CORN:
The recent USDA report proved to be another scratch in terms of making any significant changes to South America or the world spreadsheets. Traders are less likely to assume there will be measurable data changes until late season or even after the fact when USDA needs to adjust their data, which has now become a trend. This also puts more emphasis on data coming out of South America reporting agencies, rather than USDA, as well as following weather forecasts, which unfortunately continue to be unpredictable or reliable in this current weather pattern. The next big USDA report comes out on Thursday, March 28th when they release the Prospective Planting Report, for the US growing season. This will give a bigger picture of potential world carryover. Weather in the US will also become a bigger focus in the weeks ahead as we are currently looking at extremely dry conditions in many areas across the Midwest. I write this from Minnesota, where we effectively skipped a “real” winter this year and have had much above normal temperatures with very little snow or precipitation. It does make you wonder about the weather for the upcoming growing season.
SOYBEANS:
Brazilian soybean basis has been firming as it appears there may not be as many beans available as anticipated. Either farmers are holding the crop waiting for prices to go up, or there is a smaller crop due to poor weather conditions earlier in the season. It is currently estimated that Brazil is over half done with harvest. The commodity trading funds are showing they could be uneasy with the record net-short contracts held in soybeans currently, with a 50 cent move off the lows in the last week. If traders continue to lift out of short positions, that will drive the upside in soybean prices. If there are more confirmations of Brazil’s crop shrinking, demand from China increases, and basis in the US and SA rises, that could potentially be strong handwriting on the wall for the funds to exit shorts. US weather is potentially the next focus of attention as well. Do keep in mind that as prices recover to attractive levels, there are many ways to establish hedge coverage to protect against downside risk.
WHEAT:
Wheat futures worked their way down to new contract lows since mid-February and have not recovered much since. Traders have lost their concern over the fighting in Ukraine and other parts of the world that could impact grain or wheat production. Russia has grown back-to-back bumper crops of wheat and continues to under-cut the world in prices which has put major pressure on wheat futures.
CATTLE:
Strong boxed beef prices and higher cash bids were not enough to spark prices to the upside in live cattle futures last week. The beef packer margins have also improved from previously. Live cattle futures have gotten stuck in a sideways pattern on the chart for several days, holding prices in a narrow range. The next big price level on the April chart would be at $190.27 to fill in a gap left on the chart from last October, if cattle prices continue the momentum to the upside. Current fundamentals still support cattle prices as long as beef demand holds.
HOGS:
Lean hog futures have been on a relentless rally since the beginning of the year. The US exports on pork have continued to impress, data from January shows an increase of 5.8% over January of 2023. The USDA has also raised the 2024 pork export forecast and expects it to increase 4.8% this year. This will likely depend on the strength or weakness of the US dollar against foreign currencies like the Mexican peso. We are also at price levels on the charts now to consider hedge protection, to cover any unexpected downside risk that could potentially show up in this market at any time.
Give us a call for more information on our consulting and advisory services offered at Bullpen Trading LLC, for all levels of agribusinesses. 507-424-6339
“The risk of loss in trading futures and/or options is a substantial investment. Past performance, whether actual or indicated by simulated historical tests of strategies, is not indicative of future results.”