Editor's Note: The ag commodity markets are closed Monday for Martin Luther King day.
Corn closed higher Friday, finding support above its 20 day moving average for the first time in 30 plus days. Rains in Brazil are delaying soybean harvest. The delay in harvest is pushing back the second crop corn plantings. Ideally the corn should be planted by February 20th, especially in the Mato Grosso state. Imea, has already pegged the Mato Grosso corn crop at 762 million bushels down 8.7% from last year. So, further delay could drop that number further. Drought in South Africa has a potential to increase demand for U.S. corn. The country side has seen a whopping 15 inches of rain this season. The lowest level since records were kept, and is the fourth consecutive year of below average rainfall. Expectations are that the region will need to import a record 230 million bushels plus. The bullish forecast could help boost prices with upticks vulnerable to short covering as funds continue to have long bearish bets on corn. Speculators increased their net short position in corn futures in the week of Jan 12 by 27,300 lots to a net short position of -239,566 as reported by the CFTC on Friday. The large position continues to leave the market vulnerable to short covering. March corn futures climbed up 5 ¼ cents to $3.63 ¼ on Friday’s close, while May added 4 ¾ cents to $3.67 ½.
Soybean futures retreated back below their 100 day moving average dropping 0.5% on Friday’s close. On Friday, NOPA pegged U.S. crush last month at 157.71 million bushels. Even though up from last month, it came in below trade estimates. The figure is well below the previous year’s 165.38 bushels bringing the bears back into the market. At the current crush pace, the demand could be down as much as 26 million bushels from USDA’s season forecast for crush. Friday’s report pressured soybeans down 0.8% testing its 40 day moving average of $8.75. Speculators decreased their net short position in soybeans futures in the week of Jan 12 by 20,117 lots to a net short position of -104,809 as reported by the CFTC on Friday. The concurrent dive in equity index futures and the nearby crude oil contract’s push below the $30/barrel level probably discouraged commodity bulls. The crude oil drop seemed to drag soyoil downward as well. March soybean futures declined 3 ¼ cents to $8.79 on Friday’s close, while Mar soyoil fell 10 points to 29.65 cents per pound and March meal sank $3.50 to $270.70.
A strong corn market influenced Friday's trading in the wheat market. Futures found buying support closing above its 10 and 20 day moving average. Cooler weather in the north, triggered a small amount of short covering lending price support. Cold conditions in north eastern areas of the Plains over the weekend and early next week has traders concerned over winterkill risks. Paris wheat traded contract lows on Friday. Prices were pressured on weak oil prices and a competitive export market. France, the EU’s largest wheat grower, is having a hard time finding a home for its wheat. Russia is able to stay cheaper as the euro firms. The Russian Agriculture Ministry this week announced that it will present amendments to the export tax to the government by the end of the month. Argentina has been picking up the slack as the stronger U.S. dollar sent the Russian export tax higher. The competition for U.S. wheat will get much steeper if Russia can reduce its tax. Speculators decreased their net short position in wheat futures in the week of Jan 12 by 17,700 lots to a net short position of -112,767 as reported by the CFTC on Friday. Even though they lowered the overall all position, it is still large and leaves the market vulnerable to short covering. March CBOT wheat surged 5 cents to $4.73 ¾ per bushel in Friday’s trading, while March KC wheat gained 5 ½ cents to $4.74 and March MWE gained 4 ¾ cents to $4.97 ¾.
U.S. Cattle sank Friday. A drop in the U.S. stock market and investor concerns on overall commodity prices weighed down futures sending them limit down. Crude oil weakness found sympathy trading in the Live Cattle market. Drop in crude oil prices is good for us as drivers but creates demand concerns globally especially in countries that economies depend on its revenue. After several days of firm cash prices, Beef Cut outs fell on Friday. Choice cuts are down 2.51 to 232.65 while Select cuts are down 1.80 to 227.63. The estimated weekly beef slaughter, including Saturday estimates, is at 568,000 head vs 550,000 head last week and 550,000 head the previous year. Year to date is estimated at 1,163,000 head vs 1,226,000 last year. February live cattle lost 3.00 cents to 127.550 cents/pound Friday, while April futures dropped 3.00 cents to 128.50. March feeder cattle declined 4.50 cents to 150.275 cents/pound and April feeders lost 4.50 cents to 150.850.
Hogs felt pressure from the cattle complex Friday as outside markets pressure commodity futures. Hog nearby futures have seen a consistent uptick in price movement. Some are suggesting that today’s down turn is more triggered on profit taking vs the complete tailspin cattle seen Friday. Firm cash markets on strong packer margins will continue to provide support against outside market pressure. Although hog and pork fundamentals remain quite positive, the premiums to the CME index already built into futures prices make rallies from recent levels problematic. That may also be why hog futures seem sensitive to equity markets shifts. Pork packer margins for January 15 at +$35.56 vs +$36.81 on Thursday. The estimated weekly pork slaughter, including Saturday estimates, is at 2,300,000 head vs 2,369,000 head last week and 2,244,000 head the previous year. Year to date is estimated at 5,041,000 head vs 5,142,000 last year. Country hogs firmed ahead of the 3 day holiday weekend up 1.36 to $52.77. February hog futures closed 0.33 cents/pound lower at 62.025 cents/pound Friday, while April hogs dropped 0.33 cents to 67.450 cents/pound.
Cotton weakened on poor U.S. retail sales data last Friday, dropping 0.8% on the day. Cotton is an industrial commodity and is vulnerable to macroeconomic events and data. US retails sales surprised Wall Street, data showed a decline of 0.3% last month. Overall growth for 2015 is reported at 2.1%, the slowest in six years. Brent crude dropped 5.8% to below $30 a barrel. A drop in crude oil coupled with poor US economic data, sent the Dow Jones tumbling, down 2.3%. As with the Dow Jones, the CRB commodity index dropped 2%. The latest drop pushed the index below 160 points for the first time in 15 years. U.S. cotton exports have firmed as production problems in South Asia support fresh demand. Vietnam, a major exporter of yarn from Asia, has returned to the U.S. for supplies. The problems in India and Pakistan will present export opportunities especially if China and Indonesia begin to ramp up purchasing. March cotton tumbled 0.49 cents to 61.41 cents/pound on Friday’s close, while May cotton dropped 0.37 to 61.90 cents/pound.