Market Briefs | March 15, 2023

Both old and new crop corn futures have sold off sharply in recent weeks. The divide between old crop prices and new crop prices is narrowing. USDA is currently projecting a big corn crop, and that is impacting futures. They are currently projecting a trendline yield of 181.5 bushels per acre as the drought in the midwest has eased over the winter. Total production is estimated to be 15.085 billion bushels on 91 million acres. July futures are testing the waters around $6. Additional selling could see the market move to fill the gap left between $5.95 and $6 last July. New crop December is establishing support near $5.50 for the time being. Below that, the double bottom of $5.43 ¼ charted last July should provide support. 

USDA pegged cotton seedings at 10.9 million acres, reflecting an expected shift away from cotton and into corn throughout the Mid-South. Weekly export inspections, which have been robust, slowed down last week, with a total of 114,500 bales sold for delivery in the 2022/23 marketing year. Vietnam was the top buyer, while China was not a buyer last week. Cotton shipments, however, were strong last week, at 287,500 bales, up 44% from the previous four-week average. July cotton has fallen to three-month lows and is now testing support in the 79¢ area. 

Weakness in rice futures has continued, but July now appears to be establishing support at $16.25 and building some upward momentum as the market has closed back above the $17 level. For the 2023/24 outlook, USDA pegged acreage at 2.5 million, up close to 13% from the previous year. All rice production is projected to be 185 million hundredweight, up 15%. Average yields were estimated to be 2% higher than last year at 7,523 lb/acre. Additional selling pressure came from the monthly Supply/Demand report, which raised the 2022/23 carryout by 3 million cwt to 36.1 million, due to an equal reduction in the export projection. World carryout was also increased by more than 4 MMT based on higher production in India. The current weather in the Mid-South is not conducive for field work, as cold, wet weather continues. Soil temperatures will need to rise before rice can be planted.

Soybean futures are under pressure as Brazil harvests a big crop. In the recent supply/demand report, however, USDA cut the carryover estimate to 210 million bushels, down 15 million bushels from the previous report. USDA has pegged soybean seedings at 87.5 million acres, which is unchanged from last year but over a million acres below average trade guesses. New crop November beans have broken its uptrend and have support around $13.30.

Livestock and Poultry
In the March Supply/Demand report, USDA raised the 2023 beef production forecast. Slaughter projections for the first three quarters were raised on increased feedlot placements. Pork production was lowered as higher first-quarter slaughter rates was more than offset by lighter carcass-weight estimates. Broiler and turkey production was raised for the first quarter, while egg production was reduced. Trade projections were mostly unchanged in the report, but turkey export forecasts were lowered.

For 2023, cattle prices were raised for all four quarters on expectations of firm demand and tightening supplies. Broiler and egg price projections were higher based on current prices and supply projections.

In the futures market, live cattle futures have turned lower and violated uptrending support. General concerns about the economy and the potential impacts on demand sparked the selloff. The June contract gapped lower on Monday but held above support at $157. A move below that level would open the market to a retest of support at $155. Feeder futures also look to have topped after setting a new high of $224.12½ last week. There is very little chart support above the $210 area. June hog futures have moved higher in recent days, but for now resistance at $106 looks tough to break, especially with an overall weaker tone in the cash hog market.

In the March supply/demand report, USDA raised its forecast for 2023 milk production on a larger cow inventory. Import estimates were also raised, while export projections were reduced. The Class III price projections were lowered, while Class IV prices are projected higher. The all-milk price is projected lower at $20.45 per cwt.