Texas markets

COLUMN: Weather and export corridor holding back markets | Agriculture / Energy

Hello market watchers. June is here with weather similar to May. In fact, forecasts show that we won’t be back to the 90s in the Southern Plains until next Sunday.

It would have been my father’s 75th birthday. Always a busy time to prepare for the harvest. I miss him a lot.

Although the milder heat at this time of year is more tolerable, it does not help the progress of the winter wheat crop. Only a quarter of the Texas crop is harvested and only 14% of Oklahoma.

I’ve only seen a handful of combines, with custom cutters even further south of the delays. This is also a year where the number of custom harvest teams from Northern States is already considerably lower. Labor shortages, including foreign contractors, are a major reason we’re seeing fewer custom crews this year, as are high fuel costs and persistent drought that has reduced yield. and therefore the potential return for everyone involved.

This may be a year when the whole state could harvest simultaneously. Early reports continue to show test weights holding up and protein remaining high, averaging around 12%, with several reports at 15%. After the rains of the weekend, additional chances return from Tuesday evening to Wednesday.

After dry conditions in the wheat-growing regions of Europe, the main French exporter also received rain last week. This theme also extends to Australia in the southern hemisphere, where wheat has just been sown. Although it remains early, conditions are favorable for the growing season and are leading to increased production and export prospects from Australia. On Thursday, Egypt reported wheat purchases from Russia, Romania and Bulgaria. It just goes to show that despite the harsh rhetoric, Russian wheat, as well as energy products, will continue to be traded around the world.

Putin shook up the wheat market this week by saying on Tuesday that Ukrainian grain could flow uninterrupted across the Black Sea. It is a negotiation, of course, for sanctions and we will see what the coming weeks bring. An important meeting will take place in Turkey on June 8 with Russia to discuss shipments through the Bosphorus.

It was a shortened trading week with markets closed Monday for Memorial Day, but enough to send the KC wheat market down $1.20 a bushel. The last three days have all closed below the 50-day moving average. Thursday was an inside day lower and lower for the KC and Chicago wheat contracts with a lower close on Friday. This often suggests that we will see a follow-up in the same direction, i.e. lower. While the $10.85-10.90 area will be support, the 100-day moving average is down to the $10.40 level.

Cool, wet weather benefiting Kansas wheat despite problems in Oklahoma and Texas, combined with continued talks about grain exports out of Ukraine, could keep wheat and corn prices under pressure for now . US winter wheat conditions remained flat overall this week at 29% good to excellent, in line with expectations and a one percentage point improvement from the previous week. Maize planting essentially caught up to the five-year average of 87% to 86% completed last week from 79% the previous week.

While acres of corn are lost in the Dakotas, the rapid catch-up in plantings more broadly is keeping the corn market capped at the moment. Soybeans are now 66% planted, slightly ahead of expectations, compared to the five-year average of 67% and 50% last week. Spring wheat accelerated to 73% complete versus just 67% expected and just 49% last week. However, this remains well below the five-year average of 92%.

Cotton plantings are progressing at a rapid pace now at 68% planted from 54% last week and now ahead of average. Sorghum is slightly below average at 40% compared to 43% over the past five years. New crop December corn futures had a few interesting days to end the week with inside days on the chart Thursday and Friday. The market is just between the 50 and 100 day moving averages.

With crude oil rising above $120 a barrel on Friday, we could see corn supported for its energy equivalence. Diesel, in particular, has closed higher for nine straight sessions, the last four of which were all-time highs. Refining is at maximum capacity and European talks about blocking Russian diesel have only fueled the fire.

Cattle producers are certainly welcoming a respite in feed costs, but we are not out of the woods yet. The corn market usually peaks until the 4th of July so we will see how the next month plays out. Corn conditions in Ukraine as well as old crop exports are likely to have a huge impact on the future of corn and it remains to be seen how that will play out. December corn futures closed the week at $6.90. November new crop soybeans ended the week at $15.27 on palm oil strength and export demand hopes.

Cattle markets eventually took up the supply with feeding contracts leading the way. August feeders jumped this week by $9.50 per cwt, all taking place over the past 3 days. The close above the 50-day moving average is favorable for further follow-up next week. If August breaks above $175, we could see the 100-day moving average at $176.92 as our next target. Fed cattle futures followed, but only managed to close above the 20-day moving average. Cash traded this week around $136. While this recent rebound has been welcome, I don’t believe this is the livestock gap trade I’ve been talking about. U.S. exports remain strong for beef, particularly to China, as the economic outlook begins to be clouded by talk of a potential recession and headlines.

Tesla’s Elon Musk said this week he would cut 10% of salaried employees, while JP Morgan Chase’s Dimon said an economic hurricane was on the horizon. Expect markets to be jittery as we await another Fed rate decision on June 15th. If you’ve been waiting to protect held livestock until late summer or early fall, this may be the right place to do it.

If you’re ready to trade the commodity markets, call me at (580) 232-2272 or drop by my office to set up your account and discuss risk management and marketing solutions to pursue your goals. Auto-trading accounts are also available. It’s never too late to start and no operation is too small to have a risk management and marketing plan in place.

Come see me every Thursday sale day at the Enid Cattle Market and talk markets. I wish everyone a successful trading week.

Sidwell is a Licensed Series 3 Commodity Futures Broker and Director of Sidwell Strategies. He can be reached at (580) 232-2272 or [email protected] Trading futures and options involves risk of loss and may not be suitable for all investors. See the full disclaimer at http://www.sidwellstrategies.com/disclaimer.