Written Commentary
SOYBEANS
Friday’s USDA quarterly stocks and acreage report reinforced the bearish supply situation, with quarterly stocks slightly above guesses. Acreage was 410,000 acres below the March intentions and 650,000 below the pre-report estimates. Unfortunately for the bull camp, the acreage cut was not enough to offset the fact that current favorable US Midwest weather is likely to result in a significant jump in ending stocks year-over-year. In addition, on-farm bean stocks were up 44% from last year, and off-farm were up 6%. The USDA did make a special note that there were 12.76 million bean acres left to plant when the survey was conducted. Despite the slightly lower acreage, a significant US weather issue is needed for any sustained rally. The 5-day forecast has rain chances across northern Missouri, Iowa, and Wisconsin, and the 6- to 10-day outlook has below-normal temperatures for all of the central and western Midwest with normal precipitation.
NASS crush will be out at 2 PM central time today. The pre-report estimate is 193.85 million bushels, compared to 189.3 last year. Bean oil stocks are expected to be 2.214 billion pounds, down from 2.386 last year. Commitments of Traders data showed Managed Money traders added 24,000 contracts to their short position, which hit an 8-week high and the largest net short for this date.
The International Grains Council estimated 2024/25 global bean production up 1 million tonnes to 415 million tonnes, up 23 million tonnes from 2023/24. EIA data showed US renewable diesel operable capacity jumped 15% in April to 4.129 million gallons per year.
SOYBEAN MEAL
Soymeal prices struggled last week under the weight of the bearishness in soybeans and talk that weaker South American meal premiums have opened the window to import meal into the southeast US. Flooding affected soy processing plant logistics early last week in northwest Iowa and southern Minnesota. With significant maintenance downtime this month, it will be difficult to catch up, and that likely means the US cash meal markets will remain tight in the near term, although South American premiums are slipping. NASS May crush data will be released later this afternoon and is expected at 193.85 million bushels, up from 189.3 in May of last year.
December meal prices spiked below support to start the week and have hit their lowest levels since November 30, 2021. Prices have fallen $50 a ton since late May, and there has been no reasonable upside correction in the downswing.
CORN
Friday’s USDA report offered nothing for the bull camp, and prices accelerated lower. USDA’s June survey indicated farmers planted 1.5 million more corn acres than the March intentions report suggested. Quarterly stocks were also higher than the estimates, giving the market dual bearish numbers to contend with and prices broke sharply. Friday’s trading volume was the highest since February 2022. In further bearish news, USDA reported on-farm corn stocks were up 37% from a year ago to 3.03 billion bushels, the highest in 25 years. USDA did note that at the time of the survey, there were 3.356 million acres left to plant. Iowa, Minnesota, and Nebraska saw 250,000 – 300,000 acre gains, and Kansas was up 600,000 acres. The 5-day precipitation forecast shows additional chances for rain across northern Missouri, Iowa, and Wisconsin. Temperatures in the 6-10 day timeframe are expected to be below normal for nearly all of the Midwest except for the far eastern belt. Precipitation is expected to be normal. The Commitments of Traders reports showed Managed Money traders significantly increased their net shorts by over 86,000 contracts to 277,666, a 10-week high and the largest speculative short for this date. The bear camp seems unconcerned with the unusually large speculative short due to the generally favorable US weather outlook. Monsoon rains in Mexico are beginning to ease their drought. The upper Mississippi River has reached the flood stage in some areas, but the lack of a major export program in the US Gulf reduces the concerns. December corn plummeted through support on Friday on heavy volume and hit its lowest point since May 26, 2021. Open interest only dropped 1191 contracts Friday, which is a bit of a surprise and may mean prices still need to go lower to flush out additional long speculative positions.
A favorable US weather outlook and a bearish USDA report Friday means the market is likely to stay under pressure to start this holiday week.
WHEAT
Friday’s USDA report was a mixed bag with lower than expected all wheat acreage but higher quarterly stocks than anticipated. Quarterly stocks number was the highest since 2021, and on-farm stocks at 139 million bushels were significantly higher than last year’s 124 million, while off-farm stocks were up significantly at 563 million bushels, compared to 456 million a year ago. CFTC data showed funds increased their net short position to 70,487 contracts, a 9-week high and the 2nd most bearish in the last eight years for this date. SovEcon updated their expected Russian exports to 46.1 million tonnes, compared to 47.8 last month. Russian grain harvest was lowered to 127.4 million tonnes, compared to 144.9 last month.
