Market Briefs | July 19, 2023

PUBLISHED July 19, 2023

Livestock and Poultry
In the July Supply/Demand report, USDA raised its forecast for red meat and poultry production for 2023 on higher beef, broiler and turkey production. Only the pork production estimate declined on lower projected slaughter totals in the second and third quarters. Producers are indicating intentions to lower farrowings in the second half of 2023 and early 2024. Egg production was also raised for the second quarter. 2023 cattle and hog price forecasts were raised from last month on firm demand and relatively tight supplies. Broiler and turkey prices for 2023 were reduced on current prices and forecasts for higher production.

Live cattle futures continue to trend higher, despite some negative chart action in the form of bearish key reversals in deferred contracts. The weakness was short-lived. October needs to close above resistance at $184.35 in order to open further upside potential. Hog futures are moving in a mostly sideways pattern. Continued strength in cash hog and wholesale pork prices remains supportive despite the fact that product prices have likely made its seasonal top.

USDA didn’t change the 2023 milk production forecast in the monthly supply/demand report. The forecast for 2024 was lowered on lower cow inventories and slower growth in milk per cow numbers. As a result of lower Class III and Class IV prices, the 2023 all-milk price forecast was lowered to $19.55 per cwt. For 2024, the Class III milk price is forecast lower, but the Class IV price forecast was unchanged. The all-milk price forecast was lowered to $19.10 per cwt.

September futures have rallied back from a six-week low over the past few sessions. However, between fundamental factors and overhead technical resistance at $15.86, the upside is likely limited. The fundamental situation for the rice market is a mixed bag. Strong Asian prices are somewhat supportive as it makes our rice more competitive. However, weekly export sales reported last week were only 4,000 metric tons. That is not nearly enough to keep pace with the USDA forecast. The July supply/demand report projects larger supplies but also larger exports and domestic use that results in slightly lower ending stocks. The long grain average on-farm price was lowered 50¢ from the June report to $14.50 and the medium grain on-farm price was pegged at $16. The rice crop conditions have improved a bit. In Arkansas, 68% of the crop is rated good to excellent, and 22% of the crop is headed. 

Cotton futures continue to trend higher, but December has run into resistance at 83¢. Weak exports are a factor, as traders focus on the Chinese economy. The monthly supply/demand report was bearish as well. Beginning stocks were raised 50,000 bales due to lower 2022/23 disappearance. Exports for 2023/24 were reduced 250,000 bales due to reduction in projected world trade and U.S. market share. Despite planted acres being down 169,000 acres from last year, harvested acres are projected to be up 117,000 acres as beneficial rains in West Texas improve crop conditions there. Total production is pegged at 16.5 million bales. The projected upland on-farm price is pegged at 76¢/lb, down a penny from the June report. USDA says 45% of the crop is in good to excellent condition nationwide, while in Arkansas, 69% of the crop is rated good to excellent, 93% of the crop is squaring, and 61% is setting bolls. 

The July supply/demand report was not at all what the market was expecting. USDA left its yield estimate at 52 bushels per acre. Harvested acres were decreased 4 million acres, but domestic crush was reduced by 10 million bushels and exports were reduced by 125 million bushels. The net result was a carryout estimate of 300 million bushels for 2023/24. The on-farm price forecast was up 30¢ from last month at $12.40/bushel. All that said, it seems like the market wasn’t really buying it. 55% of the crop is rated good to excellent, and many analysts do not think a 52 bu/ac national average is achievable. November continues to trend higher, setting a new 6 month high this week. The next level of resistance is at the December high of $14.27¾.

USDA says that corn acreage totals 94.1 million acres across the U.S., and that the average yield will be 177.5 bu/ac. Total production is pegged at 15.32 billion bushels and total supply is pegged at 16.747 billion. Carryover is projected to be 2.262 billion bushels, and the average on-farm price is forecast at $4.80 per bushel. 57% of the crop is rated good to excellent this week. Futures have been on a roller coaster ride, with traders taking over a dollar off the market in a few short days. December has found support at $4.81 and bulls are trying to build off that level.