Written Commentary
Ag Market View for September 06.24
September 6, 2024
SOYBEANS
Although Friday’s USDA report was slightly friendly compared to pre-report expectations, it also reinforced the longer-term bearish supply situation, and prices are following through to the downside to start of the week. Old and new crop US ending stocks were both slightly under expectations. USDA did raise China’s bean imports to 103 million tonnes.
CFTC data showed funds holding a new record net short position of 172,605 contracts, surpassing the previous record in 2019. Bean Oil had a second week of large fund buying, which reduced its net short position over the last two weeks by over 90,000 contracts to 17,000 net shorts as of Tuesday last week.
NOPA June crush will be released today, and the pre-report estimate is 177.94 million bushels, down from 183.625 in May. Bean oil stocks are expected at 1.669 billion pounds, down from 1.724 in May.
Some rains moved through the eastern Corn Belt on Monday morning. Over the next two weeks, temperatures will be mostly below normal for the Midwest, except for the northwest growing areas. Precipitation this week will focus on eastern Colorado, Western Kansas, and parts of the eastern corn belt.
SOYBEAN MEAL
Last Friday’s USDA July supply/demand report was not as bearish for soybeans as pre-report estimates suggested, as US ending stocks were slightly below the guesses for both old and new crop. However, new crop bean ending stocks are still expected to be significantly above last year. Over the next two weeks, the US weather outlook remains favorable for crop development. US export demand has been poor, and China has yet to step up with any significant US new crop purchases despite recent sharply lower prices. USDA did not change the old or new crop balance sheets for soybean meal, while global meal carryout tightened slightly.
June NOPA crush was released this morning at 175.599 million bushels, compared to pre-report estimates of 177.94 million and 183.625 in May. Bean oil stocks were 1.622 billion pounds, compared to estimates of 1.669 billion pounds and 1.724 in May. US crush profit margins remain strong, allowing processors to push basis bids higher to pry supplies out of farmers’ hands.
CORN
Price action is bearish again to start the week, despite USDA offering a friendly report Friday. Old and new crop carryout were lowered more than expected. Feed and residual and exports increases tightened both old and new crop balance sheets, which may result in corn being more sensitive to weather threats.
However, as pollination is ongoing for the next two weeks, the heat looks to stay in the Northwest corn belt, with normal and below-normal temperatures for the rest of the Midwest. It should allow favorable pollination weather for a good portion of the crop.
Commitments of Traders data showed Managed Money net shorts at record levels of 354,000 contracts as of Tuesday last week. That is highly unusual for this time of year but indicates the extremely bearish attitude.
Some of this morning’s weakness may be coming from reports of 4 new human bird flu cases found in Colorado poultry workers and Safras’s 2024/25 Brazil production estimate at 134.92 million tonnes, up from 125.56 in 2023/24.
WHEAT
Friday’s bearish supply/demand stats from the USDA will be hard for the market to overcome in the near-term as the technical picture weakens and prices sink to new contract lows to start the week.
HRW and spring wheat production were well above guesses, yield was raised a significant 2.4 BPA, and burdensome ending stocks look to be a significant bearish problem for the rest of the year. The USDA numbers indicate that the fundamental data justifies the sharp price drop since late May. Adding to the bearish news, IKAR raised their Russian wheat crop estimate to 83.2 million tonnes, up from 82 million last month. China says its summer wheat crop is up 2.7% year-over-year to 138.22 million tonnes.
CFTC data showed managed Money net shorts at 69,000 contracts as of Tuesday last week, down 4800 from the previous week. French wheat harvest is 4% done and conditions dropped 1% last week to 57% good/excellent. Argentine’s wheat seeding is 93% complete.
CATTLE
In the 2nd half of last week, August, live cattle prices closed nearly unchanged each day as prices took a breather after the sharp drop early last week. Key trendline support remains at last week’s low of 180.82; gap support is below that at 179.67 – 180.35. A more significant break would be likely if August prices close below the gap.
The estimated average dressed cattle weight last week was 844 pounds, down from 846 the previous week and up from 814 a year ago. The 5-year average weight for that week is 817 pounds. Although steer carcass weights declined 2 pounds from the previous week, the carcass weight average is still 25 pounds above the same week last year.
Cash trade Friday was mainly in line with what was seen earlier in the week, and the majority of trade was 2-$3 lower in the South and $1-$2 lower in the North. The 5-area, 5-day weighted average for the week was 194.22, down from 195.65 at the end of the previous week. Estimated beef production last week was 506.0 million pounds, down from 514.6 million a year ago. The USDA boxed beef cutout was up 51 cents at mid-session Friday and closed 41 cents higher at $322.06, down from $330.43 the previous week.
HOGS
August hogs stronger close Friday confirmed Thursday’s key reversal higher and suggests prices could strengthen further. Important resistance stands at 91.17, and if prices can exceed that level, a run to moving average resistance at 93.55 is possible. December hog prices remained nearly unchanged late last week, with nothing in the technical picture suggesting a low yet in that contract month.
USDA Friday showed that the third and fourth quarters’ pork production is estimated to be the second-largest on record, at 6.835 million pounds and 7.490 million, respectively.
The cash hog Index was near steady on Friday. Estimated US pork production last week was 508.2 million pounds, up from 435.8 the previous week and 489.5 a year ago. The CME Lean Hog Index as of July 10 was 88.65, down from 88.67 the previous session and from 89.45 the previous week. The USDA pork cutout, released after the close Friday, came in at $98.12, up $2.25 from Thursday and $94.24 the previous week. The previous low was $95.87 on July 11. The previous high was $98.54 on June 21.
MILK – CLASS III
August Class III Milk had its third weekly loss last week after failing to hold on to an early rally.
The USDA reported that milk volumes are seasonally decreasing, with persistent heat and humidity continuing to affect milk output and components across the West and Central regions. Meanwhile, volumes are trending flat to lower in the East region. Unplanned downtime of some milk end-users has made spot milk loads more widely available in California, while the East is experiencing steady to robust demand for all classes that are keeping availability tight on components.
The tightening of cream availability across the country is a notable trend, with some butter producers suggesting that it is becoming too expensive for churning. The current and forecasted temperatures are negatively impacting the willingness to accommodate spot load requests that require lengthy transportation distances. Domestic butter demand is slightly up in the East, steady in the Central region, and steady to lighter in the West.
Cheese production schedules are mixed throughout the US. Cheesemakers in the West and Central regions have steady production schedules, while production has largely held steady in the East despite the tightening of spot milk loads available for processing. Notably, cheese inventories in cold storage remain balanced with demand, indicating a stable market condition.
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