Midweek the market is tense, but we are finally getting words from the Fed that may help shed light on where things may be going and that is trying to restore confidence in the market. Out just before the close on Wednesday the Fed has announced it will increase interest rates 0.25%. That is right in line with analyst expectations. The Fed rate now stands at 4.75%-5%, they also signaled there is likely at least one more rate hike left in 2023. Most analysts are suggesting that will come with the FOMC meeting in May. The Fed is also calling the banking system sound and resilient.
From the outside looking in the Fed is trying to catch a falling knife or sword. They have been very hawkish and in unison that interest rates must continuing rising, while also unwinding the balance sheet in order to combat inflation. A brand new challenge was introduced to the whole idea though when regional banks started having liquidity issues which lead to failures. So now the Fed must balance battling inflation with keeping contagion out of the banks. The analysts will look over and analyze every word that Chairman Powell speaks and types on Wednesday afternoon. That may help the money flow decide where it wants to go. Early on it is quickly running from the US dollar and flowing into precious metals.
For the ag commodity complex the unfortunate news out of all the chaos seems to be that bullish speculative money does not want to stay anywhere near the complex. John Payne highlights this issue in more depth in his commentary below.
For the grain complex the wheat market has fallen sharply this week. This even as Sov Econ noted Wednesday that Russia’s wheat crop will likely be around 85.3 MMT down nearly 19 MMT from last year. Although that would be more in line with their 5 year production average. The lower price in wheat may also encourage more buyers to step into the market. Jordan currently has a tender for milling wheat out in the world. Analyst expect Egypt to quickly follow suite.
For the soybean complex Brazil continues to be in the drivers seat. Agroconsult raised its Brazilian soybean production estimate from 153 MMT to 155 MMT and exports to a record 96 MMT. While Brazil is pre-occupied with harvesting, storing and shipping their large soybean crop the US is the best buy in the world on corn. China knows that and so far this week has purchased over 300,000 MT of corn announced in USDA flash sales. On Thursday we will see just how much corn was sold last week with the large sales to China.
For the week of March 17, US ethanol production dropped to a 10-week low of 997,000 b/d. Production was 4.3% below the same week last year and consistent with the five-year average for the week. US ethanol stocks eased 0.8% to 26.2 million barrels. Stocks were 0.2% more than a year ago and 9.7% above the five-year average. Inventories thinned across all regions except the Midwest (PADD 2) and West Coast (PADD 5).
In the livestock complex cattle and hogs were caught in the broader risk off atmosphere of the market. The cash market is trying to keep the live cattle and feeder cattle futures steady. Lean hogs though have lost a tremendous amount of support. June lean hogs are now retracing back to multi year lows.
In the country the fed cattle cash market has kicked off on Wednesday. In Kansas and Texas cattle were moving at $163 live. That would be $1 lower than last week’s average trade. In Nebraska and Iowa cattle were trading $164 live and $264 dressed. That would be fully steady. There was also rumored trade of $165 live in Iowa on clean hided program eligible cattle.
For the week ending March 11, 2023, Imported Beef Passed for Entry in the U.S. totaled 43,351, 93.40% of the previous week and 99.82% of the 4-week average.
Daily slaughter estimates Thursday
Cattle
124,000 hd today 123,000 hd wk ago 122,000 hd yr ago
Hogs
484,000 hd today 478,000 hd wk ago 475,000 hd yr ago
Thursday Midday Carcass Cutout
Beef
Choice up 1.95 283.25
Select dn 0.32 269.50
C/S Spread 123.75
Loads 71
Pork
Carcass up 0.83 80.69
Bellies up 2.70 84.81
Loads 113
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 market commentary with John Payne of Hedge Point Global Markets
