Cattle futures continue to recover, however, indications that the wholesale beef market has topped could limit the upside potential in the near-term. A large back-up of market ready cattle due to plant closures now looms over the market, and it could take months to work through the excess supplies. October live futures have taken out previous resistance and are now in position to challenge resistance at $105. August feeders need to close above $139 to suggest further gains are possible.
Plant closures due to Covid-19 have significantly reduced hog slaughter capacity in the U.S. Daily slaughter totals are increasing, but are still significantly below last year’s totals. As a result, composite pork cutout values continue to increase as do packer margins for those still in operation. Technically, the June contract has topped out at $66.95, capped by resistance in the form of a chart gap between $67.55 and $68.75.
Corn futures are trending sideways, with contract lows the only support on the charts. That support is at $3.00 for old-crop July and $3.25 for December. Expectations for a huge crop this year and record-high ethanol stocks will continue to loom over the market, limiting upside potential. Weekly ethanol production has increased in May but is still well below the level needed to meet the USDA projections. The outlook for 20/21 is for record high production of 16 billion bushels. And while projections for domestic and exports are also higher than 19/20, ending stocks are forecast to increase 1.2 billion bushels, which would be the highest ending stocks since 1987/88. The on-farm average price is estimated to be $3.20/bushel, down 40 cents from 19/20 and the lowest price since 2006/07.
Soybeans have seen some strength this week, but like corn, so far the trend is more sideways than up. The spike low of $8.31 looks like solid support for November for now, but the market is having trouble challenging resistance at $8.60. The May supply/demand report projected a 4.125 billion bushel crop, up 568 million bushels from last year. Global demand is expected to increase next year, and the U.S. is projected to capture 34% of the world soybean trade. Ending stocks are projected to decrease by 175 million bushels from 19/20 to 20/21. However, the average on-farm price is also expected to decrease, pegged at $8.20/bushel, down 30 cents from 19/20.
Rice futures continue to see wide daily trading ranges and a big divergence between old crop and new crop prices. In this week’s Supply/Demand report, USDA reduced the rice export projection by 1 million cwt, and lowered the projected on farm price to $13. For 20/21, production is expected to be up 17% from 19/20. Larger exports, domestic use, ending stocks, and a 32% decrease in beginning stocks will help to offset the increase in production. The projected on-farm price for 20/21 is projected to be $12.90.
Cotton futures are trending mostly sideways with December building resistance at the recent high of 59.50 cents and support just above 54 cents. The May supply/demand report for 20/21 projects production down 400,000 bales from the previous year. That is based on the 13.7 million acre planting intentions reported in March, which is very likely to be revised downward as farmers reacted to sharply lower prices and altered their planting decisions. Mill use is expected to recover by 200,000 bales, and exports are expected to be up 1 million bales, but ending stocks are still projected to rise 600,000 bales to 7.7 million bales. The on-farm average price is pegged at 57 cents per pound.