This week’s action:
Corn May down 8.5 at $6.41
Beans May flat at $15.19
KC Wheat May down 18 at $8.15
Feeders April up 2.40 at $196
Fats April flat at $165.50
Hogs April down 1.50 at $84.50
Corn Dec23 down 5 at $5.72
Beans Nov23 flat at $13.76
KC Wheat July23 down 18 at $8.07
Spring Insurance Price are set:
Corn Dec23: $5.91 – 2nd highest on record
Beans Nov23: $13.76 – 2nd highest on record
Current Ratio: 2.33:1 vs 2.43:1 last year
The last 3 years have all offered a higher fall insurance price vs spring. This is an anomaly historically and given USDA outlook and 2+ million more potential acres of corn in 2023, farmers need to pay attention to what type of insurance coverage they’re taking. Protecting price and yield in this environment could be a significant benefit. The best way to accomplish this is by electing Revenue Protection(RP) instead of Yield Protection(YP). We see a lot of prospects electing YP to save a couple dollars and can have a very negative impact in certain years.
Grains continued their long liquidation to start the week but were met with buying Wednesday morning as rumors of China buying US corn as well as Russian responding with a No deal to the Black See grain corridor. Though rumors are still swirling on China grain purchases, there has been no confirmations through mid-day Friday. The US export demand remains poor as the weekly #s came in at 598k tonnes which was at the low end of expectations. Cumulative corn exports are at 60% of the USDA pace vs the 5-year average of 73%. Annual ethanol use is also down 5.8% over the last year. Though cumulative soybean sales are at 90% vs the 5-year of 84%, domestic soybean crush is down nearly 2% with current USDA expectations of a 1% increase from 2022. Crush margins were record high for the month of March, so one could assume we continue to ramp up domestic crush.
As mentioned last week in the USDA outlook, corn is expected to gain 2.4 million acres in 2023 and based on the fertilizer values below, it could easily be more. Below is a summary of the insurance ratio for each of the last 10 years and highlights corn acres for years over 90 million. It appears that a ratio above 2.4:1 won’t really impact acres, but below 2.3 shows an outlier on the 94+ million-acre mark.
USDA has another report next Wednesday. This is the last stocks report prior to acre intention at the end of March. A year ago, USDA had old crop stocks at 1.377 billion bushels and May futures were sitting at 7.50. That was shortly after the Russia/Ukraine war started so appeared to be a $1.00+ of war premium in the market. This should be evaluated on any thoughts that current corn markets are too low vs where you think they should be. Though the war remains, it’s not what it was a year ago, nor has the same market impact. The largest question going into next week’s report is how much will the USDA drop South American production. February’s dryness and an additional growing season in the Northern hemisphere should maintain support under global grain supply as we head into our peak marketing seasons. Seasonals favor your short-term risk to the downside, but that also means any rally’s should be rewarded.
South American weather has been one of the most arid weather patterns in history as the US drought slowly dissipates going into Spring. The midway GFS is much wetter Northern Argentina with a 10 total forecasts of 2-4 inches. The core of Argentina remains warm into mid-March.
The cattle market ad a strong finish after a lackluster start. April live closed only 90 cents from last week’s contract high as cash cattle range from 164-167. A +$2.00 basis is right on par with the long-term cash seasonal. As we move into the end of March and beginning of April cash basis should be +3-5 seasonally. 170 cash cattle are right around the corner following that data. Local feed yards are sitting on limited show lists, and it doesn’t appear there’s many to add until we get into April.
Long- and short-term fundamentals are supportive, but US export demand has been slowing. Cumulative sales are off 80,000 tonnes since last year and lowest since 2020. The chart below shows your April live cattle with many different supportive moving averages and support on sell offs. June and April closed above resistance today.
36% of US adults reported that their credit card debt outweighs their emergency savings. That is the highest level on record and is an increase from 22% a year ago. Connected to that is an average increase of $395/month in cost of home goods and services from 2022. Interest rates are expected to rise again from 7.75 today as the current inflation rate sits at 6.4%. This will be the first time the prime rate is above 8% since pre 2008 financial crisis.
Something that probably means nothing:
Blackstone CEO Steve Schwarzman took home a total of $1.27 billion in compensation in 2022. This is a Wall Street record!
Blackstone’s share price declined 40% in 2022.