The bull market continues in corn futures. Nearby May topped $7 this week. Volume this week has been the highest since last August, and volatility is likely to continue. The market turned lower on Wednesday as the market is now expecting production to exceed current USDA projections. Despite snow across large portions of the corn belt last week, producers have seeded 17% of planned acreage, compared with a 5-year average of 20%. There is plenty of time to get the crop in the ground, but significant rain events could cause delays in the coming days. Concerns about Brazil’s second-crop corn production are supportive, as dry weather is causing crop conditions to deteriorate.
Extremely tight supplies of old-crop beans have driven basis levels to impressive levels. Sharp gains in crude oil values have increased demand for biodiesel, sending soy oil prices sharply. Despite sharp gains in beans, the soybean/corn price ratio continues to favor corn. That means we could still see farmers switch some intended soybean acres to corn. USDA says that 8% of the U.S. crop has been seeded, and 26% of the Arkansas crop is in the ground. Technically, November futures shattered previous resistance at $13. Tuesday’s high of $13.84 ¾ now becomes the upside target.
Cotton futures continue to trend higher, supported by carryover strength from other commodities. This market hasn’t seen the same volatility. Drought conditions in West Texas could result in a decrease in acres or increased abandonment if the acres do get planted. Demand for cotton has rebounded significantly since the lows seen during 2020. The U.S. dollar is relatively soft compared with other currencies, making U.S. cotton more competitive. New-crop December is trending higher, but resistance at the contract high of 89.28 cents looks solid at this point.
USDA says 47% of the crop is in the ground across the country, and Arkansas farmers have seeded 44% of the crop here. That is behind the 5-year average pace of 52% and 56% respectively. The slow pace of planting is providing some underlying support to the market. Carryover support from other markets is an obvious factor as well, but the biggest fundamental factor supporting the market is the smaller expected crop. Demand improved last week, with net sales of 96,900 metric tons and 93,000 metric tons shipped.
There is little doubt that skyrocketing corn futures are having a negative impact on cattle futures, and the charts are looking bearish. Friday’s USDA Cattle on Feed report showed the April 1 feedlot inventory to be 105.3% of last year’s. That total was smaller than the trade was expecting, since the 2020 inventory was impacted by Covid-19 and was down slightly from the 2019 total. The supply of feeder cattle outside feedlots is smaller than a year ago, and placements are expected to be down as well. June live cattle have been trending lower, but have potentially found some support at the recent low of $114.55.
Hog futures have looked toppy for a few weeks after charting a bearish key reversal and breaking through the long-term uptrend. Last week’s USDA monthly Cold Storage Report provided support gave the market a bit of a boost. March 31 frozen pork stocks were down 26.8% from a year earlier. Wholesale pork prices remain strong and hog supplies are declining due to seasonal factors. It does look like the market has put in a significant top, which for June is $110.075. That could prove to be tough resistance on a rebound.