CORN:
This week is setting up for potential volatility with several key countries in the global markets on holiday, along with the USDA Ag Outlook Forum later in the week. The Chinese and well as several Asian grain markets are closed for their Lunar New Year holiday, and the South American grain markets are closed for several days due to Carnival. With both global holiday closures this week, it is more likely to see thinner volume trade. On Thursday and Friday, the USDA annual Ag Outlook Forum will release data that doesn’t reflect structural value to the grain markets, but it does get attention. USDA will release “their” initial acreage guesstimates on Thursday morning, which is not the “surveyed” acreage intentions from producers, that will be officially released on Thursday, March 28th. Currently several private firms are lowering their projections or estimates for corn acres for 2024 in the US, which if realized, could impact the overall carryover build forecast. Then, on Friday the USDA will release their estimated balance sheets for the 2024 growing season. All this data is subject to change with the actual acreage report in March, and weather outlook projections for the US growing season. It is also worth noting that commodity managed funds have now built a massive, short position in corn futures very close to the record short set in 2019, which was tested again in 2020 at the start of covid.
SOYBEANS:
A lot of data on world grain estimates are making headlines, from last week’s USDA report to several South American reporting firms releasing updated estimates. Currently, CONAB, along with several others, are projecting much lower Brazilian soybean numbers than what USDA currently is forecasting. We do know the first harvest of (Brazil) soybeans went very quickly and weather likely had some impact on soybean production. What is important to focus on is the “global” production with supply and demand. The US is part of this equation but not the primary source of world soybeans, as we once were. The global market has also gotten so much bigger with world production levels and demand. Demand for energy products, as well as feed grains, have soared in recent years. Today we noticed USDA revised the previous weeks’ soybeans inspections (they did not report earlier), adding about 5 additional cargos of soybeans shipped to China from the previous week. So, regardless of the data they tell us, if China (and other countries) need supplies, they will go where grain is available. In the meantime, building the domestic bio-fuel market as a viable alternative to relying only on export business is a key element for US bean prices.
WHEAT:
Russia’s ag minister is proposing an increase in their grain export quota, starting February 15th until their new marketing year begins, on July 1st. The current quota in Russia is 24 MMT and would now go to 28.0 MMT instead with this proposal. This would be another sign of Russia sitting on large wheat supplies, and their willingness to move it quickly and likely undercutting the world market prices as they have previously done to fund their ongoing war. Wheat futures have continued their path of choppy, sideways action on the price charts. Wheat futures appear to trade opposite the US dollar and traders have stalled out adding big positions in either direction.
CATTLE:
Last week saw sharply higher cash trade in cattle, which has helped live cattle futures to reach the highest level it has traded at in over three months. Cattle prices may struggle to sustain current levels as packer margins have now slipped to levels that will make it hard for them to push bids higher. Slaughter levels continue to drop lower than a year ago with less available market ready cattle. This week will likely see another standoff in cash as feedlots hold out for higher levels and it comes down to how bad the packers need to obtain animals.
HOGS:
Cash and wholesale fundamentals continue to weaken, causing lean hog futures to drop as well. There is a sizeable spread in the cash to futures market, with the cash market looking tired and stalled out. A shift in demand could trigger a new round of buying, especially if export sales pick up, as some are anticipating could happen.
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