Cotton export demand has faded in the last couple of weeks, but the overall demand remains good.
Latest news from the agriculture market: Cotton export demand was cut on a year to year basis to 14.0 million bales, from 14.5 million in the current year as Asian production could recover and provide more competition in the marketplace.
US markets were lower as selling developed before the USDA production data and in response to ideas of higher production that were generated from the Kansas Wheat Tour. However, USDA showed less than expected production and prices started to rally again late in the week. USDA estimated all winter wheat production at 1.25 billion bushels, down 35% from last year. The biggest drop was in Hard Red Winter production which is estimated down 32% from last year at 737 million bushels. Soft Red Winter production was 297 million bushels, down 14% from 2016, and White Winter was 212 million bushels, down 13% from 2016. Hard Red Winter Wheat production was below average trade guesses and was the biggest surprise in the report.
The market had trouble holding rally attempts as world data showed plenty of wheat available to the market even with reduced US production. World production is projected at 737.83 million tons, from 753.09 million tons for the current year. World ending stocks are projected at 258.29 million tons, from 255.35 million tons in the current year. Those estimates show the problem for the market as demand will not be strong enough to reduce ending stocks even with reduced production. The data will change as US production could get even smaller. No one will know the full extent of the losses until harvest, but a damage should become easier to see in coming weeks. World production estimates could get smaller as well as some freezes have been reported recently in Europe. This damaging weather comes after dry conditions were reported in both eastern and western Europe and also in North Africa.
Corn remained in a narrow trading range last week and the weekly charts show sideways trends. The market remains a weather market, but farmers have been able to work around wet spots and get a lot of the crop planted. USDA showed that planting progress was as good as could be hoped for last week, and a big jump in planting progress is expected in the reports that will be released on Monday afternoon. The weather started to clear late last week. The weekend was dry, and a couple more dry days are coming early this week before the rains hit again. US farmers will be running just as hard as possible to get just as much corn planted as possible. The weather remains less than perfect for farmers with forecasts for more rain, and the rain and cool temperatures have not only inhibited planting progress but initiate emergence of the crop. Extensive replanting might be needed in some areas of the Midwest where the rains and cool weather have most affected the crop. Production ideas could be overstated for those reasons. USDA showed that production potential remains strong at just over 14 billion bushels for the coming year from more than 15 billion bushels this year. It used the planting intentions reports and trend line yield estimates from the Outlook Forum to calculate the production potential. However, USDA cut domestic and export demand for the coming year so ending stocks projections remained above 2.0 billion bushels. Most of the domestic losses came in the feed area as industrial and ethanol use was actually increased. The reduced export demand reflects the potential for increased competition in world markets from South America after that region basically was shut out of world trade due to much-reduced production a year ago.
Soybeans and soybean meal
Soybeans and Soybean Meal were both lower last week. The selling is related primarily to the threat of strong competition in the short term from South America. However, Brazil producers remain very reluctant sellers amid the political problems inside the country and both Brazilian and Argentine producers are unhappy with the strength of their currencies against the US Dollar as they earn less in local terms for exported Soybeans and products. The US export demand was not real strong last week, but was in line with or above trade expectations. The domestic crush has also held strong, but overall crush demand has weakened lately due to reduced demand for Soybean Meal. Demand for US Soybeans and products could remain strong. US prices for Summer months are now competitive again with those from South America as producers in Brazil and Argentina have been reluctant sellers recently due to weaker world prices and stronger local currencies. USDA expects less production this year at 4.255 billion bushels despite increased planted area as it has cut yield expectations back to a trend line level. The yield last year was very high due to the extended Fall season and near perfect weather in the second half of the year. Both the domestic use and exports were increased on a year to year basis. US ending stocks were 480 million bushels, bigger than this year but not as high as trade expectations that ranged to levels well above 500 million bushels. World ending stocks levels are expected to decrease slightly in the coming year to 100.79 million tons, from 101.71 million this year, due to very strong use. The overall effect of the reports is to imply relatively stable prices for the coming year.
