Top 5 watch list for April
The first quarter of 2021 saw volatile trade action for the agricultural commodity sector. Will that volatile price action continue into the beginning of the second quarter? Traditionally, the month of April is a quieter time for agricultural commodity trade. The seasonal price action for grain futures traditionally suggests sideways to lower as the industry has a better handle on current supply and probable acres to be planted in the spring.
That quieter trade action may not be the case this year as old-crop corn and soybean ending stocks remain historically tight. Even with larger planted acres expected this spring, trade will continue to eye weather this spring and summer for potential production concerns. Demand for export, feed, and biofuels may continue to support prices. Outside markets may influence. And even in the livestock sector, there could be many twists and turns for the month ahead.
Here are the top five watch list items for the month of April:
Hog futures have been on a solid uptrend since December 2020. Supported initially by strong export demand, and a threat of another outbreak of African swine fever in China, prices were able to clear the 100.00 mark recently for the April through August 2021 futures contracts! From a historical perspective, this rally has been extraordinary. April hogs have only traded higher in the spring of 2014.
Recently, the USDA released the March 1 Hogs and Pigs report, and the numbers were bullish. All Hogs and Pigs on March 1 came in at 98.2% of last year compared with the average trade guess of 100.1% and a range of 99% to 101.3%. Kept for Breeding came in at 97.5% of last year compared to the average guess of 98.7% and a range of 97.4% to 100.4%. Kept for Marketing came in at 98.2% compared with the average guess of 100.2% and a range of 99.2% to 101.6%. The December-February pig crop came in at 98.6% compared with expectations for 100.7% and a range of 98.9% to 102.4%. Heading into April, the market is facing continued strong demand with domestic supply numbers lowering.
For the moment, the cattle outlook remains supportive as cash fundamentals remain firm, as consumer demand improves. The economy continues to re-open in various parts of the country, consumers are going out to eat, and they’re having friends over for grilling. Cumulative beef export sales for the year are at 422,485 tonnes compared with 337,281 last year and the five-year average of 275,823. This is a record! Japan, South Korea, Hong Kong, and China have been frequent buyers.
After finding a price low of 89.16 in early January, the value of the U.S. Dollar index has been slowly creeping higher. By late March the value of the index had reach near the 93.00 mark, a value not seen since November 2020. In late March, U.S. Treasury Secretary Janet Yellen was quite confident in her speech to Congress that the economic outlook was optimistic, which triggered buying of the dollar.
Remember, when the value of the dollar is lower compared with other global currencies, it makes it cheaper for other countries to import our commodities based on currency exchange rates. A lower dollar means more U.S. agricultural exports are likely. Now that the dollar has been creeping higher, some of that extra attractiveness to purchase U.S. commodities may be waning.
The soybean old-crop fundamentals continue to remain friendly. The stocks-to-use ratio is now tied for the tightest ever in history at 2.6%. Export demand is strong with export sales near 99% of USDA projections of 2.25 billion bushels. Export inspections (what has actually left the country already) is pegged near 90% of USDA projections, well ahead of the normal five-year average pace. While the amount of soybeans planted in the U.S. this spring will be up substantially from one year ago, perfect weather this spring and summer is essential. A bumper crop is needed to help offset the tight ending stocks.
Demand will also be watched closely. Export sales are ready to take out the USDA export projections, so many feel the USDA will need to increase the export demand category on the April 9 WASDE report. If this occurs, then ending stocks will continue to shrink.
5. Weekly Crop Progress Reports
Every Monday afternoon at 3 p.m. CST, the USDA releases the planting progress report. This shows the pace of planting in the U.S., along with the condition of the crops and pasture conditions. Should there be any delay in spring planting, or any worry that the condition of the crop is deteriorating, that will support price. On the flip side, if the planting pace is swift and weather conducive to growing a large crop, that may weigh on grain prices during the month of April.
Be ready. When prices are higher and the outlook for grain prices is friendly, it makes it easier to be complacent with your grain marketing. Make sure you are monitoring the value in front of you.
Disclaimer: The data contained herein is believed to be drawn from reliable sources but cannot be guaranteed. Individuals acting on this information are responsible for their own actions. Commodity trading may not be suitable for all recipients of this report. Futures and options trading involve significant risk of loss and may not be suitable for everyone. Therefore, carefully consider whether such trading is suitable for you in light of your financial condition. No representation is being made that scenario planning, strategy or discipline will guarantee success or profits. Any decisions you may make to buy, sell or hold a futures or options position on such research are entirely your own and not in any way deemed to be endorsed by or attributed to Total Farm Marketing. Total Farm Marketing and TFM refer to Stewart-Peterson Group Inc., Stewart-Peterson Inc., and SP Risk Services LLC. Stewart-Peterson Group Inc. is registered with the Commodity Futures Trading Commission (CFTC) as an introducing broker and is a member of National Futures Association. SP Risk Services, LLC is an insurance agency and an equal opportunity provider. Stewart-Peterson Inc. is a publishing company. A customer may have relationships with all three companies. SP Risk Services LLC and Stewart-Peterson Inc. are wholly owned by Stewart-Peterson Group Inc. unless otherwise noted, services referenced are services of Stewart-Peterson Group Inc. Presented for solicitation.