Market Analysis – May 3, 2022

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Market Analysis May 3, 2022

Drew Haynen, Van Zee Commodities LLC

Cattle:

The cattle market has struggled the last couple of weeks. It’s been unable to gain any traction. With April finally going off the board, June is the front month. Cash is trading in the north at $145/cwt with most packers participating. In the south, cash is also coming up and trading at $141/cwt. Why are the packers being so aggressive? Are we more current on cattle than most traders realize? It seems like traders are worried about a recession and the fear that beef demand will be crushed if we have a recession or inflation keeps moving higher. The worry is that many middle-wage American workers will not have enough disposable income to buy beef, or at least not in the quantity that they were last year. The weather has been a damper on demand. I think that we are short cattle and that packers will stay aggressive bidding. We should get another little rally in the June cattle. We do need to be prepared for a recession and be willing to lock in cattle prices if your profitability levels are reached. The Aug, Oct, and Dec months have been at some very lofty levels and are giving producers the opportunity to hedge.

The feeder cattle market also had a hard couple of weeks, except for yesterday when they were up over five dollars in some months. I think that there is optimism in the feeder market. Much of the pasture acres look to be receiving some rain so hopefully, grass season is on the way very shortly. This should help slow the placements substantially. Rain is also being seen in the great plains. If the crops get in the ground, which they should soon, and we have a good growing season, hopefully, we can see the corn market settle down and maybe move lower. Both of these things in tandem should keep some premium in the feeder market.

Grains:

The grain market has stalled out a little it seems. The willing buyers at $8 are harder to find and sellers are more aggressive. I am sure there are plenty of farmers laying off some of next year’s crops as well as profit-taking happening at these highs. The weather looks to have turned a little wetter and is still cool. This is hurting planting progress which was reported last night at 14% of corn planted as well as only 6% of beans. Traders are a little worried that planting won’t be done quite a on time this year which could hurt yield a little bit. I will take the rain right now knowing how fast a crop can get planted with the equipment that we have these days. I know slow planting historically hurts yield, but drought would hurt final yields more. The Ukraine war is still happening, as most know. This is hurting the export market out of the Black Sea; although, the Ukraine ag minister did say a couple of days ago that 20% of planting was complete so far and they are expecting 80% of the crop to be planted this year. The last 10% will probably be fairly late because they have to clean up mine fields and debris, but the ag minister thought they would still get it in. Hopefully, this is true and Black Sea ports will open up soon so that world grain markets can get their hands on more wheat, corn, and beans which would definitely push the USA grain markets lower with less export demand.

Cattle and Grain Markets for May 3, 2022
Month $/cwt
Cattle June 136.15
Aug 137.70
Feeders May 160.75
Aug 175.62
Corn May     8.04
July     7.98
Soybeans May   16.77
July   16.45

 

If you have any more questions or concerns or just want to discuss the specifics or potential risks and reward for different futures strategies, please call Drew Heynen at 712-722-3888.

 

The risk of loss in trading futures and options on futures can be substantial and may not be suitable for everyone.  This material has been prepared by a trading employee of Van Zee Commodities LLC and is, or is in the nature of, a solicitation. All sources used are believed to be reliable; however, any decisions made to buy, sell or hold a futures or options of futures position should not be solely based on this research and should not in any way be deemed to be endorsed by Van Zee Commodities LLC.  Van Zee Commodities LLC is registered with the Commodity Futures Trading Commission as an introducing broker and is a member of National Futures Association. 

 

Sheep and hay data compiled by Ross Bronson, Ag Risk Consultant, Redd Summit Advisors

Sheep:

Markets were mostly higher to steady this week. San Angelo was up $20-$30 for lambs compared to last week. Fredericksburg was stead this week as were Hamilton and Goldthwaite. New Holland, PA sold steady to $20 lower this week. The USDA estimated domestic lamb and mutton meat production for the week ending April 23rd totaled 2.35 million pounds on a 35,000 head slaughter week, up from 2.31 million pounds and 34,000 head last week. Imported lamb and mutton meat for the week ending April 16th totaled approximately 7.19 million pounds which equates to 311 percent of the domestic production for the same period. 

Sheep markets for week ending April 29, 2022
  Current Week Prior Week Percent Change Prior Year Percent Change
Feeder Lamb Prices, Medium and Large 1-2, 60-90 lbs, Wtd Avg, $/cwt.
           
Ft Collins, CO NQ $265.32 NA NQ NA
Newell, SD NQ NQ NA NQ NA
Sioux Falls, SD NQ $240.52 NA NQ NA
Billings, MT $315.38 $312.35 1.0% $295.00 6.9%
           
Light Weight Slaughter Lamb Prices, Choice & Prime 1-3, 60-90 lbs, Wtd Avg, $/cwt.
           
San Angelo, TX $349.98 $307.72 13.7% $260.36 34.4%
Columbia, TN $340.00 NQ NA $277.50 22.5%
New Holland, PA NQ $412.92 NA $298.03 NA
           
Slaughter Lamb Prices, Wtd Avg, $/cwt.
           
Neg. Pur. Live $222.30 $215.32 3.2% $197.16 12.8%
Form. Pur. Carcass Base NQ NQ NA NQ NA
Comp.-Form. & Neg.Carcass Base NQ NQ NA NQ NA

*No Quote

** Not Applicable

 

Hay:

Although recent rains are a welcome sight in much of the west, the cooler weather has slowed early growth for many alfalfa producers, especially in the Pacific Northwest. Trading has picked up in California with first cuttings coming in many of the main production regions after rain caused a week or so delay. Export demand is still strong but there is some question as to whether it will stay that way. Some Asian countries are looking at different options with the market so high, and projections for summer are hard to pin down. In all the story is positive for now with the recent moisture in many areas, but it may not be enough to turn things around.

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