Rice reacted to the USDA reports with a sharp rally for the second half of the week. The reports were considered bullish for prices as USDA cut production more than the trade expected. Production for the coming year was projected at 201 million hundredweight, from 224.1 million for the current year. Demand was cut on the domestic side which was a surprise for many market participants as demand for the last few years has been rather stable. In addition, immigrants from Asia and Latin America generally eat a lot of Rice, so demand ideas usually trend slightly higher on a year to year basis. Export demand was increased slightly. Ending stocks were cut by 10 million hundredweight to 38.1 million hundredweight for the coming year. World ending stocks projections are higher at 118.56 million tons, from 117.03 million this year. The increase came as production is expected to increase, especially in India and Thailand, where production was less due to droughts from a failed monsoon. Demand was also increased, but not by enough to cover the increase in production. US Rice futures should react primarily to the US data as US Rice right now is relatively cheap. The price action was strong last week and the funds and other speculators are still short. The data implies that further price strength is likely.
Palm oil and vegetable oils
World vegetable oils markets were higher last week. Palm Oil was the strongest market as export demand held relatively well and on mixed production ideas. The demand was about 12% higher on a month to month basis in Malaysia in the data reported by the private surveyors. It was a strong start to the month again as some traditional buyers loaded up on supplies before the Spring holidays. Reports from the interiors of both countries suggest that trees in both Indonesia and Malaysia have been slow to respond to improved conditions, and MPOB production in the last few months has been generally below trade expectations. MPOB estimated April production at 1.55 million tons against 1.46 million tons in March and trade expectations of 1.59 million tons. Exports were 1.28 million tons, from 1.27 million in March and trade expectations of 1.31 million tons. Ending stocks were 1.60 million tons, from 1.55 million in March and trade expectations of 1.65 million. It was a positive report for prices. Trees have seen plenty of rain and production should be seasonally increasing, and traders will watch for these tendencies in the updates that should be seen later this week. Ideas are that the increase so far has been less than expected and that the production is not increasing at the expected rate. Canola remains relatively strong amid tight Canadian market conditions. Producers in Canada are unwilling sellers due to cold and wet weather in the Prairies that has kept field work to a minimum in many areas. Producers are now actively planting, but are still working around rain in western areas. Demand from both the processor side and the export side has been strong enough to generally support the market. Soybean Oil was higher as the US moved to impose anti-dumping duties on biofuels imported from Argentina and Indonesia. The duties should force improved demand for Soybean Oil in the US as the production of biofuels should shift back to the US. WASDE showed increased US production at 22.620 billion pounds and also increased demand. Year to year ending stocks are estimated at 2.242 billion pounds. World ending stocks are projected at 20 million tons, from 18.53 million this year.
Futures were lower in early week trading but exploded higher at the end of the week to close limit up in the July month. Futures closed at new contract highs and new highs for the move. The export sales report was considered positive for prices and seemed to be the catalyst for the move. The weekly charts still show strong uptrends. Supplies available to the market are still increasing. Certified stocks levels have been increasing for the last couple of weeks and are now well over 300,000 bales. Export demand has faded in the last couple of weeks, but the overall demand remains good. The US mills still appear to have a lot of July positions to cover in the market. Planting progress was slow last week due to the rains and cold temperatures and should be much more active this week as the weather is expected to improve. WASDE showed the potential for a big US crop as it estimated production at 19.20 million bales, from 17.17 million in the current year. Export demand was cut on a year to year basis to 14.0 million bales, from 14.5 million in the current year as Asian production could recover and provide more competition in the marketplace. Ending stocks levels are estimated at a high level at 5.0 million bales. World ending stocks levels are expected to decline to 87.14 million bales, from 89.52 million in the current year, mostly on reduced stocks in China. The report should imply limited upside price potential for new crop Cotton futures.
Frozen concentrated orange juice and citrus
FCOJ closed lower in mostly quiet trading. USDA increased Florida production to 68 million boxes, from 67 million in the previous report. IBGE in Brazil increased production estimates for that country, so the news was rather negative for futures traders. Brazil has been exporting FCOJ to the US to cover the short Florida crop. The Florida Movement and Pack report showed imports were over 7 million gallons last period, from under 5 million a year ago. The latest Nielsen report once again highlighted the weak domestic demand that remains very low overall. Not even a very small Florida crop has been able to create much of a sustained rally in futures due in part to the weak demand and in part due to the increased imports from Brazil. Domestic production remains very low due to the greening disease and drought. Trees now are showing small fruit. Irrigation is being heavily used to prevent loss. The Valencia harvest is moving to processors and into the fresh market and will start to wind down at this time. That harvest should be over in a couple of weeks. Brazil crops remain in mostly good condition. Brazil imports will arrive starting this month.