Wheat had a relatively tame reaction to Friday’s bullish acreage and bearish stock numbers. Now that the US harvest is past the 50% mark, harvest hedge pressure should begin to fade, and wheat is likely to react better to bullish news.
CATTLE
August futures closed weaker Friday after hitting their highest level in 8 months earlier in the week. Boxed beef values gained last week, and higher cash trade was also supportive. For the short holiday week, look for resistance on August at last week’s highs at 187.42. Pullback support is likely to surface on a break to 183.35.
Live cash trade Friday in the north was $197–198 and the South $188–194. The 5-area, 5-day weighted average for the week ended at 192.83, down from 194.28 at the end of the prior week. Sales volumes were a bit light for the 3rd week in a row. The estimated average dressed cattle weight last week was 848 pounds, down from 850 the previous week and up from 809 a year ago. The 5-year average weight for that week is 813 pounds. Estimated beef production last week was weaker at 515.7 million pounds, down from 525.3 million a year ago. The USDA boxed beef cutout was up $2.40 at mid-session Friday and closed $2.99 higher at $326.32. This was up from $322.39 the previous week. The previous low was $323.33 on June 27. The previous high was $328.34 on July 3, 2023.
HOGS
August hogs ended Friday’s session in the upper portion of the day’s range and set a new high for the week. The higher weekly close resulted in a weekly upside reversal and was the 1st week to close higher since the middle of April. With technical indicators showing bullish divergence and prices finally showing weekly gains, the path of least resistance looks higher.
Estimated US pork production last week was 521.5 million pounds, unchanged from the previous week and up from 487.5 a year ago. The USDA estimated that hog slaughter through last Friday was 2.358 million head, down from 2.373 million a week ago but up from 2.259 million a year ago. The USDA pork cutout, released after the close Friday, came in at $97.35, up $2.99 from Thursday but down from $98.54 the previous week. The previous low was $94.36 on June 27. The previous high was $98.54 on June 21.
MILK – CLASS III
August Class III Milk closed lower last week for the second week in a row, hitting a three-week low in the processes.
The USDA reported that farm-level milk production in the Northeast and upper Mountain states is steady, while the Southeast, Central, and West regions have had weaker output in recent weeks. Summer temperatures are reaching the 100-degree mark across the Southern tier of states. Storm systems with high humidity moved across the Upper Midwest and Northeast. The combination of heat and humidity has reduced milk production. Milk producers who have confirmed H5N1 highly pathologic avian influenza infections in their herds can apply for lost milk production at the Farm Service Agency under the ELAP program, which will pay those farmers 90% of their production losses.
Cheese production and demand are steady in the East and Central regions, but some production lines may be down for a 4-day weekend and will hold off purchasing additional spot loads of milk. Lighter milk production has contributed to lighter cheese production schedules in the West region. The NASS Cold Storage report said that natural cheese stocks on May 31st were 4% above year-ago levels.
Spot milk prices generally ranged from $1.50-under to even with Class III Milk. Support for August Class III Milk is 19.48, with additional support at 19.20. Look for resistance at 20.16..
Please contact us at 1.877.690.7303 or via email at sales@admis.com for any questions or comments on this report or would like more information about ADMIS research.
>>Explore more here
Risk Warning: Investments in Equities, Contracts for Difference (CFDs) in any instrument, Futures, Options, Derivatives and Foreign Exchange can fluctuate in value. Investors should therefore be aware that they may not realise the initial amount invested and may incur additional liabilities. These investments may be subject to above average financial risk of loss. Investors should consider their financial circumstances, investment experience and if it is appropriate to invest. If necessary, seek independent financial advice.
ADM Investor Services International Limited, registered in England No. 2547805, is authorised and regulated by the Financial Conduct Authority [FRN 148474] and is a member of the London Stock Exchange. Registered office: 3rd Floor, The Minster Building, 21 Mincing Lane, London EC3R 7AG.
A subsidiary of Archer Daniels Midland Company.
© 2021 ADM Investor Services International Limited.
Futures and options trading involve significant risk of loss and may not be suitable for everyone. Therefore, carefully consider whether such trading is suitable for you in light of your financial condition. The information and comments contained herein is provided by ADMIS and in no way should be construed to be information provided by ADM. The author of this report did not have a financial interest in any of the contracts discussed in this report at the time the report was prepared. The information provided is designed to assist in your analysis and evaluation of the futures and options markets. However, any decisions you may make to buy, sell or hold a futures or options position on such research are entirely your own and not in any way deemed to be endorsed by or attributed to ADMIS. Copyright ADM Investor Services, Inc.
