavy rain potential this week centered on Minnesota and Wisconsin and stretching into eastern Nebraska, eastern South Dakota, and northwest Iowa. The growing season is clearly starting out with widely differing conditions in the eastern and western belts, meaning only minor weather rallies can be expected unless conditions in the Western belt deteriorate. May NOPA crush will be released today at 11 AM Chicago time. The average estimate is 178.3 million bushels, slightly above May of last year at 177.9 million. Soy oil stocks are expected to be 1.775 billion pounds, down from 1.872 billion last May. CFTC data as of Tuesday of last week showed Managed Money net shorts hit a 6-week high for beans, a 5-week low for soymeal, and net longs a 5-year high for bean oil.
This year’s growing season is shaping up to be split between more stressful conditions in the eastern belt and plenty of moisture in the Western belt. The anticipated large ending stocks give the crop a bit of cushion for a weather problem, keeping prices under pressure.
SOYBEAN MEAL
The Soybean complex is starting the week testing the early May lows on July Beans after choppy conditions last week and July Meal has pulled back into the middle the last week’s range. Contrasting weather conditions with crop stress becoming an issue in the eastern belt as temps rise and precip fades, and a much wetter and cooler pattern in western bean belt areas has reduced the propensity for weather traders to aggressively position on the long side.
USDA’s June Supply and Demand report last week featured a 10-million-bushel reduction to old crop crush following April’s crush slowdown. The soymeal balance sheet showed lower production and an increase in exports, offset by lower domestic usage, which kept ending stocks unchanged for both old and new crop soymeal. The global meal balance sheet tightened slightly as world meal stocks were lowered by 90,000 tonnes for old crop and 80,000 tonnes for new crop. Global meal production is forecast to be record high. Central Illinois spot cash crush margins have turned higher and are near $1.00 a bushel. US cash meal premiums remain strong.
Commitments of Trader’s data Friday indicated Managed Money decreased their long position in soymeal by 8,000 contracts to 93,000 net longs, as of Tuesday of last week, a 5-week low in net longs.
CORN
Heavy rains over the weekend in Minnesota, eastern South Dakota and northwest Iowa have introduced a level of uncertainty in the market. This, coupled with the heavy selling that hit the corn market late in the session Friday, has given the edge to the bear camp to start the week.
The eastern belt was dry over the weekend, and temperatures may test 100 later this week. However, over in the Western belt, heavy rain potential is expected this week in Minnesota, Wisconsin and northwest Iowa with cooler temperatures over that region as well. Today’s condition report is expected to show a decline of 1 – 2%. The north China Plains are expected to remain dry for the next 10 days with some shower potential beyond that in the extended models. Mato Grosso harvest is now 21.73% complete according to IMEA. Their production estimate for the region is 45.8 million tonnes, down from a record 52.5 last season. CFTC data as of Tuesday of last week showed managed Money net shorts near unchanged from the previous week but the highest in 2 months.
Without a major weather problem at this time of year, seasonal trends are typically weak. Despite rising stress in the Eastern corn belt, Western belt conditions are expected to offset, keeping bullish weather traders on the sidelines.
WHEAT
July Chicago gapped lower overnight after last week’s consolidation, giving the edge to the bear camp to start the week. Fresh market moving news over the weekend was limited, but spring wheat conditions in Russia are too wet, and southern Russia and eastern Ukraine are expected to see some limited relief to dryness there, which may add to today’s pressure. More likely, strong yields and good harvest weather for the southern Plains are encouraging more aggressive selling from the bear camp.
Winter wheat harvest progress later today is expected to be around 20% complete, and conditions are becoming a moot point with the ongoing harvest. Wheat exports over the last 11 months are up 11% from the previous year. Global exportable supplies will be tightening for the rest of the year. However, for the short term, US harvest pressure has not yet peaked, which will keep selling pressure ongoing. Ukraine says their grain exports for the marketing year have reached 48.7 million tonnes, 3% above year ago. CFTC data as of last Tuesday showed managed Money at its most bearish in 6 weeks and holding net shorts of 45,000 contracts.
Breaking news over the weekend was absent, but prices are starting the week on a bearish note after a busy harvest weekend in the southern Plains
CATTLE
Packers got more aggressive Friday with bids in the north jumping to $197, which sparked a strong futures rally after the market gapped higher Friday morning on the opening. Hamburger meat has continued to strengthen over the last couple of months, which is one reason cattle prices remain elevated. The 5–area, 5-day weighted average at the end of last week was 191.69, up from 188.25 a week ago. Cash ideas this week are steady/higher after August futures closed at its highest level since March 20. CFTC data showed Managed Money traders reduced their net long position by 4200 contracts as of Tuesday last week. However, the very strong price action late last week is likely to have resulted in additional longs being added. August futures look poised to test the 2024 highs of 185.05.
The estimated average dressed cattle weight last week was 851 pounds, down from 852 the previous week and up from 809 a year ago. The 5-year average weight for that week is 813 pounds. Estimated beef production last week was 522.4 million pounds, up from 513.7 million a year ago. The USDA estimated cattle slaughter was 119,000 head on Friday and 7,000 head on Saturday. The total for last week was 615,000 head, up from 614,000 the previous week but down from 636,124 a year ago. The USDA boxed beef cutout was up $1.50 at mid-session Friday and closed $1.58 higher at $319.89, up from $316.75 the previous week. The previous high was $322.78 on July 5, 2023.
HOGS
Today will likely be an important test for the bull camp after Friday’s probe into new lows and subsequent reversal higher on July hogs. CFTC data showed Managed Money reduced their net long position by 10,000 contracts to 6,200 as of Tuesday of last week. Perhaps news China is starting an anti-dumping investigation into EU pork imports may have been part of Friday’s price strength as US pork may have a chance to gain market share with China. After the long downtrend since April if July hogs can close higher today, the stage would finally be set to see a good short-term upside correction.
Estimated US pork production last week was 515.1 million pounds, down from 521.2 the previous week and up from 492.7 a year ago. The CME Lean Hog Index as of June 12 was 91.58, up from 91.38 the previous session but down from 91.92 the previous week. The USDA estimated that hog slaughter came in at 456,000 head on Friday and 49,000 on Saturday. That brought the total for last week to 2.390 million head, down from 2.422 million the previous week but up from 2.326 million a year ago. The USDA pork cutout, released after the close Friday, came in at $100.71, up $4.66 from Thursday and up from $100.30 the previous week. The previous low was $96.05 on June 13. The previous high was $102.57 on June 11.
MILK – CLASS III
July Class III Milk futures shook off initial pressure and a midweek pullback to reach a new contract high early Friday and then lost strength before finishing the week with an outside-day down daily close and a sizable weekly gain.
The USDA reported that farm-level milk production in the West and Central regions is on a downward curve, while the strong spring push in production is just starting to level out in the Northeast. Class I demand is light to steady as many schools are on summer break. At the same time, Federal Milk Marketing Order 1 authorized the temporary discarding of milk due to various handling obstacles.
Cream availability is beginning to tighten seasonally, particularly as ice cream manufacturers have increased production. Domestic butter demand is steady in the Central and West regions, retail demand is steady, and food service demand is weak in the East region.
Cheese production schedules in the East are steady as processors try to make use of readily available milk supplies. Central region cheesemakers are seeing strong production schedules, while production in the West is steady to lighter with steady demand.
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