Top Farmer Closing Commentary 05-11-2021

CORN HIGHLIGHTS: Corn futures shot higher after the pause session and never looked back. Overnight futures were weaker following sharp losses yesterday. However, continued concern over Brazil supplies and China a noted buyer again for the new crop, help to move price in a positive direction as did a weaker U.S. dollar and firmer soybean and wheat market. May futures, which has its last trading day on Friday, ended 11-1/4 cents higher at 7.59-1/2. Jul closed at 10-1/2 higher at 7.22-1/4 and new crop Dec closed 2 higher at 6.11-1/4. Tomorrow at 11:00 am central time the USDA will release its monthly Supply and Demand report. Attention will be focused on exports and production in Brazil. The pre-report projected carry-out figure for the U.S. is 1.260 billion bushels. This is a decline from the April estimate of 1.352 billion. Continued strong basis levels suggest tight inventory and strong demand. Planting at 67% complete as of Sunday is well ahead of the five-year average which is 52%. Poor pasture conditions, according to the most recent USDA Progress report, could imply more corn usage. Jul corn future price in China is at a 16-week high at $11.20 per bushel.

SOYBEAN HIGHLIGHTS: Soybean old crop futures rallied into new contract highs today with Jul futures leading today’s charge closing 27-1/4 cents higher at 16.14-3/4, while new crop Nov gained 17-1/4 closing at 14.31-1/2, a new contract high close. Strong gains in soymeal of near 5 per ton and soybean oil gaining near 100 points on futures all provided underlying support. Tomorrow the USDA will release its monthly Supply and Demand report with projected carryout forecasted at 118 mb. Last month was 120 mb. There appears to be a growing belief that the USDA will make little change to carry out but that the true figure is somewhere well beneath 100 million. Projected world carryout is expected to remain unchanged at 86.9 million metric tons. The latest USDA crop report indicates that 42% of intended soybean acres are planted versus the 5-year average of 22%. The market is at a critical crossroads. What will be interesting tomorrow is to see whether higher prices are curbing demand. The cash market would suggest not. For four months the projected carryout did not change, yet both cash and futures prices continued to move higher. Potentially, the most interesting figure to be watched tomorrow will be 2021/2022 projected carry out. The current preview report estimate is 132 million. The bottom line there is no room for error producing the crop ahead.

WHEAT HIGHLIGHTS: May Chi wheat up 17-1/4 cents at 7.59-3/4 and Jul Chi up 11-1/4 cents at 7.41-3/4. May KC wheat up 7 cents closing at 7.02-1/2, while KC Jul closed up 7 cents at 7.10-1/2. No real change in fundamentals today, so wheat seemingly followed fellow grain corn today. Expanding drying in the northern Plains continues to be a driving force in wheat support. USDA crop progress showed 70% of spring wheat crop is planted – ahead of the 5-year average of 51%. North Dakota’s topsoil moisture shows that 80% is less than adequate as drought continues to expand. Winter wheat crop improved by 1% this week to 49% good/excellent but that’s still slightly behind last year’s 53% at this time. Kansas, however, dropped 2% from last week’s rating to 53% good/excellent. All eyes will be on tomorrow’s UDSA wheat report – its expectations are for new-crop ending stocks to fall to 762 mb, the lowest in 7 years. However, if exports don’t start to increase, that number just becomes less impactful – as of right now the U.S. looks like we won’t meet May’s expectations without some major export business through the rest of May.

CATTLE HIGHLIGHTS: The cattle market saw another day of good buying strength, led by the live cattle futures. Additional short-covering and technical buying supported by the retail beef market supported the live cattle futures on Tuesday.  June cattle still limited by cash trade gained .400 to 118.625, but August cattle gained 1.700 to 122.050.  The strength stayed throughout the market with the Dec and later contracts pushing to new contact high closes on today’s session. The wholesale beef market is the driving force under the cattle market’s recovery from the recent selloff. Choice carcasses gained 2.84 to 311.95, and select carcasses were 2.59 higher to 296.35. The choice-select spread has been starting to move wider as carcass weights have trended lower, possibly reflecting a more current feedlot situation and cattle being pulled forward in the face of high grain prices. A more current countryside may start shifting the leverage to the producer from the packer, but that will take time. Current packer margins are estimated at over $700, as slaughter cattle are very available and the packer isn’t pressured into a stronger cash market for those animals. Cash trade is still unestablished, and that is weighing on the Jun futures. Expectations are for steady to slightly higher than last week, but the majority of business will hold off until tomorrow or later. The strong close on the Aug and Oct contracts have those markets looking to retest the contract highs that Dec and later futures pushed through today. The live cattle technical picture is vastly improved over the past couple of days. Feeder cattle manage to hold small gains, with the exception of May feeders. The May contract dropped 0.125 to 135.325, but Aug feeders gained 0.150 to 148.850. A return of strength in the grain markets limited the gains in the feeder complex, despite the strong live cattle move. The price relationship between feeder cattle and live cattle has needed adjusting, and that process may be at hand.

LEAN HOG HIGHLIGHTS: Hog futures saw moderate selling pressure again on Tuesday, as prices continue to consolidate off the most recent move higher. Jun hogs finished 0.925 lower to 111.175, and Jul hogs lost 1.275 to 111.425. Technically, front-month charts failed to push over key price levels at the 10-day moving average, leaving the door open for further downside pressure. The price gap on the Jun charts at 109.725 and the 20-day moving average are possible near-term downside targets. A factor weighing in hog futures has been the weakness in Chinese hog values. Live hog futures on the Dalian Exchange in China have lost 7% over the past 2 days, to the lowest level since end-January.  This may be due to the restriction of animal transport in China to help curb ASF, causing production build-up in regions, pressuring prices. Secondly, since live cattle and hog touched equal value, spreading between cattle and hogs has become evident. Fundamentally, the market is still strong. Cash trade stays firm and the Lean Hog Index gained 0.88 to 110.10, running a slight discount to May futures. Carcass values stay firm overall and were firmer at midday. Pork carcasses traded 0.55 higher to 113.71 on moderate movement of 199 loads. Recently beef and chicken wholesale prices have accelerated higher, leaving pork behind. Could a sharer upside move in carcass values be on the horizon? Demand is strong and export demand may be the driver behind a possible move higher in products. The current price action in the hog market is more consolidative in nature, back-checking support levels. The fundamentals are still strong, and hogs have the potential for another push higher. At this point, the top doesn’t look to be in at this point.




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