Market Briefs | Jan. 6, 2022

March cotton futures are technically in an uptrend drawn off the Oct. 31 low. The recent pattern has been more sideways, though, and resistance at 90 cents continues to cap the market. So far, support at 77.50 is holding. Significant net cancellations reported in recent weeks have resulted in a decrease in export commitments, which are lower now than they were at the first of November, and sales are below the pace needed to meet USDA’s current export projections. That is something to look out for in upcoming supply/demand reports. The latest report showed net cancellations from China of 144,000 bales. The end of the zero–Covid policy in China allowed people to return to work and to social situations but has also resulted in a spike in serious infections. Until that economy stabilizes and demand returns, the cotton market could continue to stall. It is hard to see this market having much upside in the short-term unless export sales improve.

To say rice futures have been volatile over the past month is an understatement. In early December, March futures took about $1.50 off the market before finding support near $17. In the last two weeks, though, futures quickly retraced losses to set a new high of $18.53, which will likely prove to be tough resistance. Rice futures got a boost coming into 2023 from the final weekly export report of the year. Total sales of 98,700 metric tons, of which 80,000 metric tons were purchased by Iraq, was the highest weekly total in about two months. Exports for 2022-23 are currently running 40% behind last year’s pace.

Soybean futures have also been volatile, with little clear direction as prices chart big gains one day and big losses the next. The market remains focused on South American weather and its impact on the crop there. The main concern currently is dryness in Argentina. Conditions in Brazil remain largely favorable. The most recent export inspections report showed 53.8 million bushels, which was below projections. Inspections are down 7% when compared to this date in 2021-22, and slightly below USDA projections for the marketing year. Technically, July soybeans have set a new high of $15.46 last week but are now trading just below the $15 mark. USDA estimates the average on-farm price for 2022-23 to be $14, so the market could be overpriced at current levels.

As in the soybean market, traders are watching conditions in South America. While conditions are mostly favorable in Brazil, the same can’t be said for Argentina, which has been hot and dry. Recent transportation issues across the U.S. due to winter weather have resulted in higher prices to try to pull corn to market. Demand from ethanol plants is on pace to meet USDA’s target of 5.275 billion bushels. Export inspections, however, and down 27% from a year ago. USDA is currently projecting exports to be down, but only by 16%. Heavy precipitation has helped replenish soil moisture and improved the Mississippi River levels, good news as farmers prepare to plant the crop.

Cattle futures soared to new highs at the end of the year as the severe winter storm moved through the Plains and the Midwest. Strong wholesale beef prices have also been supportive. In the Dec. 23 Cattle on Feed report, USDA pegged the total inventory at 11.7 million head, or 97% total from a year ago. November placements were 1.93 million head, down 2% from the previous year. Marketings during November were pegged at 1.89 million head, the highest November total since the report began in 1996. Technically, February futures have resistance at the recent high of $159.17½, but the market is clearly trending higher. 

February lean hogs continue to be capped by resistance near $92, and have turned lower in recent days after again failing at that resistance. The December Hogs and Pigs report showed a total inventory of 73.1 million head. That was down 2% from the year-ago total, and down 1% from the previous quarter. The market hog inventory was down 2% from the previous year, while the breeding inventory was up slightly at 6.15 million head. Cash hog and wholesale pork prices continue to face seasonal pressure.