Futures were higher for the week and pulled away from support areas on the weekly charts from a low that was completed over the Winter. The market action remains less than strong overall due to ideas of good supplies and reports of weak demand. The cash market remains slow. Offers remain in the cash market, and differentials are stable. Buyers remain quiet and appear ready to use already contracted supplies. New York has featured some buying support from commercials as they fix prices for differentials purchases, but there was plenty of speculative and commercial selling last week as well. London had been trading sideways as supplies available to the market remain tight, but as demand seemed to back off. Offers are less and seen at high prices from Robusta countries such as Vietnam, and has been a short crop there as well due to dry weather at flowering time. Indonesia and Brazil are also very low on supplies.
It was mostly a sideways week in New York and London, and New York moved away from support areas, but really did nothing to change the overall chart patterns. Ideas are that prices can remain generally weak, and futures are still below breakdown points on the weekly charts. The fundamentals are changing from a tight supply situation to one with more supplies available to the market. Production conditions have been better this year in Brazil, and a better harvest is anticipated in the next couple of months despite the weak start as demonstrated in the initial UNICA data a couple of weeks ago. Production is also less in India and Thailand. The Indian weather service estimates that the monsoon will be 96% of absolute normal, and that is within the normal range for them. There are increased hopes for a strong rebound in production and has kept import ideas to a minimum. China is still importing significantly less Sugar so far this year. The weather in Latin American countries away from Brazil appears to be mostly good. Northeast Brazil remain too dry. Center South areas have had plenty of rain. The harvest has been slow to get going, and the first two UNICA reports have reflected the reduced flow of Sugarcane to mills. Mills have increased the percentage of Sugar produced from the cane at the expense of Ethanol production, so supply from Brazil is good despite the reduced crush pace so far. Most of Southeast Asia has had good rains.
Futures markets were higher last week as both markets showed that at least a short term low has been made on the daily charts. The mid crop harvest is in full swing in West Africa, and ideas are that the quality of the mid crop is good. The demand from Europe is reported weak over all, and the North American demand has been weaker. The grind reports from both regions and also Asia showed increases between 1% and 1.5%. Supplies in storage in Europe are reported to be very high. The next production cycle still appears to be big as the growing conditions around the world are generally very good. West Africa has seen much better rains this year and now getting warm and dry weather. Growing conditions are good. East African conditions are now called good. Good conditions are still being reported in Southeast Asia.
Dairy and meat
Dairy markets were higher and made new highs for the move. The daily charts imply that a seasonal low was made a couple of weeks ago and that a trend to higher prices should continue It looks like the annual US flush is over. Supplies are strong seasonally in all areas of the US. Demand is good for cream, and cheese makers are displaying increasing demand. Cream demand for Butter has been very good as orders for print butter have increased. However, butter inventories in cold storage are increasing in some areas. Demand for Ice Cream has been mixed depending on the region. Cheese demand appears to be getting stronger due to promotions on the retail level. Exports are reported to be stronger. Dried products prices are generally weaker. Bottled milk demand has been steady to lower due to school holidays.
US cattle and beef prices were higher. The beef market has been strong, but packers paid lower prices for cattle last week after the big move higher in prices that was seen in the previous week. Feedlots are very current with supplies and are pulling cattle ahead in order to take advantage of the high prices. The trade is worried about a trend change to down given that the market has been very strong, but the cash market keeps holding and demand is also holding. April went off the Board on Friday and now June is too cheap when compared to cash prices. That implies that the market will need to rally again this week.
Pork markets and Lean Hogs futures were firm on ideas that cash market values had bottomed recently. Cash markets have had a firm tone inside the US despite strong hog availability. Pork demand remains stronger than expected, but packers have been pulling back from the market as they sense increasing supplies are coming. Packer demand has been very good until now. There are big supplies out there for any demand. The charts show that the market could work lower.
DISCLAIMER: This article expresses my own ideas and opinions. Any information I have shared are from sources that I believe to be reliable and accurate. I did not receive any financial compensation in writing this post, nor do I own any shares in any company I’ve mentioned. I encourage any reader to do their own diligent research first before making any investment decisions.