Market Briefs | August 2, 2023

PUBLISHED August 3, 2023

The recent surge in corn prices has been offset by several factors, including cooler and wetter weather forecasts and the appreciation of the U.S. dollar. This downward price trend followed a decline in the overall conditions of the corn crop, which were expected to decrease by 1%, but saw a 2% decrease, resulting in a rating of 55% for the good to excellent category. It is worth noting that the ratings updates released on Monday are likely to be considered temporary due to the projected arrival of anticipated rainfall and moderate temperatures across a significant portion of the Heartland region. Furthermore, the corn crop conditions in Arkansas closely mirrored the national average for the good to excellent category, showing a modest 1% decrease compared to the previous week. As for the U.S. export market, it continues to face significant competition from the Brazilian crop, presenting challenges for the industry.

On Monday, soybean futures experienced a significant downward gap, declining by 51 cents. However, the market saw a subsequent resurgence in international interest following favorable export inspection volumes and fresh announcements of Chinese purchases. Despite these positive developments, similar to corn, the soybean market faced limitations on its gains due to a stronger dollar, reduced domestic usage rates, and improved weather forecasts in the coming days. Moreover, soybean ratings witnessed a larger-than-expected decline as a result of last week’s high temperatures, with the good to excellent rating dropping by an additional 2 points, reaching only 52%. Arkansas soybean conditions mirrored the national trend, also experiencing a 2% decrease, resulting in a good to excellent rating of 69%. In terms of projections, the soybean crush for June 2023 is anticipated to fall within a trading range of 173.5 million to 177.0 million bushels. If this estimate materializes, it will mark the smallest monthly crush volume since September 2022.

Last week, India announced that all exports of non-Basmati exports would be immediately banned. India is citing crop damage from excessive monsoons as the reason for the export ban. The July WASDE shows expectations for India to produce 134 million metric tons and have a carryout of 32 million metric tons for the 2023/24 marketing year, so there is the possibility that the forecast will change. In reaction to the ban, U.S. futures prices rallied to new four-month highs before charting a bearish reversal. Trading has been a bit erratic in recent days, and September has yet to close above resistance at $16. At home, the crop is in relatively good shape, although excessive heat has caused the crop condition ratings to drop. In Arkansas, 67% is now rated good to excellent, down 6 points from last week. Roughly 60% of the crop in Arkansas is headed, which is well ahead of the 5-year average of 46%. Exports remain disappointing, as U.S. prices are not considered competitive. Last week’s exports were only 15,100 metric tons. 

After climbing to new 10-month highs, December cotton futures charted a huge bearish reversal. That top of 88.39 cents could prove to be difficult resistance. Hot, dry conditions in Texas and questions about the yield potential of the crop drove the market higher. Currently 17% of the crop in Texas is rated good to excellent, while 50% is rated poor to very poor. A terrible export report last week helped to turn the market around when USDA reported net cancellations of 18,700 bales for the current marketing year and only 80,600 bales for next year.

Traders observed that the current cattle supply situation and the likelihood of packers offering higher bids prompted them to anticipate increased prices this week. Higher volumes of cash cattle trades were expected as the past two weeks have seen trades pushed to Friday. Boxed beef prices also rose, with choice beef increasing by $4.32 and select beef by $1.87. These gains on Tuesday may indicate a shift from the steady-to-lower trend that had been developing.

Regarding hog futures, they initially showed strength with new highs on Tuesday, but later experienced selling pressure. The initial strength was due to robust cash and higher cutout prices on Monday. However, ongoing uncertainty in demand is causing December and later contracts to remain mostly sideways to lower. Expectations for the week were that cash prices will rise again, as packers have been more active in purchasing during the first half of the week to ensure an adequate supply.