The sun sets on the 2nd quarter of 2022 and the selling continued through to the end. It still appears that managed money continued to shift cash across the market trying to brace for possible recession in the US economy.
In the outside equity markets consumer data and inflationary data on Thursday seemed to spell out that the main street is feeling the squeeze of inflation and increasing interest rates. As a result it’s slowing down spending habits. Personal income was up 0.5% month over month in May, that was in line with analyst expectations. So wages are still on the rise with a strong job market. The interesting with main street though, personal consumption expenditures only rose by 0.2% month-on-month in May. That was below analyst expectations of 0.5% increase in line with income increase. This is what Arlan Suderman had to say on the economic data, “In other words, consumers are starting to pull back on spending as their confidence in the economy falls.” The Fed’s measure of inflation, the PCE price index, was up 0.6% month-on-month in May, down from analysts expectations of 0.7%. Year over year the PCE price index is up 6.3%. Now in full disclosure the Federal Reserve actually prefers to use the core PCE price index. Core PCE Index removed food and energy as it is more volatile. The core PCE price index was up 0.3% month-on-month in May. Year over year the Core PCE Index is up 4.7%.
In the grain complex USDA did little to excite the bulls with the quarterly stocks and acreage report. For quarterly stocks USDA estimates the US has in all storage 4.346 billion bushels of corn, 660 million bushels of wheat and 971 million bushels of soybeans. Wheat was the only grain to see a reduction (185 million bushels) from June 1 2021 stocks. Soybeans saw the most significant rise in stocks up 202 million bushels from last year. Deeper into the data commercial grain companies are holding much more grain than farmers and with basis still strong in the country it appears commercial grain will continue to try and pry every last old crop bushel from the farmers hand. This scenario sets up an interesting dynamic of the cash market not necessarily reflecting what the futures market is saying. Mike Zuzolo, Global Commodity Analytics, may have the best take on why this is occurring. Zuzolo in his midday commentary pointed out that managed money has been holding significant long positions in the commodities including grains as a hedge against inflation. With the reshuffle currently occurring money may not be viewing the grain futures as they had been in the recent past. If the cash market remains strong it may help bring the futures market back to match the current bullish trend.
For planting acreage data USDA estimates that US farmers planted 89.92 million acres of corn, 88.325 million acres of soybeans and 47.092 million acres of all wheat. The soybean number was below the lowest analyst pre-report estimate and below the March number of 90.955 million acres. USDA did include a note in the report that they would revisit soybean acres in August to see how late acres in the Dakotas and Minnesota faired and if they should be included in the acreage estimate. Corn increased slightly from the March numbers, but is still well below last years 93.357 million acres. Part of the reason for the drop in comparison to a year ago for corn and soybeans both, was an increase in cotton and wheat acres in 2022.
Final note on grains with the USDA data appearing to be a flash in the pan market direction will likely be influenced by weather and money flow for the next couple of weeks.
In the livestock complex lean hogs continue to struggle with a poor carcass cutout and sliding cash market. The quarterly hogs and pigs report released on Wednesday showed the US dropped 1% across all classes of hogs. Darrell Holaday with Country Futures goes into more detail on the report here:
On the cattle side of the trade cash has been thin on fed cattle in the country. That has done little to support futures. Meanwhile a sharply lower corn market has assisted feeder cattle futures higher in spread trading. That has lent support to the live cattle. The June live cattle contract exited the board at $138. That should help cement cash the rest of the week. In the country feeder cattle sales saw higher cash prices in Nebraska as feeders are chasing premium cattle to capture fed cattle premiums later in the year. Pasture and range condition though is dwindling in the current weather environment and early weaning is a real concern possibly putting a lot of light cattle in feedlots.
In the country cash has been hit and miss, Southern live business has been marked at mostly $138, that is steady to roughly $1 lower than last week’s weighted averages. Northern dressed deals were marked at mostly $234, not quite $1 lower than last week’s weighted average basis Nebraska. Colorado had some late sales at $145, about steady with last week’s weighted average.
For the week ending June 18, 2022, Imported Beef Passed for Entry in the U.S. totaled 47,811, 100.10% of the previous week and 102.74% of the 4-week average.
Slaughter Estimates Thursday
124,000 hd today 122,000 hd wk ago 117,000 hd yr ago
458,000 hd today 465,000 hd wk ago 455,000 hd yr ago
Thursday Midday Carcass Cutout
Choice dn 1.00 263.88
Select dn 0.41 240.40
C/S Spread 23.48
Carcass dn 1.47 107.09
bellies dn 6.86 140.65
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 Donna Hughes of Daniels Ag Marketing
Closing market commentary with Jack Fenske with York Commodities