Cattle, hog trading
The CME Group will begin offering a post-close/pre-open state for cattle and hog markets to allow order entries for the next trading day.
Starting June 6, the post-close/pre-open state will apply to futures and options for lean hogs, feeder cattle and live cattle contracts.
The window to place orders will run from 2:30 p.m. to 4 p.m. Central Time. CME Group says no matching takes place during this post-close/pre-open timeframe and it should not be considered an extension of the current day’s trading session.
The CME move comes as Congress and the Obama administration are looking at livestock markets from a variety of angles.
U.S. corn exports
Informa Economics said exports of U.S. corn and corn products generated $74.7 billion in annual economic output in 2014, with sales of U.S. feed grain products contributing $82 billion.
Informa’s analysis said corn and corn product exports increased U.S. gross domestic production by $29.8 billion. The National Corn Growers Association and the U.S. Grains Council commissioned the study. NCGA president Chip Bowling said the study underscores the need for the Trans-Pacific Partnership.
USDA economist Warren Preston said farm exports are now forecast at $124.5 billion. If realized, it would be $15.2 billion below the fiscal year 2015 export level. USDA’s export forecast is down 10 percent from its initial forecast last August.
Ag imports are forecast at a record $114.8 billion. The U.S. agricultural trade surplus is now forecast at $9.7 billion for fiscal year 2016. That’s down from $25.7 billion in fiscal year 2015, but up $3.2 billion from the February forecast.
Purdue University ag economist Mike Boehlje said much of the merger talk among major ag companies like Monsanto and Bayer is being driven by the companies’ desire to reduce their cost structure. When they had better times, they may have been like some farmers, maybe weren’t quite as careful to control their costs,” said Boehlje. “What this is going to mean is that there will be, on one hand, there may be a little less competition out on the market. Economists and farmers always like to see more competition rather than less. While there are concerns about less competition, Boehlje says the upside would be better research funding.
Corn closed the week 5.75 cents higher.
Last week, private exporters did not report any new sales, only a change in destination of a previous sale of 120,000 metric tons of corn to Taiwan from an unknown destination.
Weekly export sales of corn showed a total of 56.97 mb, this was well above the 8.9 mb (225,500 mt) needed to be on pace with USDA’s May demand projection of 1.725 bb.
The USDA revealed U.S. corn plantings at 94 percent planted with 78 percent of the crop emerged.
The first good-to-excellent rating for corn came in at 72 percent g/e, slightly behind last year’s rating of 74 percent g/e.
Iowa was rated 77 percent g/e with Illinois 71 percent, Minnesota 71 percent and Nebraska 72 percent.
During June, the outlook for prices is simple as weather and how it impacts the emerging crops will be 95 percent of the pricing movement. The only other supply side news the market will deal with is the June 10 USDA monthly supply/demand crop report.
The market will want to be bullish as the key pollination time period is directly ahead of the market. Producers will want to use options as a way to manage risk and provide price insurance.
This will enable producers to make sales and cover the upside if weather is adverse. The end of the month will also have the quarterly stocks and planting intentions report from the USDA.
This report could be a shocker to the market as some reports have farmers decreasing seeded acres from the last report in March. Seasonal highs are usually formed by June 23.
Strategy and outlook: Producers should have used weakness to re-own sales with options to manage price risk and summer volatility.
Soybeans closed the week 47 cents higher.
Last week, private exporters reported sales of 213,000 mt of soybeans to an unknown destination.
Weekly export sales of soybeans showed a total of 38.44 mb. This puts total old-crop sales at 1.779 billion bushels, above
USDA’s May demand projection of 1.74 bb.
Soybean plantings reached 73 percent, above estimates with 45 percent emerged.
Last year, the U.S. was 56 percent seeded at this time. Iowa is 74 percent done, Illinois is 51 percent, Indiana only 31 percent, while Minnesota is 86 percent and Nebraska is 54 percent finished.
Soybean meal has been the upside leader as Argentina, the world’s leader meal exporter, has largely been out of the market, leaving U.S. endusers to scramble to secure supplies as their export business has dramatically improved.
Until U.S. new crop supplies can be guaranteed, prices will remain strong. The month of June looks to be similar to corn as we are in a weather market and weather forecasts will be the primary driving force.
The crop looks to be seeded before June 15 leaving beans to spend the rest of June developing its root system. Rains after June 15 will be viewed as beneficial to crop development and negative for prices.
However, dryness in the month of June will send prices sharply higher. Like the corn market, producers should use options as a risk management tool and price insurance.
The month of June is not the key reproductive month for soybeans, however, the market will be quick to add a premium into prices on less than ideal weather.
The acreage report at the end of the month could be a shocker to the trade.
Strategy and outlook: Producers should look to re-own sales with options to manage price risk and summer volatility during price weakness in May.
This material has been prepared by a sales or trading employee or agent of Midwest Market Solutions and is, or is in the nature of, a solicitation. This material is not a research report prepared by Midwest Market Solution’s Research Department. The risk of loss in trading futures and/or options is substantial and each investor and/or trader must consider whether this is a suitable investment. Past performance, whether actual or indicated by simulated historical tests of strategies, is not indicative of future results. Trading advice is based on information taken from trades and statistical services and other sources that Midwest Market Solutions believes are reliable. We do not guarantee that such information is accurate or complete and it should not be relied upon as such.
Brian Hoops can be reached at (605) 660-1155.
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