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With the U.S. Department of Agriculture's January reports out of the way, the grain markets are starting to focus on what's happening with South American weather, Randy Koenen of the Red River Farm Network and Randy Martinson of Martinson Ag Risk Management discussed on the Friday, Jan. 20, 2023, Agweek Market Wrap. Meanwhile, the USDA's Cattle on Feed report, released Friday, appears friendly to the cattle market.
Koenen said the grain market ended the week with soybeans lower, corn higher and wheat "caught in the middle." Martinson said part of that comes down to all eyes moving to South American weather, which is expected to get cooler and wetter.
Argentina recently dropped their crop conditions for corn and soybeans. The corn, in particular, made be too far gone to benefit from a switch out of hot, dry conditions, as the corn crop there is in pollination stage. However, soybeans aren't as far along.
"Soybeans could still come out of it," Martinson said. "We are going to see a tough corn crop for them and a subpar soybean crop."
If wetter conditions come to southern Brazil, the soybean crop there could make up for some of Argentina's problems. But, Koenen and Martinson stressed, it's important to remember that Brazil exports whole beans while Argentina exports meal and oil. There have been reports of Brazilian soybeans bound for Argentina, where they would be processed. The U.S. could benefit from increased demand of meal and oil, Martinson said.
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Corn and wheat, to an extent, benefited from stronger export demand this week, while soybean export demand faltered. Soybean demand is expected to fade more, as it does seasonally at this time of year.
Martinson said Friday's cattle on feed report was friendly and was the report that had been expected for some time given high numbers of slaughter cattle heading to market in recent month. The on-feed number in the report was close to expectations but represented the largest year-over-year decline in 32 months. Placements were higher than expected and marketing was as expected. Martinson predicted that the USDA's Cattle Inventory report, due out Jan. 31, 2023, "should really be friendly."
The lean hog market, meanwhile, has not seen as friendly of news, Koenen noted. Martinson said demand is the story there, with both exports and domestic demand being low.
"That hog market has certainly been under a heavy, heavy pressure," he said.
The state of the U.S. economy is keeping meat markets on the defensive. Martinson said even while anticipating the friendly Cattle on Feed report, the cattle market was looking at economic indicators, including reports of large numbers of layoffs.
Martinson said weather in South America will continue to be in the spotlight in the coming weeks for the grain markets. If the rains do develop, "we could see soybeans drift a little bit further." While he thinks demand could develop, he said a dip in soybeans might be a sign to wrap up old crop sales.
"Basis has been pretty good, but it is going to start to widen out as soon as our demand starts to slow down," Martinson said. "A lot of elevators aren't going to want to buy grain and have it sitting in house."
(The Agweek Market Wrap is sponsored by Gateway Building Systems.)
