News & Media

Market Briefs | May 11, 2022

Cattle futures have been under pressure this week. Weak wholesale beef prices and rising U.S. interest rates were cited as reasons for the losses. Technically, the June contract looks very weak. On Monday, futures tested support near $131, and a close below that support could result in a retest of the October lows near $128.40. The October chart doesn’t look quite a worrisome, but the market does need to hold above support at $140. Feeder futures have been under pressure from weakness in live contracts, while losses in corn have limited selling somewhat. October feeders have support at $173. 

Hog futures continue to trend lower. Technically, June futures appear to have topped on March 31, charting a huge bearish reversal after setting a new contract high of $127.32 ½. The market has violated long-term uptrending support and have been locked in a steep downtrend for the past couple of weeks. Futures are now testing support at the $100 level. Weak export sales are a major factor in the selloff. Exports are reportedly down over 25% from the same time period in 2021. China has been absent from the market, and a strong dollar has made U.S. pork more expensive on the world market. Hog supplies are expected to decline into summer. 

Both old and new cotton contracts soared to new contract highs last week and set a new 11-year high on a front month basis. The market turned lower on Friday, however, and has not been able to build much upward momentum. Follow through selling has been limited, though.

The continued drought in Texas has traders worried about the yield potential for the crop there. Export sales have improved, with USDA reporting net sales of 232,000 bales of the current crop, including 100,000 bales to China. New crop net sales totaled 93,000 bales, and shipments were robust at 426,000 bales. Arkansas cotton acres are expected climb 8% this year, to 520,000 acres, while the U.S. crop is pegged at 12.234 million acres, up 9% from a year ago. Production could be impacted by drought in the Southwest. Nationwide, cotton farmers have seeded 24% of the crop, which is on pace with the 5-year average. Arkansas farmers, who have planted 32% of the crop, are ahead of the average pace of 24%. 

Rice futures are showing signs of topping after new crop September failed at resistance at $17.47. A close below $17 could open the possibility of a retest of support in the $16 area. Rice acres in the state are currently pegged at 1.191 million, of which 1.080 million are expected to be long grain, with 110,000 acres of medium grain. That is down 2% from last year’s crop. The U.S. crop is expected to be 3% smaller. However, slow planting progress could result in an even smaller crop than anticipated. As of May 8, Arkansas farmers had seeded 57% of the crop, compared with 75% a year ago and a 5-year average of 72%. With the final planting date for crop insurance coverage coming quickly, farmers will be faced with tough decisions in the next couple of weeks. Weekly export sales were extremely disappointing at just 10,200 metric tons, and shipments of 34,100 metric tons, down 46% from the previous 4-week average.

Corn futures are working in a sideways to lower pattern, but the longer-term uptrend remains intact for now. The market is focused on supply. The war rages on in Ukraine, and farmers there are running out of time to plant corn. In the U.S., the weather hasn’t cooperated, resulting in farmers at home running behind schedule as well. As of May 8, farmers in the U.S. had planted 22% of the crop, compared with a 5-year average of 50%. Nationwide, the crop is only expected to be down 4% from last year, with total acres pegged at 89.49 million, but if wet weather continues, it could be even smaller, as that is based upon a survey done in early March. Weekly export sales of 59.8 million bushels were within trade expectations, and shipments of 75 million bushels was supportive. 

November beans are looking toppy. The market has violated the long-term uptrend and looks like a retest of support at $14 is a possibility. 2022 is projected to be a record-setter for soybean production. The U.S. crop is pegged at almost 91 million acres, up 4% from last year. In Arkansas, farmers are expected to seed 3.25 million acres to soybeans. That’s 7% more acres than in 2021. Planting delays in corn are bearish for soybeans, as the current weather makes it likely that the size of the soybean crop will be even larger than current projections.