Daily market commentary

Daily market commentary
January 20th, 2022 | Rural Radio Network Staff

Coming into the end of a holiday shortened trading week volatility has been healthy, but the bulls are outweighing the bears in most market sectors.

Equities were able to recover towards the end of the week as treasury yields declined, but still held near pre-pandemic levels. Financial reporting from Wall Street has shown most companies ended 2021 on a fairly strong note with good outlooks for 2022. This is helping fuel the Fed’s decision to increase interest rates several times in 2022.

In reaction to the likelihood of increasing interest rates in the US, China has called for another look at the economy before rates rise. This week China has tweaked and injected more currency into the country. This type of quantitative easing has not been seen in China since 2009 following the financial crisis and collapse. Analysts see China a step behind much of the world in inflation, but are cautious in recent actions by China. Commodities may benefit from cheaper interest and more cash in China though as end users continue to secure supplies for future use.

The broader market is also looking past Omicron and expects energy demand to steadily increase through 2022. This week WTI crude oil futures passed 7 year highs above $87/barrel. The higher oil demand may also support ethanol with better blending margins for refiners.

In the grain complex soybeans are leading the charge at the end of the week. China’s quantitative easing and Brazilian farmers lack of selling have created a perfect whirlwind for soybean bulls. John Payne pointed out in his Thursday afternoon commentary that momentum also helped drive the market higher as it rolled through short stops above $14. The increased momentum may be met with resistance or profit taking if more news doesn’t support the bulls next week.

Meanwhile corn is in limbo between soybeans and wheat. A stalling cold front over parts of Argentina and Brazil is sidelining South American weather bulls. Most regions in South America are seeing a couple inches of much needed rain. Albeit some analysts say the early planted crop is too far gone to be saved. Later plantings the rain is perfect for.

EIA data Thursday showed for the week ending January 14, US ethanol production increased 46,000 barrels per day (b/d), or 4.7%, to 1.053 million b/d. US ethanol production was 11.4% above the same week last year, which was affected by the pandemic, and 0.4% more than the same week two years ago.

US ethanol stocks increased 3.0% to a 48-week high of 23.6 million barrels. However, stocks were 0.2% below the year-ago level and 1.8% less than the same week two years ago. Inventories built across all regions except the Gulf Coast (PADD 3), including record-high reserves in the Midwest (PADD 2).

Wheat caught pressure at the end of the week, but there still seems to be data feeding the bulls. For the bears, the Buenos Aires Grain Exchange did report that Argentina has a record wheat crop of 21.8 MMT. Albeit doesn’t seem that much will make it to the global market with strong domestic demand in Argentina. For the bulls tensions between Ukraine and Russia continue to escalate and any fighting conflict between the two could greatly damage black sea wheat production. In the US the drought monitor continues to paint a strong drought over much of the winter wheat acres in the country. The damage is likely already being done with little snow cover to help protect the wheat from late winter cold snaps.

In the livestock complex cattle continue in their sideways choppy trade. Cash was not exciting this week concluding after Tuesday and Wednesday. The cash market was essentially steady and did not provide support for bulls to pull the futures market much past current cash levels. Meanwhile labor problems look to slowly be resolving for packing plants, but there is still a significant gap between last year’s slaughter pace and this year’s slaughter pace.

In the lean hog trade momentum has helped rally the complex sharply higher. Thursday at the close the June contract was back above $103. Momentum will have to help carry hogs into the positive on Friday to stave off any profit sellers. The pork carcass cutout continues to be mixed with strong bellies and poor ham prices.

In the cash trade a light trade is developed on Tuesday and a slightly heavier trade on Wednesday. In the South cattle are trading at $137 live and in the North $218 dressed. Prices seem essentially steady with last week.

The Fed Cattle Exchange Auction Wednesday listed a total of 3,580 head, of which none actually sold, 159 were scratched from the auction and 3,421 head were listed as unsold, as they did not meet the reserve prices, that ranged from $125 to $139.50 Opening prices ranged from $122 to $136, high bids ranged from $134 to $138. The state-by-state breakdown looks like this: TX 1,008 total head, all of which went unsold; KS 1,301 total head, 1,142 head went unsold and 159 head were scratched from the auction; NE 1,233 total head, all of which went unsold; CA 38 total head, all of which went unsold.

Daily Slaughter Estimates Friday

Cattle

114,000 hd today 113,000 hd wk ago 120,000 hd yr ago

Saturday slaughter

61,000 hd Sat 50,000 hd wk ago 68,000 hd yr ago

Hogs

445,000 hd today 422,000 hd wk ago 486,000 hd yr ago

Saturday slaughter

218,000 hd Sat 149,000 hd wk ago 315,000 hd yr ago

Friday midday carcass cutout

Beef

Choice dn 0.26 292.72

Select up 0.49 282.67

C/S Spread 10.05

Loads 46

Pork

Carcass up 8.34 98.23

Bellies up 20.91 177.19

Loads 151

Daily Broker Commentary

Pre-opening grains with Mark Gold of Top Third Ag Marketing

Pre-opening livestock with Jerry Stowell of Country Futures

Midday market commentary with Mike Zuzolo of Global Commodity Analytics

Closing grain commentary with John Payne Daniels Ag Marketing

Closing market commentary with Jack Fenske with York Commodities

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