News & Media

Market Briefs for March 20, 2020

The selloff in cotton continues unabated and futures are now trading at a 10 ½ year low on a spot-month basis. Crude oil is trading at an 18-year low at this point, meaning that synthetics will remain a very cheap option for clothing manufacturers and will continue to pressure cotton prices.  As more and more retailers close and people around the world are encouraged to practice social distancing, there is concern that the demand for cotton will be diminished further. In their annual production survey, the National Cotton Council reported an expected total U.S. crop of 13 million acres, down 5.5% from last year’s crop. However, those surveys were completed by farmers in January and early February, when the price for cotton was over 15 cents per pound higher than it is currently. Weekly export reports have so far remained the bright spot in this market, and China has been a steady if modest buyer of the past few weeks. However, there are indications that the relationship between China and the U.S. is again tense, and that demand could be in jeopardy. This week saw solid sales of 340,700 bales for 19-20 delivery, and China accounted for 61,700 of those bales. 

Cattle futures have largely followed the stock market over the past few weeks as the world wrestles with the impact of coronavirus, charting huge losses in the process. The April live contract may work to establish support at the recent low of $91.075. Cash prices are currently higher than futures, with live cattle sales reported at $110 this week. However, cutout values and boxed beef prices have seen unprecedented gains this week. The gains are benefiting packers, who’s margins have increased sharply to an estimated $461.80 on Wednesday and $529.35 on Thursday according to HedgersEdge. The monthly Cattle on Feed report, scheduled to be released later this week, is expected to show total inventory essentially flat at 100.3% of a year ago.  

The bottom dropped out of hog futures this week, but after spiking to new lows the market is attempting to stabilize. The market is concerned about demand, especially from China as coronavirus continues to spread. April will have support at the low of $51.12 ½. However, the market has failed twice at resistance in the form of a chart gap between $63.80 and $62.85. The market will need to close that gap in order to confirm a bottom. The composite pork cutout continues to rise. 

Corn futures continue to set new contract lows on an almost daily basis, but the market showed signs of stability on Thursday. As congress and the administration make progress on an economic stimulus package, commodity markets saw some buying interest. Weekly export sales totaled 904,600 metric tons this week, down 30.5% from this week last year, but within trade expectations. The initial USDA acreage estimate of 94 million acres, up from 89.7 million a year ago, continues to loom large over the market. The March prospective plantings report, scheduled for release March 31, isn’t expected to show big changes to that estimate.  So far, the forecast isn’t great for planting progress in the south, but that won’t affect the market unless significant planting delays are seen in the Mid-west, too. The NOAA 1- and 3-month outlooks show above-average precipitation and warm temperatures across the South and much of the Corn Belt.  

After setting new lows several sessions in a row, soybeans posted gains late this week. Talk of a stimulus package from Washington and the potential for a port strike in Brazil both provided support, as did profit taking. Weakness in the stock market and crude oil futures and strength in the dollar amid Covid-19 fears have all taken their toll over the past few weeks. The data coming out of USDA’s annual Outlook Forum was not particularly bullish for soybean prices, either. Soybean acreage is estimated to be 85 million acres, up from 76.1 million in 2019, and soybean prices are expected to average $8.80 per bushel. 

Rice futures continue to be the bright spot in the market with old crop futures testing the waters above $14, their highest level in nearly 6 years. New crop futures, however, have not shown the same strength, even as volume has picked up in recent weeks. The initial USDA supply/demand projections for rice paint a bearish picture, especially if the weather cooperates. Acreage is projected to be up over 600,000 acres and production is forecast to be up 47.8 million hundredweight, resulting in the highest ending stocks number in over 20 years. For now, new crop September has resistance at the recent high of $12.15, and support at $11.70.